Document:

Term Loan Agreement

 EXHIBIT 10.3 
  
 Execution Copy 
  
 $20,000,000 
  
 TERM LOAN AGREEMENT 
  
 among 
  
 STYROCHEM
FINLAND OY 
 as Borrower, 
  
 The Several Lenders 
 from Time to
Time Parties Hereto, 
  
 and 
  
 GUGGENHEIM CORPORATE FUNDING, LLC, 
 as Administrative Agent 
  
 Dated as of June 30, 2005 

 TABLE OF CONTENTS 
  

					
	 	    	 	  	Page

	ARTICLE I -        DEFINITIONS	  	1
			
	 1.1
	    	Defined Terms	  	1
			
	 1.2
	    	Other Definitional Provisions	  	15
		
	ARTICLE II -       AMOUNT AND TERMS OF COMMITMENTS	  	16
			
	 2.1
	    	Term Loan Commitments	  	16
			
	 2.2
	    	Procedure for Term Loan Borrowing	  	16
			
	 2.3
	    	Repayment of Term Loans; Evidence of Debt	  	16
			
	 2.4
	    	Fees	  	17
			
	 2.5
	    	Optional Prepayments	  	18
			
	 2.6
	    	Mandatory Prepayments	  	18
			
	 2.7
	    	Interest Rates and Payment Dates	  	19
			
	 2.8
	    	Computation of Interest and Fees	  	20
			
	 2.9
	    	Inability to Determine Interest Rate.	  	20
			
	 2.10
	    	Pro Rata Treatment and Payments	  	21
			
	 2.11
	    	Requirements of Law	  	21
			
	 2.12
	    	Taxes	  	22
			
	 2.13
	    	Indemnity	  	23
			
	 2.14
	    	Illegality	  	24
			
	 2.15
	    	Change of Lending Office	  	24
			
	 2.16
	    	Conversion and Continuation Options	  	24
			
	 2.17
	    	Minimum Amounts and Maximum Number of Eurodollar Tranches	  	25
		
	ARTICLE III -        REPRESENTATIONS AND WARRANTIES	  	25
			
	 3.1
	    	Financial Condition	  	25
			
	 3.2
	    	No Change	  	26
			
	 3.3
	    	Corporate Existence; Compliance with Law	  	26
			
	 3.4
	    	Corporate Power; Authorization; Enforceable Obligations	  	26
			
	 3.5
	    	No Legal Bar	  	26
			
	 3.6
	    	No Material Litigation	  	27
			
	 3.7
	    	No Default	  	27
			
	 3.8
	    	Ownership of Property; Liens	  	27
			
	 3.9
	    	Intellectual Property	  	27
			
	 3.10
	    	Taxes	  	27

 TABLE OF CONTENTS 
 (continued) 
  

					
	 	    	 	  	Page

	 3.11
	    	[Intentionally Deleted.]	  	27
			
	 3.12
	    	Labor Matters	  	27
			
	 3.13
	    	[Intentionally Deleted.]	  	28
			
	 3.14
	    	[Intentionally Deleted.]	  	28
			
	 3.15
	    	Subsidiaries	  	28
			
	 3.16
	    	Use of Proceeds	  	28
			
	 3.17
	    	Environmental Matters	  	28
			
	 3.18
	    	Accuracy of Information, etc	  	29
			
	 3.19
	    	Security Documents	  	29
			
	 3.20
	    	Solvency	  	30
			
	 3.21
	    	Equity Loan Agreement	  	30
		
	ARTICLE IV -        CONDITIONS PRECEDENT	  	30
			
	 4.1
	    	Conditions to the Term Loan	  	30
		
	ARTICLE V -         AFFIRMATIVE COVENANTS	  	33
			
	 5.1
	    	Financial Statements	  	33
			
	 5.2
	    	Certificates; Other Information	  	33
			
	 5.3
	    	Payment of Obligations	  	35
			
	 5.4
	    	Conduct of Business and Maintenance of Existence, etc	  	35
			
	 5.5
	    	Maintenance of Property; Insurance	  	35
			
	 5.6
	    	Inspection of Property; Books and Records; Discussions	  	35
			
	 5.7
	    	Notices	  	35
			
	 5.8
	    	Environmental Laws, etc	  	36
			
	 5.9
	    	Additional Collateral, etc	  	36
			
	 5.10
	    	Further Assurances	  	37
			
	 5.11
	    	Hedging Agreements	  	37
			
	 5.12
	    	Senior Credit Agreement	  	38
		
	ARTICLE VI -        NEGATIVE COVENANTS	  	38
			
	 6.1
	    	Financial Condition Covenants	  	38
			
	 6.2
	    	Limitation on Indebtedness	  	39
			
	 6.3
	    	Limitation on Liens	  	40
			
	 6.4
	    	Limitation on Fundamental Changes	  	40

  

 ii 

 TABLE OF CONTENTS 
 (continued) 
  

					
	 	    	 	  	Page

	 6.5
	    	Limitation on Disposition of Property	  	41
			
	 6.6
	    	Limitation on Restricted Payments	  	41
			
	 6.7
	    	Limitation on Capital Expenditures	  	41
			
	 6.8
	    	Limitation on Investments	  	42
			
	 6.9
	    	Limitation on Payments of Debt Instruments, Modifications of Certain Agreements, etc	  	42
			
	 6.10
	    	Limitation on Transactions with Affiliates	  	43
			
	 6.11
	    	Limitation on Sales and Leasebacks	  	43
			
	 6.12
	    	Limitation on Changes in Fiscal Periods	  	43
			
	 6.13
	    	Limitation on Negative Pledge Clauses	  	43
			
	 6.14
	    	Limitation on Restrictions on Subsidiary Distributions	  	44
			
	 6.15
	    	Limitation on Lines of Business	  	44
			
	 6.16
	    	Limitation on Hedge Agreements	  	44
		
	ARTICLE VII -        EVENTS OF DEFAULT	  	44
		
	ARTICLE VIII -       THE ADMINISTRATIVE AGENT	  	46
			
	 8.1
	    	Appointment	  	46
			
	 8.2
	    	Delegation of Duties	  	46
			
	 8.3
	    	Exculpatory Provisions	  	46
			
	 8.4
	    	Reliance by Administrative Agent	  	47
			
	 8.5
	    	Notice of Default	  	47
			
	 8.6
	    	Non-Reliance on Administrative Agent and Other Lenders	  	47
			
	 8.7
	    	Indemnification	  	48
			
	 8.8
	    	Administrative Agent in Its Individual Capacity	  	48
			
	 8.9
	    	Successor Administrative Agent	  	49
			
	 8.10
	    	Authorization to Release Liens and Guarantees	  	49
		
	ARTICLE IX -        MISCELLANEOUS	  	49
			
	 9.1
	    	Amendments and Waivers	  	49
			
	 9.2
	    	Notices	  	50
			
	 9.3
	    	No Waiver; Cumulative Remedies	  	51
			
	 9.4
	    	Survival of Representations and Warranties	  	51
			
	 9.5
	    	Payment of Expenses	  	51

  

 iii 

 TABLE OF CONTENTS 
 (continued) 
  

					
	 	    	 	  	Page

	 9.6
	    	Successors and Assigns; Participations and Assignments	  	53
			
	 9.7
	    	Adjustments; Set-off	  	55
			
	 9.8
	    	Counterparts	  	56
			
	 9.9
	    	Severability	  	56
			
	 9.10
	    	Integration	  	56
			
	 9.11
	    	GOVERNING LAW	  	56
			
	 9.12
	    	Submission To Jurisdiction; Waivers	  	56
			
	 9.13
	    	Acknowledgments	  	57
			
	 9.14
	    	Confidentiality	  	57
			
	 9.15
	    	Accounting Changes	  	58
			
	 9.16
	    	WAIVERS OF JURY TRIAL	  	58

  

 iv 

 SCHEDULES: 
  

			
	1.2	    	Term Loan Commitments
	3.4	    	Consents, Authorizations, Filings and Notices
	3.15	    	Subsidiaries
	3.17	    	Environmental Matters
	6.2(e)	    	Existing Indebtedness
	6.3(f)	    	Existing Liens
	9.6(c)	    	Restricted Holders

  
 EXHIBITS: 
  

			
	A	    	Form of Guarantee Agreement
	B	    	Form of Compliance Certificate
	C	    	Form of Closing Certificate
	D	    	[Intentionally Deleted]
	E	    	Form of Assignment and Acceptance
	F-1    	    	Form of Legal Opinion of Borrower’s Counsel
	F-2	    	Form of Legal Opinion of Holdings’ Counsel
	G	    	Form of Term Loan Note
	H	    	Form of Borrowing Notice
	I	    	Form of Intercreditor Agreement
	J	    	Form of Pledge Agreement
	K	    	Form of Security Agreement

  

 v 

 TERM LOAN AGREEMENT, dated as of June 30, 2005, among StyroChem Finland Oy, a limited liability company
organized under the laws of Finland with Business ID 1094747-6 (the “Borrower”), the other Loan Parties party hereto, the several banks and other financial institutions or entities from time to time parties to this Agreement (the
“Lenders”), and Guggenheim Corporate Funding, LLC, as administrative agent (in such capacity, the “Administrative Agent”). 
  
 W I T N E S S E T H: 
  
 WHEREAS, the Borrower is party to a Secured Overdraft Facility Agreement dated as of March 20, 2002 (as amended on June 30, 2005 and as may be further
amended, modified or supplemented from time to time to the extent permitted herein, the “Senior Credit Agreement”) with Nordea Bank Finland Plc (together with its successors and permitted assigns, the “Senior
Lender”); 
  
 WHEREAS, the Borrower has requested that
the Lenders make available a term loan facility in the aggregate principal amount of $20,000,000 for the purposes of (i) refinancing the Intercompany Loan (as defined below), (ii) repaying certain outstanding indebtedness of the Borrower under local
currency borrowings and the existing working capital facility and (iii) for other general corporate purposes; 
  
 WHEREAS, the Lenders are willing to make such term loan facility available to the Borrower upon and subject to the terms and conditions hereinafter set
forth; 
  
 NOW, THEREFORE, in consideration of the premises and
the agreements hereinafter set forth, the parties hereto hereby agree as follows: 
  
 ARTICLE I - DEFINITIONS 
  
 1.1
Defined Terms. As used in this Agreement, the terms listed in this Section 1.1 shall have the respective meanings set forth in this Section 1.1. 
  
 “Adjustment Date”: as defined in the Pricing Grid. 
  
 “Administrative Agent”: as defined in the preamble hereto. 
  
 “Affiliate”: as to any Person, any other Person that,
directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the
securities having ordinary voting power for the election of directors (or persons performing similar functions) of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise.

  
 “Agreement”: this Term Loan Agreement, as
amended, supplemented or otherwise modified from time to time. 
  
 “Alternative Currency”: any lawful currency other than Dollars that is freely transferable into Dollars. 

 “Applicable Margin”: initially, a rate per annum equal to (a) with respect to Eurodollar
Loans, 6.50% and (b) with respect to Base Rate Loans, 3.75%; provided that, on and after the first Adjustment Date, the Applicable Margins with respect to all Loans will be determined pursuant to the Pricing Grid. 
  
 “Asset Sale”: any Disposition of Property or series of
related Dispositions of property (excluding any such Disposition permitted by clause (a), (b), (c) or (d) of Section 6.5). 
  
 “Assignee”: as defined in Section 9.6(c). 
  
 “Assignment and Acceptance”: as defined in Section 9.6(c). 
  
 “Assignor”: as defined in Section 9.6(c). 
  
 “Base Rate”: for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to
the greatest of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus  1/2 of 1%. For purposes hereof: “Prime Rate” shall mean the prime rate of interest specified under the Bloomberg reference identified as “PRIMBB Index” on the date that is the first day of such period (or such
other comparable page as may, in the opinion of the Administrative Agent, replace such page for the purpose of displaying such rate), as in effect from time to time. Any change in the Base Rate due to a change in the Prime Rate actually available or
the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. The Prime Rate is a reference rate and does not necessarily
represent the lowest or best rate actually available. 
  
 “Base Rate Loans”: Loans for which the applicable rate of interest is based upon the Base Rate. 
  
 “Benefited Lender”: as defined in Section 9.7. 
  

“Board”: the Board of Governors of the Federal Reserve System of the United States (or any successor). 
  
 “Borrowing Notice”: with respect to any request for
borrowing of Loans hereunder, a notice from the Borrower, substantially in the form of, and containing the information prescribed by, Exhibit H, delivered to the Administrative Agent. 
  
 “Borrower”: as defined in the preamble hereto. 
  
 “Business Day”: a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law to close. 
  
 “Capital Expenditures”: for any period, with respect to any Person, the aggregate of all expenditures by such Person for the acquisition or leasing (pursuant to a capital lease) of fixed or capital
assets or additions to equipment (including replacements, capitalized repairs and improvements during such period) which are required to be capitalized under GAAP on a balance sheet of such Person. 
  

 2 

 “Capital Lease Obligations”: with respect to any Person, the obligations of such Person
to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance
sheet of such Person under GAAP; and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP. 
  
 “Capital Stock”: any and all shares, interests,
participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the
foregoing. 
  
 “Cash Equivalents”: (a) marketable
direct obligations issued by, or unconditionally guaranteed by, (i) the United States government or issued by any agency thereof and backed by the full faith and credit of the United States, or (ii) any agency or instrumentality of Finland and
backed by the full faith of Finland, in each case maturing within one year from the date of acquisition; (b) certificates of deposit, time deposits, eurodollar time deposits or overnight bank deposits having maturities of six months or less from the
date of acquisition issued by any Lender or by any commercial bank (i) organized under the laws of the United States of America or any state thereof having combined capital and surplus of not less than $500,000,000 or (ii) organized under the laws
of Finland or another member state of the European Economic Area and having a rating of at least “A-1” by S&P or “P-1” by Moody’s; (c) commercial paper of an issuer rated at least (i) A-2 by S&P or P-2 by
Moody’s, or carrying an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally or (ii) having a rating comparable to A-2 or P-2 from a
Finnish rating agency operating within the European Economic Area, and in each case maturing within six months from the date of acquisition; (d) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b)
of this definition, having a term of not more than 30 days with respect to securities issued or fully guaranteed or insured by the United States or Finnish governments; (e) securities with maturities of one year or less from the date of acquisition
issued or fully guaranteed by the Finnish government, any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated (i) at least A by S&P or A by Moody’s or (ii) a rating comparable to A from a Finnish or other
applicable rating agency; (f) securities with maturities of six months or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition;
and (g) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition. 
  
 “Change of Control”: (a) the Permitted Investors shall cease to own beneficially and of record 51% of the
outstanding common stock of Holdings, or (b) Holdings shall cease to own beneficially and of record (directly or indirectly through one or more Subsidiaries) and control, directly or indirectly, 100% of each class of outstanding Capital Stock of the
Borrower. 
  

 3 

 “Closing Date”: the date on which the conditions precedent set forth in Section 4.1
shall have been satisfied. 
  
 “Closing Date
Projections”: as defined in Section 4.1(g). 
  
 “Code”: the United States Internal Revenue Code of 1986, as amended from time to time. 
  
 “Collateral”: all Property of the Loan Parties (other than Holdings), now owned or hereafter acquired, upon which a Lien is purported to
be created by any Security Document. 
  
 “Compliance
Certificate”: a certificate duly executed by a Responsible Officer, substantially in the form of Exhibit B. 
  
 “Consolidated EBITDA”: of any Person for any period, Consolidated Net Income of such Person and its Subsidiaries for such period
plus, without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of (a) income tax expense, (b) Consolidated Interest Expense (including accrued interest) of such
Person and its Subsidiaries, amortization or writeoff of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness, (c) depreciation and amortization expense, (d) amortization of
intangibles (including, but not limited to, goodwill) and organization costs, (e) any extraordinary, unusual or non-recurring expenses or losses (including, whether or not otherwise includable as a separate item in the statement of such Consolidated
Net Income for such period, losses on sales of assets outside of the ordinary course of business), (f) any other non-cash charges and (g) management fees payable by Borrower to Radnor Management pursuant to the Management Agreement, and
minus, to the extent included in the statement of such Consolidated Net Income for such period, the sum of (a) interest income (except to the extent deducted in determining Consolidated Interest Expense), (b) any extraordinary, unusual or
non-recurring income or gains (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, gains on the sales of assets) and (c) any other non-cash income, all as determined on
a consolidated basis; provided, that for purposes of calculating Consolidated EBITDA of the Borrower and its Subsidiaries for any period, (i) the Consolidated EBITDA of any Person acquired by the Borrower or its Subsidiaries during such
period shall be included on a pro forma basis for such period (assuming the consummation of such acquisition and the incurrence or assumption of any Indebtedness in connection therewith occurred on the first day of such period) if the consolidated
balance sheet of such acquired Person and its consolidated Subsidiaries as at the end of the period preceding the acquisition of such Person and the related consolidated statements of income and stockholders’ equity and of cash flows for the
period in respect of which Consolidated EBITDA is to be calculated (x) have been previously provided to the Administrative Agent and the Lenders and (y) either (1) have been reported on without a qualification arising out of the scope of the audit
by independent certified public accountants of nationally recognized standing or (2) have been found acceptable by the Administrative Agent and (ii) the Consolidated EBITDA of any Person Disposed of by the Borrower or its Subsidiaries during such
period shall be excluded for such period (assuming the consummation of such Disposition and the repayment of any Indebtedness in connection therewith occurred on the first day of such period). 
  

 4 

 “Consolidated Interest Expense”: of any Person for any period, total cash interest
expense (including that attributable to Capital Lease Obligations) of such Person and its Subsidiaries for such period with respect to all outstanding Indebtedness of such Person and its Subsidiaries (including, without limitation, all commissions,
discounts and other fees and charges owed by such Person with respect to letters of credit and bankers’ acceptance financing and net costs of such Person under Hedge Agreements in respect of interest rates to the extent such net costs are
allocable to such period in accordance with GAAP). 
  
 “Consolidated Fixed Charges”: for any period, the Consolidated Interest Expense of the Borrower and its Subsidiaries for such period. 
  

“Consolidated Fixed Charge Coverage Ratio”: for any period, the ratio of (a) Consolidated EBITDA of the Borrower and its Subsidiaries
for such period minus the aggregate amount actually paid by the Borrower and its Subsidiaries in cash during such period on account of Capital Expenditures to (b) Consolidated Fixed Charges for such period. 
  
 “Consolidated Leverage Ratio”: as of any date, the ratio of
(a) Consolidated Total Debt on such date to (b) Consolidated EBITDA of the Borrower and its Subsidiaries for the last 12 fiscal month period ending on or before such date. 
  
 “Consolidated Net Income”: of any Person for any period, the consolidated net income (or loss) of such
Person and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP; provided, that in calculating Consolidated Net Income of the Borrower and its consolidated Subsidiaries for any period, there shall be
excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary of the Borrower or is merged into or consolidated with the Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person (other
than a Subsidiary of the Borrower) in which the Borrower or any of its Subsidiaries has an ownership interest, except to the extent that any such income is actually received by the Borrower or such Subsidiary in the form of dividends or similar
distributions and (c) the undistributed earnings of any Subsidiary of the Borrower to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any Contractual
Obligation (other than under any Loan Document) or Requirement of Law applicable to such Subsidiary. 
  
 “Consolidated Total Debt”: at any date, the aggregate principal amount of all Indebtedness of the Borrower and its Subsidiaries at such
date, determined on a consolidated basis in accordance with GAAP; provided that Consolidated Total Debt shall not include revolver borrowings under the Senior Credit Agreement to the extent that the Borrower maintains cash balances in excess of the
amount drawn under the Senior Credit Agreement from time to time. 
  
 “Contractual Obligation”: as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its Property is
bound. 
  
 “Control Investment Affiliate”: as to
any Person, any other Person that (a) directly or indirectly, is in control of, is controlled by, or is under common control with, such 
  

 5 

 Person and (b) is organized by such Person primarily for the purpose of making equity or debt investments in one or more
companies. For purposes of this definition, “control” of a Person means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. 
  
 “Default”: any of the events specified in Article 7, whether
or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied. 
  
 “Derivative Agreement”: the Master Customer Contract for Derivative Transactions Agreement, as amended, modified or supplemented from
time to time to the extent permitted herein to be entered into between the Borrower and the Senior Lender. 
  
 “Derivatives Counterparty”: as defined in Section 6.6. 
  
 “Disposition”: with respect to any Property, any sale, lease, sale and leaseback, assignment, conveyance,
transfer or other disposition thereof; and the terms “Dispose” and “Disposed of” shall have correlative meanings. 
  
 “Dollar Equivalent”: of any amount means, at the time of determination thereof, (a) if such amount is expressed in an Alternative
Currency, the equivalent of such amount in Dollars determined by using the rate of exchange quoted by Citibank in New York, New York at 11:00 a.m. (New York City time) on the date of determination (or, if such date is not a Business Day, the last
Business Day prior thereto) to prime banks in New York for the spot purchase in the New York foreign exchange market of such amount of Dollars with such Alternative Currency and (b) if such amount is denominated in any other currency, the equivalent
of such amount in Dollars as determined by the Administrative Agent using any method of determination it deems reasonably appropriate. 
  
 “Dollars” and “$”: lawful currency of the United States of America. 
  
 “Eligible Assignee”: (a) a Lender or an Affiliate, Related
Fund or Control Investment Affiliate of any Lender, (b) a commercial bank, (c) a finance company, insurance company, financial institution or fund, in each case regularly engaged in making, purchasing, holding or otherwise investing in loans and
similar extensions of credit, or (d) a savings and loan association or savings bank organized under the laws of the United States or any State thereof. 
  
 “Environmental Laws”: any and all laws, rules, orders, regulations, statutes, ordinances, guidelines, codes, decrees, or other legally
enforceable requirements (including, without limitation, common law) of any international authority, foreign government, the United States, or any state, local, municipal or other governmental authority, regulating, relating to or imposing liability
or standards of conduct concerning protection of the environment or of human health, or employee health and safety, as has been, is now, or may at any time hereafter be, in effect. 
  
 “Equity Loan Agreement”: the Loan Agreement dated as of December 28, 2001 between the Borrower and Radnor
Chemical in the aggregate principal amount of €8,000,000. 
  

 6 

 “Environmental Permits”: any and all permits, licenses, approvals, registrations,
notifications, exemptions and other authorizations required under any Environmental Law. 
  
 “Euro” and “€”: the single currency of the European Union. 
  
 “Eurocurrency Reserve Requirements”: for any day, the aggregate (without duplication) of the maximum rates (expressed as a decimal
fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves) under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto
dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board) maintained by a member bank of the Federal Reserve System. 
  
 “Eurodollar Base Rate”: with respect to each day during each
Interest Period, the rate per annum determined on the basis of the rate for deposits in Dollars for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Page 3750 of the Telerate screen as of 11:00
A.M., London time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Page 3750 of the Telerate screen (or otherwise on such screen), the “Eurodollar Base Rate” for
purposes of this definition shall be determined by reference to such other comparable publicly available service for displaying eurodollar rates as may be selected by the Administrative Agent. 
  
 “Eurodollar Loans”: Loans for which the applicable rate of
interest is based upon the Eurodollar Rate. 
  
 “Eurodollar Rate”: with respect to each day during each Interest Period, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%): 
  
               Eurodollar Base Rate               
 1.00 - Eurocurrency Reserve Requirements 
  
 “Eurodollar Tranche”: the collective reference to Eurodollar Loans the then current Interest Periods with respect to all of which begin
on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day). 
  
 “Event of Default”: any of the events specified in Article 7, provided that any requirement for the giving of notice, the lapse of
time, or both, has been satisfied. 
  
 “Excess Cash
Flow”: for any fiscal year of the Borrower, the difference, if any, of (a) the sum, without duplication, of (i) Consolidated Net Income for such fiscal year, (ii) the amount of all non-cash charges (including depreciation, amortization and
deferred taxes) deducted in arriving at such Consolidated Net Income, (iii) the amount of the decrease, if any, in working capital for such fiscal year and (iv) the aggregate net amount of non-cash loss on the Disposition of Property by the Borrower
and its Subsidiaries during such fiscal year (other than sales of inventory in the ordinary course of business), to the extent deducted in arriving at such Consolidated Net Income minus (b) the sum, without duplication, of (i) the amount of
all non-cash credits included in arriving at such Consolidated Net Income, including deferred tax credits, 
  

 7 

 (ii) the aggregate amount actually paid by the Borrower and its Subsidiaries in cash during such fiscal year on account
of Capital Expenditures (minus the principal amount of Indebtedness incurred in connection with such expenditures), (iii) the aggregate amount of all optional prepayments of the Term Loans during such fiscal year, (iv) the aggregate amount of
all regularly scheduled principal payments of Indebtedness permitted hereunder (including, without limitation, the Term Loans) of the Borrower and its Subsidiaries made during such fiscal year (other than in respect of any revolving credit facility
to the extent there is not an equivalent permanent reduction in commitments thereunder), (v) the aggregate net amount of non-cash gain on the Disposition of Property by the Borrower and its Subsidiaries during such fiscal year (other than sales of
inventory in the ordinary course of business), to the extent included in arriving at such Consolidated Net Income, (vii) the net decrease during such fiscal year (if any) in deferred tax accounts of the Borrower and (viii) the amount of the
increase, if any, in working capital for such fiscal year. 
  
