Document:

KIRBY
        CORPORATION

      

      

      THE
        BANKS NAMED HEREIN,

      

      and

       

      JPMORGAN
        CHASE BANK, N.A.,

      as
        Funds Administrator, Issuer and Administrative Agent

      

      
        
          

        

      

       

      $250,000,000

      Amended
        and Restated Credit Agreement

      

      
        
 

      June
        14, 2006

      

      
        
 

      

      WELLS
        FARGO BANK, N.A. and BANK OF AMERICA, N.A.,

      as
        Syndication Agents

       

      

      THE
        BANK OF TOKYO-MITSUBISHI UFJ, LTD.

      and

      DnB
        NOR BANK ASA,

      as
        Documentation Agents

       

      

      J.P.
        MORGAN SECURITIES, INC.

      and

      BANC
        OF AMERICA SECURITIES LLC,

      as
        Co-Lead Arrangers and Joint Bookrunners 

       

      
        

        

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      TABLE
        OF CONTENTS

       

      
        	
                ARTICLE
                  I. DEFINITIONS, ETC.

              	
                1

              
	 	 	
                 

              
	
                SECTION
                  1.01

              	
                CERTAIN
                  DEFINED TERMS

              	
                1

              
	
                SECTION
                  1.02

              	
                ACCOUNTING
                  TERMS

              	
                2

              
	
                SECTION
                  1.03

              	
                COMPUTATION
                  OF TIME PERIODS

              	
                2

              
	
                SECTION
                  1.04

              	
                REFERENCES,
                  ETC

              	
                2

              
	
                 

              	 	
                 

              
	
                ARTICLE
                  II. COMMITMENTS AND TERMS OF CREDIT

              	
                2

              
	 	 	
                 

              
	
                SECTION
                  2.01

              	
                COMMITMENTS;
                  LOANS AND BORROWINGS

              	
                2

              
	
                SECTION
                  2.02

              	
                REVOLVING
                  BORROWING PROCEDURES; CONVERSIONS

              	
                3

              
	
                SECTION
                  2.03

              	
                SWINGLINE
                  LOANS

              	
                4

              
	
                SECTION
                  2.04

              	
                THE
                  NOTES

              	
                5

              
	
                SECTION
                  2.05

              	
                REDUCTION
                  OF THE COMMITMENTS

              	
                5

              
	
                SECTION
                  2.06

              	
                REPAYMENT
                  OF LOANS

              	
                6

              
	
                SECTION
                  2.07

              	
                INTEREST
                  ACCRUAL, PAYMENTS, ETC

              	
                6

              
	
                SECTION
                  2.08

              	
                PREPAYMENTS

              	
                8

              
	
                SECTION
                  2.09

              	
                PAYMENTS
                  AND COMPUTATIONS

              	
                9

              
	
                SECTION
                  2.10

              	
                FEES

              	
                10

              
	
                SECTION
                  2.11

              	
                SETOFF,
                  COUNTERCLAIMS AND TAXES

              	
                11

              
	
                SECTION
                  2.12

              	
                FUNDING
                  LOSSES

              	
                13

              
	
                SECTION
                  2.13

              	
                CHANGE
                  OF LAW

              	
                13

              
	
                SECTION
                  2.14

              	
                INCREASED
                  COSTS

              	
                14

              
	
                SECTION
                  2.15

              	
                SUBSTITUTION
                  OF BANKS

              	
                15

              
	
                SECTION
                  2.16

              	
                LETTERS
                  OF CREDIT.

              	
                16

              
	
                SECTION
                  2.17

              	
                INCREASE
                  OF COMMITMENTS.

              	
                18

              
	 	 	
                 

              
	
                ARTICLE
                  III. CONDITIONS OF CREDIT

              	
                19

              
	 	 	
                 

              
	
                SECTION
                  3.01

              	
                CONDITIONS
                  PRECEDENT TO THE INITIAL BORROWING

              	
                19

              
	
                SECTION
                  3.02

              	
                CONDITIONS
                  PRECEDENT TO ALL BORROWINGS

              	
                21

              
	 	 	
                 

              
	
                ARTICLE
                  IV. REPRESENTATIONS AND WARRANTIES

              	
                21

              
	 	 	
                 

              
	
                SECTION
                  4.01

              	
                CORPORATE
                  EXISTENCE; ETC

              	
                21

              
	
                SECTION
                  4.02

              	
                CORPORATE
                  AUTHORITY; BINDING OBLIGATIONS

              	
                22

              
	
                SECTION
                  4.03

              	
                NO
                  CONFLICT

              	
                22

              
	
                SECTION
                  4.04

              	
                NO
                  CONSENT

              	
                22

              
	
                SECTION
                  4.05

              	
                NO
                  DEFAULTS OR VIOLATIONS OF LAW

              	
                22

              
	
                SECTION
                  4.06

              	
                FINANCIAL
                  POSITION

              	
                23

              
	
                SECTION
                  4.07

              	
                LITIGATION

              	
                23

              
	
                SECTION
                  4.08

              	
                USE
                  OF PROCEEDS

              	
                23

              
	
                SECTION
                  4.09

              	
                GOVERNMENTAL
                  REGULATION

              	
                24

              
	
                SECTION
                  4.10

              	
                DISCLOSURE

              	
                24

              
	
                SECTION
                  4.11

              	
                ERISA

              	
                24

              
	
                SECTION
                  4.12

              	
                PAYMENT
                  OF TAXES

              	
                24

              
	
                SECTION
                  4.13

              	
                PROPERTIES;
                  TITLE AND LIENS

              	
                24

              
	
                SECTION
                  4.14

              	
                PARI
                  PASSU RANKING

              	
                24

              
	
                SECTION
                  4.15

              	
                ENVIRONMENTAL
                  MATTERS

              	
                25

              
	
                SECTION
                  4.16

              	
                NO
                  UNDISCLOSED LIABILITIES

              	
                25

              
	
                SECTION
                  4.17

              	
                LABOR
                  MATTERS

              	
                25

              
	 	 	
                 

              
	
                ARTICLE
                  V. AFFIRMATIVE COVENANTS

              	
                26

              
	 	 	
                 

              
	
                SECTION
                  5.01

              	
                REPORTING
                  REQUIREMENTS

              	
                26

              
	
                SECTION
                  5.02

              	
                TAXES;
                  CLAIMS

              	
                28

              

      

      
        
          
          

        

        
          -i-

          
            

          

        

        
          
          

        

      

      

      
        	
                SECTION
                  5.03

              	
                COMPLIANCE
                  WITH LAWS AND AGREEMENTS

              	
                28

              
	
                SECTION
                  5.04

              	
                INSURANCE

              	
                28

              
	
                SECTION
                  5.05

              	
                CORPORATE
                  EXISTENCE; ETC

              	
                29

              
	
                SECTION
                  5.06

              	
                INSPECTIONS;
                  ETC

              	
                29

              
	
                SECTION
                  5.07

              	
                MAINTENANCE
                  OF PROPERTIES

              	
                29

              
	
                SECTION
                  5.08

              	
                ACCOUNTING
                  SYSTEMS; ETC

              	
                29

              
	
                SECTION
                  5.09

              	
                USE
                  OF LOAN PROCEEDS

              	
                29

              
	
                SECTION
                  5.10

              	
                FURTHER
                  ASSURANCES IN GENERAL

              	
                29

              
	 	 	
                 

              
	
                ARTICLE
                  VI. NEGATIVE COVENANTS

              	
                30

              
	 	 	
                 

              
	
                SECTION
                  6.01

              	
                FINANCIAL
                  COVENANTS

              	
                30

              
	
                SECTION
                  6.02

              	
                RESTRICTIONS
                  ON DEBT

              	
                30

              
	
                SECTION
                  6.03

              	
                RESTRICTION
                  ON LIENS

              	
                31

              
	
                SECTION
                  6.04

              	
                CONSOLIDATED
                  SUBSIDIARY DISPOSITIONS

              	
                32

              
	
                SECTION
                  6.05

              	
                RESTRICTIONS
                  ON CONSOLIDATED SUBSIDIARY DISTRIBUTIONS

              	
                32

              
	
                SECTION
                  6.06

              	
                MERGERS
                  AND ACQUISITIONS

              	
                32

              
	
                SECTION
                  6.07

              	
                RESTRICTED
                  INVESTMENTS

              	
                33

              
	
                SECTION
                  6.08

              	
                LINES
                  OF BUSINESS

              	
                33

              
	
                SECTION
                  6.09

              	
                TRANSACTIONS
                  WITH AFFILIATES

              	
                33

              
	
                SECTION
                  6.10

              	
                RESTRICTED
                  PAYMENTS

              	
                33

              
	 	 	
                 

              
	
                ARTICLE
                  VII. DEFAULT

              	
                34

              
	 	 	
                 

              
	
                SECTION
                  7.01

              	
                EVENTS
                  OF DEFAULT

              	
                34

              
	
                SECTION
                  7.02

              	
                SETOFF
                  IN EVENT OF DEFAULT

              	
                36

              
	
                SECTION
                  7.03

              	
                NO
                  WAIVER; REMEDIES

              	
                36

              
	
                SECTION
                  7.04

              	
                NO
                  PRESERVATION OF SECURITY FOR UNMATURED REIMBURSEMENT
                  OBLIGATIONS

              	
                36

              
	 	 	
                 

              
	
                ARTICLE
                  VIII. THE AGENTS AND THE FUNDS ADMINISTRATOR

              	
                37

              
	 	 	
                 

              
	
                SECTION
                  8.01

              	
                AUTHORIZATION
                  AND ACTION

              	
                37

              
	
                SECTION
                  8.02

              	
                RELIANCE,
                  ETC

              	
                37

              
	