 “Excess Cash Flow Application Date”: as defined in Section 2.6(c). 
  
 “Existing Credit Agreements”: collectively (i) the Intercompany Loan, (ii) the Senior Secured Finance Facility Agreement dated as of December 17, 2002 and amended on February 1, 2005, between the
Borrower and the Senior Lender and (iii) the Nordea Term Loan Agreement. 
  
 “Extraordinary Recovery Event”: (i) any settlement of or payment in respect of any property or casualty insurance claim or any condemnation proceeding relating to any asset of the Borrower or any of
its Subsidiaries and (ii) any cash received by, paid to or for the account of the Borrower in connection with the close out or termination of the Derivative Agreement. 
  
 “Federal Funds Effective Rate”: for any day, a rate per annum (expressed as a decimal, rounded upwards, if
necessary, to the next higher 1/100 of 1%) equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal
Reserve Bank of New York on the Business Day next succeeding such day, provided that (i) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Effective Rate for such day shall be such rate on such transactions
on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if such rate is not so published for any day, the Federal Funds Effective Rate for such day shall be the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal Funds brokers of recognized standing selected by it. 
  
 “Fee Letter”: the Fee Letter dated as of the date hereof between the Borrower and the Administrative Agent. 
  
 “GAAP”: (i) with respect to audited financial statements
generally accepted accounting principles in Finland as in effect from time to time and (ii) with respect to unaudited financial statements generally accepted accounting principles in the United States of America as in effect from time to time;
provided that (x) any reconciliation or conversion between Finnish GAAP and US GAAP shall be in accordance with US GAAP and (y) the Borrower shall provide 
  

 8 

 the Administrative Agent with details of such reconciliation or conversion which shall be satisfactory to the
Administrative Agent. 
  
 “Governmental
Authority”: any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. 
  
 “Guarantee Agreement”: the Amended and Restated Continuing
Guaranty and Agreement to be executed and delivered by Holdings, substantially in the form of Exhibit A, as the same may be amended, supplemented or otherwise modified from time to time. 
  
 “Guarantee Obligation”: as to any Person (the “guaranteeing person”), any obligation of
(a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit), if to induce the creation of such obligation of such other Person the guaranteeing person has issued a reimbursement,
counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the “primary obligations”) of any other third Person (the “primary
obligor”) in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any Property constituting direct or
indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency
of the primary obligor, (iii) to purchase Property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv)
otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of
which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount
for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person’s maximum reasonably anticipated liability in respect thereof as determined
by the Borrower in good faith. 
  
 “Hedge
Agreements”: all interest rate or currency swaps, caps or collar agreements, foreign exchange agreements, commodity contracts or similar arrangements entered into by the Borrower or its Subsidiaries providing for protection against
fluctuations in interest rates, currency exchange rates, commodity prices or the exchange of nominal interest obligations, either generally or under specific contingencies. 
  
 “Holdings”: as defined in the preamble hereto. 
  
 “Indebtedness”: of any Person at any date, without
duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the 
  

 9 

 deferred purchase price of Property or services (other than trade payables incurred in the ordinary course of such
Person’s business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to
Property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such Property), (e) all Capital Lease Obligations of such Person, (f)
all obligations of such Person, contingent or otherwise, as an account party or applicant under acceptance, letter of credit or similar facilities, (g) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise
acquire for value any Capital Stock of such Person, (h) all Guarantee Obligations of such Person in respect of obligations of the kind referred to in clauses (a) through (g) above; (i) all obligations of the kind referred to in clauses (a) through
(h) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on Property (including, without limitation, accounts and contract rights) owned by such Person, whether or
not such Person has assumed or become liable for the payment of such obligation and (j) for the purposes of Section 7.1(e) only, all obligations of such Person in respect of Hedge Agreements. The equity loan under the Equity Loan Agreement shall not
be deemed “Indebtedness” for purposes of this definition, to the extent such equity loan is deemed and treated as equity (and not debt) under applicable accounting rules and regulations. 
  
 “Indemnified Liabilities”: as defined in Section 9.5.

  
 “Indemnitee”: as defined in Section 9.5.

  
 “Intellectual Property”: the collective
reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including, without limitation, copyrights, copyright licenses, patents, patent
licenses, trademarks, trademark licenses, technology, know-how and processes, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom. 

 
 “Intercompany Loan”: the Loan Agreement dated as of
October 15, 1997 and amended on March 18, 2002 between the Borrower and Radnor Chemical in the aggregate outstanding principal amount of €8,667,122.39. 
  
 “Intercreditor Agreement”: the Intercreditor Agreement dated as of the date hereof among the Borrower, the Administrative Agent and the
Senior Lender, substantially in the form of Exhibit I, as the same may be amended, supplemented or otherwise modified from time to time. 
  
 “Interest Payment Date”: (a) as to any Eurodollar Loan having an Interest Period of three months or shorter, the last day of such
Interest Period, (b) as to any Eurodollar Loan having an Interest Period longer than three months, each day that is three months, or a whole multiple thereof, each day prior to the last day of such Interest Period that occurs at intervals of three
months’ duration after the first day of such Interest Period, (c) as to any Base Rate Loan, the last day of each March, June, September and December to occur while such Loan is 
  

 10 

 outstanding and the final maturity date of such Loan, and (d) as to any Loan the date of any repayment or prepayment made
in respect thereof. 
  
 “Interest Period”: as to
any Eurodollar Loan, (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Borrower in its notice of
borrowing or notice of conversion, as the case may be, given with respect thereto; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six
months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than two Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the
foregoing provisions relating to Interest Periods are subject to the following: 
  
 (1) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; 
  
 (2) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period. 
  
 “Investments”: as defined in Section 6.8. 
  
 “Lenders”: as defined in the preamble hereto. 
  
 “Lien”: any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any capital lease
having substantially the same economic effect as any of the foregoing). 
  
 “Loan”: any loan made by any Lender pursuant to this Agreement. 
  
 “Loan Documents”: this Agreement, the Guaranty Agreement, the Security Documents, the Term Notes, the Intercreditor Agreement, the Fee Letter and each other agreement or document executed by a Loan
Party and delivered to the Administrative Agent or any Lender in connection with or pursuant to any of the foregoing. 
  
 “Loan Parties”: Holdings, the Borrower, StyroChem Europe and each Subsidiary of the Borrower that is a party to a Loan Document.

  
 “Management Agreement”: the Management
Services Agreement dated as of February 19, 1999 among Radnor Management, Inc., StyroChem Europe, and the Borrower. 
  

 11 

 “Material Adverse Effect”: a material adverse effect on (a) the business, assets,
property, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole or (b) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights or remedies of the Agents or the
Lenders hereunder or thereunder. 
  
 “Material
Environmental Amount”: an amount or amounts payable by the Borrower and/or any of its Subsidiaries, in the aggregate in excess of €250,000 (or its Dollar Equivalent), for: costs to comply with any Environmental Law; costs of any
investigation, and any remediation, of any Material of Environmental Concern; and compensatory damages (including, without limitation damages to natural resources), punitive damages, fines, and penalties pursuant to any Environmental Law.

  
 “Materials of Environmental Concern”: any
gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products, polychlorinated biphenyls, urea-formaldehyde insulation, asbestos, pollutants, contaminants, radioactive materials, and any other substances or forces of any
kind, whether or not any such substance or force is defined as hazardous or toxic under any Environmental Law, that is regulated pursuant to or could give rise to liability under any Environmental Law. 
  
 “Maturity Date”: July 1, 2008. 
  
 “Maximum Lawful Rate”: as defined in Section 2.7(d),

  
 “Moody’s”: Moody’s Investors
Service, Inc. 
  
 “Net Cash Proceeds”: (a) in
connection with any Asset Sale or any Extraordinary Recovery Event, the proceeds thereof in the form of cash and Cash Equivalents (including any such proceeds received by way of deferred payment of principal pursuant to a note or installment
receivable or purchase price adjustment receivable or otherwise, but only as and when received) of such Asset Sale or Extraordinary Recovery Event, net of attorneys’ fees, accountants’ fees, investment banking fees, amounts required to be
applied to the repayment of Indebtedness secured by a Lien expressly permitted hereunder on any asset which is the subject of such Asset Sale or Extraordinary Recovery Event (other than any Lien pursuant to a Security Document) and other customary
fees and expenses actually incurred in connection therewith and net of taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), (b) in
connection with any issuance or sale of equity securities or debt securities or instruments or the incurrence of loans, the cash proceeds received from such issuance or incurrence, net of attorneys’ fees, investment banking fees,
accountants’ fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith and (c) in connection with any Purchase Price Refund, the cash amount thereof, net of any expenses
incurred in the collection thereof. 
  
 “Non-Excluded
Taxes”: as defined in Section 2.12(a). 
  
 “Non-U.S. Lender”: as defined in Section 2.12(d). 
  

 12 

 “Nordea Term Loan Agreement”: the Loan Agreement dated as of March 20, 2001 between the
Borrower and the Senior Lender in the aggregate outstanding amount of €504,563.73. 
  
 “Obligations”: the unpaid principal of and interest on (including, without limitation, interest accruing after the maturity of the Term Loans and interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Term Loans and all other obligations
and liabilities of the Borrower to the Administrative Agent or to any Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this
Agreement, any other Loan Document or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without
limitation, all fees, charges and disbursements of counsel to the Administrative Agent or to any Lender that are required to be paid by the Borrower pursuant hereto) or otherwise. 
  
 “Other Taxes”: any and all present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document. 
  
 “Participant”: as defined in Section 9.6(b). 
  
 “Payment Office”: as to any Lender or the Administrative
Agent, the office specified from time to time by such Lender or the Administrative Agent, as the case may be, as its payment office by notice to the Borrower and, in the case of a Lender’s Payment Office, the Administrative Agent. 

 
 “Permitted Investors”: (i) Michael T. Kennedy, R.
Radcliffe Hastings and Michael V. Valenza; (ii) the spouse and children or grandchildren (including children or grandchildren by adoption) of Michael T. Kennedy, R. Radcliffe Hastings or Michael V. Valenza; (iii) any controlled Affiliate (without
giving effect to clause (a) of the definition of “Affiliate”) of any of the foregoing; (iv) in the event of the incompetence or death of any of the Persons described in clause (i) or (ii) above, such person’s estate, executor,
administrator, committee or other personal representative; or (v) any trusts created for the benefit of the Persons described in clause (i), (ii), or (iv) or any trust for the benefit of any such trust. 
  
 “Person”: an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. 
  
 “Pledge Agreement”: the Agreement on Pledge of Shares dated as of the date hereof between StyroChem Europe
and the Administrative Agent, substantially in the form of Exhibit J, as the same may be amended, supplemented or otherwise modified from time to time. 
  
 “Pledged Stock”: the term “Pledged Shares” as defined in the Pledge Agreement. 
  

 13 

 “Pricing Grid”: the pricing grid attached hereto as Annex A. 
  
 “Prime Rate”: as defined in the definition of Base Rate.

  
 “Pro Forma Balance Sheet”: as defined in
Section 3.1(a). 
  
 “Projections”: as defined in
Section 5.2(c). 
  
 “Property”: any right or
interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible, including, without limitation, Capital Stock. 
  
 “Radnor Chemical”: Radnor Chemical Corporation, a Delaware corporation. 
  
 “Radnor Management”: Radnor Management Inc., a Delaware
corporation. 
  
 “Register”: as defined in
Section 9.6(d). 
  
 “Related Fund”: with respect
to any Lender, any fund that (x) invests in commercial loans and (y) is managed or advised by the same investment advisor as such Lender, by such Lender or an Affiliate of such Lender. 
  
 “Required Lenders”: at any time, the holders of more than 50% of the aggregate principal amount of Term
Loans then outstanding. 
  
 “Requirement of Law”:
as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject. 
  
 “Responsible Officer”: the managing director, or chief financial officer of the Borrower, but in any event, with respect to financial
matters, the managing director of the Borrower or the executive vice president or chief financial officer of Holdings. 
  
 “Restricted Payments”: as defined in Section 6.6. 
  
 “SEC”: the Securities and Exchange Commission (or successors thereto or an analogous Governmental
Authority). 
  
 “Secured Parties”: as defined in
the Security Agreement. 
  
 “Security Agreement”:
the Agreement on the Pledge of Floating Charge Promissory Notes dated as of the date hereof among the Borrower, the Administrative Agent and the Senior Lender, substantially in the form of Exhibit K, as the same may be amended, supplemented or
otherwise modified from time to time. 
  
 “Security
Documents”: the collective reference to the Guarantee Agreement, the Security Agreement, the Pledge Agreement, the Intercreditor Agreement and all other security 
  

 14 

 documents hereafter delivered to the Administrative Agent granting a Lien on any Property of any Person to secure the
obligations and liabilities of any Loan Party under any Loan Document. 
  
 “Senior Credit Agreement”: as defined in the recital hereto. 
  
 “Senior Lender”: as defined in the recital hereto. 
  
 “Senior Liens”: first priority Liens granted in favor of the Senior Lender under the Senior Credit Agreement. 
  
 “S&P”: Standard & Poor’s Rating Services.

  
 “StyroChem Europe”: StyroChem Europe (The
Netherlands) B.V., a company organized and existing under the laws of The Netherlands. 
  
 “Subsidiary”: as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than
stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or
the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a “Subsidiary” or to “Subsidiaries” in this
Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. 
  
 “Subsidiary Guarantor”: each Subsidiary of the Borrower. 
  
 “Term Loan”: as defined in Section 2.1. 
  
 “Term Loan Commitment”: as to any Lender, the obligation of such Lender to make Term Loans in an aggregate principal amount not to exceed the amount set forth under the heading “Term Loan
Commitment” opposite such Lender’s name on Schedule 1.2 hereto, or, as the case may be, in the Assignment and Acceptance pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to the
terms hereof. The aggregate amount of the Term Loan Commitments is $20,000,000. 
  
 “Term Loan Note”: as defined in Section 2.3(f). 
  
 “Term Loan Percentage”: as to any Lender at any time, the percentage which the aggregate principal amount of such Lender’s Term
Loans then outstanding constitutes with respect to the aggregate principal amount of all Term Loans then outstanding. 
  
 “Transferee”: as defined in Section 9.14. 
  
 1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when
used in the other Loan Documents or any certificate or other document made or delivered pursuant hereto or thereto. 
  

 15 

 (b) As used herein and in the other Loan Documents, and any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms relating to the Borrower and its Subsidiaries not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given
to them under GAAP. 
  
 (c) The words “hereof”,
“herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified. 
  
 (d) The meanings
given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 
  
 (e) All calculations of financial ratios set forth in Section 6.1 shall be calculated to the same number of decimal places as the relevant ratios are
expressed in and shall be rounded upward if the number in the decimal place immediately following the last calculated decimal place is five or greater. For example, if the relevant ratio is to be calculated to the hundredth decimal place and the
calculation of the ratio is 3.246, the ratio will be rounded up to 3.25. 
  
 ARTICLE II - AMOUNT AND TERMS OF COMMITMENTS 
  
 2.1
Term Loan Commitments. Subject to the terms and conditions hereof, each Lender severally agrees to make to the Borrower term loans (“Term Loans”) on the Closing Date in an aggregate principal amount not to exceed such
Lender’s Term Loan Percentage of the Term Loan Commitment. 
  
 2.2 Procedure for Term Loan Borrowing. The Borrower shall deliver to the Administrative Agent a Borrowing Notice (which Borrowing Notice must be received by the Administrative Agent prior to 10:00 A.M., New York City time, two
Business Days prior to the anticipated Closing Date) requesting that the Lenders make Term Loans in an amount not to exceed the aggregate amount of the Term Loan Commitments on the Closing Date. Upon receipt of such Borrowing Notice from the
Borrower, the Administrative Agent shall promptly notify each Lender thereof. Each Lender will make its Term Loan Percentage of the amount of the Term Loans available to the Borrower at an account designated by the Borrower in such Borrowing Notice
prior to 12:00 Noon, New York City time, on the Closing Date in immediately available funds. 
  
 2.3 Repayment of Term Loans; Evidence of Debt. 
  
 (a) The Term Loans shall amortize in twelve consecutive installments, commencing on September 30, 2005, each of which shall be in an amount equal to such Lender’s Term Loan Percentage multiplied by the amount set
forth below opposite such installment: 
  

 16 

				
	 Installment

	  	Principal
Amount

	 September 30, 2005
	  	$	500,000
	 December 31, 2005
	  	$	500,000
	 March 31, 2006
	  	$	500,000
	 June 30, 2006
	  	$	500,000
	 September 30, 2006
	  	$	575,000
	 December 31, 2006
	  	$	575,000
	 March 31, 2007
	  	$	575,000
	 June 30, 2007
	  	$	575,000
	 September 30, 2007
	  	$	650,000
	 December 31, 2007
	  	$	650,000
	 March 31, 2008
	  	$	650,000
	 Maturity Date
	  	$	13,750,000

  
 (b) The Borrower
hereby further agrees to pay interest on the unpaid principal amount of the Term Loans from time to time outstanding from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in Section 2.7. 

 
 (c) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing indebtedness of the Borrower to such Lender resulting from each Term Loan of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this
Agreement. 
  
 (d) The Administrative Agent, on behalf of the
Borrower, shall maintain the Register pursuant to Section 9.6(d), and a subaccount therein for each Lender, in which shall be recorded (i) the amount of each Term Loan made hereunder and any Term Loan Note evidencing such Term Loan, (ii) the amount
of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by each Lender hereunder from the Borrower. 
  
 (e) The entries made in the Register and the accounts of each Lender
maintained pursuant to Section 2.3(c) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the
failure of any Lender or the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Term Loans made to the
Borrower by such Lender in accordance with the terms of this Agreement. 
  
 (f) The Borrower agrees that, upon the request to the Administrative Agent by any Lender, the Borrower will promptly execute and deliver to such Lender a promissory note of the Borrower evidencing any Term Loans of such Lender,
substantially in the form of Exhibit G (a “Term Loan Note”), with appropriate insertions as to date and principal amount. 
  
 2.4 Fees. The Borrower agrees to pay to the Administrative Agent the fees in the amounts and on the dates set forth in the Fee Letter. 

 

 17 

 2.5 Optional Prepayments. (a) The Borrower may at any time and from time to time prepay the Term
Loans, in whole or in part, upon irrevocable notice delivered to the Administrative Agent at least one Business Day prior thereto, which notice shall specify the date and amount of such prepayment, as set forth in Section 2.5(c). Upon receipt of any
such notice the Administrative Agent shall promptly notify each relevant Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to such
date on the amount prepaid. Partial prepayments of Term Loans shall be in an aggregate principal amount of $1,000,000 or a whole multiple thereof. 
  
 (b) Amounts to be applied in connection with any prepayments made pursuant to this Section shall be applied to the Term Loans, pro rata
among the Lenders according to the amounts of the Term Loans then held by the Lenders. 
  
 (c) Each optional prepayment in respect of the Term Loans shall be accompanied by a prepayment premium equal to (i) if such prepayment is made prior to the first anniversary of the Closing Date, 2% of the principal
amount of such prepayment and (ii) if such prepayment is made on or after the first anniversary of the Closing Date and prior to the second anniversary of the Closing Date, 0.5% of the principal amount of such prepayment; provided that
optional prepayments up to $2,000,000 per fiscal year throughout the term of this Agreement shall not be subject to a prepayment premium. Any prepayment of the Term Loans upon the refinancing thereof (whether with proceeds of equity or Indebtedness)
or upon the occurrence of a Change of Control shall be deemed to be an optional prepayment. 
  
 2.6 Mandatory Prepayments. (a) If any Capital Stock shall be issued, or Indebtedness incurred, by the Borrower or any of its Subsidiaries (excluding any Indebtedness incurred in accordance with Section 6.2 of
this Agreement), then on the date of such issuance or incurrence, the Term Loans shall be prepaid by an amount equal to the amount of the Net Cash Proceeds of such issuance or incurrence, as set forth in Section 2.6(d). The provisions of this
Section do not constitute a consent to the issuance of any equity securities by any entity whose equity securities are pledged pursuant to the Security Documents, or a consent to the incurrence of any Indebtedness by the Borrower or any of its
Subsidiaries. 
  
 (b) If on any date the Borrower or any of its
Subsidiaries shall receive Net Cash Proceeds from any Asset Sale or Extraordinary Recovery Event, then, on the date of receipt by the Borrower of such Net Cash Proceeds, the Term Loans shall be prepaid by an amount equal to the amount of such Net
Cash Proceeds (less any amount applied by the Borrower within 180 days of receipt to repair or replace any damaged or condemned property for which insurance proceeds or condemnation proceeds have been received), as set forth in Section 2.6(d);
provided that the Borrower shall only be required to prepay under this Section 2.6(b) from Net Cash Proceeds in excess of $500,000 in the aggregate for all Asset Sale or Extraordinary Recovery Events over the term of this Agreement. The
provisions of this Section do not constitute a consent to the consummation of any Disposition not permitted by Section 6.5. 
  
 (c) If, for any fiscal year of the Borrower commencing with the fiscal year ending December 31, 2005, the Consolidated Leverage Ratio is greater than 3.0
to 1 and there shall be Excess Cash Flow, then, on the relevant Excess Cash Flow Application Date, the Term 
  

 18 

 Loans shall be prepaid by an amount equal to 50% of such Excess Cash Flow, as set forth in Section 2.6(d). Each such
prepayment shall be made on a date (an “Excess Cash Flow Application Date”) no later than five days after the earlier of (i) the date on which the financial statements of the Borrower referred to in Section 5.1(b), for the fiscal
year with respect to which such prepayment is made, are required to be delivered to the Lenders and (ii) the date such financial statements are actually delivered. 
  
 (d) Amounts to be applied in connection with any prepayments made pursuant to this Section shall be applied to the
prepayment of the Term Loans, pro rata among the Lenders according to the amounts of the Term Loans then held by the Lenders. 
  
 (e) Each mandatory prepayment in respect of the Term Loans shall be made without prepayment premium or penalty. 
  
 2.7 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall
bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin in effect for such day. Each Base Rate Loan shall bear interest for each
day on which it is outstanding at a rate per annum equal to the Base Rate in effect for such day plus the Applicable Margin in effect for such day. 
  
 (b) Notwithstanding the rates of interest specified in clause (a) above or elsewhere herein, effective immediately upon the occurrence of an Event of
Default and for as long thereafter as such Event of Default shall be continuing, the principal balance of all Term Loans and the amount of all other Obligations then due and payable shall bear interest at a rate per annum that is equal to (i) in the
case of principal, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this Section plus 2% and (ii) in the case of all other Obligations, the rate then applicable to Base Rate Loans plus 2%, in each case from
the date of such nonpayment to (but excluding) the date on which such amount is paid in full (after as well as before judgment). 
  
 (c) Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (b) of this Section
shall be payable from time to time on demand. 
  
 (d)
Notwithstanding anything to the contrary set forth in this Section 2.7, if a court of competent jurisdiction determines in a final order that the rate of interest payable hereunder exceeds the highest rate of interest permissible under law (the
“Maximum Lawful Rate”), then so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable hereunder shall be equal to the Maximum Lawful Rate; provided, however, that if at any time thereafter
the rate of interest payable hereunder is less than the Maximum Lawful Rate, Borrower shall continue to pay interest hereunder at the Maximum Lawful Rate until such time as the total interest received by the Lenders is equal to the total interest
which would have been received had the interest rate payable hereunder been (but for the operation of this paragraph) the interest rate payable since the Closing Date as otherwise provided in this Agreement. Thereafter, interest hereunder shall be
paid at the rate of interest and in the manner provided in this Section, unless and until the rate of interest again exceeds the Maximum Lawful Rate, and at that time 
  

 19 

 this paragraph shall again apply. In no event shall the total interest received by the Lenders pursuant to the terms
hereof exceed the amount which the Lenders could lawfully have received had the interest due hereunder been calculated for the full term hereof at the Maximum Lawful Rate. If, notwithstanding the provisions of this Section 2.7(d), a court of
competent jurisdiction shall finally determine that the Lenders have received interest hereunder in excess of the Maximum Lawful Rate, the Lenders shall refund any excess to Borrower or as a court of competent jurisdiction may otherwise order.

  
 2.8 Computation of Interest and Fees. (a) Interest,
fees and commissions payable pursuant hereto shall be calculated on the basis of a 360-day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders in each determination of
a Eurodollar Rate. Any change in the interest rate on a Term Loan resulting from a change in the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The
Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders of the effective date and the amount of each such change in interest rate. 
  
 (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be
conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the quotations used by the Administrative Agent in
determining any interest rate pursuant to Section 2.8(a). 
  