                SECTION
                  8.03

              	
                CHASE
                  AND AFFILIATES

              	
                38

              
	
                SECTION
                  8.04

              	
                BANK
                  CREDIT DECISION

              	
                39

              
	
                SECTION
                  8.05

              	
                INDEMNIFICATION

              	
                39

              
	
                SECTION
                  8.06

              	
                EMPLOYEES
                  OF THE AGENT, ETC

              	
                40

              
	
                SECTION
                  8.07

              	
                SUCCESSOR
                  AGENT

              	
                40

              
	
                SECTION
                  8.08

              	
                SUCCESSOR
                  FUNDS ADMINISTRATOR

              	
                40

              
	
                SECTION
                  8.09

              	
                NOTICE
                  OF DEFAULT

              	
                41

              
	
                SECTION
                  8.10

              	
                EXECUTION
                  OF LOAN DOCUMENTS

              	
                41

              
	
                SECTION
                  8.11

              	
                DUTIES
                  OF SYNDICATION AGENT AND DOCUMENTATION AGENT

              	
                41

              
	
                 

              	 	
                 

              
	
                ARTICLE
                  IX. MISCELLANEOUS

              	
                41

              
	 	 	
                 

              
	
                SECTION
                  9.01

              	
                AMENDMENTS,
                  ETC

              	
                41

              
	
                SECTION
                  9.02

              	
                PARTICIPATION
                  AGREEMENTS AND ASSIGNMENTS

              	
                42

              
	
                SECTION
                  9.03

              	
                NOTICES

              	
                45

              
	
                SECTION
                  9.04

              	
                COSTS
                  AND EXPENSES

              	
                46

              
	
                SECTION
                  9.05

              	
                SUCCESSORS
                  AND ASSIGNS

              	
                46

              
	
                SECTION
                  9.06

              	
                INDEPENDENCE
                  OF COVENANTS

              	
                46

              
	
                SECTION
                  9.07

              	
                SURVIVAL
                  OF REPRESENTATIONS AND WARRANTIES

              	
                46

              
	
                SECTION
                  9.08

              	
                SEPARABILITY

              	
                47

              
	
                SECTION
                  9.09

              	
                CAPTIONS

              	
                47

              
	
                SECTION
                  9.10

              	
                LIMITATION
                  BY LAW

              	
                47

              
	
                SECTION
                  9.11

              	
                COUNTERPARTS

              	
                47

              
	
                SECTION
                  9.12

              	
                GOVERNING
                  LAW

              	
                47

              
	
                SECTION
                  9.13

              	
                LIMITATION
                  ON INTEREST

              	
                47

              
	
                SECTION
                  9.14

              	
                INDEMNIFICATION

              	
                48

              
	
                SECTION
                  9.15

              	
                SUBMISSION
                  TO JURISDICTION

              	
                49

              

      

       

      
        
          
          

        

        
          -ii-

          
            

          

        

        
          
          

        

         

      

      
        	
                SECTION
                  9.16

              	
                WAIVER
                  OF JURY TRIAL

              	
                49

              
	
                SECTION
                  9.17

              	
                FINAL
                  AGREEMENT OF THE PARTIES

              	
                49

              
	
                SECTION
                  9.18

              	
                PATRIOT
                  ACT

              	
                49

              
	
                 

              	 	 

      

      
        	
                EXHIBIT
                  2.02(A)

              	
                FORM
                  OF BORROWING REQUEST

              	 
	
                EXHIBIT
                  2.02(C)

              	
                FORM
                  OF CONVERSION NOTICE

              	 
	
                EXHIBIT
                  2.04

              	
                FORM
                  OF NOTE

              	 
	
                EXHIBIT
                  2.17(A)

              	
                FORM
                  OF COMMITMENT INCREASE AGREEMENT

              	 
	
                EXHIBIT
                  2.17(B)

              	
                FORM
                  OF NEW BANK AGREEMENT

              	 
	
                EXHIBIT
                  9.02

              	
                FORM
                  OF ASSIGNMENT AND ACCEPTANCE

              	 
	
                 

              	 	 
	
                SCHEDULE
                  2.01

              	
                ALLOCATION
                  AND BANK NAMES

              	 
	
                SCHEDULE
                  4.01

              	
                CONSOLIDATED
                  SUBSIDIARIES (PART A) AND EXCLUDED AFFILIATES (PART B)

              	 
	
                SCHEDULE
                  4.16

              	
                LIABILITIES

              	 

      

       

      
        
          
          

        

        
          -iii-

          
            

          

        

        
          
          

        

      

      AMENDED
        AND RESTATED CREDIT AGREEMENT

       

      THIS
        AMENDED AND RESTATED CREDIT AGREEMENT dated as of June 14, 2006 (this
“Agreement”),
        is
        among KIRBY CORPORATION, a Nevada corporation (the “Borrower”), the banks named
        on the signature pages hereto (together with their respective successors
        and
        assigns in such capacity, the “Banks”),
        JPMORGAN CHASE BANK, N.A., as Funds Administrator (the “Funds
        Administrator”)
        and as
        Administrative Agent (the “Agent”),
        WELLS
        FARGO BANK, N.A. and BANK OF AMERICA, N.A., each as a Syndication Agent and
        THE
        BANK OF TOKYO-MITSUBISHI UFJ, LTD. and DNB NOR BANK ASA, each as a Documentation
        Agent. Unless otherwise defined herein, all capitalized terms used herein
        and
        defined in Article I are used herein as so defined.

       

      PRELIMINARY
        STATEMENT

       

      Pursuant
        to that certain Credit Agreement dated as of September 19, 1997 (the
“Existing
        Credit Agreement”),
        among
        the Borrower, the banks named therein, the Agent as the Funds Administrator
        and
        the Agent, the parties named therein as Banks made a revolving credit facility
        available to the Borrower upon the terms and conditions set forth therein.
        Said
        Existing Credit Agreement was amended by that certain First Amendment to
        Credit
        Agreement dated as of January 30, 1998, that certain Second Amendment to
        Credit
        Agreement dated November 30, 1998, that certain Third Amendment to Credit
        Agreement dated November 5, 2001, that certain Fourth Amendment to Credit
        Agreement dated January 31, 2003 and that certain Fifth Amendment to Credit
        Agreement dated as of December 9, 2003, all of said Amendments among the
        Borrower, the Banks named therein, the Agent, the Funds Administrator and
        the
        other parties named therein as syndication agent or documentation agent (said
        parties, in such capacities, together with the Agent, the
“Agents”).

       

      The
        Borrower now requests that the Banks amend and restate the Existing Credit
        Agreement and provide the Borrower with a credit facility pursuant to which
        the
        Banks will commit to make Revolving Loans in a principal amount of up to
        $250,000,000 outstanding at any time. The proceeds of the Revolving Loans
        shall
        be used to refinance indebtedness, to finance working capital needs of the
        Borrower and its Subsidiaries and for their general corporate purposes,
        including permitted acquisitions.

       

      In
        connection therewith, the Agent has agreed to serve in such capacity for
        the
        Banks and the Agent and the Banks are agreeable to the Borrower’s request,
        subject to the terms of this Agreement.

       

      Accordingly,
        in consideration of the foregoing and the mutual covenants set forth herein,
        the
        parties hereto agree as follows:

       

      ARTICLE
        I.

      DEFINITIONS,
        ETC.

       

      Section
        1.01 Certain
        Defined Terms.
        Capitalized terms used in this Agreement and not otherwise defined herein
        shall
        have the respective meanings set forth in Annex A
        hereto
        (such meanings to be equally applicable to both singular and plural forms
        of the
        terms defined).

       

      
        
          
          

        

        
          -1-

          
            

          

        

        
          
          

        

      

      Section
        1.02 Accounting
        Terms.
        All
        accounting terms not specifically defined herein shall be construed in
        accordance with generally accepted accounting principles consistent with
        those
        applied in the preparation of the consolidated financial statements referred
        to
        in Section
        4.06.

       

      Section
        1.03 Computation
        of Time Periods.
        In this
        Agreement in the computation of periods of time from a specified date to
        a later
        specified date, unless otherwise indicated, the word “from” means “from and
        including” and the words “to” and “until” each means “to but
        excluding.”

       

      Section
        1.04 References,
        Etc.
        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. All references herein to Sections,
        Annexes, Exhibits and Schedules shall, unless the context requires a different
        construction, be deemed to be references to the Sections of this Agreement
        and
        the Annexes, Exhibits and Schedules attached hereto and made a part hereof.
        In
        this Agreement, unless a clear contrary intention appears, the word “including”
(and with correlative meaning “include”) means including, without limiting the
        generality of any description preceding such term. No provision of this
        Agreement shall be interpreted or construed against any Person solely because
        that Person or its legal representative drafted such provision.

       

      ARTICLE
        II.

      COMMITMENTS
        AND TERMS OF CREDIT

       

      Section
        2.01 Commitments;
        Loans
        and Borrowings.
        (a) Each
        Bank
        severally agrees, on the terms and conditions hereinafter set forth, to make
        Revolving Loans to the Borrower from time to time on any Business Day during
        the
        period from the Effective Date up to, but excluding, the Termination Date
        in an
        aggregate principal amount that will not result in such Bank’s Revolving Credit
        Exposure exceeding at any time such Bank’s Commitment as set forth in
Schedule 2.01.
        Subject
        to the terms and conditions of this Agreement, the Borrower may borrow, repay
        pursuant to Section
        2.06
        or
        prepay pursuant to Section
        2.08
        and
        reborrow under this Section
        2.01(a)
        the
        Revolving Loans.

       

      (b)  Each
        Revolving Loan shall be made as part of a Borrowing consisting of Revolving
        Loans made by the Banks ratably in accordance with their respective Commitments.
        The failure of any Bank to make any Loan required to be made by it shall
        not
        relieve any other Bank of its obligations hereunder; provided
        that the
        Commitments of the Banks are several and no Bank shall be responsible for
        any
        other Bank’s failure to make Loans as required.