 2.9
Inability to Determine Interest Rate. If prior to the first day of any Interest Period: 
  
 (a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of
circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or 
  
 (b) the Administrative Agent shall have received notice from the Required Lenders that the Eurodollar Rate determined or to be determined for such
Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, 
  
 the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and
the Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as Base Rate Loans, (y) any Loans that were to have been converted on the
first day of such Interest Period to Eurodollar Loans shall be continued as Base Rate Loans and (z) any outstanding Eurodollar Loans shall be converted, on the last day of the then current Interest Period with respect thereto, to Base Rate Loans.
Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Loans shall be made or continued as such, nor shall the Borrower have the right to convert Base Rate Loans to Eurodollar Loans. 
  

 20 

 2.10 Pro Rata Treatment and Payments. (a) Each borrowing by the Borrower from the Lenders
hereunder shall be made pro rata according to the respective Term Loan Percentages of the relevant Lenders. 
  
 (b) Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Term Loans shall be made pro
rata according to the respective outstanding principal amounts of the Term Loans then held by the Lenders. 
  
 (c) Each payment of the Term Loans shall be accompanied by accrued interest to the date of such payment on the amount paid. 
  
 (d) All payments (including prepayments) to be made by the Borrower
hereunder, whether on account of principal, interest, fees or otherwise, shall be made without setoff or counterclaim and shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the applicable Lender or the Administrative
Agent, as the case may be, at the Payment Office for such Lender or the Administrative Agent, in Dollars and in immediately available funds. Any payment made by the Borrower after 12:00 Noon, New York City time, on any Business Day shall be deemed
to have been on the next following Business Day. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day. In the case of any extension of any payment of
principal pursuant to the preceding sentence, interest thereon shall be payable at the then applicable rate during such extension. 
  
 2.11 Requirements of Law. (a) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital
adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender’s or such corporation’s capital as a consequence of its obligations hereunder to a level below that which such Lender or such
corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender’s or such corporation’s policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then
from time to time, after submission by such Lender to the Borrower (with a copy to the Administrative Agent) of a written request therefor, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or
such corporation for such reduction. 
  
 (b) A certificate as to
any additional amounts payable pursuant to this Section submitted by any Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. The obligations of the Borrower pursuant to this Section
shall survive the termination of this Agreement and the payment of the Term Loans and all other amounts payable hereunder. 
  
 (c) Notwithstanding anything in this Agreement to the contrary, the Lenders shall not be entitled to compensation under Section 2.11 or Section 2.12 for
any amounts incurred or accruing more than 90 days prior to the giving of notice by the applicable Lender to the Borrower of additional costs of the type described in such Sections. 
  

 21 

 (d) Any Lender claiming any additional amounts payable pursuant to Section 2.11 or Section 2.12 shall, at
the request of the Borrower, use its reasonable efforts (consistent with its internal policies and Requirements of Law) to change the jurisdiction of its lending office if the making of such a change would avoid the need for, or reduce the amount
of, any such additional amounts that would be payable or may thereafter accrue and would not, in the sole determination of such Lender, be otherwise disadvantageous to such Lender. 
  
 2.12 Taxes. (a) All payments made by the Borrower under this Agreement shall be made free and clear of, and without
deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on the Administrative Agent or any Lender as a result of a present or former connection between the Administrative Agent or such
Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent’s or such Lender’s
having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Loan Document). If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings
(“Non-Excluded Taxes”) or any Other Taxes are required to be withheld from any amounts payable to the Administrative Agent or any Lender hereunder, the amounts so payable to the Administrative Agent or such Lender shall be increased
to the extent necessary to yield to the Administrative Agent or such Lender (after payment of all Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement;
provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender with respect to any Non-Excluded Taxes (i) that are attributable to such Lender’s failure to comply with the
requirements of paragraph (d) or (e) of this Section or (ii) that are United States withholding taxes imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement, except to the extent that such Lender’s
assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such Non-Excluded Taxes pursuant to this paragraph (a). 
  
 (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable
law. 
  
 (c) Whenever any Non-Excluded Taxes or Other Taxes are
payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Administrative Agent for the account of the Administrative Agent or Lender, as the case may be, a certified copy of an original official receipt received by
the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary
evidence, the Borrower shall indemnify the Administrative Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure. The agreements in
this Section shall survive the termination of this Agreement and the payment of the Term Loans and all other amounts payable hereunder. 
  

 22 

 (d) Each Lender (or Transferee) that is not a citizen or resident of the United States of America, a
corporation, partnership or other entity created or organized in or under the laws of the United States of America (or any jurisdiction thereof), or any estate or trust that is subject to federal income taxation regardless of the source of its
income (a “Non-U.S. Lender”) shall deliver to the Borrower and the Administrative Agent (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) two copies of either U.S.
Internal Revenue Service Form W-8BEN or Form W-8ECI, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of “portfolio interest” a
statement in a form satisfactory to the Administrative Agent and a Form W-8BEN, or any subsequent versions thereof or successors thereto properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or a reduced rate
of, U.S. federal withholding tax on all payments by the Borrower under this Agreement and the other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement (or, in the case of
any Participant, on or before the date such Participant purchases the related participation). In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S.
Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the U.S.
taxing authorities for such purpose). Notwithstanding any other provision of this paragraph, a Non-U.S. Lender shall not be required to deliver any form pursuant to this paragraph that such Non-U.S. Lender is not legally able to deliver. 

 
 (e) A Lender that is entitled to an exemption from or reduction of
non-U.S. withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without
withholding or at a reduced rate, provided that such Lender is legally entitled to complete, execute and deliver such documentation and in such Lender’s reasonable judgment such completion, execution or submission would not materially
prejudice the legal position of such Lender. 
  
 2.13
Indemnity. The Borrower agrees to indemnify each Lender for, and to hold each Lender harmless from, any loss or expense that such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion
into or continuation of Eurodollar Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment after the Borrower has given a notice
thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment or conversion of Eurodollar Loans on a day that is not the last day of an Interest Period with respect thereto. Such indemnification may include an amount
equal to the excess, if any, of (i) the amount of interest that would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or
continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate 
  

 23 

 of interest for such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any)
over (ii) the amount of interest (as reasonably determined by such Lender) that would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Eurodollar market.
A certificate as to any amounts payable pursuant to this Section submitted to the Borrower by any Lender shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and the payment of the Loans
and all other amounts payable hereunder. 
  
 2.14
Illegality. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Eurodollar Loans as
contemplated by this Agreement, (a) the commitment of such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and convert Base Rate Loans to Eurodollar Loans shall forthwith be canceled and (b) such Lender’s Loans then
outstanding as Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such
conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to Section 2.13.

  
 2.15 Change of Lending Office. Each Lender agrees that,
upon the occurrence of any event giving rise to the operation of Section 2.11, 2.12(a) or 2.14 with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to
designate another lending office for any Loans affected by such event with the object of avoiding the consequences of such event; provided, that such designation is made on terms that, in the sole judgment of such Lender, cause such Lender
and its lending office(s) to suffer no economic, legal or regulatory disadvantage, and provided, further, that nothing in this Section shall affect or postpone any of the obligations of any Borrower or the rights of any Lender pursuant
to Section 2.11, 2.12(a) or 2.14. 
  
 2.16 Conversion and
Continuation Options. (a) The Borrower may elect from time to time to convert Eurodollar Loans to Base Rate Loans by giving the Administrative Agent at least two Business Days’ prior irrevocable notice of such election; provided,
that any such conversion of Eurodollar Loans may be made only on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert Base Rate Loans to Eurodollar Loans by giving the Administrative Agent at
least two Business Days’ prior irrevocable notice of such election (which notice shall specify the length of the initial Interest Period therefor; provided, that no Base Rate Loan may be converted into a Eurodollar Loan (i) when any
Event of Default has occurred and is continuing and the Administrative Agent has, or the Majority Lenders have, determined in its or their sole discretion not to permit such conversions or (ii) after the date that is one month prior to the Maturity
Date. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof. 
  
 (b) The Borrower may elect to continue any Eurodollar Loan as such upon the expiration of the then current Interest Period with respect thereto by giving
irrevocable notice to the Administrative Agent in accordance with the applicable provisions of the term “Interest 
  

 24 

 Period” set forth in Section 1.1, of the length of the next Interest Period to be applicable to such Loans;
provided, that no Eurodollar Loan may be continued as such (i) when any Event of Default has occurred and is continuing and the Administrative Agent has, or the Majority Lenders have determined in its or their sole discretion not to permit
such continuations or (ii) after the date that is one month prior to the Maturity Date; provided, further, that if the Borrower shall fail to give any required notice as described above in this paragraph or if such continuation is not
permitted pursuant to this Agreement, such Loans shall be converted automatically to Base Rate Loans on the last day of such then expiring Interest Period. Upon receipt of any such notice the Administrative Agent as applicable, shall promptly notify
each relevant Lender thereof. 
  
 2.17 Minimum Amounts and
Maximum Number of Eurodollar Tranches. Notwithstanding anything to the contrary in this Agreement, all borrowings, conversions, continuations and optional prepayments of Eurodollar Loans and all selections of Interest Periods shall be in such
amounts and be made pursuant to such elections so that, (a) after giving effect thereto, the aggregate principal amount of the Eurodollar Loans comprising each Eurodollar Tranche shall be equal to $500,000 or a whole multiple of $50,000 in excess
thereof and (b) no more than eight Eurodollar Tranches shall be outstanding at any one time. 
  
 ARTICLE III - REPRESENTATIONS AND WARRANTIES 
  
 To induce the Administrative Agent and the Lenders to enter into this Agreement and to make the Term Loans, the Borrower hereby represents and warrants to the Administrative Agent and each Lender that: 
  
 3.1 Financial Condition. (a) The unaudited pro forma
consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at May 31, 2005 (including the notes thereto) (the “Pro Forma Balance Sheet”), copies of which have heretofore been furnished to each Lender, has been
prepared giving effect (as if such events had occurred on such date) to (i) the Term Loans to be made on the Closing Date and the use of proceeds thereof and (ii) the payment of fees and expenses in connection with the foregoing. The Pro Forma
Balance Sheet has been prepared based on the best information available to the Borrower as of the date of delivery thereof, and presents fairly on a pro forma basis the estimated financial position of Borrower and its consolidated
Subsidiaries as at May 31, 2005 assuming that the events specified in the preceding sentence had actually occurred at such date. 
  
 (b) The audited consolidated balance sheets of the Borrower and its consolidated Subsidiaries as at December 31, 2004, December 31, 2003 and December 31,
2002 and the related consolidated statements of income and of cash flows for the fiscal years ended on such dates, reported on by and accompanied by an unqualified report from KPMG LLP present fairly the consolidated financial condition of the
Borrower and its consolidated Subsidiaries as at such date, and the consolidated results of its operations and its consolidated cash flows for the fiscal year then ended. The unaudited consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at May 31, 2005 and the related unaudited consolidated statements of income and cash flows for the 5-month period ended on such date, present fairly the consolidated financial condition of the Borrower and its consolidated
Subsidiaries as at such date, and the consolidated results of its operations and its consolidated cash flows for the 5-month period then ended (subject to normal year-end audit adjustments). All such financial 
  

 25 

 statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved by the aforementioned firm of accountants and disclosed therein). The Borrower and its Subsidiaries do not have any material Guarantee Obligations, contingent liabilities and
liabilities for taxes, or any long-term leases or unusual forward or long-term commitments, including, without limitation, any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives, that are not
reflected in the most recent financial statements referred to in this paragraph. During the period from December 31, 2004 to and including the date hereof there has been no Disposition by the Borrower and its Subsidiaries of any material part of its
business or Property, except as previously disclosed to the Administrative Agent. 
  
 3.2 No Change. Since December 31, 2004 there has been no development or event that has had or could reasonably be expected to have a Material Adverse Effect. 
  
 3.3 Corporate Existence; Compliance with Law. Each of the Borrower and
its Subsidiaries (a) is duly organized and validly existing under the laws of the jurisdiction of its organization, (b) has the corporate power and authority, and the legal right, to own and operate its Property, to lease the Property it operates as
lessee and to conduct the business in which it is currently engaged, and (c) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect. 
  
 3.4 Corporate Power;
Authorization; Enforceable Obligations. Each Loan Party has the corporate power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party and, in the case of the Borrower, to borrow hereunder.
Each Loan Party has taken all necessary corporate action to authorize the execution, delivery and performance of the Loan Documents to which it is a party and, in the case of the Borrower, to authorize the borrowings on the terms and conditions of
this Agreement. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings hereunder or the execution, delivery, performance,
validity or enforceability of this Agreement or any of the other Loan Documents, except (i) consents, authorizations, filings and notices described in Schedule 3.4, which consents, authorizations, filings and notices have been obtained or made and
are in full force and effect (unless otherwise indicated on Schedule 3.4) and (ii) the filings referred to in Section 3.19. Each Loan Document has been duly executed and delivered on behalf of each Loan Party that is a party thereto. This Agreement
constitutes, and each other Loan Document upon execution will constitute, a legal, valid and binding obligation of each Loan Party that is a party thereto, enforceable against each such Loan Party in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (whether enforcement is sought by
proceedings in equity or at law). 
  
 3.5 No Legal Bar. The
execution, delivery and performance of this Agreement and the other Loan Documents, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or any Contractual Obligation of Holdings or any of its
Subsidiaries and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law or any such 
  

 26 

 Contractual Obligation (other than the Liens created by the Security Documents). No Requirement of Law or Contractual
Obligation applicable to the Borrower or any of its Subsidiaries could reasonably be expected to have a Material Adverse Effect. 
  
 3.6 No Material Litigation. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Borrower, threatened by or against the Borrower or any of its Subsidiaries or against any of their respective properties or revenues (a) with respect to any of the Loan Documents, any of the transactions contemplated hereby or
thereby, or the ranking and seniority of their respective obligations thereunder, or (b) that could reasonably be expected to have a Material Adverse Effect. 
  
 3.7 No Default. Neither Holdings, the Borrower nor any of its Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect that could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 
  

3.8 Ownership of Property; Liens. Each of the Borrower and its Subsidiaries has valid legal title to all its real property, and valid legal
title to, or a valid leasehold interest in, all its other Property, and none of such Property is subject to any Lien, except Senior Liens and Liens permitted by Section 6.3. 
  
 3.9 Intellectual Property. The Borrower and each of its Subsidiaries owns, or is licensed to use, all Intellectual
Property necessary for the conduct of its business as currently conducted. No material claim has been asserted and is pending by any Person challenging or questioning the use of any Intellectual Property or the validity or effectiveness of any
Intellectual Property, nor does the Borrower know of any valid basis for any such claim. The use of Intellectual Property by the Borrower and its Subsidiaries does not infringe on the rights of any Person in any material respect. 
  
 3.10 Taxes. Each of the Borrower and each of its Subsidiaries has
filed or caused to be filed all material tax returns that are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its Property and all other taxes, fees or other
charges imposed on it or any of its Property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with
GAAP have been provided on the books of the Borrower or its Subsidiaries, as the case may be); and no tax Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge.

  
 3.11 [Intentionally Deleted.] 
  
 3.12 Labor Matters. There are no strikes or other labor disputes
against the Borrower or any of its Subsidiaries pending or, to the knowledge of the Borrower, threatened that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect. Hours worked by and payment made to
employees of the Borrower and its Subsidiaries have not been in violation of applicable labor laws or any other applicable Requirement of Law dealing with such matters that (individually or in the aggregate) could reasonably be expected to

  

 27 

 have a Material Adverse Effect. All payments due from the Borrower or any of its Subsidiaries on account of employee
health and welfare insurance that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect if not paid have been paid or accrued as a liability on the books of the Borrower or the relevant Subsidiary.

  
 3.13 [Intentionally Deleted.] 
  
 3.14 [Intentionally Deleted.] 
  
 3.15 Subsidiaries. (a) The Subsidiaries listed on Schedule 3.15
constitute all the Subsidiaries of StyroChem Europe and the Borrower at the date hereof. Schedule 3.15 sets forth as of the Closing Date the name and jurisdiction of incorporation of each Subsidiary and, as to each Subsidiary, the percentage of each
class of Capital Stock owned by each Loan Party. 
  
 (b) Except as
listed on Schedule 3.15, there are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments (other than stock options granted to employees or directors and directors’ qualifying shares) of any nature
relating to any Capital Stock of the Borrower or any Subsidiary. 
  
 3.16 Use of Proceeds. The proceeds of the Term Loans shall be used (i) to repay in full the Intercompany Loan, (ii) to reduce the outstanding amount under the Senior Credit Agreement to an amount not to exceed €2,500,000, (iii)
to repay outstanding indebtedness of the Borrower under local currency uncommited credit lines with the Senior Lender in an aggregate amount of €5,300,000, (iv) to repay outstanding indebtedness of the Borrower under the Nordea Term Loan
Agreement in an aggregate amount of €504,563.73, (v) for other general purposes and (vi) to pay related fees and expenses. 
  
 3.17 Environmental Matters. Other than exceptions to any of the following that could not, individually or in the aggregate, reasonably be expected
to result in the payment of a Material Environmental Amount and except as set forth on Schedule 3.17: 
  
 (a) The Borrower and its Subsidiaries: (i) are, and within the period of all applicable statutes of limitation have been, in compliance with all
applicable Environmental Laws; (ii) hold all Environmental Permits (each of which is in full force and effect) required for any of their current or intended operations or for any property owned, leased, or otherwise operated by any of them; (iii)
are, and within the period of all applicable statutes of limitation have been, in compliance with all of their Environmental Permits; and (iv) reasonably believe that: each of their Environmental Permits will be timely renewed and complied with,
without material expense; any additional Environmental Permits that may be required of any of them will be timely obtained and complied with, without material expense; and compliance with any Environmental Law that is or is expected to become
applicable to any of them will be timely attained and maintained, without material expense. 
  
 (b) Materials of Environmental Concern are not present at, on, under, in, or about any real property now or formerly owned, leased or operated by the Borrower or any of its Subsidiaries, or at any other location
(including, without limitation, any location to which Materials of Environmental Concern have been sent for re-use or recycling or for treatment, storage, or disposal) which could reasonably be expected to (i) give rise to liability of the

  

 28 

 Borrower or any of its Subsidiaries in excess of €250,000 in the aggregate under any applicable Environmental Law or
otherwise result in costs in excess of €250,000 in the aggregate to the Borrower or any of its Subsidiaries, or (ii) interfere with the Borrower’s or any of its Subsidiaries’ continued operations, or (iii) impair the fair saleable
value of any real property owned or leased by the Borrower or any of its Subsidiaries. 
  
 (c) There is no judicial, administrative, or arbitral proceeding (including any notice of violation or alleged violation) under or relating to any Environmental Law to which the Borrower or any of its Subsidiaries is,
or to the knowledge of the Borrower or any of its Subsidiaries will be, named as a party that is pending or, to the knowledge of the Borrower or any of its Subsidiaries, threatened. 
  
 (d) Neither the Borrower nor any of its Subsidiaries has received any written request for information, or been notified that
it is a potentially responsible party under or relating to any Environmental Law, or with respect to any Materials of Environmental Concern. 
  
 (e) Neither the Borrower nor any of its Subsidiaries has entered into or agreed to any consent decree, order, or settlement or other agreement, or is
subject to any judgment, decree, or order or other agreement, in any judicial, administrative, arbitral, or other forum for dispute resolution, relating to compliance with or liability under any Environmental Law. 
  
 (f) Neither the Borrower nor any of its Subsidiaries has assumed or retained,
by contract or operation of law, any liabilities of any kind, fixed or contingent, known or unknown, under any Environmental Law or with respect to any Material of Environmental Concern. 
  
 3.18 Accuracy of Information, etc. No statement or information contained in this Agreement, any other Loan Document
or any other document, certificate or statement furnished to the Administrative Agent or the Lenders or any of them, by or on behalf of any Loan Party for use in connection with the transactions contemplated by this Agreement or the other Loan
Documents, contained as of the date such statement, information, document or certificate was so furnished, any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements contained herein or
therein not misleading. The projections and pro forma financial information contained in the materials referenced above are based upon good faith estimates and assumptions believed by management of the Borrower to be reasonable at the time
made, it being recognized by the Lenders that such financial information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such financial information may differ from the
projected results set forth therein by a material amount. There is no fact known to any Loan Party that could reasonably be expected to have a Material Adverse Effect that has not been expressly disclosed herein, in the other Loan Documents or in
any other documents, certificates and statements furnished to the Agents and the Lenders for use in connection with the transactions contemplated hereby and by the other Loan Documents. 
  
 3.19 Security Documents. The Security Documents are effective to create in favor of the Administrative Agent, for the
benefit of the Secured Parties, a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof. In the case of the 
  

 29 

 Pledged Stock described in the Pledge Agreement, when any stock certificates representing such Pledged Stock are
delivered to the Administrative Agent and the Borrower is notified of the pledge of such Pledged Stock, such pledge of the Pledged Stock shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of StyroChem
Europe in such Collateral and the proceeds thereof in accordance with the Pledge Agreement, as security for the Obligations, in each case prior and superior in right to any other Person. In the case of the floating charges described in the Security
Agreement, when, in accordance with the Security Agreement, (x) the floating charge promissory notes numbered 1-7 have been delivered to the Senior Lender, (y) the floating charge promissory notes numbered 10-13 have been issued and such notes have
been registered in the Finnish Business Mortgage Register, and (z) the floating charge promissory notes numbered 8-13 have been delivered to the Administrative Agent, then the floating charges established in favor of the Administrative Agent
pursuant to the Security Agreement shall be perfected, as security for the Obligations prior and superior in right to any other Person (except, in the case of Collateral other than Pledged Stock, Senior Liens and Liens permitted by Section 6.3) and
in an insolvency of the Borrower shall convey to the Administrative Agent the priority ranking afforded by Finnish law, subject to the Intercreditor Agreement. 
  

3.20 Solvency. Each Loan Party is, and after giving effect to the incurrence of all Indebtedness and obligations being incurred in connection
herewith and therewith will be and will continue to be, solvent. 
  
 3.21 Equity Loan Agreement. The equity loan under the Equity Loan Agreement is deemed and treated as equity (and not debt) in the Borrower’s financial statements and under applicable accounting rules and regulations. 

 
 ARTICLE IV - CONDITIONS PRECEDENT 
  
 4.1 Conditions to the Term Loan. The agreement of each Lender to make
the Term Loans requested to be made by it hereunder is subject to the satisfaction, prior to or concurrently with the making of such Term Loans on the Closing Date, of the following conditions precedent: 
  
 (a) Loan Documents. The Administrative Agent shall have received (i)
this Agreement, executed and delivered by a duly authorized officer of the Borrower, (ii) the Guarantee Agreement, executed and delivered by a duly authorized officer of Holdings, (iii) a Term Loan Note issued to each Lender, executed and delivered
by a duly authorized officer of the Borrower, (iv) the Intercreditor Agreement, executed and delivered by a duly authorized officer of each party thereto, (v) the Security Agreement, executed and delivered by a duly authorized officer of the
Borrower, and (vi) the Pledge Agreement, executed and delivered by a duly authorized officer of the StyroChem Europe, in each case in form and substance satisfactory to the Administrative Agent. 
  
 (b) Pro Forma Balance Sheet; Financial Statements. The Administrative
Agent shall have received (i) the Pro Forma Balance Sheet, (ii) audited consolidated financial statements of the Borrower and its Subsidiaries for the fiscal year ended December 31, 2004, and (iii) unaudited interim consolidated financial statements
of the Borrower and its Subsidiaries for each fiscal month and quarterly period ended subsequent to December 31, 2004. 
  

 30 

 (c) Approvals. All governmental and third party approvals necessary in connection with the
continuing operations of the Borrower and its Subsidiaries and the transactions contemplated hereby shall have been obtained and be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or
threatened by any competent authority which would restrain, prevent or otherwise impose adverse conditions on the financing contemplated hereby. 
  
 (d) Due Diligence. The Administrative Agent shall have completed its business, financial, accounting, insurance, environmental and legal due
diligence, with results satisfactory to the Administrative Agent. 
  
 (e) Termination of Existing Credit Agreement. The Administrative Agent shall have received evidence satisfactory to the Administrative Agent that the Existing Credit Agreement shall be simultaneously terminated, all amounts
thereunder shall be simultaneously paid in full and arrangements satisfactory to the Administrative Agent shall have been made for the termination of Liens and security interests granted in connection therewith. 
  
 (f) Fees. The Administrative Agent shall have received all fees
required to be paid under the Fee Letter, and all expenses for which invoices have been presented (including reasonable fees, disbursements and other charges of counsel to the Administrative Agent), on or before the Closing Date pursuant to the Loan
Documents. All such amounts will be paid with proceeds of Term Loans made on the Closing Date and will be reflected in the funds flow and direction letter given by the Borrower to the Administrative Agent on or before the Closing Date. 