       

      (c)  Each
        Borrowing of a Revolving Loan shall be comprised entirely of Prime Rate Loans
        or
        Fixed Rate Loans as the Borrower may request in accordance herewith. Prime
        Rate
        Borrowing shall consist of Prime Rate Loans made on the same day by the Banks
        ratably according to their respective Commitment Percentages, and Prime Rate
        Borrowings may be in any amount. Each Fixed Rate Borrowing shall be in an
        aggregate amount not less than $1,000,000 or an integral multiple of $100,000
        in
        excess thereof, and shall consist of Fixed Rate Loans of the same Type made
        on
        the same day by the Banks ratably according to their respective Commitment
        Percentages. Each Swingline Loan shall be in an amount that is an integral
        multiple of $1,000 and not less than $100,000 and shall accrue interest at
        a
        rate equal to the Federal Funds Rate plus the Applicable Margin for Eurodollar
        Rate Loans. Borrowings of more than one Type may be outstanding at the same
        time, but the Borrower shall not be entitled to request any Borrowing or
        to
        Convert Loans comprising any Borrowing into Revolving Loans of another Type,
        if
        after giving effect to such Borrowing or Conversion, as the case may be,
        any
        Bank would have outstanding at any one time more than six (6) different Types
        of
        Loans.

       

      
        
          
          

        

        
          -2-

          
            

          

        

        
          
          

        

      

       

      (d)  Notwithstanding
        any other term or provision hereof no Loan shall be made if after giving
        effect
        thereto the aggregate principal amount of Loans outstanding would exceed
        the
        Total Commitment.

       

      Section
        2.02 Revolving
        Borrowing Procedures; Conversions.
        ii)
        Each
        Borrowing of a Revolving Loan shall be made upon the written, telecopied
        or
        facsimile transmitted request of the Borrower, given to the Funds Administrator
        not later than 11:00 a.m. (Houston time) on (i) the third Business Day
        prior to the proposed Borrowing Date in the case of a Eurodollar Rate Borrowing,
        (ii) the second Business Day prior to the proposed Borrowing Date in the
        case of
        an Adjusted CD Rate Borrowing or (iii) the Business Day immediately preceding
        the proposed Borrowing Date in the case of a Prime Rate Borrowing, and upon
        receipt the Funds Administrator shall give each other member of the Bank
        Group
        prompt notice of such request by telecopier, telex or cable. Each request
        for a
        Borrowing (a “Borrowing Request”) made by the Borrower shall be in substantially
        the form of Exhibit 2.02(a), specifying therein (A) the Borrowing Date for
        such Borrowing, (B) the Type of Loans comprising such Borrowing, (C) the
        aggregate amount of such Borrowing, and (D) in the case of a Fixed Rate
        Borrowing, the Interest Period for the Loans comprising such Borrowing. Each
        Bank shall, before 11:30 a.m. (Houston time) on the date of such Borrowing,
        make
        available for the account of its Applicable Lending Office to the Funds
        Administrator at its address referred to in Section
        9.03,
        in same
        day funds, such Bank’s ratable portion of such Borrowing. After the Funds
        Administrator’s receipt of such funds and upon fulfillment of the applicable
        conditions set forth in Article III,
        the
        Funds Administrator will make such funds available to the Borrower at the
        Funds
        Administrator’s aforesaid address. Each Borrowing Request shall be irrevocable
        and binding on the Borrower.

       

      (b)  Unless
        the Funds Administrator shall have received notice from a Bank prior to any
        Borrowing Date that such Bank will not make available to the Funds Administrator
        such Bank’s ratable portion of such Borrowing, the Funds Administrator may
        assume that such Bank has made such portion available to the Funds Administrator
        on such Borrowing Date in accordance with Section
        2.02(a)
        and the
        Funds Administrator may, in reliance upon such assumption, make available
        to the
        Borrower on such Borrowing Date a corresponding amount. If and to the extent
        that such Bank shall not have so made such ratable portion available to the
        Funds Administrator, such Bank and the Borrower severally agree to repay
        to the
        Funds Administrator forthwith on demand such corresponding amount, together
        with
        interest thereon for each day from the date such amount is made available
        to the
        Borrower until the date such amount is repaid to the Funds Administrator
        at (i)
        in the case of the Borrower, the interest rate applicable at the time to
        the
        Revolving Loans comprising such Borrowing and (ii) in the case of such Bank,
        the
        Federal Funds Rate. If such Bank shall repay to the Funds Administrator such
        corresponding amount, such amount so repaid shall constitute such Bank’s Loan as
        part of such Borrowing for purposes of this Agreement.

      
        
          
          

        

        
          -3-

          
            

          

        

        
          
          

        

      

       

      (c)  The
        Borrower may, subject to the terms of this Agreement, on any Business Day,
        upon
        written, telecopied or facsimile transmitted notice to the Funds Administrator,
        given not later than 11:00 a.m. (Houston time) on (i) the third Business
        Day
        prior to the proposed Conversion Date in the case of a Conversion of Loans
        into
        Eurodollar Rate Loans, (ii) the second Business Day prior to the proposed
        Conversion Date in the case of a Conversion of Loans into Adjusted CD Rate
        Loans
        or (iii) the Business Day immediately preceding the proposed Conversion Date
        in
        the case of a Conversion of Loans into Prime Rate Loans, Convert all Loans
        comprising one or more Borrowings into Loans of another Type comprising a
        single
        Borrowing, and the Funds Administrator shall promptly transmit the contents
        of
        such notice to each other member of the Bank Group by telecopier, telex or
        cable. Each notice of a Conversion (a “Conversion
        Notice”)
        given
        by the Borrower shall be in substantially the form of Exhibit 2.02(c),
        specifying therein (A) the Conversion Date for such Conversion, (B) the Loans
        to
        be Converted, (C) the Type of Loans to which such Loans are to be Converted
        and
        (D) in the case of a Conversion into Fixed Rate Loans, the Interest Period
        for
        such Converted Loans. Notwithstanding any other term or provision hereof,
        after
        giving effect to any such Conversion, the size of all Borrowings outstanding
        hereunder and the number of different Types of Loans outstanding hereunder
        shall
        conform to the requirements of Section
        2.01.
        In the
        event of any Conversion of Fixed Rate Loans on any day other than the last
        day
        of the Interest Period applicable thereto, the Borrower shall be obligated
        to
        reimburse the Banks in respect thereof pursuant to Section
        2.12.
        If the
        Borrower shall fail to give a timely Conversion Notice conforming to the
        requirements of this Agreement with respect to any Fixed Rate Loans prior
        to the
        expiration of the Interest Period applicable thereto, such Fixed Rate Loans
        shall, automatically on the last day of such Interest Period, be Converted
        into
        Prime Rate Loans.

       

      Section
        2.03 Swingline
        Loans.
        iii) Subject
        to the terms and conditions set forth herein, the Swingline Bank agrees to
        make
        Swingline Loans to the Borrower on any Business Day during the period from
        the
        Effective Date up to, but excluding, the Termination Date, in an aggregate
        principal amount at any time outstanding that will not result in (i) the
        aggregate principal amount of outstanding Swingline Loans exceeding $25,000,000
        or (ii) the sum of the total Revolving Credit Exposure exceeding the Total
        Commitment; provided that the Swingline Bank shall not be required to make
        a
        Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing
        limits and subject to the terms and conditions set forth herein, the Borrower
        may borrow, prepay and reborrow Swingline Loans.

       

      (b)  To
        request a Swingline Loan, the Borrower shall notify the Funds Administrator
        of
        such request by telephone (confirmed by telecopy), not later than 2:00 p.m.
        (Houston time), on the day of a proposed Swingline Loan. Each such notice
        shall
        be irrevocable and shall specify the requested date (which shall be a Business
        Day) and amount of the requested Swingline Loan. The Funds Administrator
        will
        promptly advise the Swingline Bank of any such notice received from the
        Borrower. The Swingline Bank shall make each Swingline Loan available to
        the
        Borrower by means of a credit to the general deposit account of the Borrower
        with the Swingline Bank (or, in the case of a Swingline Loan made to finance
        the
        reimbursement of a drawing under a Letter of Credit as provided in Section
        2.16(b)(iv),
        by
        remittance to the Issuing Bank) by 2:00 p.m. (Houston time) on the requested
        date of such Swingline Loan.