 
 (g) Closing Date Projections. The Administrative Agent shall have
received satisfactory financial projections (the “Closing Date Projections”) for the period from the Closing Date through the Maturity Date, which shall contain the Borrower’s anticipated balance sheets, income statements and
cash flow statements, on a consolidated basis for the Borrower and its Subsidiaries, (i) on a monthly basis for the period commencing on the Closing Date through the fiscal year ending December 31, 2006, and on an annual basis thereafter through the
third anniversary of the Closing Date. 
  
 (h) Security
Interest. The Administrative Agent shall have received security interests in the Collateral subject to no liens on any of the Collateral except for Senior Liens and Liens permitted by Section 6.3. 
  
 (i) Closing Certificate. The Administrative Agent shall have received
a certificate of each Loan Party, dated the Closing Date, substantially in the form of Exhibit C, with appropriate insertions and attachments. 
  
 (j) Legal Opinions. The Administrative Agent shall have received the following executed legal opinions: 
  
 (i) the legal opinion of Luostarinen, Mettala & Raikkonen, Finnish
counsel to the Loan Parties, substantially in the form of Exhibit F-1; and 
  
 (ii) the legal opinion of Duane Morris, counsel to Holdings, substantially in the form of Exhibit F-2. 
  

 31 

 Each such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as the
Administrative Agent may reasonably require. 
  
 (k) Pledged
Stock; Stock Powers; Pledged Notes. The Administrative Agent shall have received (i) the certificates representing the shares of Capital Stock pledged pursuant to the Pledge Agreement, endorsed in blank by a duly authorized officer of the
pledgor thereof and (ii) floating charge promissory notes numbered 8-13 pledged pursuant to the Security Agreement endorsed (without recourse) in blank (or accompanied by an executed transfer form in blank satisfactory to the Administrative Agent)
by the pledgor thereof. 
  
 (l) [Intentionally Deleted].

  
 (m) Filings, Registrations and Recordings. Each
document required by the Security Documents or under law or reasonably requested by the Administrative Agent to be filed, registered or recorded in order to create in favor of the Administrative Agent, for the benefit of the Secured Parties, a
perfected Lien on the Collateral described therein, prior and superior in right to any other Person (other than with respect to Senior Liens and Liens expressly permitted by Section 6.3), shall have been filed, registered or recorded or shall have
been delivered to the Administrative Agent be in proper form for filing, registration or recordation. 
  
 (n) Charter and Good Standing. The Administrative Agent shall have received in respect of each Loan Party, such Loan Party’s (i) charter
documents, including all amendments thereto and (ii) good standing or equivalent certificates for such Loan Party’s jurisdiction of incorporation and in each other jurisdiction where its ownership or lease of property or conduct of business
requires such Loan Party to be qualified to do business. 
  
 (o)
Insurance. The Administrative Agent shall have received satisfactory evidence that the insurance policies required by the Loan Documents are in full force and effect. 
  
 (p) No Material Adverse Effect. The Administrative Agent shall be satisfied that, prior to the Closing Date, there
has not occurred (i) any Material Adverse Change since December 31, 2004 or (ii) a material disruption of or material adverse change in the financial, banking or capital markets. 
  
 (q) [Intentionally Deleted]. 
  

(r) Representations and Warranties. Each of the representations and warranties made by any Loan Party in or pursuant to the Loan Documents shall
be true and correct on and as of such date as if made on and as of such date, unless such representation and warranty expressly relates to an earlier date, in which case such representation and warranty shall be true and correct as of such earlier
date. 
  
 (s) No Default. No Default or Event of Default
shall have occurred and be continuing on such date or after giving effect to the extensions of credit requested to be made on such date. 
  
 (t) Senior Credit Agreement. At the time of making such Term Loan, and immediately after giving effect thereto, (i) the commitments under the
Senior Credit Agreement 
  

 32 

 shall be for an amount not greater than €5,000,000 and (ii) there shall be €5,000,000 of availability under the
Senior Credit Agreement. 
  
 ARTICLE V - AFFIRMATIVE COVENANTS

  
 The Borrower hereby agrees that, so long as the Term Loan
Commitments remain in effect or any Term Loan or other amount is owing to any Lender or the Administrative Agent hereunder, the Borrower shall and shall cause each of its Subsidiaries to: 
  
 5.1 Financial Statements. Furnish to the Administrative Agent and
each Lender: 
  
 (a) as soon as available, but in any event
within 90 days after the end of each fiscal year of the Borrower, a copy of the audited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such year and the related audited consolidated statements of income
and of cash flows for such year, setting forth in each case in comparative form the figures as of the end of and for the previous year, reported on without a “going concern” or like qualification or exception, or qualification arising out
of the scope of the audit, by KPMG Oy Ab or other independent certified public accountants of nationally recognized standing; 
  
 (b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the
Borrower, the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and of cash flows for such quarter and the portion of the
fiscal year through the end of such quarter, setting forth in each case in comparative form the figures as of the end of and for the corresponding period in the previous year, certified by a Responsible Officer as being fairly stated in all material
respects (subject to normal year-end audit adjustments); and 
  
 (c) as soon as available, but in any event not later than 30 days after the end of each month occurring during each fiscal year of the Borrower, the unaudited consolidated balance sheets of the Borrower and its Subsidiaries as at the end of
such month and the related unaudited consolidated statements of income and of cash flows for such month and the portion of the fiscal year through the end of such month, setting forth in each case in comparative form the figures as of the end of and
for the corresponding period in the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments); 
  
 all such financial statements to be complete and correct in all material respects and to be prepared in reasonable detail and in accordance
with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein). 
  
 5.2 Certificates; Other Information. Furnish to the Administrative
Agent and each Lender: 
  
 (a) concurrently with the delivery of
the financial statements referred to in Section 5.1(a), a certificate of the independent certified public accountants reporting on such 
  

 33 

 financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default
or Event of Default, except as specified in such certificate (it being understood that such certificate shall be limited to the items that independent certified public accountants are permitted to cover in such certificates pursuant to their
professional standards and customs of the profession); 
  
 (b)
concurrently with the delivery of any financial statements pursuant to Section 5.1(a) and (b), (i) a Compliance Certificate (x) stating that, to the best of such Responsible Officer’s knowledge, each Loan Party during such period has observed
or performed all of its covenants and other agreements, and satisfied every condition, contained in this Agreement and the other Loan Documents to which it is a party to be observed, performed or satisfied by it, and that such Responsible Officer
has obtained no knowledge of any Default or Event of Default except as specified in such certificate and (y) containing all information and calculations necessary for determining compliance by the Borrower and its Subsidiaries with the provisions of
this Agreement referred to therein as of the last day of the fiscal quarter or fiscal year of the Borrower, as the case may be, and (ii) in the case of quarterly or annual financial statements, (x) to the extent not previously disclosed to the
Administrative Agent, a listing of where the Borrower keeps inventory or equipment and (y) any filings specified in such Compliance Certificate as being required to be delivered therewith; 
  
 (c) as soon as available, and in any event no later than 15 days prior to the
end of each fiscal year of the Borrower, a detailed consolidated monthly budget for the following fiscal year (including a projected consolidated balance sheet of the Borrower and its Subsidiaries as of the end of the following fiscal year, and the
related consolidated statements of projected cash flow and projected income), and copies of all budgets and financial projections provided to the Board of Directors of the Borrower, and, as soon as available, significant revisions, if any, of such
budget and projections with respect to such fiscal year (collectively, the “Projections”), which Projections shall in each case be accompanied by a certificate of a Responsible Officer stating that such Projections are based on
reasonable estimates, information and assumptions and that such Responsible Officer has no reason to believe that such Projections are incorrect or misleading in any material respect; 
  
 (d) (i) within 30 days after the end of each fiscal month of the Borrower, a narrative discussion and analysis of the
financial condition and results of operations of the Borrower and its Subsidiaries for such fiscal month and for the period from the beginning of the then current fiscal year to the end of such fiscal month, as compared to the portion of the
Projections covering such periods and to the comparable periods of the previous year; (ii) within 45 days after the end of each fiscal quarter of the Borrower, a narrative discussion and analysis of the financial condition and results of operations
of the Borrower and its Subsidiaries for such fiscal quarter and for the period from the beginning of the then current fiscal year to the end of such fiscal quarter, as compared to the portion of the Projections covering such periods and to the
comparable periods of the previous year; (iii) within 90 days after the end of each fiscal year of the Borrower, a narrative discussion and analysis of the financial condition and results of operations of the Borrower and its Subsidiaries for such
fiscal year, as compared to the portion of the Projections covering such period and to the comparable periods of the previous year. 
  

 34 

 (e) within 5 days after the same are sent, copies of all financial statements and reports that the
Borrower sends to the holders of any class of its debt securities; 
  
 (f) as soon as possible and in any event within 3 Business Days of obtaining knowledge thereof: (i) any development, event, or condition that, individually or in the aggregate with other developments, events or conditions, could reasonably
be expected to result in the payment by the Borrower and its Subsidiaries, in the aggregate, of a Material Environmental Amount; and (ii) any notice that any governmental authority may deny any application for an Environmental Permit sought by, or
revoke or refuse to renew any Environmental Permit held by, the Borrower; and 
  
 (g) promptly, such additional financial and other information as any Lender may from time to time reasonably request. 
  
 5.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its
material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of
the Borrower or its Subsidiaries, as the case may be. 
  
 5.4
Conduct of Business and Maintenance of Existence, etc. (a) Preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in
the normal conduct of its business, except, in each case, as otherwise permitted by Section 6.4; and (b) comply with all Contractual Obligations and Requirements of Law, except to the extent that failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect. 
  
 5.5 Maintenance of Property; Insurance. (a) Keep all Property and systems useful and necessary in its business in good working order and condition, ordinary wear and tear excepted and (b) maintain with financially sound and reputable
insurance companies insurance on all its Property in at least such amounts and against at least such risks (but including in any event public liability, product liability and business interruption) as are usually insured against in the same general
area by companies engaged in the same or a similar business. 
  
 5.6 Inspection of Property; Books and Records; Discussions. (a) Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and
transactions in relation to its business and activities and (b) permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and to discuss
the business, operations, properties and financial and other condition of the Borrower and its Subsidiaries with officers and employees of the Borrower and its Subsidiaries and with its independent certified public accountants; provided that,
unless a Default or an Event of Default has occurred, the Lenders shall have access under clause (b) four times per year. 
  
 5.7 Notices. Promptly give notice to the Administrative Agent and each Lender of: 
  
 (a) the occurrence of any Default or Event of Default; 
  

 35 

 (b) any (i) default or event of default under any material Contractual Obligation of the Borrower or any
of its Subsidiaries or (ii) litigation, investigation or proceeding which may exist at any time between the Borrower or any of its Subsidiaries and any Governmental Authority, that in either case, if not cured or if adversely determined, as the case
may be, could reasonably be expected to have a Material Adverse Effect; 
  
 (c) any litigation or proceeding affecting the Borrower or any of its Subsidiaries in which the amount involved is €250,000 or more and not covered by insurance or in which injunctive or similar relief is sought; and 
  
 (d) any development or event that has had or could reasonably be expected to
have a Material Adverse Effect. 
  
 Each notice pursuant to this Section shall be
accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower or the relevant Subsidiary proposes to take with respect thereto. 
  
 5.8 Environmental Laws, etc. (a) Comply in all material respects with,
and ensure compliance in all material respects by all tenants and subtenants, if any, with, all applicable Environmental Laws, and obtain and comply in all material respects with and maintain, and ensure that all tenants and subtenants obtain and
comply in all material respects with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws. 
  
 (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions
required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws. 
  
 5.9 Additional Collateral, etc. (a) With respect to any Property acquired after the Closing Date by the Borrower or
any of its Subsidiaries (other than (x) any Property described in paragraph (b) or paragraph (c) of this Section, and (y) any Property subject to a Lien expressly permitted by Section 6.3(g)) as to which the Administrative Agent, for the benefit of
the Secured Parties, does not have a perfected Lien, promptly (i) execute and deliver to the Administrative Agent such amendments to the Security Documents or such other documents as the Administrative Agent deems necessary or advisable to grant to
the Administrative Agent, for the benefit of the Secured Parties, a security interest in such Property and (ii) take all actions necessary or advisable to grant to the Administrative Agent, for the benefit of the Secured Parties, a perfected first
priority security interest in such Property, including without limitation, filings or recordings in such jurisdictions as may be required by the Security Documents or by law or as may be requested by the Administrative Agent. 
  
 (b) With respect to any fee interest in any real property acquired after the
Closing Date by the Borrower or any of its Subsidiaries (other than any such real property subject to a Lien expressly permitted by Section 6.3(g)), promptly (i) if requested by the Administrative Agent, execute and deliver a first priority mortgage
in favor of the Administrative Agent, for the benefit of the Secured Parties, covering such real property, in form and substance 
  

 36 

 reasonably satisfactory to the Administrative Agent, (ii) if requested by the Administrative Agent, provide the Lenders
with such other documents with respect to such real property and (iii) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative Agent. 
  
 (c) With respect to any new Subsidiary created or acquired after the Closing Date by the Borrower or any of its Subsidiaries, promptly (i) execute and deliver to the Administrative Agent such amendments to the
Security Documents as the Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for the benefit of the Secured Parties, a perfected first priority security interest in the Capital Stock of such new Subsidiary that
is owned by the Borrower or any of its Subsidiaries, (ii) deliver to the Administrative Agent the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the
Borrower or such Subsidiary, as the case may be, (iii) cause such new Subsidiary (A) to become a party to the Security Agreement and (B) to take such actions necessary or advisable to grant to the Administrative Agent for the benefit of the Secured
Parties a valid and perfected security interest in the Collateral described in the Security Agreement with respect to such new Subsidiary, including, without limitation, the filings and recordings in such jurisdictions as may be required by the
Security Documents or by law or as may be requested by the Administrative Agent, and (iv) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be
in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent. 
  
 5.10 Further Assurances. From time to time execute and deliver, or cause to be executed and delivered, such additional instruments, certificates or documents, and take such actions, as the Administrative Agent
may reasonably request for the purposes of implementing or effectuating the provisions of this Agreement and the other Loan Documents, or of more fully perfecting or renewing the rights of the Administrative Agent and the Lenders with respect to the
Collateral (or with respect to any additions thereto or replacements or proceeds thereof or with respect to any other property or assets hereafter acquired by the Borrower or any Subsidiary which may be deemed to be part of the Collateral) pursuant
hereto or thereto. Upon the exercise by the Administrative Agent or any Lender of any power, right, privilege or remedy pursuant to this Agreement or the other Loan Documents which requires any consent, approval, recording, qualification or
authorization of any Governmental Authority, the Borrower will execute and deliver, or will cause the execution and delivery of, all applications, certifications, instruments and other documents and papers that the Administrative Agent or such
Lender may be required to obtain from the Borrower or any of its Subsidiaries for such governmental consent, approval, recording, qualification or authorization. 
  
 5.11 Hedging Agreements. Within 60 days of the Closing Date, the Borrower shall enter into Hedging Agreements, on
terms and with Derivative Counterparties acceptable to the Administrative Agent, to provide protection against (i) interest rates risks under this Agreement with respect to a notional amount of at least $13,000,000 and (ii) currency risks under this
Agreement with respect to a notional amount of at least $13,000,000. 
  

 37 

 5.12 Senior Credit Agreement. The Borrower shall prepay the revolving loans under the Senior
Credit Agreement so that on the last day of the fiscal year of each year and for the 29 consecutive day period immediately thereafter, there shall not be any revolving loans outstanding under the Senior Credit Agreement. 
  
 ARTICLE VI - NEGATIVE COVENANTS 
  
 The Borrower hereby agrees that, so long as the Term Loan Commitments remain
in effect or any Term Loan or other amount is owing to any Lender or the Administrative Agent hereunder, the Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly: 
  
 6.1 Financial Condition Covenants. 
  
 (a) Minimum Consolidated EBITDA. Permit Consolidated EBITDA of the
Borrower and its Subsidiaries as at the last day of any period of four consecutive fiscal quarters of the Borrower (or, if less, the number of full fiscal quarters subsequent to the Closing Date) ending with any fiscal quarter set forth below to be
less than the amount set forth below opposite such fiscal quarter: 
  

				
	 Fiscal Quarter

	  	Minimum Consolidated EBITDA

	 June 30, 2005
	  	$	826,000
	 September 30, 2005
	  	$	2,015,200

  
 (b) Maximum
Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio on each day of each fiscal quarter set forth below to exceed the ratio set forth below opposite such fiscal quarter: 
  

			
	 Fiscal Quarter

	  	Maximum Consolidated Leverage Ratio

	 December 31, 2005
	  	3.75 to 1
	 March 31, 2006
	  	3.75 to 1
	 June 30, 2006
	  	3.75 to 1
	 September 30, 2006
	  	3.75 to 1
	 December 31, 2006
	  	3.75 to 1
	 March 31, 2007
	  	3.75 to 1
	 June 30, 2007
	  	3.75 to 1
	 September 30, 2007
	  	3.75 to 1
	 December 31, 2007
	  	3.75 to 1
	 March 31, 2008
	  	3.75 to 1
	 June 30, 2008
	  	3.75 to 1

  
 (c) Minimum
Consolidated Fixed Charge Coverage Ratio. Permit the Consolidated Fixed Charge Coverage Ratio for any period of four consecutive fiscal quarters of 
  

 38 

 the Borrower (or, if less, the number of full fiscal quarters subsequent to the Closing Date) ending with any fiscal
quarter set forth below to be less than the ratio set forth below opposite such fiscal quarter: 
  

			
	 Fiscal Quarter

	  	Minimum Consolidated Fixed Coverage Ratio

	 December 31, 2005
	  	2.0 to 1
	 March 31, 2006
	  	2.0 to 1
	 June 30, 2006
	  	2.0 to 1
	 September 30, 2006
	  	2.0 to 1
	 December 31, 2006
	  	2.0 to 1
	 March 31, 2007
	  	2.0 to 1
	 June 30, 2007
	  	2.0 to 1
	 September 30, 2007
	  	2.0 to 1
	 December 31, 2007
	  	2.0 to 1
	 March 31, 2008
	  	2.0 to 1
	 June 30, 2008
	  	2.0 to 1

  
 6.2 Limitation on
Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except: 
  
 (a) Indebtedness of any Loan Party pursuant to any Loan Document; 
  
 (b) Indebtedness (including, without limitation, Capital Lease Obligations) secured by Liens permitted by Section 6.3(g) in an aggregate principal amount
not to exceed €500,000 in the aggregate during the term of this Agreement; 
  
 (c) Indebtedness under the Senior Credit Agreement and Derivative Agreement and any other derivative agreement entered into to hedge exposure under Section 5.11; 
  
 (d) Indebtedness outstanding on the date hereof and listed on Schedule
6.2(e); 
  
 (e) Guarantee Obligations made in the ordinary course
of business by the Borrower or any of its Subsidiaries of obligations of the Borrower or any Subsidiary Guarantor; 
  
 (f) Indebtedness consisting of intercompany loans made by Radnor Chemical to the Borrower in an aggregate amount not to exceed $5,000,000 during the term
of this Agreement; provided that (x) the obligations under such intercompany loans shall be subordinated to the Obligations of the Borrower hereunder in a manner reasonably satisfactory to the Administrative Agent; provided that regularly
scheduled principal and interest payments may be made on such debt in the absence of a Default or an Event of Default and (y) no Default or Event of Default has occurred (or would result therefrom at the time such loan is made); and 
  
 (g) Indebtedness under the Equity Loan Agreement. 
  

 39 

 6.3 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its
Property, whether now owned or hereafter acquired, except for: 
  
 (a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case
may be, in conformity with GAAP; 
  
 (b) carriers’,
warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or that are being contested in good faith by
appropriate proceedings; 
  
 (c) pledges or deposits in connection
with workers’ compensation, unemployment insurance and other social security legislation; 
  
 (d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business; 
  
 (e) easements,
rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business that, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the Property subject
thereto or materially interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries; 
  
 (f) Liens in existence on the date hereof listed on Schedule 6.3(f); 
  
 (g) Liens securing Indebtedness of the Borrower or any other Subsidiary incurred pursuant to Section 6.2(b) to finance the
acquisition of fixed or capital assets, provided that (i) such Liens shall be created not more than 90 days after the acquisition of such fixed or capital assets, (ii) such Liens do not at any time encumber any Property other than the
Property financed by such Indebtedness (and replacements thereof), and (iii) the amount of Indebtedness secured thereby is not increased; 
  
 (h) Liens created pursuant to the Security Documents; 
  
 (i) any interest or title of a lessor under any lease entered into by the Borrower or any other Subsidiary in the ordinary course of its business and
covering only the assets so leased; and 
  
 (j) the Senior Liens.

  
 6.4 Limitation on Fundamental Changes. Enter into any
merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or Dispose of all or substantially all of its Property or business, except that: 
  
 (a) any Subsidiary of the Borrower may be merged or consolidated with or
into the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or with or into any Subsidiary Guarantor (provided that (i) the Subsidiary Guarantor shall be the 
  

 40 

 continuing or surviving corporation or (ii) simultaneously with such transaction, the continuing or surviving corporation
shall become a Subsidiary Guarantor and the Borrower shall comply with Section 5.9 in connection therewith); and 
  
 (b) any Subsidiary of the Borrower may Dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any Subsidiary
Guarantor. 
  
 6.5 Limitation on Disposition of Property.
Dispose of any of its Property (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary’s Capital Stock to any
Person, except: 
  
 (a) the Disposition of obsolete or worn out
property or other property no longer used or useful in the business of the Borrower in the ordinary course of business; provided, that with respect to Dispositions in excess of €250,000 in the aggregate during the term of this Agreement,
the requirements of Section 2.6(b) are complied with in connection therewith. 
  
 (b) the sale of inventory in the ordinary course of business; 
  
 (c) Dispositions permitted by Section 6.4(b); 
  
 (d) the sale or issuance of any Subsidiary’s Capital Stock to the Borrower or any Subsidiary Guarantor; and 
  
 (e) any Extraordinary Recovery Event referred to in clause (i) of the definition of Extraordinary Recovery Event, provided, that the requirements
of Section 2.6(b) are complied with in connection therewith. 
  
 6.6 Limitation on Restricted Payments. Declare or pay any dividend on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any Capital Stock of the Borrower or any Subsidiary, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the
Borrower or any Subsidiary, or enter into any derivatives or other transaction with any financial institution, commodities or stock exchange or clearinghouse (a “Derivatives Counterparty”) obligating the Borrower or any Subsidiary
to make payments to such Derivatives Counterparty as a result of any change in market value of any such Capital Stock (collectively, “Restricted Payments”), except that any Subsidiary may make Restricted Payments to the Borrower or
any Subsidiary Guarantor. 
  
 6.7 Limitation on Capital
Expenditures. Make or commit to make any Capital Expenditure, except Capital Expenditures of the Borrower and its Subsidiaries in the ordinary course of business during each of the fiscal years set forth below not exceeding the amount set forth
below opposite such fiscal year: 
  

 41 

				
	 Fiscal Year Ended

	  	Maximum Capital Expenditures

	 December 31, 2005
	  	€	1,000,000
	 December 31, 2006
	  	€	1,000,000
	 December 31, 2007
	  	€	1,000,000

  
 6.8 Limitation on
Investments. Make any advance, loan, extension of credit (by way of guaranty or otherwise) or capital contribution to, or purchase any Capital Stock, bonds, notes, debentures or other debt securities of, or any assets constituting an ongoing
business from, or make any other investment in, any other Person (all of the foregoing, “Investments”), except: 
  
 (a) extensions of trade credit in the ordinary course of business; 
  
 (b) investments in Cash Equivalents; 
  
 (c) Investments arising in connection with the incurrence of Indebtedness permitted by Section 6.2(b) and (e); 

 
 (d) Investments (other than those relating to the incurrence of
Indebtedness permitted by Section 6.8(c)) by the Borrower or any of its Subsidiaries in the Borrower or any Person that, prior to such Investment, is a Subsidiary Guarantor; 
  
 (e) any purchase of all or a significant part of the assets of a business conducted by any other Person, or all or
substantially all of the assets constituting the business of a division, branch or other unit of operation of any other Person, consented to by the Required Lenders in their sole discretion; 
  
 (f) other Investments not exceeding €250,000 in the aggregate during the
term of this Agreement; and 
  
 (g) Investments arising in
connection with intercompany loans made by the Borrower to Holdings in an aggregate amount not to exceed $500,000 during the term of this Agreement; provided that (x) such intercompany loan shall be evidenced by a demand note and shall be pledged
and delivered to the Administrative Agent as additional collateral security for the Obligations. 
  
 6.9 Limitation on Payments of Debt Instruments, Modifications of Certain Agreements, etc. 
  
 (a) cancel any claim or Indebtedness owed to any of them except in the
ordinary course of business consistent with past practice; 
  
 (b) prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of any subordination terms of, any Indebtedness; provided, however, that the Borrower
and its Subsidiaries may (i) prepay the Obligations in accordance with the terms of this Agreement, (ii) make regularly scheduled or otherwise required repayments under the Senior Credit 
  

 42 

 Agreement and (iii) prepay Indebtedness under the Existing Credit Agreements with the proceeds of the Term Loan
hereunder; 
  
 (c) amend its certificate of incorporation (or
equivalent charter documents) in any manner determined by the Administrative Agent to be adverse to the Lenders; 
  
 (d) (i) amend, supplement or otherwise modify (pursuant to a waiver or otherwise) the terms and conditions of the Management Agreement in any manner that
would increase the amounts payable by the Borrower thereunder or (ii) otherwise amend, supplement or otherwise modify the terms and conditions of the Management Agreement in any manner determined by the Administrative Agent to be adverse to the
Lenders. 
  
 6.10 Limitation on Transactions with
Affiliates. Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of Property, the rendering of any service or the payment of any management, advisory or similar fees, with any Affiliate (other than
Holdings, the Borrower or any Subsidiary Guarantor) unless such transaction is (a) otherwise permitted under this Agreement, (b) in the ordinary course of business of the Borrower or such Subsidiary, as the case may be, and (c) upon fair and
reasonable terms no less favorable to the Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm’s length transaction with a Person that is not an Affiliate. Notwithstanding the foregoing the Borrower and its
Subsidiaries may pay to Holdings fees and expenses pursuant to the Management Agreement in an aggregate amount not to exceed one-percent (1%) of the Borrower’s revenue in any fiscal year, provided that, (i) no Default or Event of Default
has occurred and is continuing (or would result therefrom), (ii) the Borrower is in compliance with the financial covenants set forth in Section 6.1 hereto and (iii) the Borrower is in compliance with the covenants set forth in Section 6.9 hereto.

  
 6.11 Limitation on Sales and Leasebacks. Enter into any
arrangement with any Person providing for the leasing by the Borrower or any Subsidiary of real or personal property which has been or is to be sold or transferred by the Borrower or such Subsidiary to such Person or to any other Person to whom
funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Borrower or such Subsidiary. 
  
 6.12 Limitation on Changes in Fiscal Periods. Permit the fiscal year of the Borrower to end on a day other than December 31st or change the
Borrower’s method of determining fiscal quarters. 
  
 6.13
Limitation on Negative Pledge Clauses. Enter into or suffer to exist or become effective any agreement that prohibits or limits the ability of the Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon
any of its Property or revenues, whether now owned or hereafter acquired, to secure the Obligations, other than (a) this Agreement and the other Loan Documents, (b) any agreements with respect to the Senior Credit Agreement and (c) any agreements
governing any purchase money Liens or Capital Lease Obligations otherwise permitted hereby (in which case, any prohibition or limitation shall only be effective against the assets financed thereby). 
  

 43 

 6.14 Limitation on Restrictions on Subsidiary Distributions. Enter into or suffer to exist or
become effective any consensual encumbrance or restriction on the ability of any Subsidiary to (a) make Restricted Payments in respect of any Capital Stock of such Subsidiary held by, or pay any Indebtedness owed to, the Borrower or any other
Subsidiary, (b) make Investments in the Borrower or any other Subsidiary or (c) transfer any of its assets to the Borrower or any other Subsidiary, except for such encumbrances or restrictions existing under or by reason of (i) any restrictions
existing under the Loan Documents and (ii) any restrictions with respect to a Subsidiary imposed pursuant to an agreement that has been entered into in connection with the Disposition of all or substantially all of the Capital Stock or assets of
such Subsidiary. 
  
 6.15 Limitation on Lines of Business.
Enter into any business, either directly or through any Subsidiary, except for those businesses in which the Borrower and its Subsidiaries are engaged on the date of this Agreement or that are reasonably related thereto. 
  
 6.16 Limitation on Hedge Agreements. Enter into any Hedge Agreement
other than Hedge Agreements entered into in the ordinary course of business, and not for speculative purposes, to protect against changes in interest rates or foreign exchange rates. 
  
 ARTICLE VII - EVENTS OF DEFAULT 
  
 7.1 Events of Default. If any of the following events shall occur and be continuing: 
  
 (a) (i) The Borrower shall fail to pay any principal of any Term Loan when due in accordance with the terms hereof, or (ii)
the Borrower shall fail to pay any interest on any Term Loan or any other amount payable hereunder or under any other Loan Document within 5 days following the due date in accordance with the terms hereof or thereof; or 
  
 (b) Any representation or warranty made or deemed made by any Loan Party
herein or in any other Loan Document or that is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been
inaccurate in any material respect on or as of the date made or deemed made or furnished; or 
  
 (c) Any Loan Party shall default in the observance or performance of any agreement contained in Section 5.4(a) (with respect to the Borrower only), Section 5.7(a) or Section 6; or 
  
 (d) Any Loan Party shall default in the observance or performance of any
other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section and other than the Guarantee Agreement), and such default shall continue unremedied for a period of 15 days;
or 
  
 (e) The Borrower or any of its Subsidiaries shall (i)
default in making any payment of any principal of any Indebtedness (including, without limitation, any Guarantee Obligation, but excluding the Term Loans) beyond the period of grace, if any, on the scheduled or original due date with respect
thereto; or (ii) default in making any payment of any interest on any such Indebtedness beyond the period of grace, if any, provided in the instrument or 
  

 44 

 agreement under which such Indebtedness was created; or (iii) default in the observance or performance of any other
agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition
is to cause, or to permit the holder or beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or
to become subject to or mandatory offer to purchase by the obligor thereunder or (in the case of any such Indebtedness constituting a Guarantee Obligation) to become payable; provided, that a default, event or condition described in clause
(i), (ii) or (iii) of this paragraph (e) shall not at any time constitute an Event of Default unless, at such time, one or more defaults, events or conditions of the type described in clauses (i), (ii) and (iii) of this paragraph (e) shall have
occurred and be continuing with respect to Indebtedness the outstanding principal amount of which exceeds in the aggregate $250,000; or 
  
 (f) (i) Holdings, the Borrower or any of its Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or
for all or any substantial part of its assets, or Holdings, the Borrower or any of its Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against Holdings, the Borrower or any of its
Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above that (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a
period of 60 days; or (iii) there shall be commenced against Holdings, the Borrower or any of its Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or
any substantial part of its assets that results in the entry of an order for any such relief that shall not have been vacated, discharged, or stayed or bonded pending appeal within 20 days from the entry thereof; or (iv) Holdings, the Borrower or
any of its Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) Holdings, the Borrower or any of its Subsidiaries
shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or 
  
 (g) One or more judgments or decrees shall be entered against the Borrower or any of its Subsidiaries involving for the Borrower and its Subsidiaries
taken as a whole a liability (not paid or fully covered by insurance as to which the relevant insurance company has acknowledged coverage) of €250,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within 15 days from the entry thereof; or 
  
 (h) Any of the Security Documents shall cease, for any reason (other than by reason of the express release thereof), to be in full force and effect, or any Loan Party or any Affiliate of any Loan Party shall so assert, or any Lien created
by any of the Security Documents 
  

 45 

 shall cease to be enforceable and of the same effect and priority purported to be created thereby; or 
  
 (i) The Guarantee Agreement shall cease, for any reason (other than by reason
of the express release thereof), to be in full force and effect or any Loan Party or any Affiliate of any Loan Party shall so assert; or 
  
 (j) Any Change of Control shall occur; 
  
 then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) above, automatically the Term Loans hereunder (with
accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents shall immediately become due and payable, and (B) if such event is any other Event of Default with the consent of the Required Lenders, the
Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Term Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and
the other Loan Documents to be due and payable forthwith, whereupon the same shall immediately become due and payable. 
  
 ARTICLE VIII - THE ADMINISTRATIVE AGENT 
  
 8.1 Appointment. Each Lender hereby irrevocably designates and appoints the Administrative Agent as the agent of such Lender under this Agreement
and the other Loan Documents, and each Lender irrevocably authorizes the Administrative Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and
perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the
contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent. 
  
 8.2 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement and the other
Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care. 
  
 8.3
Exculpatory Provisions. Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person
under or in connection with this Agreement or any other Loan Document (except to the extent that any of the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from its or such
Person’s own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by 
  

 46 

 any Loan Party or any officer thereof contained in this Agreement or any other Loan Document or in any certificate,
report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other Loan Document or for any failure of any Loan Party to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire
as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party. 
  
 8.4 Reliance by Administrative Agent. The Administrative Agent shall
be entitled to rely, and shall be fully protected in relying, upon any instrument, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed
by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Loan Parties), independent accountants and other
experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of any Term Loan Note as the owner thereof for all purposes unless such Term Loan Note shall have been transferred in accordance with Section 9.6 and
all actions required by such Section in connection with such transfer shall have been taken. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall
first receive such advice or concurrence of the Required Lenders (or, if so specified by this Agreement, all Lenders or any other instructing group of Lenders specified by this Agreement) as it deems appropriate or it shall first be indemnified to
its satisfaction by the Lenders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, if so specified by this Agreement, all Lenders or any other instructing group of Lenders specified by this
Agreement), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Term Loans. 
  
 8.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of
any Default or Event of Default hereunder unless the Administrative Agent shall have received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a
“notice of default”. In the event that the Administrative Agent shall receive such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all Lenders or any other instructing group of Lenders specified by this Agreement); provided that unless and until the
Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable
in the best interests of the Lenders. 
  
 8.6 Non-Reliance on
Administrative Agent and Other Lenders. Each Lender expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, 
  

 47 

 employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by
the Administrative Agent hereafter taken, including any review of the affairs of a Loan Party or any affiliate of a Loan Party, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender
represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates and made its own decision to make its Term Loans hereunder and enter into this Agreement. Each Lender
also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition
and creditworthiness of the Loan Parties and their affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any affiliate of a Loan Party that may
come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. 
  
 8.7 Indemnification. The Lenders agree to indemnify the Administrative Agent in its capacity as such (to the extent not reimbursed by the Borrower
and without limiting the obligation of the Borrower to do so), ratably according to their respective Term Loan Percentages in effect on the date on which indemnification is sought under this Section (or, if indemnification is sought after the date
upon which the Term Loans shall have been paid in full, ratably in accordance with such Term Loan Percentages immediately prior to such date), for, and to save the Administrative Agent harmless from and against, any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any time (including, without limitation, at any time following the payment of the Term Loans) be imposed on, incurred by or
asserted against the Administrative Agent in any way relating to or arising out of, the Term Loans, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated
hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the Administrative Agent’s gross negligence or
willful misconduct. The agreements in this Section shall survive the payment of the Term Loans and all other amounts payable hereunder. 
  
 8.8 Administrative Agent in Its Individual Capacity. The Administrative Agent and its affiliates may make loans to, accept deposits from and
generally engage in any kind of business with any Loan Party as though the Administrative Agent were not the Administrative Agent. With respect to its Term Loans made or renewed by it, the Administrative Agent shall 
  

 48 

 have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same
as though it were not the Administrative Agent, and the terms “Lender” and “Lenders” shall include the Administrative Agent in its individual capacity. 
  
 8.9 Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent upon 10 days’
notice to the Lenders and the Borrower. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint a successor agent for the Lenders, which successor
agent shall (unless an Event of Default under Section 7.1(a) or Section 7.1(f) with respect to the Borrower shall have occurred and be continuing) be subject to approval by the Borrower (which approval shall not be unreasonably withheld or delayed),
whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term “Administrative Agent” shall mean such successor agent effective upon such appointment and approval, and the former
Administrative Agent’s rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the
Term Loans. If no successor agent has accepted appointment as Administrative Agent by the date that is 10 days following a retiring Administrative Agent’s notice of resignation, the retiring Administrative Agent’s resignation shall
nevertheless thereupon become effective, and the Lenders shall assume and perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. After any
retiring Administrative Agent’s resignation as Administrative Agent, the provisions of this Section 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Agreement and
the other Loan Documents. 
  
 8.10 Authorization to Release
Liens and Guarantees. The Administrative Agent is hereby irrevocably authorized by each of the Lenders to effect any release of Liens or guarantee obligations contemplated by Loan Documents. 
  
 ARTICLE IX - MISCELLANEOUS 
  
 9.1 Amendments and Waivers. Neither this Agreement or any other Loan
Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section 9.1. The Required Lenders and each Loan Party party to the relevant Loan Document may, or (with the written
consent of the Required Lenders) the Administrative Agent and each Loan Party party to the relevant Loan Document may, from time to time, (a) enter into written amendments, supplements or modifications hereto and to the other Loan Documents
(including amendments and restatements hereof or thereof) for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the Loan Parties hereunder or thereunder or
(b) waive, on such terms and conditions as may be specified in the instrument of waiver, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however,
that no such waiver and no such amendment, supplement or modification shall: 
  

	 	(i)	forgive the principal amount or extend the final scheduled date of maturity of any Term Loan, reduce the stated rate of any interest or 

  

 49 

 fee payable hereunder or extend the scheduled date of any payment thereof, or increase the amount or
extend the expiration date of any Term Loan Commitment of any Lender; require additional consents to be obtained with respect to the sale or any assignment or participations of any interests of the Lenders hereunder, in each case without the consent
of each Lender directly affected thereby; 
  

	 	(ii)	amend, modify or waive any provision of this Section, or reduce any percentage specified in or otherwise amend or modify the definition of Required Lenders, consent to the
assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Loan Documents, release all or substantially all of the Collateral or release all or substantially all of Holdings or the Subsidiary
Guarantors from their guarantee obligations, in each case without the consent of all Lenders; 

  

	 	(iii)	amend, modify or waive any provision of Section 8, or any other provision of this Agreement affecting the rights and obligations of the Administrative Agent, without the consent of
the Administrative Agent; or 

  

	 	(iv)	amend, modify or waive any provision of Section 2.10 without the consent of each Lender directly affected thereby. 

  
 Any such waiver and any such amendment, supplement or modification shall apply equally to
each of the Lenders and shall be binding upon the Loan Parties, the Lenders, the Administrative Agent and all future holders of the Term Loans. In the case of any waiver, the Loan Parties, the Lenders and the Administrative Agent shall be restored
to their former position and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event
of Default, or impair any right consequent thereon. Any such waiver, amendment, supplement or modification shall be effected by a written instrument signed by the parties required to sign pursuant to the foregoing provisions of this Section;
provided, that delivery of an executed signature page of any such instrument by facsimile transmission shall be effective as delivery of a manually executed counterpart thereof. 
  
 9.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in
writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered, or three Business Days after being deposited in the mail, postage prepaid, or, in the case of telecopy
notice, when received, addressed (a) in the case of the Borrower, the Administrative Agent, as follows, (b) in the case of a Lender which becomes a party to this Agreement pursuant to an Assignment and Acceptance, in such Assignment and Acceptance
or (c) in the case of any party, to such other address as such party may hereafter notify to the other parties hereto: 
  

 50 

			
	The Borrower:	  	StyroChem Finland Oy
	 	  	P.O. Box 360
	 	  	FIN-06101 Porvoo, Finland
	 	  	Attention: Henrik Akermark
	 	  	Telecopy: (358) 19-541-8232
	 	  	Telephone: (358) 19-541-8230
		
	with a copy to:	  	Radnor Holdings Corporation
	 	  	Radnor Financial Center
	 	  	150 Radnor Chester Road
	 	  	Suite A 300
	 	  	Radnor, PA 19087-5292
	 	  	Attention: R. Radcliffe Hastings, Executive Vice President
	 	  	Telecopy: (610) 995-2697
	 	  	Telephone: (610) 995-2568
		
	The Administrative Agent:	  	Guggenheim Corporate Funding, LLC
	 	  	135 East 57th Street
	 	  	New York, New York 10022
	 	  	Attention: Adrian Duffy/Kaitlin Trinh
	 	  	Telecopy: (212) 644-8107
	 	  	Telephone: (212) 739-9282

  
 provided that any notice,
request or demand to or upon the Administrative Agent or any other Lender shall not be effective until received. 
  
 9.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 
  
 9.4 Survival of Representations and Warranties. All representations
and warranties made herein, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Term Loans and
other extensions of credit hereunder. 
  
 9.5 Payment of
Expenses. The Borrower agrees (a) to pay or reimburse the Lenders and the Administrative Agent for all their reasonable out-of-pocket costs and expenses incurred in connection with the syndication of the Term Loans and the development,
preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the 
  

 51 

 consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the
reasonable fees and disbursements and other charges of counsel to the Lenders and the Administrative Agent, (b) to pay or reimburse each Lender and the Administrative Agent for all their costs and expenses incurred in connection with the enforcement
or preservation of any rights under this Agreement, the other Loan Documents and any other documents prepared in connection herewith or therewith, including, without limitation, the fees and disbursements of counsel to each Lender and of counsel to
the Administrative Agent, (c) to pay, indemnify, or reimburse each Lender and the Administrative Agent for, and hold each Lender and the Administrative Agent harmless from, any and all recording and filing fees and any and all liabilities with
respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration (with respect to
administration, subject to the Fee Letter) of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other
documents and (d) to pay, indemnify or reimburse each Lender, the Administrative Agent, their respective affiliates, and their respective officers, directors, trustees, employees, advisors, agents and controlling persons (each, an
“Indemnitee”) for, and hold each Indemnitee harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the other Loan Documents and any such other documents, including, without limitation, any of the foregoing relating to the use of
proceeds of the Loans or the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Borrower or any of its Subsidiaries or any of their Properties and the fees and disbursements and other
charges of legal counsel in connection with claims, actions or proceedings by any Indemnitee against the Borrower hereunder (all the foregoing in this clause (d), collectively, the “Indemnified Liabilities”), provided, that
(i) subject to subclause (ii) below, the Borrower shall have no obligation hereunder to any Indemnitee with respect to Indemnified Liabilities to the extent such Indemnified Liabilities are found by a final and nonappealable decision of a court of
competent jurisdiction to have resulted solely from the gross negligence or willful misconduct of such Indemnitee and (ii) with respect to Indemnified Liabilities relating to the violation of, noncompliance with or liability under, any Environmental
Law applicable to the operations of the Borrower or any of its Subsidiaries or any of their Properties (collectively, the “Environmental Indemnified Liabilities”), (A) prior to the Indemnitee’s removal from possession of any of
the Properties as a result of foreclosure, appointment of a receiver, deed in lieu of foreclosure or otherwise (collectively, the “Removal Event”), the Borrower shall have no obligation hereunder to any Indemnitee with respect to
Environmental Indemnified Liabilities to the extent such Environmental Indemnified Liabilities are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted solely from the gross negligence or willful
misconduct of such Indemnitee and (B) subsequent to the Removal Event, the Borrower shall have no obligation hereunder to any Indemnitee with respect to Environmental Indemnified Liabilities to the extent such Environmental Indemnified Liabilities
are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted solely from the negligence or willful misconduct of such Indemnitee. Without limiting the foregoing, and to the extent permitted by applicable law,
the Borrower agrees not to assert and to cause its 
  

 52 

 Subsidiaries not to assert, and hereby waives and agrees to cause its Subsidiaries so to waive, all rights for
contribution or any other rights of recovery with respect to all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, under or related to Environmental Laws, that any of them might have
by statute or otherwise against any Indemnitee for any Indemnified Liabilities. All amounts due under this Section shall be payable not later than 30 days after written demand therefor. Statements payable by the Borrower pursuant to this Section
shall be submitted to the Borrower at the address of the Borrower set forth in Section 9.2, or to such other Person or address as may be hereafter designated by the Borrower in a notice to the Administrative Agent. The agreements in this Section
shall survive repayment of the Term Loans and all other amounts payable hereunder. 
  
 9.6 Successors and Assigns; Participations and Assignments. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Administrative Agent, all future holders of the
Term Loans and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Administrative Agent and each Lender.

  
 (b) Any Lender may, without the consent of the Borrower, in
accordance with applicable law, at any time sell to one or more banks, financial institutions or other entities (each, a “Participant”) participating interests in any Term Loan owing to such Lender or any other interest of such
Lender hereunder and under the other Loan Documents. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender’s obligations under this Agreement to the other parties to this Agreement shall remain
unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Term Loan for all purposes under this Agreement and the other Loan Documents, and the Borrower and the Administrative
Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and the other Loan Documents. In no event shall any Participant under any such participation have any
right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom, except to the extent that such amendment, waiver or consent would require the consent of all Lenders
pursuant to Section 9.1. The Borrower agrees that if amounts outstanding under this Agreement and the Term Loans are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each
Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating
interest were owing directly to it as a Lender under this Agreement, provided that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in
Section 9.7(a) as fully as if such Participant were a Lender hereunder. The Borrower also agrees that each Participant shall be entitled to the benefits of Sections 2.11 and 2.12 with respect to its participation in the Term Loans outstanding from
time to time as if such Participant were a Lender; provided that, in the case of Section 2.12, such Participant shall have complied with the requirements of said Section, and provided, further, that no Participant shall be
entitled to receive any greater amount pursuant to any such Section than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such
transfer occurred. 
  

 53 

 (c) Any Lender (an “Assignor”) may, in accordance with applicable law and upon written
notice to the Administrative Agent, at any time and from time to time assign to any Eligible Assignee or, with the consent of the Administrative Agent and the Borrower (which, in each case, shall not be unreasonably withheld or delayed), to an
additional bank, financial institution or other entity (each, an “Assignee”) all or any part of its rights and obligations under this Agreement pursuant to an Assignment and Acceptance, substantially in the form of Exhibit E (an
“Assignment and Acceptance”), executed by such Assignee and such Assignor (and, where the consent of the Administrative Agent and the Borrower is required pursuant to the foregoing provisions, by the Administrative Agent and the
Borrower) and delivered to the Administrative Agent for its acceptance and recording in the Register; provided that (i) no such assignment to an Assignee (other than any Lender or any Affiliate, Related Fund or Control Investment Affiliate
thereof) shall be in an aggregate principal amount of less than $1,000,000 (other than in the case of an assignment of all of a Lender’s interests under this Agreement), unless otherwise agreed by the Administrative Agent, (ii) no such
assignment shall be made to any bank, financial institution or other entity listed on Schedule 9.6(c) without the consent of the Borrower and (iii) with respect to any amounts payable under Section 2.11 or Section 2.12 that existed on the date of
the assignment, the Assignee shall not be entitled to receive any greater amount pursuant to such Sections than the Assignee’s Assignor would have been entitled to receive with respect to the interests, rights and obligations transferred by
such Assignor to the Assignee had such assignment not occurred. Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a
party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with the Term Loans as set forth therein, and (y) the Assignor thereunder shall, to the extent provided in such
Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of an Assignor’s rights and obligations under this Agreement, such Assignor shall cease to be a
party hereto, except as to Section 2.11, 2.12 and 9.5 in respect of the period prior to such effective date). For purposes of the minimum assignment amounts set forth in this paragraph, multiple assignments by two or more Related Funds shall be
aggregated. Notwithstanding any provision of this Section, the consent of the Borrower shall not be required for any assignment that occurs at any time when any Event of Default shall have occurred and be continuing. 
  
 (d) The Administrative Agent shall, on behalf of the Borrower, maintain at
its address referred to in Section 9.2 a copy of each Assignment and Acceptance delivered to it and a register (the “Register”) for the recordation of the names and addresses of the Lenders and the Commitment of, and principal
amount of the Term Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is
recorded in the Register as the owner of the Term Loans and any Term Loan Notes evidencing such Term Loans recorded therein for all purposes of this Agreement. Any assignment of any Term Loan, whether or not evidenced by a Term Loan Note, shall be
effective only upon appropriate entries with respect thereto being made in the Register (and each Term Loan Note shall expressly so provide). Any assignment or transfer of all or part of a Term Loan evidenced by Term Loan Note shall be registered on
the Register only upon surrender for registration of assignment or transfer of the Term Loan Note evidencing such Term Loan, accompanied by a duly executed Assignment and Acceptance; thereupon one or more new Term Loan Notes in the 
  

 54 

 same aggregate principal amount shall be issued to the designated Assignee, and the old Term Loan Notes shall be returned
by the Administrative Agent to the Borrower marked “canceled”. The Register shall be available for inspection by the Borrower or any Lender (with respect to any entry relating to such Lender’s Term Loans) at any reasonable time and
from time to time upon reasonable prior notice. 
  
 (e) Upon its
receipt of an Assignment and Acceptance executed by an Assignor and an Assignee (and, in any case where the consent of any other Person is required by Section 9.6(c), by each such other Person) together with payment to the Administrative Agent of a
registration and processing fee of $3,500 (treating multiple, simultaneous assignments by or to two or more Related Funds as a single assignment) (except that no such registration and processing fee shall be payable in the case of an Assignee which
is already a Lender or is an affiliate or Related Fund of a Lender or a Person under common management with a Lender), the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined
pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Borrower. On or prior to such effective date, the Borrower, at its own expense, upon request, shall execute and
deliver to the Administrative Agent (in exchange for the Term Loan Note of the assigning Lender) a new Term Loan Note to the order of such Assignee in an amount equal to the Term Loan assumed or acquired by it pursuant to such Assignment and
Acceptance and, if the Assignor has retained a Term Loan, upon request, a new Term Loan Note to the order of the Assignor in an amount equal to the Term Loan retained by it hereunder. Such new Term Loan Note or Term Loan Notes shall be dated the
Closing Date and shall otherwise be in the form of the Term Loan Note or Term Loan Notes replaced thereby. 
  