       

      
        
          
          

        

        
          -4-

          
            

          

        

        
          
          

        

      

      (c)  The
        Swingline Bank may by written notice given to the Administrative Agent not
        later
        than 9:00 a.m. (Houston time) on any Business Day require the Bank Group
        to
        acquire participations on such Business Day in all or a portion of the Swingline
        Loans outstanding. Such notice shall specify the aggregate amount of Swingline
        Loans in which Bank Group will participate. Promptly upon receipt of such
        notice, the Funds Administrator will give notice thereof to each Bank,
        specifying in such notice such Bank's Commitment Percentage of such Swingline
        Loan or Loans. Each Bank hereby absolutely and unconditionally agrees, upon
        receipt of notice as provided above, to pay to the Funds Administrator, for
        the
        account of the Swingline Bank, such Bank's Commitment Percentage of such
        Swingline Loan or Loans. Each Bank acknowledges and agrees that its obligation
        to acquire participations in Swingline Loans pursuant to this paragraph is
        absolute and unconditional and shall not be affected by any circumstance
        whatsoever, including the occurrence and continuance of a Default or reduction
        or termination of the Commitments, and that each such payment shall be made
        without any offset, abatement, withholding or reduction whatsoever. Each
        Bank
        shall comply with its obligation under this paragraph by wire transfer of
        immediately available funds, in the same manner as provided in Section
        2.02
        with
        respect to Loans made by such Bank (and Section
        2.02
        shall
        apply, mutatis mutandis, to the payment obligations of the Bank Group), and
        the
        Funds Administrator shall promptly pay to the Swingline Bank the amounts
        so
        received by it from the Bank Group. The Funds Administrator shall notify
        the
        Borrower of any participations in any Swingline Loan acquired pursuant to
        this
        paragraph, and thereafter payments in respect of such Swingline Loan shall
        be
        made to the Funds Administrator and not to the Swingline Bank. Any amounts
        received by the Swingline Bank from the Borrower (or other party on behalf
        of
        the Borrower) in respect of a Swingline Loan after receipt by the Swingline
        Bank
        of the proceeds of a sale of participations therein shall be promptly remitted
        to the Funds Administrator; any such amounts received by the Funds Administrator
        shall be promptly remitted by the Funds Administrator to the Bank Group that
        shall have made their payments pursuant to this paragraph and to the Swingline
        Bank, as their interests may appear; provided that any such payment so remitted
        shall be repaid to the Swingline Bank or to the Funds Administrator, as
        applicable, if and to the extent such payment is required to be refunded
        to the
        Borrower for any reason. The purchase of participations in a Swingline Loan
        pursuant to this paragraph shall not relieve the Borrower of any default
        in the
        payment thereof.

       

      Section
        2.04 The
        Notes.
        The
        Loans made by each Bank shall be evidenced by a single Note issued to such
        Bank
        by the Borrower (a) dated the date of this Agreement (or such other date
        as may
        be specified in Section
        9.02),
        (b)
        payable to the order of such Bank in a principal amount equal to such Bank’s
        Commitment and (c) otherwise duly completed, substantially in the form of
        Exhibit 2.04.
        Each
        Loan made by a Bank to the Borrower and all payments made on account of the
        principal amount thereof shall be entered by such Bank in its records or
        on the
        schedule (or a continuation thereof) attached to the Note of such Bank,
provided,
        however,
        that
        prior to any transfer of any such Note, such Bank shall endorse the amount
        and
        maturity of any outstanding Loans on the schedule (or a continuation thereof)
        attached to such Note.

       

      Section
        2.05 Reduction
        of the Commitments.
        The
        Borrower shall have the right, upon at least three Business Days’ notice to the
        Funds Administrator to terminate in whole or reduce ratably in part the unused
        portions of the respective Commitments of the Banks, provided,
        that
        each partial reduction shall be in the aggregate amount of $1,000,000 or
        an
        integral multiple of $1,000,000 in excess thereof.

       

      
        
          
          

        

        
          -5-

          
            

          

        

        
          
          

        

      

      Section
        2.06 Repayment
        of Loans.
        The
        Borrower hereby unconditionally promises to pay (i) to the Funds
        Administrator for the account of each Bank the then unpaid principal amount
        of
        each Revolving Loan on the Termination Date, together with any unpaid interest
        accrued thereon and (ii) to the Swingline Bank the then unpaid principal
        amount of each Swingline Loan on the earlier of the Termination Date and
        the
        first date after such Swingline Loan is made that is the last day of the
        calendar month and is at least two (2) Business Days after such Swingline
        Loan
        is made; provided
        that on
        each date that a Borrowing of a Revolving Loan is made, the Borrower shall
        repay
        all Swingline Loans then outstanding.

       

      Section
        2.07 Interest
        Accrual, Payments, Etc.
        (a)
        Subject
        to the provisions of Section
        9.13,
        the
        Borrower shall pay interest on the unpaid principal amount of each Loan made
        by
        each Bank from the date of such Loan until such principal amount shall be
        paid
        in full, on the dates and at the rates per annum specified as
        follows:

       

      (i)  if
        such
        Loan is a Prime Rate Loan, a rate per annum equal to the lesser of (A) the
        Highest Lawful Rate and (B) the Prime Rate in effect from time to time
plus
        or
minus,
        as
        applicable, the Applicable Margin in effect from time to time, and unpaid
        accrued interest on such Loans shall be payable on each Quarterly Payment
        Date
        and on the date such Prime Rate Loan shall be paid in full;

       

      (ii)    
        if
        such
        Loan is an Adjusted CD Rate Loan, a rate per annum equal at all times during
        the
        Interest Period for such Loan to the lesser of (A) the Highest Lawful Rate
        and
        (B) the sum of the Adjusted CD Rate for such Interest Period plus
        the
        Applicable Margin in effect as of the first day of such Interest Period,
        and
        unpaid accrued interest on such Loans shall be payable on each Quarterly
        Payment
        Date and on the last day of such Interest Period;

       

      (iii)   
        if
        such
        Loan is a Eurodollar Rate Loan, a rate per annum equal at all times during
        the
        Interest Period for such Loan to the lesser of (A) the Highest Lawful Rate
        and
        (B) the sum of the Eurodollar Rate for such Interest Period plus
        the
        Applicable Margin in effect as of the first day of such Interest Period,
        and
        unpaid accrued interest on such Loans shall be payable on each Quarterly
        Payment
        Date and on the last day of such Interest Period; or

       

      (iv)   
        if
        such
        Loan is a Swingline Loan, a rate per annum equal to the Federal Funds Rate
        plus
        the Applicable Margin for Eurodollar Rate Loans.

       

      Any
        amount of principal or, to the extent permitted by applicable law, interest
        which is not paid when due (whether at stated maturity, by acceleration or
        otherwise) shall bear interest from the date on which such amount is due
        until
        such amount is paid in full, at a rate per annum (the “Default
        Rate”)
        equal
        at all times to the lesser of (A) the Highest Lawful Rate and (B) the Prime
        Rate
        in effect from time to time during the applicable period plus
        or
minus,
        as
        applicable, the Applicable Margin in effect from time to time during such
        period
plus
        two
        percent (2%), payable on demand.

       

      (b)  The
        Borrower shall pay to each Bank additional interest on the unpaid principal
        amount of each Eurodollar Rate Loan of such Bank, from the date of such Loan
        until such principal amount is paid in full, at an interest rate per annum
        equal
        at all times to the remainder obtained by subtracting (i) the Eurodollar
        Rate
        for the Interest Period for such Loan from (ii) the rate obtained by dividing
        such Eurodollar Rate by a percentage equal to 100% minus
        the
        Eurodollar Rate Reserve Percentage of such Bank for such Interest Period,
        payable on each date on which interest is payable on such Loan. Such additional
        interest shall be calculated by such Bank and notified to the Borrower (together
        with a copy of such Bank’s calculations) through the Funds
        Administrator.

       

      
        
          
          

        

        
          -6-

          
            

          

        

        
          
          

        

      

      (c)  (i)
        The
        Agent shall give prompt notice to the Borrower and each other member of the
        Bank
        Group of the applicable interest rate determined by the Agent hereunder for
        each
        Borrowing. Each determination by the Agent (or, in the case of Section
        2.07(b),
        by a
        Bank) of an interest rate hereunder shall be conclusive and binding for all
        purposes, absent manifest error.

       

      (ii)  If
        one or
        more Banks holding aggregate Commitment Percentages of at least fifty percent
        (50%) shall, at least one Business Day before the date of any requested
        Eurodollar Rate Borrowing, notify the Agent and the Funds Administrator that
        the
        Eurodollar Rate applicable to such Borrowing will not adequately reflect
        the
        cost to such Banks of making, funding or maintaining their respective Eurodollar
        Rate Loans for such Borrowing, the right of the Borrower to select Eurodollar
        Rate Loans for such Borrowing or any subsequent Borrowing shall be suspended
        until the Agent shall notify the Borrower and each other member of the Bank
        Group that the circumstances causing such suspension no longer exist, and
        each
        Loan comprising such Borrowing shall be made as, or Converted into, as
        applicable, a Prime Rate Loan.

       

      (iii)  If
        the
        Agent is unable to determine the Adjusted CD Rate in accordance with the
        definition thereof for any Adjusted CD Rate Borrowing or the Eurodollar Rate
        in
        accordance with the definition thereof for any Eurodollar Rate Borrowing,
        (A)
        the Agent shall forthwith notify the Borrower and each other member of the
        Bank
        Group that the interest rate cannot be determined for such Adjusted CD Rate
        Borrowing or Eurodollar Rate Borrowing, as the case may be, (B) each Adjusted
        CD
        Rate Borrowing or Eurodollar Rate Borrowing, as the case may be, previously
        requested but not yet funded or Converted, as applicable, will automatically
        be
        made as or Converted into, as applicable, a Prime Rate Borrowing, and (C)
        the
        obligation of the Banks to make Adjusted CD Rate Loans or Eurodollar Rate
        Loans,
        as the case may be, shall be suspended until the Agent shall notify the Borrower
        and each other member of the Bank Group that the circumstances causing such
        suspension no longer exist.