 (f) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this Section concerning assignments of Term Loans and Term
Loan Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests in Term Loans and Term Loan Notes, including, without limitation, any pledge or assignment by a Lender of any Term Loan
or Term Loan Note to any Federal Reserve Bank in accordance with applicable law. 
  
 9.7 Adjustments; Set-off. (a) If any Lender (a “Benefited Lender”) shall at any time receive any payment of all or part of the Obligations owing to it, or receive any collateral in respect
thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 7.1(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if
any, in respect of such other Lender’s Obligations, such Benefited Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender’s Obligations, or shall provide such other Lenders
with the benefits of any such collateral, as shall be necessary to cause such Benefited Lender to share the excess payment or benefits of such collateral ratably with each of the Lenders; provided, however, that if all or any portion
of such excess payment or benefits is thereafter recovered from such Benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. 
  
 (b) In addition to any rights and remedies of the Lenders provided by law,
each Lender shall have the right, without prior notice to the Borrower, any such notice being 
  

 55 

 expressly waived by the Borrower to the extent permitted by applicable law, upon any amount not being paid when due by
the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise), to set off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any
other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the
account of the Borrower. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender, provided that the failure to give such notice shall not affect the validity of
such setoff and application. 
  
 9.8 Counterparts. This
Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed
signature page of this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the
Administrative Agent. 
  
 9.9 Severability. Any provision
of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 
  
 9.10 Integration. This Agreement and the other Loan Documents represent the entire agreement of the Borrower, the Administrative Agent and the
Lenders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Lender relative to subject matter hereof not expressly set forth or referred to
herein or in the other Loan Documents. 
  
 9.11 GOVERNING
LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 
  
 9.12 Submission To Jurisdiction; Waivers. 
  
 (a) The Borrower hereby irrevocably and unconditionally submits for itself
and its Property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, to the exclusive jurisdiction of the courts of England to settle any dispute arising out of or in connection with this
Agreement or any other Loan Document; 
  
 (b) The Borrower hereby
irrevocably and unconditionally agrees that the courts of England are the most appropriate and convenient courts to settle disputes and accordingly the Borrower will not argue to the contrary; 
  
 (c) The Borrower hereby irrevocably and unconditionally consents that any
such action or proceeding may be brought in such courts and waives any objection that it may 
  

 56 

 now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding
was brought in an inconvenient court and agrees not to plead or claim the same; 
  
 (d) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the
Borrower at its address set forth in Section 9.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto; 
  
 (e) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in
any other jurisdiction; and 
  
 (f) waives, to the maximum extent
not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages. 
  
 (g) This Section 9.12 is for the benefit of the Administrative Agent and the Lenders only. As a result, neither the
Administrative Agent nor any Lender shall be prevented from taking proceedings relating to a dispute in any other courts with jurisdiction. To the extent allowed by law, the Administrative Agent and the Lenders may take concurrent proceedings in any
number of jurisdictions. 
  
 9.13 Acknowledgments. The
Borrower hereby acknowledges that: 
  
 (a) it has been advised by
counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents; 
  
 (b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this
Agreement or any of the other Loan Documents, and the relationship between the Administrative Agent and the Lenders, on one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

  
 (c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated hereby among the Administrative Agent and the Lenders or among the Borrower and the Lenders. 
  
 9.14 Confidentiality. Each of the Administrative Agent and the Lenders agrees to keep confidential all non-public
information provided to it by any Loan Party pursuant to this Agreement that is designated by such Loan Party as confidential; provided that nothing herein shall prevent the Administrative Agent or any Lender from disclosing any such
information (a) to the Administrative Agent, any other Lender or any affiliate of any thereof, (b) to any Participant or Assignee (each, a “Transferee”) or prospective Transferee that agrees to comply with the provisions of this
Section or substantially equivalent provisions, (c) to any of its employees, directors, agents, attorneys, accountants and other professional advisors, (d) upon the request or demand of any Governmental Authority having jurisdiction over it, (e) in
response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law (in which case the Administrative Agent or Lender, as 
  

 57 

 applicable, shall inform the Borrower promptly thereof), (f) in connection with any litigation or similar proceeding (in
which case the Administrative Agent or Lender, as applicable, shall inform the Borrower promptly thereof), (g) that has been publicly disclosed other than in breach of this Section, (h) to the National Association of Insurance Commissioners or any
similar organization or any nationally recognized rating agency that requires access to information about a Lender’s investment portfolio in connection with ratings issued with respect to such Lender or (i) in connection with the exercise of
any remedy hereunder or under any other Loan Document. Notwithstanding anything herein to the contrary, any party subject to confidentiality obligations hereunder or under any other related document (and any employee, representative or other agent
of such party) may disclose to any and all persons, without limitation of any kind, such party’s U.S. federal income tax treatment and tax structure of the transactions contemplated by this Agreement relating to such party and all materials of
any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure. However, no such party shall disclose any information relating to such tax treatment or tax structure to the extent
nondisclosure is reasonably necessary in order to comply with applicable securities laws. The agreements in this Section shall survive repayment of the Term Loans and all other amounts payable hereunder. 
  
 9.15 Accounting Changes. In the event that any “Accounting
Change” (as defined below) shall occur and such change results in a change in the method of calculation of financial covenants, standards or terms in this Agreement, then the Borrower and the Administrative Agent agree to enter into
negotiations in order to amend such provisions of this Agreement so as to equitably reflect such Accounting Change with the desired result that the criteria for evaluating the Borrower’s financial condition shall be the same after such
Accounting Change as if such Accounting Change had not been made. Until such time as such an amendment shall have been executed and delivered by the Borrower, the Administrative Agent and the Required Lenders, all financial covenants, standards and
terms in this Agreement shall continue to be calculated or construed as if such Accounting Change had not occurred. “Accounting Change” refers to any change in accounting principles required by the promulgation of any rule, regulation,
pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants or, if applicable, the SEC. 
  
 9.16 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 
  

 58 

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

			
	STYROCHEM FINLAND OY.
		
	By:	 	 /s/ R. Radcliffe Hastings

	Name:	 	R. Radcliffe Hastings
	Title:	 	Authorized Signatory
	
	STYROCHEM EUROPE (THE NETHERLANDS) B.V.
		
	By:	 	 /s/ Michael T. Kennedy

	Name:	 	Michael T. Kennedy
	Title:	 	Managing Director
	
	GUGGENHEIM CORPORATE FUNDING, LLC, as Administrative Agent
		
	By:	 	 /s/ William Hagner

	Name:	 	William Hagner
	Title:	 	Attorney in Fact
	
	MIDLAND NATIONAL LIFE INSURANCE COMPANY, by Midland Advisors Company as its Agent
		
	By:	 	 /s/ Adrian Duffy

	Name:	 	Adrian Duffy
	Title:	 	Managing Director
	
	NORTH AMERICAN COMPANY FOR LIFE AND HEALTH INSURANCE, by Midland Advisors Company as its Agent
		
	By:	 	 /s/ Adrian Duffy

	Name:	 	Adrian Duffy
	Title:	 	Managing Director

  
 [SIGNATURE PAGE TO TERM LOAN AGREEMENT] 

 PRICING GRID FOR TERM LOANS 
  

							
	 Consolidated Leverage Ratio

	  	Applicable Margin
for Eurodollar Loans

	 	 	Applicable Margin
for Base Rate Loans

	 
	 Greater than or equal to 3.25 to 1
	  	6.50	%	 	3.75	%
	 Less than 3.25 to 1 and equal to or greater than 2.75 to 1
	  	5.75	%	 	3.00	%
	 Less than 2.75 to 1 and equal to or greater than 2.25 to 1
	  	5.00	%	 	2.25	%
	 Less than 2.25 to 1 and equal to or greater than 1.75 to 1
	  	3.50	%	 	0.75	%
	 Less than 1.75 to 1
	  	3.00	%	 	0.25	%

  
 Changes in the Applicable Margin with
respect to Term Loans resulting from changes in the Consolidated Leverage Ratio shall become effective 5 Business Days after the date (the “Adjustment Date”) on which financial statements with respect to the fiscal quarter ended
December 31, 2005 are delivered to the Lenders pursuant to Section 5.1(b) and shall remain in effect until the next change to be effected pursuant to this paragraph. If any financial statements referred to above are not delivered within the time
periods specified above, then, until such financial statements are delivered, the Consolidated Leverage Ratio as at the end of the fiscal period that would have been covered thereby shall for the purposes of this definition be deemed to be greater
than 3.25 to 1. In addition, at all times while an Event of Default shall have occurred and be continuing, the Consolidated Leverage Ratio shall for the purposes of this Pricing Grid be deemed to be greater than 3.25 to 1. Each determination of the
Consolidated Leverage Ratio pursuant to this Pricing Grid shall be made for the periods and in the manner contemplated by Section 6.1(a). 

 [Schedules and Exhibits Omitted.]SECURITIES PURCHASE AGREEMENT

      This Securities Purchase Agreement (this "Agreement") is dated as of
August 17, 2005, among Astralis Ltd., a Delaware corporation (the "Company"),
and each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a "Purchaser" and collectively the "Purchasers").

      WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act") and Rule 506 promulgated thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, securities of the Company as more fully
described in this Agreement.

      NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree
as follows:

                                   ARTICLE I.
                                   DEFINITIONS

      1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms have the
meanings indicated in this Section 1.1:

            "Action" shall have the meaning ascribed to such term in Section
      3.1(j).

            "Affiliate" means any Person that, directly or indirectly through
      one or more intermediaries, controls or is controlled by or is under
      common control with a Person as such terms are used in and construed under
      Rule 144 under the Securities Act. With respect to a Purchaser, any
      investment fund or managed account that is managed on a discretionary
      basis by the same investment manager as such Purchaser will be deemed to
      be an Affiliate of such Purchaser.

            "Closing" means the closing of the purchase and sale of the
      Securities pursuant to Section 2.1.

            "Closing Date" means with respect to Blue Cedar Limited, on or about
      August 15, 1005; with respect to all other Purchasers, on or about
      September 15, 2005 (the "Second Closing Date"), or such later date or
      dates as Blue Cedar and the Company may agree.

            "Closing Price" means on any particular date (a) the last reported
      closing bid price per share of Common Stock on such date on the Trading
      Market (as reported by Bloomberg L.P. at 4:15 PM (New York time), or (b)
      if there is no such price on such date, then the closing bid price on the
      Trading Market on the date nearest preceding such date (as reported by
      Bloomberg L.P. at 4:15 PM (New York time) for the closing bid price for
      regular session trading on such day), or (c) if the Common Stock is not
      then listed or quoted on the Trading Market and if prices for the Common
      Stock are then reported in the "pink sheets" published by the Pink Sheets,
      LLC (or a similar organization or agency succeeding to its functions of
      reporting prices), the most recent bid price per share of the Common Stock
      so reported, or (d) if the shares of Common Stock are not then publicly
      traded the fair market value of a share of Common Stock as determined by a
      qualified independent appraiser selected in good faith by the Purchasers
      of a majority in interest of the outstanding Purchasers.

                                       1
<PAGE>

            "Commission" means the Securities and Exchange Commission.

            "Common Stock" means the common stock of the Company, par value
      $0.0001 per share, and any other class of securities into which such
      securities may hereafter have been reclassified or changed.

            "Common Stock Equivalents" means any securities of the Company or
      the Subsidiaries which would entitle the holder thereof to acquire at any
      time Common Stock, including without limitation, any debt, preferred
      stock, rights, options, warrants or other instrument that is at any time
      convertible into or exchangeable for, or otherwise entitles the holder
      thereof to receive, Common Stock.

            "Company Counsel" means McCarter & English, LLP.

            "Disclosure Schedules" means the Disclosure Schedules of the Company
      delivered concurrently herewith.

            "Effective Date" means the date that the initial Registration
      Statement filed by the Company pursuant to the Registration Rights
      Agreement is first declared effective by the Commission.

            "Evaluation Date" shall have the meaning ascribed to such term in
      Section 3.1(r).

            "Exchange Act" means the Securities Exchange Act of 1934, as
      amended, and the rules and regulations promulgated thereunder.

            "Exempt Issuance" means the issuance of (a) shares of Common Stock
      or options to employees, officers, consultants or directors of the Company
      pursuant to any stock or option plan duly adopted by a majority of the
      non-employee members of the Board of Directors of the Company or a
      majority of the members of a committee of non-employee directors
      established for such purpose, (b) securities upon the exercise of or
      conversion of any Securities issued hereunder, convertible securities,
      options or warrants issued and outstanding on the date of this Agreement,
      provided that such securities have not been amended since the date of this
      Agreement to increase the number of such securities or to decrease the
      exercise or conversion price of any such securities, and (c) securities
      issued pursuant to acquisitions or strategic transactions, provided any
      such issuance in connection with a strategic transaction shall only be to
      a Person which is, itself or through its subsidiaries, an operating
      company in a business synergistic with the business of the Company and in
      which the Company receives benefits in addition to the investment of
      funds, but shall not include a transaction in which the Company is issuing
      securities primarily for the purpose of raising capital or to an entity
      whose primary business is investing in securities.

                                       2
<PAGE>

            "GAAP" shall have the meaning ascribed to such term in Section
      3.1(h).

            "Intellectual Property Rights" shall have the meaning ascribed to
      such term in Section 3.1(o).

            "Legend Removal Date" shall have the meaning ascribed to such term
      in Section 4.1(c).

            "Liens" means a lien, charge, security interest, encumbrance, right
      of first refusal, preemptive right or other restriction.

            "Material Adverse Effect" shall have the meaning assigned to such
      term in Section 3.1(b).

            "Material Permits" shall have the meaning ascribed to such term in
      Section 3.1(m).

            "Participation Maximum" shall have the meaning ascribed to such term
      in Section 4.12.

            "Per Share Purchase Price" equals $0.11, subject to adjustment for
      reverse and forward stock splits, stock dividends, stock combinations and
      other similar transactions of the Common Stock that occur after the date
      and time of this Agreement.

            "Person" means an individual or corporation, partnership, trust,
      incorporated or unincorporated association, joint venture, limited
      liability company, joint stock company, government (or an agency or
      subdivision thereof) or other entity of any kind.

            "Pre-Notice" shall have the meaning ascribed to such term in Section
      4.12.

            "Proceeding" means an action, claim, suit, investigation or
      proceeding (including, without limitation, an investigation or partial
      proceeding, such as a deposition), whether commenced or threatened in
      writing in a formal correspondence addressed to the Company and received
      by the Company.

            "Purchaser Party" shall have the meaning ascribed to such term in
      Section 4.8.

            "Registration Rights Agreement" means the Registration Rights
      Agreement, dated the date hereof, among the Company and the Purchasers, in
      the form of Exhibit A attached hereto.

            "Registration Statement" means a registration statement meeting the
      requirements set forth in the Registration Rights Agreement and covering
      the resale by the Purchasers of the Shares and the Warrant Shares.

            "Required Approvals" shall have the meaning ascribed to such term in
      Section 3.1(e).

                                       3
<PAGE>

            "Rule 144" means Rule 144 promulgated by the Commission pursuant to
      the Securities Act, as such Rule may be amended from time to time, or any
      similar rule or regulation hereafter adopted by the Commission having
      substantially the same effect as such Rule.

            "SEC Reports" shall have the meaning ascribed to such term in
      Section 3.1(h).

            "Securities" means the Shares, the Warrants and the Warrant Shares.

            "Securities Act" means the Securities Act of 1933, as amended.

            "Shares" means the shares of Common Stock issued or issuable to each
      Purchaser pursuant to this Agreement.

            "Short Sales" shall include all "short sales" as defined in Rule 200
      of Regulation SHO under the Exchange Act.

            "Stockholders Agreement" shall mean the Stockholders Agreement
      between Blue Cedar Limited and the Company in the form of Exhibit D
      hereto.

            "Subscription Amount" means, as to each Purchaser, the aggregate
      amount to be paid for Shares and Warrants purchased hereunder as specified
      below such Purchaser's name on the signature page of this Agreement and
      next to the heading "Subscription Amount", in United States Dollars and in
      immediately available funds.

            "Subsequent Financing" shall have the meaning ascribed to such term
      in Section 4.12.

            "Subsequent Financing Notice" shall have the meaning ascribed to
      such term in Section 4.12.

            "Subsidiary" means any subsidiary of the Company as set forth on
      Schedule 3.1(a).

            "Trading Day" means a day on which the Common Stock is traded on a
      Trading Market.

            "Trading Market" means the following markets or exchanges on which
      the Common Stock is listed or quoted for trading on the date in question:
      the Nasdaq SmallCap Market, the American Stock Exchange, the New York
      Stock Exchange, the Nasdaq National Market or the OTC Bulletin Board.

            "Transaction Documents" means this Agreement, the Warrants and the
      Registration Rights Agreement and any other documents or agreements
      executed by the Company or the Purchasers in connection with the
      transactions contemplated hereunder.

            "Warrants" means collectively the Long Term Common Stock purchase
      warrants and the Short Term Common Stock purchase warrants, in the forms
      of Exhibits C-1 and C-2, respectively, delivered to the Purchasers at the
      Closing in accordance with Section 2.2(a) hereof, which Warrants, among
      other things, shall be exercisable immediately and have a term of exercise
      equal to five years and one year, respectively.

                                       4
<PAGE>

            "Warrant Shares" means the shares of Common Stock issuable upon
      exercise of the Warrants.

                                  ARTICLE II.
                                PURCHASE AND SALE

      2.1 Closing. On the Closing Date, upon the terms and subject to the
conditions set forth herein, concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and each Purchaser
agrees to purchase his or its proportionate amount of Securities set forth on
the signature page of this Agreement, in the aggregate, severally and not
jointly, up to $5,000,000 of Shares and Warrants. Each Purchaser shall deliver
to the Company via wire transfer or a certified check immediately available
funds equal to their Subscription Amount and the Company shall deliver to each
Purchaser their respective Shares and Warrants as determined pursuant to Section
2.2(a) and the other items set forth in Section 2.2 issuable at the Closing.
Upon satisfaction of the conditions set forth in Sections 2.2 and 2.3, the
Closing shall occur at the offices of Company Counsel, or such other location as
the parties shall mutually agree.

      2.2 Deliveries.(a) On the Closing Date, the Company shall deliver or cause
to be delivered to each Purchaser the following:

                  (i) this Agreement duly executed by the Company;

                  (ii) the Stockholders Agreement duly executed by the Company
            (as to Blue Cedar Limited, only);

                  (iii) a legal opinion of Company Counsel, in the form of
            Exhibit B attached hereto;

                  (iv) a copy of the irrevocable instructions to the Company's
            transfer agent instructing the transfer agent to deliver, on an
            expedited basis, a certificate evidencing a number of Shares equal
            to such Purchaser's Subscription Amount divided by the Per Share
            Purchase Price, registered in the name of such Purchaser;

                  (v) a Long Term Warrant registered in the name of such
            Purchaser to purchase up to a number of shares of Common Stock equal
            to 100% of such Purchaser's Subscription Amount divided by the Per
            Share Purchase Price, with an exercise price equal $0.165, subject
            to adjustment therein;

                  (vi) a Short Term Warrant registered in the name of such
            Purchaser to purchase up to a number of shares of Common Stock equal
            to two-thirds of such Purchaser's Subscription Amount divided by the
            Per Share Purchase Price, with an exercise price equal $0.165,
            subject to adjustment therein; and (vii) the Registration Rights
            Agreement duly executed by the Company.

                                       5
<PAGE>

            (b) On the Closing Date, each Purchaser shall deliver or cause to be
      delivered to the Company the following:

                  (i) this Agreement duly executed by such Purchaser;

                  (ii) such Purchaser's Subscription Amount by wire transfer to
            the account as specified in writing by the Company;

                  (iii) the Registration Rights Agreement duly executed by such
            Purchaser; and

                  (iv) as to Blue Cedar Limited only, the Stockholders
            Agreement.

      2.3 Closing Conditions.

            (a) The obligations of the Company hereunder in connection with the
      Closing are subject to the following conditions being met or waived:

                  (i) the accuracy in all material respects when made and on the
            Closing Date of the representations and warranties of the Purchasers
            contained herein;

                  (ii) all obligations, covenants and agreements of the
            Purchasers required to be performed at or prior to the Closing Date
            shall have been performed; and

                  (iii) the delivery by the Purchasers of the items set forth in
            Section 2.2(b) of this Agreement.

            (b) The respective obligations of the Purchasers hereunder in
      connection with the Closing are subject to the following conditions being
      met or waived:

                  (i) the accuracy in all material respects on the Closing Date
            of the representations and warranties of the Company contained
            herein;

                  (ii) all obligations, covenants and agreements of the Company
            required to be performed at or prior to the Closing Date shall have
            been performed;

                  (iii) the delivery by the Company of the items set forth in
            Section 2.2(a) of this Agreement;

                  (iv) the delivery by the Company of a certificate executed by
            the Company's Chief Executive Officer and Chief Financial Officer
            certifying that the consummation of the transactions contemplated by
            this Agreement (including the assumption that both the Short Term
            Warrants and the Long Term Warrants have been exercised in whole) do
            not and will not cause the triggering of any right by any employee,
            officer or director of the Company to terminate their respective
            employment agreements (whether written or oral) or to receive any
            payment or other compensation whatsoever in connection therewith;

                                       6
<PAGE>

                  (v) there shall have been no Material Adverse Effect with
            respect to the Company since the date hereof; and

                  (vi) From the date hereof to the Closing Date, trading in the
            Common Stock shall not have been suspended by the Commission (except
            for any suspension of trading of limited duration agreed to by the
            Company, which suspension shall be terminated prior to the Closing),
            and, at any time prior to the Closing Date, trading in securities
            generally as reported by Bloomberg Financial Markets shall not have
            been suspended or limited, or minimum prices shall not have been
            established on securities whose trades are reported by such service,
            or on any Trading Market, nor shall a banking moratorium have been
            declared either by the United States or New York State authorities
            nor shall there have occurred any material outbreak or escalation of
            hostilities or other national or international calamity of such
            magnitude in its effect on, or any material adverse change in, any
            financial market which, in each case, in the reasonable judgment of
            each Purchaser, makes it impracticable or inadvisable to purchase
            the Shares at the Closing.

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

      3.1 Representations and Warranties of the Company. Except as set forth
under the corresponding section of the Disclosure Schedules which Disclosure
Schedules shall be deemed a part hereof, the Company hereby makes the
representations and warranties set forth below to each Purchaser:

            (a) Subsidiaries. All of the direct and indirect subsidiaries of the
      Company are set forth on Schedule 3.1(a). The Company owns, directly or
      indirectly, all of the capital stock or other equity interests of each
      Subsidiary free and clear of any Liens, and all the issued and outstanding
      shares of capital stock of each Subsidiary are validly issued and are
      fully paid, non-assessable and free of preemptive and similar rights to
      subscribe for or purchase securities. If the Company has no subsidiaries,
      then references in the Transaction Documents to the Subsidiaries will be
      disregarded.

            (b) Organization and Qualification. The Company and each of the
      Subsidiaries is an entity duly incorporated or otherwise organized,
      validly existing and in good standing under the laws of the jurisdiction
      of its incorporation or organization (as applicable), with the requisite
      corporate power and authority to own and use its properties and assets and
      to carry on its business as currently conducted. Neither the Company nor
      any Subsidiary is in violation or default of any of the provisions of its
      respective certificate or articles of incorporation, bylaws or other
      organizational or charter documents. Each of the Company and the
      Subsidiaries is duly qualified to conduct business and is in good standing
      as a foreign corporation or other entity in each jurisdiction in which the
      nature of the business conducted or property owned by it makes such

                                       7
<PAGE>

      qualification necessary, except where the failure to be so qualified or in
      good standing, as the case may be, could not have or reasonably be
      expected to result in (i) a material adverse effect on the legality,
      validity or enforceability of any Transaction Document, (ii) a material
      adverse effect on the results of operations, assets, business, prospects
      or financial condition of the Company and the Subsidiaries, taken as a
      whole, or (iii) a material adverse effect on the Company's ability to
      perform in any material respect on a timely basis its obligations under
      any Transaction Document (any of (i), (ii) or (iii), a "Material Adverse
      Effect") and no Proceeding has been instituted in any such jurisdiction
      revoking, limiting or curtailing or seeking to revoke, limit or curtail
      such power and authority or qualification.