       

      (d)  As
        used
        in this Agreement and the other Loan Documents, “Applicable
        Margin”
means,
        as to Loans consisting of a single Borrowing, a rate per annum determined
        pursuant to the table set forth below by reference to the Borrower’s S&P
        Rating, Moody’s Rating or Fitch Rating (individually, a “Rating”
and
        collectively, the “Ratings”)
        and
        the Type of Loans comprising such Borrowing, whereby (i) if
        either Moody’s or S&P shall not have in effect a Rating (other than by
        reason of the circumstances referred to in the last sentence of this Section
        2.07(d)),
        then
        such rating agency shall be deemed to have established a rating in the lowest
        of
        the categories set forth in the table below; (ii) if the Moody’s Rating and
        the S&P Rating shall differ by one level, the higher Rating shall apply;
        (iii) if the Moody’s Rating and the S&P Rating differ by more than one
        level and the Fitch Rating is equal to the higher of the Moody’s Rating and the
        S&P Rating, the higher Rating shall apply; (iv) if the Moody’s Rating, the
        S&P Rating and the Fitch Rating each differ by one level, and the Moody’s
        Rating and the S&P Rating differ by more than one level, the rating which is
        the middle rating shall apply; (v) if the Moody’s Rating and the S&P
        Rating differ by more than one level, and the Fitch rating is equal to the
        lower
        of the Moody’s and S&P Rating, the rating which is one level above the two
        lower Ratings shall apply; (vi) if the Moody’s Rating and the S&P Rating
        differ by more than one level, and the Borrower does not have a Fitch rating,
        the rating which is one level below the higher of the Moody’s Rating or the
        S&P Rating Ratings shall apply; and (vii) if the Moody’s Rating and the
        S&P Rating are the same, that Rating shall apply. Each change in the
        Applicable Margin shall apply during the period commencing on the effective
        date
        of such change and ending on the date immediately preceding the effective
        date
        of the next such change. If the rating system of Moody’s, S&P, or Fitch
        shall change, or if any such rating agency shall cease to be in the business
        of
        rating corporate debt obligations, the Borrower and the Banks shall negotiate
        in
        good faith to amend this definition to reflect such changed rating system
        or the
        unavailability of ratings from such rating agency and, pending the effectiveness
        of any such amendment, the Applicable Margin shall be determined by reference
        to
        the rating most recently in effect prior to such change or
        cessation.

       

      
        
          
          

        

        
          -7-

          
            

          

        

        
          
          

        

      

      Pricing
        Grid

      

      
        	
                S&P/Fitch/

                Moody’s
                  Rating

              	 	
                Eurodollar

                Rate

              	 	
                Prime

                Rate

              	 	
                Commitment

                Fee

              	 	
                Utilization

                Fee

              	 
	 	 	 	 	 	 	 	 	 	 
	
                Greater
                  than or equal to BBB+/Baa1

              	 	 	
                0.300

              	
                %

              	 	
                0.000

              	
                %

              	 	
                0.008

              	
                %

              	 	
                0.100

              	
                %

              
	
                Greater
                  than or equal to BBB/Baa2

              	 	 	
                0.400

              	
                %

              	 	
                0.000

              	
                %

              	 	
                0.100

              	
                %

              	 	
                0.100

              	
                %

              
	
                Greater
                  than or equal to BBB-/Baa3

              	 	 	
                0.525

              	
                %

              	 	
                0.000

              	
                %

              	 	
                0.125

              	
                %

              	 	
                0.100

              	
                %

              
	
                Greater
                  than or equal to BB+/Ba1

              	 	 	
                0.775

              	
                %

              	 	
                0.000

              	
                %

              	 	
                0.175

              	
                %

              	 	
                0.100

              	
                %

              
	
                Less
                  than BB+/Ba1

              	 	 	
                0.900

              	
                %

              	 	
                0.000

              	
                %

              	 	
                0.225

              	
                %

              	 	
                0.100

              	
                %

              

      

      

      Section
        2.08 Prepayments.
        (a)
        The
        Borrower may, from time to time on any Business Day, upon at least one Business
        Day’s notice to the Funds Administrator stating the proposed date and aggregate
        principal amount thereof, and if such notice is given, the Borrower shall,
        prepay the outstanding principal amount of the Prime Rate Loans (including
        any
        Swingline Loan) comprising part of the same Borrowing in whole or ratably
        in
        part; provided,
        that
        any partial prepayment of such Prime Rate Loans shall be in an aggregate
        principal amount of not less than $100,000. The Borrower may from time to
        time
        upon at least three Business Days’ notice to the Funds Administrator stating the
        proposed date and the aggregate principal amount thereof, and if such notice
        is
        given, the Borrower shall, prepay the outstanding principal amount of the
        Fixed
        Rate Loans comprising part of the same Borrowing in whole or ratably in part;
        provided,
        that
        any partial prepayment of such Fixed Rate Loans shall be in an aggregate
        principal amount of not less than $2,000,000 or an integral multiple of
        $1,000,000 in excess thereof. Subject to the preceding two sentences, Borrower
        may apply any optional prepayment of the Loans to such portions of the Loans
        as
        the Borrower may elect.

       

      (b)  The
        Borrower shall from time to time prepay the Loans comprising part of the
        same
        Borrowing in such amounts as shall be necessary so that at all times the
        aggregate amount of Loans outstanding shall not be in excess of the Total
        Commitment. Any prepayment required by this Section
        2.08(b)
        shall be
        due on the date such prepayment accrues pursuant to the preceding
        sentence.

       

      
        
          
          

        

        
          -8-

          
            

          

        

        
          
          

        

      

      (c)  Each
        prepayment of Fixed Rate Loans shall be accompanied by a prepayment of accrued
        interest to the date of such prepayment on the principal amount prepaid.
        In the
        event of any prepayment of a Fixed Rate Loan, the Borrower shall be obligated
        to
        reimburse the Banks in respect thereof pursuant to Section
        2.12.
        Unless
        otherwise specified by the Borrower, all mandatory prepayments of the Loans
        shall first be applied to Prime Rate Borrowings, and second to such Fixed
        Rate
        Borrowings as the Funds Administrator may select.

       

      Section
        2.09 Payments
        and Computations.
        (a)
        All
        payments of principal, interest, commitment fees and other amounts payable
        to
        the Banks under the Loan Documents shall be made in Dollars to the Funds
        Administrator at its address specified in Section
        9.03
        for the
        account of each of the Banks, in immediately available funds not later than
        12:00 Noon (Houston time) on the date when due. Upon receipt of such payments,
        the Funds Administrator will promptly cause to be distributed like funds
        relating to the payment of principal or interest or commitment fees ratably
        (other than amounts payable pursuant to Section
        2.07(b),
        Section
        2.11,
        Section
        2.12,
        Section
        2.13
        or
Section
        2.14)
        to the
        Banks for the account of their respective Applicable Lending Offices, and
        like
        funds relating to the payment of any other amount payable to any Bank to
        such
        Bank for the account of its Applicable Lending Office, in each case to be
        applied in accordance with the terms of this Agreement. In the event the
        Funds
        Administrator receives any such payment in immediately available funds not
        later
        than 12:00 Noon (Houston time) on any Business Day, but fails to distribute
        to
        any Bank entitled thereto like funds relating to such payment by the close
        of
        business on such Business Day, then the Funds Administrator shall pay such
        Bank
        interest thereon at the Federal Funds Rate for each day from the date such
        amount is received by the Funds Administrator until the date distributed
        to such
        Bank.

       

      (b)  Unless
        the Funds Administrator shall have received notice from the Borrower prior
        to
        the date on which any payment is due to the Banks under the Loan Documents
        that
        the Borrower will not make such payment in full, the Funds Administrator
        may
        assume that the Borrower has made such payment in full to the Funds
        Administrator on such date and the Funds Administrator may, in reliance upon
        such assumption, cause to be distributed to each Bank on such due date an
        amount
        equal to the amount then due such Bank. If and to the extent the Borrower
        shall
        not have made such payment in full to the Funds Administrator each Bank shall
        repay to the Funds Administrator forthwith on demand such amount distributed
        to
        such Bank, together with interest thereon for each day from the date such
        amount
        is distributed to such Bank until the date such Bank repays such amount to
        the
        Funds Administrator at the Federal Funds Rate.

       

      (c)  All
        payments by the Borrower of the fees payable to the Agent pursuant to the
        Fee
        Letter shall be made in Dollars directly to the Agent at its address specified
        in Section
        9.03
        in
        immediately available funds not later than 12:00 Noon (Houston time) on the
        date
        when due.

       

      (d)  All
        computations of interest based on the Prime Rate shall be made on the basis
        of a
        year of 365 or 366 days, as the case may be, and all computations of interest
        based on the Adjusted CD Rate, the Eurodollar Rate, the Federal Funds Rate,
        or
Section
        2.07(b),
        as well
        as commitment fees, shall be made on the basis of a year of 360 days (unless
        use
        of a 360 day year would cause the interest contracted for, charged or received
        hereunder to exceed the Highest Lawful Rate, in which case such computations
        shall be made on the basis of a year of 365 or 366 days, as the case may
        be), in
        each case for the actual number of days (including the first day but excluding
        the last day) occurring in the period for which such interest or commitment
        fees
        are payable.

       

      
        
          
          

        

        
          -9-

          
            

          

        

        
          
          

        

      

       

      (e)  Whenever
        any payment under the Loan Documents shall be stated to be due on a day other
        than a Business Day, such payment shall be made on the next succeeding Business
        Day, and such extension of time shall in such case be included in the
        computation of payment of interest or commitment fee, as the case may be;
        provided,
        however,
        if such
        extension would cause payment of interest on or principal of Eurodollar Rate
        Loans to be made in the next following calendar month, such payment shall
        be
        made on the next preceding Business Day.

       

      (f)  If
        any
        Bank shall obtain any payment (whether voluntary, involuntary, through the
        exercise of any right of setoff, or otherwise) on account of the Loans made
        by
        it (other than pursuant to Section
        2.07(b),
        Section
        2.11,
        Section
        2.12,
        Section
        2.13
        or
Section
        2.14)
        in
        excess of its ratable share of payments on account of the Loans obtained
        by all
        the Banks, such Bank shall forthwith purchase from the other Banks such
        participations in the Loans made by such other Banks as shall be necessary
        to
        cause such purchasing Bank to share the excess payment ratably with each
        of
        them. The Borrower agrees that any Bank so purchasing a participation from
        another Bank pursuant to this Section
        2.09(f)
        may, to
        the fullest extent permitted by law and this Agreement, exercise all its
        rights
        of payment (including the right of setoff) with respect to such participation
        as
        fully as if such Bank were the direct creditor of the Borrower in the amount
        of
        such participation.