            (c) Authorization; Enforcement. The Company has the requisite
      corporate power and authority to enter into and to consummate the
      transactions contemplated by each of the Transaction Documents and
      otherwise to carry out its obligations thereunder, except that the Company
      does not have sufficient authorized Common Stock to honor exercises of the
      Long Term Warrants, and will not be able to honor exercises of the Long
      Term Warrants until and unless the Company files an amendment to its
      Certificate of Incorporation increasing its authorized Common Stock to at
      least 200,000,000 shares. Such amendment requires the approval of a
      majority of the Company's outstanding Common Stock ("Shareholder
      Approval"). The execution and delivery of each of the Transaction
      Documents by the Company and the consummation by it of the transactions
      contemplated thereby have been duly authorized by all necessary corporate
      action on the part of the Company and no further action is required by the
      Company in connection therewith other than in connection with the Required
      Approvals. Each Transaction Document has been (or upon delivery will have
      been) duly executed by the Company and, when delivered in accordance with
      the terms hereof, will constitute the valid and binding obligation of the
      Company enforceable against the Company in accordance with its terms
      except (i) as limited by applicable bankruptcy, insolvency,
      reorganization, moratorium and other laws of general application affecting
      enforcement of creditors' rights generally and (ii) as limited by laws
      relating to the availability of specific performance, injunctive relief or
      other equitable remedies.

            (d) No Conflicts. The execution, delivery and performance of the
      Transaction Documents by the Company, the issuance and sale of the
      Securities and the consummation by the Company of the other transactions
      contemplated thereby do not and will not (i) conflict with or violate any
      provision of the Company's or any Subsidiary's certificate or articles of
      incorporation, bylaws or other organizational or charter documents
      (subject to Shareholder Approval in the case of the Long Term Warrants),
      or (ii) conflict with, or constitute a default (or an event that with
      notice or lapse of time or both would become a default) under, result in
      the creation of any Lien upon any of the properties or assets of the
      Company or any Subsidiary, or give to others any rights of termination,
      amendment, acceleration or cancellation (with or without notice, lapse of
      time or both) of, any agreement, credit facility, debt or other instrument
      (evidencing a Company or Subsidiary debt or otherwise) or other
      understanding to which the Company or any Subsidiary is a party or by
      which any property or asset of the Company or any Subsidiary is bound or
      affected, or (iii) subject to the Required Approvals, conflict with or
      result in a violation of any law, rule, regulation, order, judgment,
      injunction, decree or other restriction of any court or governmental
      authority to which the Company or a Subsidiary is subject (including
      federal and state securities laws and regulations), or by which any
      property or asset of the Company or a Subsidiary is bound or affected;
      except in the case of each of clauses (ii) and (iii), such as could not
      have or reasonably be expected to result in a Material Adverse Effect.

                                       8
<PAGE>

            (e) Filings, Consents and Approvals. The Company is not required to
      obtain any consent, waiver, authorization or order of, give any notice to,
      or make any filing or registration with, any court or other federal,
      state, local or other governmental authority or other Person in connection
      with the execution, delivery and performance by the Company of the
      Transaction Documents, other than (i) filings required pursuant to Section
      4.4 of this Agreement, (ii) the filing with the Commission of the
      Registration Statement, (iii) application(s) to each applicable Trading
      Market for the listing of the Shares and Warrant Shares for trading
      thereon in the time and manner required thereby, (iv) the filing of Form D
      with the Commission and such filings as are required to be made under
      applicable state securities laws, and (v) the Shareholder Approval
      (collectively, the "Required Approvals").

            (f) Issuance of the Securities. The Securities are duly authorized
      and, when issued and paid for in accordance with the applicable
      Transaction Documents, will be duly and validly issued, fully paid and
      nonassessable, free and clear of all Liens imposed by the Company other
      than restrictions on transfer provided for in the Transaction Documents.
      The Warrant Shares, when issued in accordance with the terms of the
      Transaction Documents, will be validly issued, fully paid and
      nonassessable, free and clear of all Liens imposed by the Company. Subject
      to Shareholder Approval, the Company has reserved from its duly authorized
      capital stock the maximum number of shares of Common Stock issuable
      pursuant to this Agreement and the Warrants.

            (g) Capitalization. The capitalization of the Company is as set
      forth on Schedule 3.1(g). The Company has not issued any capital stock
      since its most recently filed periodic report under the Exchange Act,
      other than pursuant to the exercise of employee stock options under the
      Company's stock option plans, the issuance of shares of Common Stock to
      employees pursuant to the Company's employee stock purchase plan and
      pursuant to the conversion or exercise of outstanding Common Stock
      Equivalents. No Person has any right of first refusal, preemptive right,
      right of participation, or any similar right to participate in the
      transactions contemplated by the Transaction Documents. Except as a result
      of the purchase and sale of the Securities, except as set forth on
      Schedule 3.1(g) there are no outstanding options, warrants, script rights
      to subscribe to, calls or commitments of any character whatsoever relating
      to, or securities, rights or obligations convertible into or exchangeable
      for, or giving any Person any right to subscribe for or acquire, any
      shares of Common Stock, or contracts, commitments, understandings or
      arrangements by which the Company or any Subsidiary is or may become bound
      to issue additional shares of Common Stock or Common Stock Equivalents.
      The issuance and sale of the Securities will not obligate the Company to
      issue shares of Common Stock or other securities to any Person (other than
      the Purchasers) and will not result in a right of any holder of Company
      securities to adjust the exercise, conversion, exchange or reset price
      under such securities. All of the outstanding shares of capital stock of

                                       9
<PAGE>

      the Company are validly issued, fully paid and nonassessable, have been
      issued in compliance with all federal and state securities laws, and none
      of such outstanding shares was issued in violation of any preemptive
      rights or similar rights to subscribe for or purchase securities. No
      further approval or authorization of any stockholder, the Board of
      Directors of the Company or others is required for the issuance and sale
      of the Securities. Except as set forth on Schedule 3.1(g), there are no
      stockholders agreements, voting agreements or other similar agreements
      with respect to the Company's capital stock to which the Company is a
      party or, to the knowledge of the Company, between or among any of the
      Company's stockholders.

            (h) SEC Reports; Financial Statements. Except as set forth on
      Schedule 3.1(h), the Company has filed all reports, schedules, forms,
      statements and other documents required to be filed by it under the
      Securities Act and the Exchange Act, including pursuant to Section 13(a)
      or 15(d) thereof, for the two years preceding the date hereof (or such
      shorter period as the Company was required by law to file such material)
      (the foregoing materials, including the exhibits thereto and documents
      incorporated by reference therein, being collectively referred to herein
      as the "SEC Reports") on a timely basis or has received a valid extension
      of such time of filing and has filed any such SEC Reports prior to the
      expiration of any such extension. As of their respective dates, the SEC
      Reports complied in all material respects with the requirements of the
      Securities Act and the Exchange Act and the rules and regulations of the
      Commission promulgated thereunder, and none of the SEC Reports, when
      filed, contained any untrue statement of a material fact or omitted to
      state a material fact required to be stated therein or necessary in order
      to make the statements therein, in light of the circumstances under which
      they were made, not misleading. The financial statements of the Company
      included in the SEC Reports comply in all material respects with
      applicable accounting requirements and the rules and regulations of the
      Commission with respect thereto as in effect at the time of filing. Such
      financial statements have been prepared in accordance with United States
      generally accepted accounting principles applied on a consistent basis
      during the periods involved ("GAAP"), except as may be otherwise specified
      in such financial statements or the notes thereto and except that
      unaudited financial statements may not contain all footnotes required by
      GAAP, and fairly present in all material respects the financial position
      of the Company and its consolidated subsidiaries as of and for the dates
      thereof and the results of operations and cash flows for the periods then
      ended, subject, in the case of unaudited statements, to normal, year-end
      audit adjustments.

            (i) Material Changes. Since the date of the latest audited financial
      statements included within the SEC Reports, except as specifically
      disclosed in the SEC Reports, (i) there has been no event, occurrence or
      development that has had or that could reasonably be expected to result in
      a Material Adverse Effect, (ii) the Company has not incurred any
      liabilities (contingent or otherwise) other than (A) trade payables and
      accrued expenses incurred in the ordinary course of business consistent
      with past practice and (B) liabilities not required to be reflected in the
      Company's financial statements pursuant to GAAP or required to be
      disclosed in filings made with the Commission, (iii) the Company has not
      altered its method of accounting, (iv) the Company has not declared or
      made any dividend or distribution of cash or other property to its
      stockholders or purchased, redeemed or made any agreements to purchase or
      redeem any shares of its capital stock and (v) the Company has not issued
      any equity securities to any officer, director or Affiliate, except
      pursuant to existing Company stock option plans. The Company does not have
      pending before the Commission any request for confidential treatment of
      information.

                                       10
<PAGE>

            (j) Litigation. Except as described in the SEC Reports, there is no
      action, suit, inquiry, notice of violation, proceeding or investigation
      pending or, to the knowledge of the Company, threatened against or
      affecting the Company, any Subsidiary or any of their respective
      properties before or by any court, arbitrator, governmental or
      administrative agency or regulatory authority (federal, state, county,
      local or foreign) (collectively, an "Action") which (i) adversely affects
      or challenges the legality, validity or enforceability of any of the
      Transaction Documents or the Securities or (ii) could, if there were an
      unfavorable decision, have or reasonably be expected to result in a
      Material Adverse Effect. Neither the Company nor any Subsidiary, nor any
      director or officer thereof, is or has been the subject of any Action
      involving a claim of violation of or liability under federal or state
      securities laws or a claim of breach of fiduciary duty. There has not
      been, and to the knowledge of the Company, there is not pending or
      contemplated, any investigation by the Commission involving the Company or
      any current or former director or officer of the Company. The Commission
      has not issued any stop order or other order suspending the effectiveness
      of any registration statement filed by the Company or any Subsidiary under
      the Exchange Act or the Securities Act.

            (k) Labor Relations. No material labor dispute exists or, to the
      knowledge of the Company, is imminent with respect to any of the employees
      of the Company which could reasonably be expected to result in a Material
      Adverse Effect.

            (l) Compliance. Except as set forth on Schedule 3.1(l), neither the
      Company nor any Subsidiary (i) is in default under or in violation of (and
      no event has occurred that has not been waived that, with notice or lapse
      of time or both, would result in a default by the Company or any
      Subsidiary under), nor has the Company or any Subsidiary received notice
      of a claim that it is in default under or that it is in violation of, any
      indenture, loan or credit agreement or any other agreement or instrument
      to which it is a party or by which it or any of its properties is bound
      (whether or not such default or violation has been waived), (ii) is in
      violation of any order of any court, arbitrator or governmental body, or
      (iii) is or has been in violation of any statute, rule or regulation of
      any governmental authority, including without limitation all foreign,
      federal, state and local laws applicable to its business except in each
      case of (i), (ii) and (iii) as could not have a Material Adverse Effect.

            (m) Regulatory Permits. The Company and the Subsidiaries possess all
      certificates, authorizations and permits issued by the appropriate
      federal, state, local or foreign regulatory authorities necessary to
      conduct their respective businesses as described in the SEC Reports,
      except where the failure to possess such permits could not have or
      reasonably be expected to result in a Material Adverse Effect ("Material
      Permits"), and neither the Company nor any Subsidiary has received any
      notice of proceedings relating to the revocation or modification of any
      Material Permit.

                                       11
<PAGE>

            (n) Title to Assets. The Company and the Subsidiaries do not own any
      real property. The Company owns good and marketable title in all personal
      property owned by them that is material to the business of the Company and
      the Subsidiaries, in each case free and clear of all Liens, except for
      Liens as do not materially affect the value of such property and do not
      materially interfere with the use made and proposed to be made of such
      property by the Company and the Subsidiaries and Liens for the payment of
      federal, state or other taxes, the payment of which is neither delinquent
      nor subject to penalties. Except as set forth on Schedule 3.1(n), any real
      property and facilities held under lease by the Company and the
      Subsidiaries are held by them under valid, subsisting and enforceable
      leases of which the Company and the Subsidiaries are in compliance.

            (o) Patents and Trademarks. The Company and the Subsidiaries have,
      or have rights to use, all patents, patent applications, trademarks,
      trademark applications, service marks, trade names, copyrights, licenses
      and other similar rights necessary or material for use in connection with
      their respective businesses as described in the SEC Reports and which the
      failure to so have could have a Material Adverse Effect (collectively, the
      "Intellectual Property Rights"). Neither the Company nor any Subsidiary
      has received a written notice that the Intellectual Property Rights used
      by the Company or any Subsidiary violates or infringes upon the rights of
      any Person. To the knowledge of the Company, all such Intellectual
      Property Rights are enforceable and there is no existing infringement by
      another Person of any of the Intellectual Property Rights of others.

            (p) Insurance. The Company and the Subsidiaries are insured by
      insurers of recognized financial responsibility against such losses and
      risks and in such amounts as are prudent and customary in the businesses
      in which the Company and the Subsidiaries are engaged, including, but not
      limited to, directors and officers insurance coverage at least equal to
      the aggregate Subscription Amount. To the best of Company's knowledge,
      such insurance contracts and policies are accurate and complete. Neither
      the Company nor any Subsidiary has any reason to believe that it will not
      be able to renew its existing insurance coverage as and when such coverage
      expires or to obtain similar coverage from similar insurers as may be
      necessary to continue its business without a significant increase in cost.

            (q) Transactions With Affiliates and Employees. Except as set forth
      in the SEC Reports or as set forth on Schedule 3.1(q), none of the
      officers or directors of the Company and, to the knowledge of the Company,
      none of the employees of the Company is presently a party to any
      transaction with the Company or any Subsidiary (other than for services as
      employees, officers and directors), including any contract, agreement or
      other arrangement providing for the furnishing of services to or by,
      providing for rental of real or personal property to or from, or otherwise
      requiring payments to or from any officer, director or such employee or,
      to the knowledge of the Company, any entity in which any officer,
      director, or any such employee has a substantial interest or is an
      officer, director, trustee or partner, in each case in excess of $60,000
      other than (i) for payment of salary or consulting fees for services
      rendered, (ii) reimbursement for expenses incurred on behalf of the
      Company and (iii) for other employee benefits, including stock option
      agreements under any stock option plan of the Company.

                                       12
<PAGE>

            (r) Sarbanes-Oxley; Internal Accounting Controls. The Company is in
      material compliance with all provisions of the Sarbanes-Oxley Act of 2002
      which are applicable to it as of the Closing Date. The Company and the
      Subsidiaries maintain a system of internal accounting controls sufficient
      to provide reasonable assurance that (i) transactions are executed in
      accordance with management's general or specific authorizations, (ii)
      transactions are recorded as necessary to permit preparation of financial
      statements in conformity with GAAP and to maintain asset accountability,
      (iii) access to assets is permitted only in accordance with management's
      general or specific authorization, and (iv) the recorded accountability
      for assets is compared with the existing assets at reasonable intervals
      and appropriate action is taken with respect to any differences. The
      Company has established disclosure controls and procedures (as defined in
      Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed
      such disclosure controls and procedures to ensure that material
      information relating to the Company, including its Subsidiaries, is made
      known to the certifying officers by others within those entities,
      particularly during the period in which the Company's most recently filed
      periodic report under the Exchange Act, as the case may be, is being
      prepared. The Company's certifying officers have evaluated the
      effectiveness of the Company's controls and procedures as of the date
      prior to the filing date of the most recently filed periodic report under
      the Exchange Act (such date, the "Evaluation Date"). The Company presented
      in its most recently filed periodic report under the Exchange Act the
      conclusions of the certifying officers about the effectiveness of the
      disclosure controls and procedures based on their evaluations as of the
      Evaluation Date. Since the Evaluation Date, there have been no significant
      changes in the Company's internal controls (as such term is defined in
      Item 307(b) of Regulation S-K under the Exchange Act) or, to the Company's
      knowledge, in other factors that could significantly affect the Company's
      internal controls.

            (s) Certain Fees. Except as set forth in Schedule 3.1(s), no
      brokerage or finder's fees or commissions are or will be payable by the
      Company to any broker, financial advisor or consultant, finder, placement
      agent, investment banker, bank or other Person with respect to the
      transactions contemplated by this Agreement. Except as set forth in
      Schedule 3.1(s), the Purchasers shall have no obligation with respect to
      any fees or with respect to any claims made by or on behalf of other
      Persons for fees of a type contemplated in this Section that may be due in
      connection with the transactions contemplated by this Agreement.

            (t) Private Placement. Assuming the accuracy of the Purchasers
      representations and warranties set forth in Section 3.2, no registration
      under the Securities Act is required for the offer and sale of the
      Securities by the Company to the Purchasers as contemplated hereby. The
      issuance and sale of the Securities hereunder does not contravene the
      rules and regulations of the Trading Market.

            (u) Investment Company. The Company is not, and is not an Affiliate
      of, and immediately after receipt of payment for the Securities, will not
      be or be an Affiliate of, an "investment company" within the meaning of
      the Investment Company Act of 1940, as amended. The Company shall conduct
      its business in a manner so that it will not become subject to the
      Investment Company Act.

                                       13
<PAGE>

            (v) Registration Rights. Other than as set forth on Schedule 3.1(v)
      and each of the Purchasers, no Person has any right to cause the Company
      to effect the registration under the Securities Act of any securities of
      the Company.

            (w) Listing and Maintenance Requirements. The Company's Common Stock
      is registered pursuant to Section 12(g) of the Exchange Act, and the
      Company has taken no action designed to, or which to its knowledge is
      likely to have the effect of, terminating the registration of the Common
      Stock under the Exchange Act nor has the Company received any notification
      that the Commission is contemplating terminating such registration. The
      Company has not, in the 12 months preceding the date hereof, received
      notice from any Trading Market on which the Common Stock is or has been
      listed or quoted to the effect that the Company is not in compliance with
      the listing or maintenance requirements of such Trading Market. The
      Company is, and has no reason to believe that it will not in the
      foreseeable future continue to be, in compliance with all such listing and
      maintenance requirements.

            (x) Application of Takeover Protections. The Company and its Board
      of Directors have taken all necessary action, if any, in order to render
      inapplicable any control share acquisition, business combination, poison
      pill (including any distribution under a rights agreement) or other
      similar anti-takeover provision under the Company's Certificate of
      Incorporation (or similar charter documents) or the laws of its state of
      incorporation that is or could become applicable to the Purchasers as a
      result of the Purchasers and the Company fulfilling their obligations or
      exercising their rights under the Transaction Documents, including without
      limitation as a result of the Company's issuance of the Securities and the
      Purchasers' ownership of the Securities.

            (y) Disclosure. The Company confirms that, neither it nor any other
      Person acting on its behalf has provided any of the Purchasers or their
      agents or counsel with any information that constitutes or might
      constitute material, non-public information. The Company understands and
      confirms that the Purchasers will rely on the foregoing representations
      and covenants in effecting transactions in securities of the Company. All
      disclosure provided to the Purchasers regarding the Company, its business
      and the transactions contemplated hereby, including the Disclosure
      Schedules to this Agreement, furnished by or on behalf of the Company with
      respect to the representations and warranties made herein are true and
      correct with respect to such representations and warranties and do not
      contain any untrue statement of a material fact or omit to state any
      material fact necessary in order to make the statements made therein, in
      light of the circumstances under which they were made, not misleading. The
      Company acknowledges and agrees that no Purchaser makes or has made any
      representations or warranties with respect to the transactions
      contemplated hereby other than those specifically set forth in Section 3.2
      hereof.

            (z) No Integrated Offering. Assuming the accuracy of the Purchasers'
      representations and warranties set forth in Section 3.2, neither the
      Company, nor any of its affiliates, nor any Person acting on its or their
      behalf has, directly or indirectly, made any offers or sales of any
      security or solicited any offers to buy any security, under circumstances
      that would cause this offering of the Securities to be integrated with
      prior offerings by the Company for purposes of the Securities Act or any
      applicable shareholder approval provisions, including, without limitation,
      under the rules and regulations of any Trading Market on which any of the
      securities of the Company are listed or designated.

                                       14
<PAGE>

            (aa) Solvency. Based on the financial condition of the Company as of
      the Closing Date after giving effect to the receipt by the Company of the
      proceeds from the sale of the Securities hereunder, (i) the Company's fair
      saleable value of its assets exceeds the amount that will be required to
      be paid on or in respect of the Company's existing debts and other
      liabilities (including known contingent liabilities) as they mature; (ii)
      the Company's assets are reasonably expected to be sufficient for it to
      carry on its business for the current fiscal year as now conducted and as
      proposed to be conducted including its capital needs taking into account
      the particular capital requirements of the business conducted by the
      Company, and projected capital requirements and capital availability
      thereof; and (iii) the current cash flow of the Company, together with the
      proceeds the Company would receive, were it to liquidate all of its assets
      on the date hereof, after taking into account all anticipated uses of the
      cash, would be sufficient to pay all amounts on or in respect of its debt
      outstanding on the date hereof when such amounts are required to be paid.
      The Company does not intend to incur debts beyond its ability to pay such
      debts as they mature (taking into account the timing and amounts of cash
      to be payable on or in respect of its debt). The Company has no knowledge
      of any facts or circumstances which lead it to believe that it will file
      for reorganization or liquidation under the bankruptcy or reorganization
      laws of any jurisdiction within one year from the Closing Date. The SEC
      Reports set forth as of the dates thereof all outstanding secured and
      unsecured Indebtedness of the Company or any Subsidiary, or for which the
      Company or any Subsidiary has commitments. For the purposes of this
      Agreement, "Indebtedness" shall mean (a) any liabilities for borrowed
      money or amounts owed in excess of $50,000 (other than trade accounts
      payable incurred in the ordinary course of business), (b) all guaranties,
      endorsements and other contingent obligations in respect of Indebtedness
      of others, whether or not the same are or should be reflected in the
      Company's balance sheet (or the notes thereto), except guaranties by
      endorsement of negotiable instruments for deposit or collection or similar
      transactions in the ordinary course of business; and (c) the present value
      of any lease payments in excess of $50,000 due under leases required to be
      capitalized in accordance with GAAP. Neither the Company nor any
      Subsidiary is in default with respect to any Indebtedness.

            (bb) INTENTIONALLY OMITTED.

            (cc) Tax Status. Except for matters that would not, individually or
      in the aggregate, have or reasonably be expected to result in a Material
      Adverse Effect, the Company and each Subsidiary has filed all necessary
      federal, state and foreign income and franchise tax returns and has paid
      or accrued all taxes shown as due thereon, and the Company has no
      knowledge of a tax deficiency which has been asserted or threatened
      against the Company or any Subsidiary.

            (dd) No General Solicitation. Neither the Company nor any person
      acting on behalf of the Company has offered or sold any of the Securities
      by any form of general solicitation or general advertising. The Company
      has offered the Securities for sale only to the Purchasers and certain
      other "accredited investors" within the meaning of Rule 501 under the
      Securities Act.

                                       15
<PAGE>

            (ee) Foreign Corrupt Practices. Neither the Company, nor to the
      knowledge of the Company, any agent or other person acting on behalf of
      the Company, has (i) directly or indirectly, used any funds for unlawful
      contributions, gifts, entertainment or other unlawful expenses related to
      foreign or domestic political activity, (ii) made any unlawful payment to
      foreign or domestic government officials or employees or to any foreign or
      domestic political parties or campaigns from corporate funds, (iii) failed
      to disclose fully any contribution made by the Company (or made by any
      person acting on its behalf of which the Company is aware) which is in
      violation of law, or (iv) violated in any material respect any provision
      of the Foreign Corrupt Practices Act of 1977, as amended.

            (ff) Accountants. The Company's accountants are set forth on
      Schedule 3.1(ff) of the Disclosure Schedule. To the Company's knowledge,
      such accountants, who the Company expects will express their opinion with
      respect to the financial statements to be included in the Company's Annual
      Report on Form 10-KSB for the year ending December 31, 2005, are a
      registered public accounting firm as required by the Securities Act.

            (gg) Acknowledgment Regarding Purchasers' Purchase of Securities.
      The Company acknowledges and agrees that each of the Purchasers is acting
      solely in the capacity of an arm's length purchaser with respect to the
      Transaction Documents and the transactions contemplated hereby. The
      Company further acknowledges that no Purchaser is acting as a financial
      advisor or fiduciary of the Company (or in any similar capacity) with
      respect to this Agreement and the transactions contemplated hereby and any
      advice given by any Purchaser or any of their respective representatives
      or agents in connection with this Agreement and the transactions
      contemplated hereby is merely incidental to the Purchasers' purchase of
      the Securities. The Company further represents to each Purchaser that the
      Company's decision to enter into this Agreement has been based solely on
      the independent evaluation of the transactions contemplated hereby by the
      Company and its representatives.