       

      Section
        2.10 Fees.
        (a)
        Subject
        to the provisions of Section
        9.13,
        the
        Borrower shall pay each Bank a commitment fee equal to the applicable percentage
        set forth in the pricing grid in Section
        2.07(d)
        on the
        average unused portion of the Commitment of such Bank as in effect from time
        to
        time for the period from the date hereof to, but excluding, the Termination
        Date. Accrued commitment fees shall be due and payable in arrears on each
        Quarterly Payment Date in each year, on the date of any reduction or termination
        of the Commitment of such Bank and on the Termination Date, and shall be
        computed for the period commencing with the day to which such fee was last
        paid
        (or, in the case of the first commitment fee payment date, for the period
        commencing with and including the date hereof) to the date such fee is due
        and
        payable.

       

      (b)  Subject
        to the provisions of Section
        9.13,
        the
        Borrower shall pay the Agent the arrangement and administrative fees specified
        in that certain letter agreement dated __________, 2006 between the Agent
        and
        the Borrower concerning the same (the “Fee
        Letter”).

       

      (c)  Subject
        to the provisions of Section
        9.13,
        the
        Borrower shall pay to the Agent for the pro-rata accounts of the Banks, a
        utilization fee equal to the applicable percentage set forth in the grid
        contained in Section
        2.07(d)
        on the
        daily average outstanding balance of the Loans during all times for which
        the
        principal balance of the Loans outstanding (including all outstanding, undrawn
        Letters of Credit) exceeds 33% of the Total Commitment.

       

      
        
          
          

        

        
          -10-

          
            

          

        

        
          
          

        

      

       

      Section
        2.11 Setoff,
        Counterclaims and Taxes.
        (a)
        All
        payments of principal, interest, expenses, reimbursements, compensation,
        commitment fees, letter of credit fees, arrangement fees or administration
        fees
        and any other amount from time to time due under any Loan Document shall
        be made
        by the Borrower without setoff or counterclaim and shall be made free and
        clear
        of and without deduction for any and all present or future taxes, levies,
        imposts, deductions, charges or withholdings, and all liabilities with respect
        thereto, excluding, in the case of each member of the Bank Group, taxes imposed
        on its income (or a taxable base in the nature of net income, or, in lieu
        of
        taxes so imposed or measured, on overall gross receipts and capital), and
        franchise taxes imposed on it, by the jurisdiction under the laws of which
        such
        member of the Bank Group is organized or any political subdivision thereof
        and,
        in the case of each Bank, taxes imposed on its income, and franchise taxes
        imposed on it, by the jurisdiction of such Bank’s Applicable Lending Office or
        any political subdivision thereof (all such non-excluded taxes, levies, imposts,
        deductions, charges, withholdings and liabilities being hereinafter referred
        to
        as “Taxes”).
        If
        the Borrower shall be required by law to deduct any Taxes from or in respect
        of
        any sum payable under any Loan Document to any member of the Bank Group,
        (i) the
        sum payable shall be increased as may be necessary so that after making all
        required deductions (including deductions applicable to additional sums payable
        under this Section
        2.11)
        such
        member of the Bank Group receives an amount equal to the sum it would have
        received had no such deductions been made, (ii) the Borrower shall make such
        deductions and (iii) the Borrower shall pay the full amount deducted to the
        relevant taxation authority or other authority in accordance with applicable
        law; provided
        that the
        Borrower shall not be required to pay any increased amount on account of
        Taxes
        to the extent that any such Bank shall not have furnished the Borrower with
        such
        forms, or shall not have taken such other action, as reasonably may be available
        to it under applicable tax laws and any applicable tax treaty to obtain an
        exemption from, or reduction of, such Taxes.

       

      (b)  In
        addition, the Borrower agrees to pay any present or future stamp or documentary
        taxes or any other excise or property taxes, charges or similar levies which
        arise from any payment made under any Loan Document or from the execution,
        delivery or registration of, or otherwise with respect to, any Loan Document
        (hereinafter referred to as “Other
        Taxes”).

       

      (c)  The
        Borrower will indemnify each member of the Bank Group for the full amount
        of
        Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes
        imposed by any jurisdiction on amounts payable under this Section
        2.11)
        paid by
        such member of the Bank Group (whether paid on its own behalf or on behalf
        of
        any other member of the Bank Group) and any liability (including penalties,
        interest and expenses) arising therefrom or with respect thereto, whether
        or not
        such Taxes or Other Taxes were correctly or legally asserted. This
        indemnification shall be made within 30 days from the date such member of
        the
        Bank Group makes written demand therefor.

       

      (d)  Within
        30
        days after the date of any payment of Taxes, the Borrower will furnish to
        the
        Agent, at its address referred to in Section
        9.03,
        the
        original or a certified copy of a receipt evidencing payment thereof. If
        no
        Taxes are payable in respect of any payment made under any Loan Document,
        upon
        the request of the Agent, the Borrower will furnish to the Agent and the
        Funds
        Administrator, at its address referred to in Section
        9.03,
        a
        certificate from each appropriate taxing authority, or an opinion of counsel
        acceptable to the Agent, in either case stating that such payment is exempt
        from
        or not subject to Taxes.

       

      
        
          
          

        

        
          -11-

          
            

          

        

        
          
          

        

      

       

      (e)  Without
        prejudice to the survival of any other agreement of the Borrower hereunder,
        the
        agreements and obligations of the Borrower contained in this Section
        2.11
        shall
        survive the payment in full of the Loans and all other amounts owing under
        the
        other Loan Documents. The provisions of this Section
        2.11
        are in
        all respects subject to Section
        9.13
        hereof.

       

      (f)  Each
        Bank
        represents and warrants to the Agent, the Funds Administrator and the Borrower
        that such Bank is either (i) a corporation organized under the laws of the
        United States, a state thereof or the District of Columbia, or (ii) entitled
        to
        complete exemption from United States withholding tax imposed on or with
        respect
        to any payments, including fees, to be made to it pursuant to this Agreement
        and
        the other Loan Documents (x) under an applicable provision of a tax
        convention or treaty to which the United States is a party or (y) because
        it is acting through a branch, agency or office in the United States and
        any
        payment to be received by it hereunder is effectively connected with a trade
        or
        business in the United States. Upon becoming a party to this Agreement (whether
        by assignment or as an original signatory hereto), and in any event, from
        time
        to time upon the request of the Agent, the Funds Administrator or the Borrower,
        each Bank which is not a corporation organized under the laws of the United
        States or any state thereof or the District of Columbia shall deliver to
        the
        Agent, the Funds Administrator and the Borrower such forms, certificates
        or
        other instruments as may be required by the Agent and the Funds Administrator
        in
        order to establish that such Bank is entitled to complete exemption from
        United
        States withholding taxes imposed on or with respect to any payments, including
        fees, to be made to such Bank under this Agreement and the other Loan Documents.
        Each Bank also agrees to deliver to the Borrower, the Agent and the Funds
        Administrator such other supplemental forms as may at any time be required
        as a
        result of the passage of time or changes in applicable law or regulation
        in
        order to confirm or maintain in effect its entitlement to exemption from
        United
        States withholding tax on any payments hereunder; provided,
        that
        the circumstances of the Bank at the relevant time and applicable laws permit
        it
        to do so. If a Bank determines, as a result of any change in either (1)
        applicable law, regulation or treaty, or in any official application thereof
        or
        (2) its circumstances, that it is unable to submit any form or certificate
        that
        it is obligated to submit pursuant to this Section
        2.11(f),
        or that
        it is required to withdraw or cancel any such form or certificate previously
        submitted, it shall promptly notify the Borrower, the Agent and the Funds
        Administrator of such fact. If a Bank is organized under the laws of a
        jurisdiction outside the United States, and the Borrower, the Funds
        Administrator and the Agent have not received forms, certificates or other
        instruments indicating to their satisfaction that all payments to be made
        to
        such Bank hereunder are not subject to United States withholding tax or the
        Agent otherwise has reason to believe that such Bank is subject to U.S.
        withholding tax, the Borrower shall withhold taxes from such payments at
        the
        applicable statutory rate. Each Bank shall indemnify and hold the Borrower,
        the
        Funds Administrator and the Agent harmless from any United States taxes,
        penalties, interest and other expenses, costs and losses incurred or payable
        by
        them as a result of either (A) such Bank’s failure to submit any form or
        certificate that it is required to provide pursuant to this Section
        2.11(f)
        or (B)
        reliance by the Borrower, the Funds Administrator or the Agent on any such
        form
        or certificate which such Bank has provided to them pursuant to this
Section
        2.11(f).

       

      
        
          
          

        

        
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      (g)  Any
        Bank
        claiming any additional amounts payable pursuant to this Section
        2.11
        shall
        use reasonable efforts (consistent with legal and regulatory restrictions)
        to
        file any certificate or document requested by the Borrower or to change the
        jurisdiction of its Applicable Lending Office if such a filing or change
        would
        avoid the need for or reduce the amount of any such additional amounts which
        may
        thereafter accrue and would not, in the sole determination of such Bank,
        be
        otherwise disadvantageous to such Bank.