            (hh) Acknowledgement Regarding Purchasers' Trading Activity.
      Anything in this Agreement or elsewhere herein to the contrary
      notwithstanding (except for Section 4.15 hereof), it is understood and
      agreed by the Company (i) that none of the Purchasers have been asked to
      agree, nor has any Purchaser agreed, to desist from purchasing or selling,
      long and/or short, securities of the Company, or "derivative" securities
      based on securities issued by the Company or to hold the Securities for
      any specified term; (ii) that past or future open market or other
      transactions by any Purchaser, including Short Sales, and specifically
      including, without limitation, Short Sales or "derivative" transactions,
      before or after the closing of this or future private placement
      transactions, may negatively impact the market price of the Company's
      publicly-traded securities; (iii) that any Purchaser, and counter parties
      in "derivative" transactions to which any such Purchaser is a party,
      directly or indirectly, presently may have a "short" position in the
      Common Stock, and (iv) that each Purchaser shall not be deemed to have any
      affiliation with or control over any arm's length counter-party in any
      "derivative" transaction. The Company further understands and acknowledges

                                       16
<PAGE>

      that (a) one or more Purchasers may engage in hedging activities at
      various times during the period that the Securities are outstanding,
      including, without limitation, during the periods that the value of the
      Warrant Shares deliverable with respect to Securities are being determined
      and (b) such hedging activities (if any) could reduce the value of the
      existing stockholders' equity interests in the Company at and after the
      time that the hedging activities are being conducted. The Company
      acknowledges that such aforementioned hedging activities do not constitute
      a breach of any of the Transaction Documents.

            (ii) Manipulation of Price. The Company has not, and to its
      knowledge no one acting on its behalf has, (i) taken, directly or
      indirectly, any action designed to cause or to result in the stabilization
      or manipulation of the price of any security of the Company to facilitate
      the sale or resale of any of the Securities, (ii) sold, bid for,
      purchased, or, paid any compensation for soliciting purchases of, any of
      the Securities (other than for the placement agent's placement of the
      Securities), or (iii) paid or agreed to pay to any person any compensation
      for soliciting another to purchase any other securities of the Company.

      3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:

            (a) Organization; Authority. Such Purchaser is an entity duly
      organized, validly existing and in good standing under the laws of the
      jurisdiction of its organization with full right, corporate or partnership
      power and authority to enter into and to consummate the transactions
      contemplated by the Transaction Documents and otherwise to carry out its
      obligations thereunder. The execution, delivery and performance by such
      Purchaser of the transactions contemplated by this Agreement have been
      duly authorized by all necessary corporate or similar action on the part
      of such Purchaser. Each Transaction Document to which it is a party has
      been duly executed by such Purchaser, and when delivered by such Purchaser
      in accordance with the terms hereof, will constitute the valid and legally
      binding obligation of such Purchaser, enforceable against it in accordance
      with its terms, except (i) as limited by general equitable principles and
      applicable bankruptcy, insolvency, reorganization, moratorium and other
      laws of general application affecting enforcement of creditors' rights
      generally, (ii) as limited by laws relating to the availability of
      specific performance, injunctive relief or other equitable remedies and
      (iii) insofar as indemnification and contribution provisions may be
      limited by applicable law.

            (b) Own Account. Such Purchaser understands that the Securities are
      "restricted securities" and have not been registered under the Securities
      Act or any applicable state securities law and is acquiring the Securities
      as principal for its own account and not with a view to or for
      distributing or reselling such Securities or any part thereof in violation
      of the Securities Act or any applicable state securities law, has no
      present intention of distributing any of such Securities in violation of
      the Securities Act or any applicable state securities law and has no
      arrangement or understanding with any other persons regarding the
      distribution of such Securities (this representation and warranty not

                                       17
<PAGE>

      limiting such Purchaser's right to sell the Securities pursuant to the
      Registration Statement or otherwise in compliance with applicable federal
      and state securities laws) in violation of the Securities Act or any
      applicable state securities law. Such Purchaser is acquiring the
      Securities hereunder in the ordinary course of its business. Such
      Purchaser does not have any agreement or understanding, directly or
      indirectly, with any Person to distribute any of the Securities.

            (c) Purchaser Status. At the time such Purchaser was offered the
      Securities, it was, and at the date hereof it is, and on each date on
      which it exercises any Warrants, it will be either: (i) an "accredited
      investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8)
      under the Securities Act or (ii) a "qualified institutional buyer" as
      defined in Rule 144A(a) under the Securities Act. Such Purchaser is not
      required to be registered as a broker-dealer under Section 15 of the
      Exchange Act.

            (d) Experience of Such Purchaser. Such Purchaser, either alone or
      together with its representatives, has such knowledge, sophistication and
      experience in business and financial matters so as to be capable of
      evaluating the merits and risks of the prospective investment in the
      Securities, and has so evaluated the merits and risks of such investment.
      Such Purchaser is able to bear the economic risk of an investment in the
      Securities and, at the present time, is able to afford a complete loss of
      such investment.

            (e) General Solicitation. Such Purchaser is not purchasing the
      Securities as a result of any advertisement, article, notice or other
      communication regarding the Securities published in any newspaper,
      magazine or similar media or broadcast over television or radio or
      presented at any seminar or any other general solicitation or general
      advertisement.

            (f) Access to Information. Such Purchaser has received copies of and
      has reviewed and understands all SEC Reports (including the information
      set forth in sections contained in such SEC Reports entitled "RISK
      FACTORS"). Such Purchaser has had access during the course of this
      transaction, and prior to sale, to all information necessary to enable
      Purchaser and his or its purchaser representative (as defined in Rule
      501(h) under the Securities Act), if any, to evaluate the merits and risks
      of the investment in the Securities, and Purchaser and his or its
      purchaser representative have had the opportunity to ask questions of and
      receive answers from the officers and directors of the Company, or any
      person or persons acting on its behalf, concerning the terms and
      conditions of the offering and to obtain any additional information, to
      the extent that the Company possesses such information or could acquire it
      without unreasonable effort or expense, necessary to verify information
      contained in the SEC Reports, the Transaction Documents and this Agreement
      or to which Purchaser has had access; and all questions raised by
      Purchaser or his or its purchaser representative, if any, have been
      answered to the full satisfaction of Purchaser.

            (g) Risks Relating to the Company's Business. Such Purchaser is
      aware of and understands the risks involved in the Company's business and
      affairs, including, in particular, risks common to development stage
      biotechnology companies (as discussed in the sections contained in the SEC

                                       18
<PAGE>

      Reports entitled "RISK FACTORS"). Such Purchaser has sufficient knowledge
      and experience in financial and business matters and the biotechnology
      industry so as to be capable of evaluating the merits and risks of
      investing in the Securities. Such Purchaser has acquired sufficient
      information about the Company's business to reach an informed and
      knowledgeable decision to invest in the Securities under this Agreement.

            (h) Short Sales and Confidentiality. Other than the transaction
      contemplated hereunder, such Purchaser has not directly or indirectly, nor
      has any Person acting on behalf of or pursuant to any understanding with
      such Purchaser, executed any disposition, including Short Sales (but not
      including the location and/or reservation of borrowable shares of Common
      Stock), in the securities of the Company during the period commencing from
      the time that such Purchaser first received a term sheet from the Company
      or any other Person setting forth the material terms of the transactions
      contemplated hereunder until the date hereof ("Discussion Time").
      Notwithstanding the foregoing, in the case of a Purchaser that is a
      multi-managed investment vehicle whereby separate portfolio managers
      manage separate portions of such Purchaser's assets and the portfolio
      managers have no direct knowledge of the investment decisions made by the
      portfolio managers managing other portions of such Purchaser's assets, the
      representation set forth above shall only apply with respect to the
      portion of assets managed by the portfolio manager that made the
      investment decision to purchase the Securities covered by this Agreement.
      Other than to other Persons party to this Agreement and to their
      respective counsel, such Purchaser has maintained the confidentiality of
      all disclosures made to it in connection with this transaction (including
      the existence and terms of this transaction).

      The Company acknowledges and agrees that each Purchaser does not make or
has not made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.

                                  ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

      4.1 Transfer Restrictions. (a) The Securities may only be disposed of in
      compliance with state and federal securities laws. In connection with any
      transfer of Securities other than pursuant to an effective registration
      statement or Rule 144, to the Company or to an affiliate of a Purchaser or
      in connection with a pledge as contemplated in Section 4.1(b), the Company
      may require the transferor thereof to provide to the Company an opinion of
      counsel selected by the transferor and reasonably acceptable to the
      Company, the form and substance of which opinion shall be reasonably
      satisfactory to the Company, to the effect that such transfer does not
      require registration of such transferred Securities under the Securities
      Act. As a condition of transfer, any such transferee shall agree in
      writing to be bound by the terms of this Agreement and shall have the
      rights of a Purchaser under this Agreement and the Registration Rights
      Agreement.

            (b) The Purchasers agree to the imprinting, so long as is required
      by this Section 4.1(b), of a legend on any of the Securities in the
      following form:

                                       19
<PAGE>

            THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
            EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
            RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
            ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
            MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
            AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
            REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
            WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
            OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE
            OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

            The Company acknowledges and agrees that a Purchaser may from time
      to time pledge pursuant to a bona fide margin agreement with a registered
      broker-dealer or grant a security interest in some or all of the
      Securities to a financial institution that is an "accredited investor" as
      defined in Rule 501(a) under the Securities Act and who agrees to be bound
      by the provisions of this Agreement and the Registration Rights Agreement
      and, if required under the terms of such arrangement, such Purchaser may
      transfer pledged or secured Securities to the pledgees or secured parties.
      Such a pledge or transfer would not be subject to approval of the Company
      and no legal opinion of legal counsel of the pledgee, secured party or
      pledgor shall be required in connection therewith. Further, no notice
      shall be required of such pledge. At Purchaser's expense, the Company will
      execute and deliver such reasonable documentation as a pledgee or secured
      party of Securities may reasonably request in connection with a pledge or
      transfer of the Securities, including, if the Securities are subject to
      registration pursuant to the Registration Rights Agreement, the
      preparation and filing of any required prospectus supplement under Rule
      424(b)(3) under the Securities Act or other applicable provision of the
      Securities Act to appropriately amend the list of Selling Stockholders
      thereunder.

            (c) Certificates evidencing the Shares and Warrant Shares shall not
      contain any legend (including the legend set forth in Section 4.1(b)), (i)
      while a registration statement (including the Registration Statement)
      covering the resale of such security is effective under the Securities
      Act, or (ii) following any sale of such Shares or Warrant Shares pursuant
      to Rule 144, or (iii) if such Shares or Warrant Shares are eligible for
      sale under Rule 144(k), or (iv) if such legend is not required under
      applicable requirements of the Securities Act (including judicial
      interpretations and pronouncements issued by the staff of the Commission).
      The Company shall cause its counsel to issue a legal opinion to the
      Company's transfer agent promptly after the Effective Date if required by
      the Company's transfer agent to effect the removal of the legend
      hereunder. If all or any portion of a Warrant is exercised at a time when
      there is an effective registration statement to cover the resale of the
      Warrant Shares, such Warrant Shares shall be issued free of all legends.
      The Company agrees that following the Effective Date or at such time as
      such legend is no longer required under this Section 4.1(c), it will, no
      later than three Trading Days following the delivery by a Purchaser to the
      Company or the Company's transfer agent of a certificate representing

                                       20
<PAGE>

      Shares or Warrant Shares, as the case may be, issued with a restrictive
      legend (such third Trading Day, the "Legend Removal Date"), deliver or
      cause to be delivered to such Purchaser a certificate representing such
      shares that is free from all restrictive and other legends. The Company
      may not make any notation on its records or give instructions to any
      transfer agent of the Company that enlarge the restrictions on transfer
      set forth in this Section. Certificates for Securities subject to legend
      removal hereunder shall be transmitted by the transfer agent of the
      Company to the Purchasers by crediting the account of the Purchaser's
      prime broker with the Depository Trust Company System.

            (d) In addition to such Purchaser's other available remedies, the
      Company shall pay to a Purchaser, in cash, as partial liquidated damages
      and not as a penalty, for each $1,000 of Shares or Warrant Shares (based
      on the Closing Price of the Common Stock on the date such Securities are
      submitted to the Company's transfer agent accompanied by all requisite
      documentation) delivered for removal of the restrictive legend and subject
      to Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day
      thirty (30) Trading Days after such damages have begun to accrue) for each
      Trading Day after the tenth Trading Day after the Legend Removal Date
      until such certificate is delivered without a legend. Nothing herein shall
      limit such Purchaser's right to pursue actual damages for the Company's
      failure to deliver certificates representing any Securities as required by
      the Transaction Documents, and such Purchaser shall have the right to
      pursue all remedies available to it at law or in equity including, without
      limitation, a decree of specific performance and/or injunctive relief.

            (e) Each Purchaser, severally and not jointly with the other
      Purchasers, agrees that the removal of the restrictive legend from
      certificates representing Securities as set forth in this Section 4.1 is
      predicated upon the Company's reliance on the agreement of each Purchaser
      that such Purchaser will only sell Securities in compliance with either
      the registration requirements of the Securities Act, including any
      applicable prospectus delivery requirements, or an exemption therefrom and
      all state securities laws. In that regard, each Purchaser, severally and
      not jointly with the other Purchasers, agrees that they (i) will only sell
      Securities pursuant to a registration statement provided by the Company
      pursuant to Section 3(f) of the Registration Rights Agreement; (ii) will
      deliver a prospectus provided by the Company in accordance with Section
      3(g) of the Registration Rights Agreement to each person who purchases
      Securities from them pursuant to the Registration Statement; (iii) will
      cease the use of such prospectus and the sale of any Securities thereunder
      if and when notified by the Company that such prospectus may not be used
      in accordance with Section 3(d) of the Registration Rights Agreement; and
      (iv) will sell securities only pursuant to the applicable state securities
      laws.

            (f) Until the one month anniversary of the Effective Date, the
      Company shall not undertake a reverse or forward stock split or
      reclassification of the Common Stock without the prior written consent of
      the Purchasers holding a majority in interest of the Shares.

                                       21
<PAGE>

      4.2 Furnishing of Information. As long as any Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell such Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.

      4.3 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.

      4.4 Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m.
Eastern time on the Trading Day following the date hereof, issue a Current
Report on Form 8-K, reasonably acceptable to each Purchaser disclosing the
material terms of the transactions contemplated hereby, and shall attach the
Transaction Documents thereto. The Company and each Purchaser shall consult with
each other in issuing any other press releases with respect to the transactions
contemplated hereby, and neither the Company nor any Purchaser shall issue any
such press release or otherwise make any such public statement without the prior
consent of the Company, with respect to any press release of any Purchaser, or
without the prior consent of each Purchaser, with respect to any press release
of the Company, which consent shall not unreasonably be withheld, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without
the prior written consent of such Purchaser, except (i) as required by federal
securities law in connection with the registration statement contemplated by the
Registration Rights Agreement and (ii) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide
the Purchasers with prior notice of such disclosure permitted under subclause
(i) or (ii).

      4.5 Shareholder Rights Plan. No claim will be made or enforced by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring Person" under any shareholder rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the provisions of any such plan or arrangement, by
virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers. The Company shall
conduct its business in a manner so that it will not become subject to the
Investment Company Act.

                                       22
<PAGE>

      4.6 Non-Public Information. The Company covenants and agrees that neither
it nor any other Person acting on its behalf will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company. The Shareholder Agreement between the Company and Blue Cedar
Limited shall be deemed such a written agreement as to Blue Cedar.

      4.7 Use of Proceeds. Except as set forth on Schedule 4.7 attached hereto,
the Company shall use the net proceeds from the sale of the Securities hereunder
for working capital purposes and not for the satisfaction of any portion of the
Company's debt (other than payment of trade payables incurred by the Company
prior to the date hereof in the ordinary course of the Company's business and
prior practices), to redeem any Common Stock or Common Stock Equivalents or to
settle any outstanding litigation.

      4.8 Indemnification of Purchasers. Subject to the provisions of this
Section 4.8, the Company will indemnify and hold the Purchasers and their
directors, officers, shareholders, partners, employees and agents (each, a
"Purchaser Party") harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a
Purchaser, or any of them or their respective Affiliates, by any stockholder of
the Company who is not an Affiliate of such Purchaser, with respect to any of
the transactions contemplated by the Transaction Documents (unless such action
is based upon a breach of such Purchaser's representations, warranties or
covenants under the Transaction Documents or any agreements or understandings
such Purchaser may have with any such stockholder or any violations by the
Purchaser of state or federal securities laws or any conduct by such Purchaser
which constitutes fraud, gross negligence, willful misconduct or malfeasance).
If any action shall be brought against any Purchaser Party in respect of which
indemnity may be sought pursuant to this Agreement, such Purchaser Party shall
promptly notify the Company in writing, and the Company shall have the right to
assume the defense thereof with counsel of its own choosing. Any Purchaser Party
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Purchaser Party except to the extent that (i)
the employment thereof has been specifically authorized by the Company in
writing, (ii) the Company has failed after a reasonable period of time to assume
such defense and to employ counsel or (iii) in such action there is, in the
reasonable opinion of such separate counsel, a material conflict on any material
issue between the position of the Company and the position of such Purchaser
Party. The Company will not be liable to any Purchaser Party under this
Agreement (i) for any settlement by a Purchaser Party effected without the
Company's prior written consent, which shall not be unreasonably withheld or
delayed; or (ii) to the extent, but only to the extent that a loss, claim,
damage or liability is attributable to any Purchaser Party's breach of any of
the representations, warranties, covenants or agreements made by the Purchasers
in this Agreement or in the other Transaction Documents.

                                       23
<PAGE>

      4.9 Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement and Warrant Shares pursuant to any exercise of the Warrants, subject,
in the case of the Long Term Warrants, to the receipt of Shareholder Approval.

      4.10 Listing of Common Stock. The Company hereby agrees to use best
efforts to maintain the listing of the Common Stock on a Trading Market, and as
soon as reasonably practicable following the Closing (but not later than the
earlier of the Effective Date and the first anniversary of the Closing Date).
The Company further agrees, if the Company applies to have the Common Stock
traded on any other Trading Market, it will include in such application all of
the Shares and Warrant Shares, and will take such other action as is necessary
to cause all of the Shares and Warrant Shares to be listed on such other Trading
Market as promptly as possible. The Company will take all action reasonably
necessary to continue the listing and trading of its Common Stock on a Trading
Market and will comply in all respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the Trading Market.

      4.11 Equal Treatment of Purchasers. No consideration shall be offered or
paid to any person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. For
clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each Purchaser, and
is intended to treat for the Company the Purchasers as a class and shall not in
any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of Securities or otherwise.

      4.12 Short Sales and Confidentiality. Each Purchaser severally and not
jointly with the other Purchasers covenants that neither it nor any affiliates
or agents acting on its behalf or pursuant to any understanding with it will
execute any Short Sales during the period after the Discussion Time and ending
at the time that the transactions contemplated by this Agreement are first
publicly announced as described in Section 4.4. Each Purchaser, severally and
not jointly with the other Purchasers, covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed by the
Company as described in Section 4.4, such Purchaser will maintain, the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction). Each
Purchaser understands and acknowledges, severally and not jointly with any other
Purchaser, that the Commission currently takes the position that coverage of
short sales of shares of the Common Stock "against the box" prior to the
Effective Date of the Registration Statement with the Securities is a violation
of Section 5 of the Securities Act, as set forth in Item 65, Section 5 under
Section A, of the Manual of Publicly Available Telephone Interpretations, dated
July 1997, compiled by the Office of Chief Counsel, Division of Corporation
Finance. Notwithstanding the foregoing, no Purchaser makes any representation,
warranty or covenant hereby that it will not engage in Short Sales in the
securities of the Company after the time that the transactions contemplated by
this Agreement are first publicly announced as described in Section 4.4.
Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser's assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Purchaser's assets, the covenant set forth above
shall only apply with respect to the portion of assets managed by the portfolio
manager that made the investment decision to purchase the Securities covered by
this Agreement.

                                       24
<PAGE>

      4.13 Delivery of Securities After Closing. The Company shall deliver, or
cause to be delivered, the respective Securities purchased by each Purchaser to
such Purchaser within 3 Trading Days of the Closing Date.

      4.14 Most Favored Nation. If, during the period ending 180 days after the
Second Closing Date, the Company initiates a Subsequent Financing, each
Purchaser shall have the right to exchange their respective Securities purchased
hereunder for an equal Subscription Amount of the securities sold in such
Subsequent Financing, under the same terms and conditions as are received by the
other investors in such Subsequent Financing.

      4.15 Shareholder Approval. The Company shall hold a special meeting of
shareholders (which may also be at the annual meeting of shareholders) at the
earliest practical date, but in no event later than 60 days from the First
Closing date, for the purpose of obtaining Shareholder Approval, with the
recommendation of the Company's Board of Directors that such proposal be
approved, and the Company shall solicit proxies from its shareholders in
connection therewith in the same manner as all other management proposals in
such proxy statement and all management-appointed proxyholders shall vote their
proxies in favor of such proposal. If the Company does not obtain Shareholder
Approval at the first meeting, the Company shall call a meeting every four
months thereafter to seek Shareholder Approval until the earlier of the date
Shareholder Approval is obtained or the Long Term Warrants are no longer
outstanding. The Company shall set the record date for such meeting immediately
after the earlier of the second Closing Date or September 30, 2005, and shall
not issue any voting securities between the date hereof and such record date
except pursuant to the Transaction Documents.

                                   ARTICLE V.
                                  MISCELLANEOUS

      5.1 Termination. This Agreement may be terminated by any Purchaser, as to
such Purchaser's obligations hereunder only and without any effect whatsoever on
the obligations between the Company and the other Purchasers, by written notice
to the other parties, if the Closing has not been consummated on or before
October 31, 2005; provided, however, that no such termination will affect the
right of any party to sue for any breach by the other party (or parties).

      5.2 Fees and Expenses. The Company shall deliver, prior to the Closing, a
completed and executed copy of the Closing Statement, attached hereto as Annex
A. Except as expressly set forth in the Transaction Documents to the contrary,
each party shall pay the fees and expenses of its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and performance of
this Agreement. Notwithstanding the forgoing, the Company shall pay the
attorneys fees hereunder incurred by Lipworth Capital Limited, the placement
agent in connection with the transactions contemplated by this Agreement, in the
amount of $10,000.00. The Company shall pay all transfer agent fees, stamp taxes
and other taxes and duties levied in connection with the delivery of any
Securities.

                                       25
<PAGE>

      5.3 Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

      5.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 5:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading
Day, (c) the 2nd Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto.

      5.5 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each Purchaser or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.

      5.6 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.

      5.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser. Any Purchaser may assign
any or all of its rights under this Agreement to any Person to whom such
Purchaser properly assigns or transfers any Securities in accordance with the
terms of this Agreement, provided such transferee agrees in writing to be bound,
with respect to the transferred Securities, by the provisions hereof that apply
to the "Purchasers".

      5.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.8.

                                       26
<PAGE>

      5.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New Jersey, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the federal courts sitting in the District of
New Jersey or the Superior Court of Essex County. Each party hereby irrevocably
submits to the exclusive jurisdiction of the federal courts sitting in the
District of New Jersey or the Superior Court of Essex County for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. The parties hereby waive all rights to a trial by jury. If
either party shall commence an action or proceeding to enforce any provisions of
the Transaction Documents, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys' fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.

      5.10 Survival. The representations and warranties contained herein shall
survive the Closing and the delivery of the Shares and Warrant Shares.

      5.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

      5.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

      5.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.

                                       27
<PAGE>

      5.14 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.

      5.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.

      5.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

      5.17 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. The Company has
elected to provide all Purchasers with the same terms and Transaction Documents
for the convenience of the Company and not because it was required or requested
to do so by the Purchasers.

                                       28
<PAGE>

      5.18 Liquidated Damages. The Company's obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.

      5.19 Construction. The parties agree that each of them and/or their
respective counsel has reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of the Transaction Documents or any amendments hereto.

                            (Signature Pages Follow)

                                       29
<PAGE>

            IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

ASTRALIS LTD.                                                Address for Notice:

By: -----------------------------------------------
    Name:
    Title:

With a copy to (which shall not constitute notice):

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]

                                       30
<PAGE>

        [PURCHASER SIGNATURE PAGES TO ASTR SECURITIES PURCHASE AGREEMENT]

      IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

Name of Purchaser:
                   --------------------------------------------------------
Signature of Authorized Signatory of Purchaser:
                                                --------------------------------
Name of Authorized Signatory:
                              --------------------------------------------------
Title of Authorized Signatory:
                               -------------------------------------------------
Email Address of Purchaser:
                            -----------------------------------------------
Telephone:
Fax:

Address for Notice of Purchaser:

Address for Delivery of Securities for Purchaser (if not same as above):

Subscription Amount:
Shares:
Long Term Warrant Shares:
Short Term Warrant Shares:
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]

                           [SIGNATURE PAGES CONTINUE]

                                       31
<PAGE>

                                                                         Annex A

                                CLOSING STATEMENT

Pursuant to the attached Securities Purchase Agreement, dated as of the date
hereto, the purchasers shall purchase up to $5,000,000 of Common Stock and
Warrants from Astralis Ltd. (the "Company"). All funds will be wired into the
account maintained by the Company. All funds will be disbursed in accordance
with this Closing Statement.

Disbursement Date: August ___, 2005

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

I. PURCHASE PRICE

                    Gross Proceeds to be Received in Trust      $

II. DISBURSEMENTS

                                                                $
                                                                $
                                                                $
                                                                $
                                                                $

Total Amount Disbursed:                                         $

WIRE INSTRUCTIONS:

To:
    -------------------------------------

To:
    -------------------------------------

                                       32

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