       

      Section
        2.12 Funding
        Losses.
        The
        Borrower shall indemnify each member of the Bank Group against any loss or
        reasonable expense (including, but not limited to, any loss or reasonable
        expense sustained or incurred or to be sustained or incurred in liquidating
        or
        reemploying deposits from third parties acquired to effect or maintain a
        Loan or
        any part thereof as a Fixed Rate Loan) which such Person may sustain or incur
        as
        a consequence of (a) any failure by the Borrower to fulfill on the date of
        any Borrowing hereunder the applicable conditions set forth in Article III,
        (b) any failure by the Borrower to borrow hereunder or to Convert Loans
        hereunder after a Borrowing Request or Conversion Notice, respectively, has
        been
        given, (c) any payment, prepayment or Conversion of a Fixed Rate Loan required
        or permitted by any other provisions of this Agreement, including, without
        limitation, payments made due to the acceleration of the maturity of the
        Loans
        pursuant to Section
        7.01,
        or
        otherwise made on a date other than the last day of the applicable Interest
        Period, (d) any default in the payment or prepayment of the principal amount
        of
        any Loan or any part thereof or interest accrued thereon, as and when due
        and
        payable (at the due date thereof, by notice of prepayment or otherwise) or
        (e)
        the occurrence of an Event of Default. Such loss or reasonable expense shall
        include, without limitation, an amount equal to the excess, if any, as
        determined by each Bank of (i) its cost of obtaining the funds for the Loan
        being paid, prepaid or Converted or not borrowed or Converted (based on the
        Fixed Rate applicable thereto) for the period from the date of such payment,
        prepayment or Conversion or failure to borrow or Convert to the last day
        of the
        Interest Period for such Loan (or, in the case of a failure to borrow or
        Convert, the Interest Period for the Loan which would have commenced on the
        date
        of such failure to borrow or Convert) over (ii) the amount of interest (as
        estimated by such Bank) that would be realized by such Bank in reemploying
        the
        funds so paid, prepaid or Converted or not borrowed or Converted for such
        period
        or Interest Period, as the case may be. A certificate of each member of the
        Bank
        Group setting forth any amount or amounts which such Person is entitled to
        receive pursuant to this Section
        2.12
        shall be
        delivered to the Borrower (with a copy to the Agent and the Funds Administrator)
        and shall be conclusive, if made in good faith, absent manifest error. The
        Borrower shall pay to the Funds Administrator for the account of each such
        Person the amount shown as due on any certificate within 30 days after its
        receipt of the same. Notwithstanding the foregoing, in no event shall any
        Bank
        be permitted to receive any compensation hereunder constituting interest
        in
        excess of the Highest Lawful Rate. Without prejudice to the survival of any
        other obligations of the Borrower hereunder, the obligations of the Borrower
        under this Section
        2.12
        shall
        survive the termination of this Agreement and/or the payment or assignment
        of
        any of the Notes.

       

      Section
        2.13 Change
        of Law.
        (a)
        If at
        any time any Bank determines in good faith (which determination shall be
        conclusive) that any change in any applicable law, rule or regulation or in the
        interpretation, application or administration thereof makes it unlawful,
        or any
        central bank or other Governmental Authority asserts that it is unlawful,
        for
        such Bank or its foreign branch or branches to fund or maintain any Eurodollar
        Rate Loan (any of the foregoing determinations being a “Eurodollar
        Event”),
        then,
        such Bank, at its option, may: (i) declare that Eurodollar Rate Loans will
        no longer be made or maintained by such Bank, whereupon the right of the
        Borrower to select Eurodollar Rate Loans for any Borrowing shall be suspended
        until such Bank shall notify the Funds Administrator and the Agent that the
        circumstances causing such Eurodollar Event no longer exist; (ii) with
        respect to any Eurodollar Rate Loans of such Bank then outstanding, require
        that
        all such Eurodollar Rate Loans be Converted to Prime Rate Loans, in which
        event
        all such Eurodollar Rate Loans shall automatically be Converted into Prime
        Rate
        Loans on the effective date of notice of such Eurodollar Event and all payments
        or prepayments of principal that would have otherwise been applied to repay
        such
        Converted Eurodollar Rate Loans shall instead be applied to repay the Prime
        Rate
        Loans resulting from such Conversion; and/or (iii) with respect to any
        Eurodollar Rate Loans requested of such Bank but not yet made as or Converted
        into such, require that such Eurodollar Rate Loans be made as or Converted
        into,
        as applicable, Prime Rate Loans.

       

      
        
          
          

        

        
          -13-

          
            

          

        

        
          
          

        

      

       

      (b)  Upon
        the
        occurrence of any Eurodollar Event, and at any time thereafter so long as
        such
        Eurodollar Event shall continue, such Bank may exercise its aforesaid option
        by
        giving written notice thereof to the Funds Administrator, the Agent and the
        Borrower, such notice to be effective upon receipt thereof by the Borrower.
        Any
        Conversion of any Eurodollar Rate Loan which is required under this Section
        2.13
        shall be
        made, together with accrued and unpaid interest and all other amounts payable
        to
        such Bank under this Agreement with respect to such Converted Loan (including,
        without limitation, amounts payable pursuant to Section
        2.12
        hereof),
        on the date stated in the notice to the Borrower referred to above.

       

      Section
        2.14 Increased
        Costs.
        (a)
        If, due
        to either (i) the introduction of or any change in or in the interpretation
        of
        any law or regulation or (ii) the compliance with any guideline issued or
        request made after the Effective Date by any central bank or other Governmental
        Authority (whether or not having the force of law), there shall be any increase
        in the cost to any Bank of agreeing to make or making, funding or maintaining
        Adjusted CD Rate Loans or Eurodollar Rate Loans, then the Borrower shall
        from
        time to time, subject to the provisions of Section
        9.13,
        pay to
        the Funds Administrator for the account of such Bank additional amounts
        sufficient to compensate such Bank for such increased cost upon demand by
        such
        Bank.

       

      (b)  If
        any
        Bank shall have determined in good faith that any law, rule, regulation or
        guideline adopted pursuant to or arising out of the July 1988 report of the
        Basel Committee on Banking Regulations and Supervisory Practices entitled
        “International Convergence of Capital Measurement and Capital Standards” and
        becoming applicable to such Bank after the Effective Date, or that the adoption
        after the Effective Date of any applicable law, rule, regulation or guideline
        regarding capital adequacy, or any change in any of the foregoing or in the
        interpretation or administration thereof by any central bank or other
        Governmental Authority charged with the interpretation or administration
        thereof, or compliance by such Bank (or any lending office of such Bank)
        with
        any request or directive regarding capital adequacy (whether or not having
        the
        force of law) issued after the Effective Date by any such Governmental Authority
        or comparable agency, affects or would affect the amount of capital required
        or
        expected to be maintained by such Bank or any corporation controlling such
        Bank
        and that the amount of such capital is increased by or based upon the existence
        of such Bank’s Commitment hereunder and other commitments of this type, then the
        Borrower shall from time to time, subject to the provisions of Section
        9.13,
        pay to
        such Bank upon demand additional amounts sufficient to compensate such Bank
        or
        such corporation in light of such circumstances, to the extent that such
        Bank
        reasonably determines such increase in capital to be allocable to the existence
        of such Bank’s Commitment hereunder and similar amounts are being charged
        generally to other borrowers with similar commitments from such
        Bank.

       

      
        
          
          

        

        
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      (c)  Each
        Bank
        will notify the Borrower of any event occurring after the date of this Agreement
        which will entitle such Bank to compensation pursuant to this Section
        2.14
        as
        promptly as practicable after such Bank obtains knowledge of the occurrence
        of
        such event. In no event will the Borrower be obligated to compensate any
        Bank
        pursuant to this Section
        2.14
        for any
        amounts described in paragraphs (a) or (b) above that accrued more than one
        hundred eighty (180) days prior to the date the notice described in the
        preceding sentence is given by the party requesting such compensation, but
        the
        foregoing shall in no way limit the right of such Bank to request compensation
        for amounts accrued during such one hundred eighty (180) day period or any
        future period. A certificate of such Bank setting forth in reasonable detail
        (i) such amount or amounts as shall be necessary to compensate such Bank
        (or participating banks or other entities pursuant to Section
        9.02)
        as
        specified above and (ii) the calculation of such amount or amounts shall be
        delivered to the Borrower and shall be conclusive absent manifest error.
        The
        Borrower shall pay to such Bank the amount shown as due on any such certificate
        within thirty (30) days after its receipt of the same. The failure of any
        Bank
        to demand compensation for any increased costs or reduction in amounts received
        or receivable or reduction in return on capital shall not constitute a waiver
        of
        the right of such Bank or any other Bank, to demand compensation for any
        increased costs or reduction in amounts received or receivable or reduction
        in
        return on capital. The protection of this Section
        2.14
        shall be
        available to the Banks regardless of any possible contention of invalidity
        or
        inapplicability of law, regulation or condition which shall have been
        imposed.

       

      Section
        2.15 Substitution
        of Banks.
        If one
        or more Banks requests compensation pursuant to Section
        2.14
        or
        declares a Eurodollar Event pursuant to Section
        2.13
        or the
        Borrower is required to deduct United States withholding taxes pursuant to
        Section
        2.11(f)
        from
        amounts payable to one or more Banks under the Loan Documents (any such request,
        declaration or withholding is herein called a “Substitution
        Event”
and
        any
        such Bank is herein called an “Affected
        Bank”)
        the
        Borrower may give notice to such Affected Bank (with a copy to the Agent
        and the
        Funds Administrator) that it wishes to seek one or more Eligible Assignees
        (which may be one or more of the other Banks) to assume the Commitment of
        such
        Affected Bank and to purchase the Loans of such Affected Bank and the other
        interests of such Affected Bank in the Loan Documents (collectively, the
        “Affected
        Interests”).
        Each
        Affected Bank agrees to sell all of its Affected Interests pursuant to
Section
        9.02
        to any
        such Eligible Assignee for an amount equal to the sum of the outstanding
        unpaid
        principal of and accrued interest on the Loans of such Affected Bank and
        all
        commitment fees and other fees and amounts due such Affected Bank under the
        Loan
        Documents, calculated, in each case, to the date such Affected Interests
        are
        purchased, whereupon such Affected Bank shall have no further Commitment
        or
        other obligation to the Borrower under the Loan Documents. Notwithstanding
        the
        foregoing, the Borrower may not replace any Affected Bank if (a) the Bank
        or
        Banks involved in such Substitution Event have aggregate Commitment Percentages
        in excess of thirty five percent (35%) or (b) the Borrower does not seek
        to
        replace each Bank involved in such Substitution Event.

      
        
          
          

        

        
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      Section
        2.16 Letters
        of Credit.

       

      (a)  Subject
        to the terms and conditions of this Agreement, and on the condition that
        aggregate Letter of Credit Liabilities shall never exceed $25,000,000, Borrower
        shall have the right to, in addition to the Loans provided for in Section
        2.01
        hereof,
        utilize the Commitments from time to time during the term hereof by obtaining
        the issuance of letters of credit for the account of Borrower if Borrower
        shall
        so request in a form and with such accompanying documentation as Issuer may
        reasonably require not less than five (5) Business Days prior to the proposed
        date of issuance (such letters of credit, as any of them may be amended,
        supplemented, extended or confirmed from time to time, being herein collectively
        called the “Letters
        of Credit”).
        Upon
        the date of the issuance of a Letter of Credit, the Issuer shall be deemed,
        without further action by any party hereto, to have sold to each Bank, and
        each
        such Bank shall be deemed, without further action by any party hereto, to
        have
        purchased from the Issuer, a participation, to the extent of such Bank’s
        Commitment Percentage, in such Letter of Credit and the related Letter of
        Credit
        Liabilities, which participation shall terminate on the earlier of the
        expiration date of such Letter of Credit or the Termination Date.

       

      (b)  The
        following additional provisions shall apply to each Letter of
        Credit:

       

      (i)      
        Borrower
        shall give Agent and the Issuer notice requesting each issuance of a Letter
        of
        Credit hereunder as provided in Section
        2.16(a)
        hereof
        and shall furnish such additional information regarding such transaction
        as
        Agent and the Issuer may reasonably request. Upon receipt of such notice,
        Issuer
        shall promptly notify each Bank of the contents thereof and of such Bank’s
        Commitment Percentage of the amount of such proposed Letter of
        Credit.

       

      (ii)      
        No
        Letter
        of Credit may be issued if after giving effect thereto the sum of (A) the
        aggregate outstanding principal amount of Loans plus
        (B) the
        aggregate Letter of Credit Liabilities with respect to Letters of Credit
        would
        exceed the Total Commitment. On each day during the period commencing with
        the
        issuance of any Letter of Credit and until such Letter of Credit shall have
        expired or been terminated, the Commitment of each Bank shall be deemed to
        be
        utilized for all purposes hereof in an amount equal to such Bank’s Commitment
        Percentage of the amount then available for drawings under such Letter of
        Credit
        (or any unreimbursed drawings under such Letter of Credit).

       

      (iii)     
        Upon
        receipt from the beneficiary of any Letter of Credit of any demand for payment
        thereunder, the Issuer shall promptly notify Borrower and each Bank as to
        the
        amount to be paid as a result of such demand and the payment date therefor.
        If
        at any time prior to the earlier of the expiration date of a Letter of Credit
        or
        the Termination Date, Issuer shall have made a payment to a beneficiary of
        a
        Letter of Credit in respect of a drawing under such Letter of Credit, each
        Bank
        will pay to Issuer promptly upon demand by Issuer at any time during the
        period
        commencing after such payment until reimbursement thereof in full by Borrower,
        an amount equal to such Bank’s Commitment Percentage of such payment, together
        with interest on such amount for each day from the date of demand for such
        payment (or, if such demand is made after 11:00 a.m. (Houston time) on such
        date, from the next succeeding Business Day) to the date of payment by such
        Bank
        of such amount at a rate of interest per annum equal to the Federal Funds
        Rate
        for such period.

       

      
        
          
          

        

        
          -16-

          
            

          

        

        
          
          

        

      

       

      (iv)     
        Borrower
        shall be irrevocably and unconditionally obligated forthwith to reimburse
        Issuer, on the date on which Issuer notifies Borrower of the date and amount
        of
        any payment by Issuer of any drawing under a Letter of Credit, for the amount
        paid by Issuer upon such drawing, without presentment, demand, protest or
        other
        formalities of any kind, all of which are hereby waived. Such reimbursement
        may,
        subject to satisfaction of the conditions in Sections
        3.01
        and
3.02
        hereof
        and to the limitations of the Total Commitment (after adjustment in the same
        to
        reflect the elimination of the corresponding Letter of Credit Liability),
        be
        made by a Borrowing of Loans. Issuer will pay to each Bank such Bank’s
        Commitment Percentage of all amounts received from Borrower for application
        in
        payment, in whole or in part, in respect of any Letter of Credit, but only
        to
        the extent such Bank has made payment to Issuer in respect of such Letter
        of
        Credit pursuant to clause (iii) above.

       

      (v)      
        Borrower
        will pay to Agent for the account of each Bank a letter of credit fee with
        respect to each Letter of Credit equal to the Eurodollar Rate Applicable
        Margin
        per annum, multiplied by the face amount of each Letter of Credit (and computed
        on the basis of the actual number of days elapsed in a year composed of 360
        days), in each case for the period from and including the date of issuance
        of
        such Letter of Credit to and including the date of expiration or termination
        thereof, such fee to be due and payable quarterly in arrears based on the
        date
        of the issuance thereof. Agent will pay to each Bank, promptly after receiving
        any payment in respect of letter of credit fees referred to in this clause
        (v),
        an amount equal to the product of such Bank’s Commitment Percentage times the
        amount of such fees. In addition to and cumulative of the above described
        fees,
        Borrower shall pay to Issuer, quarterly in arrears, based on the date of
        the
        issuance of the applicable Letter of Credit, a fee in an amount equal to
        0.125%
        per annum of the face amount of the applicable Letter of Credit and shall
        pay
        reasonable and customary fees imposed and expenses incurred by Issuer in
        connection with the issuance, administration, amendment, payment and negotiation
        of said Letter of Credit (such fees and expense reimbursements to be retained
        by
        Issuer for its own account).

       

      (vi)       
        The
        issuance by Issuer of each Letter of Credit shall, in addition to the conditions
        precedent set forth in Article
        III
        hereof,
        be subject to the conditions precedent (A) that such Letter of Credit shall
        be
        in such form and contain such terms as shall be reasonably satisfactory to
        Issuer and Agent, and (B) that Borrower shall have executed and delivered
        such
        applications and other instruments and agreements relating to such Letter
        of
        Credit as Issuer and Agent shall have reasonably requested and which are
        not
        inconsistent with the terms of this Agreement. In the event of a conflict
        between the terms of this Agreement and the terms of any application, the
        terms
        of this Agreement shall control.

       

      (vii)      
        Issuer
        will send to each Bank, immediately upon issuance of any Letter of Credit
        a true
        and correct copy of such Letter of Credit.

       

      
        
          
          

        

        
          -17-

          
            

          

        

        
          
          

        

      

       

      (viii)    Any
        Letter of Credit issued under this Agreement shall provide for an expiry
        date
        which is not later than the earlier of five (5) days prior to the Termination
        Date or twelve (12) months from the issuance date, provided, Borrower may
        request, and Issuer agrees to issue, Letters of Credit with expiry dates
        beyond
        five (5) days prior to the Termination Date if at the time of issuance thereof
        Borrower pledges to the Agent cash collateral in an amount and on such terms
        and
        conditions as Agent and Issuer may request. Each Letter of Credit which is
        self-extending beyond its stated expiration date must be cancelable upon
        no more
        than thirty (30) days’ written notice given by the Issuer to the beneficiary of
        such Letter of Credit.

       

      (ix)      The
        issuance of a Letter of Credit shall constitute the making of a Loan except
        as
        otherwise expressly set forth herein, and each Letter of Credit and all related
        applications and other documents executed or delivered in connection with
        any
        Letter of Credit shall be considered Loan Documents.

       

      Section
        2.17 Increase
        of Commitments.

       

      (a)  If
        no
        Default, Event of Default or Material Adverse Effect shall have occurred
        and be
        continuing, the Borrower may at any time and from time to time request an
        increase of the aggregate Commitments by notice to the Agent in writing,
        in the
        amount of such proposed increase request, substantially in the form of
Exhibit 2.17(a)
        (such
        notice, a “Commitment
        Increase Notice”);
        provided,
        however,
        that
        (i) each such increase shall be at least $5,000,000, (ii) the cumulative
        increase in Commitments pursuant to this Section
        2.17
        shall
        not exceed $75,000,000 without the approval of the Majority Banks, (iii)
        the
        Commitment of any Bank may not be increased without such Bank’s consent, and
        (iv) the aggregate amount of the Banks’ Commitments shall not exceed
        $325,000,000 without the approval of the Majority Banks. Any such Commitment
        Increase Notice must offer each Bank the opportunity to subscribe for its
        pro
        rata share of the increased Commitment. If any portion of the increased
        Commitment is not subscribed for by such Banks, the Borrower may, in its
        sole
        discretion, but with the consent of the Agent as to any Person that is not
        at
        such time a Bank (which consent shall not be unreasonably withheld or delayed),
        offer to any existing Bank or to one or more additional banks or financial
        institutions the opportunity to participate in all or a portion of such
        unsubscribed portion of the increased Commitments pursuant to paragraph (b)
        or
        (c) below, as applicable.

       

      (b)  Any
        additional bank or financial institution that the Borrower selects to offer
        participation in the increased Commitment shall become a party to this Agreement
        by executing and delivering to the Agent an agreement, substantially in the
        form
        of Exhibit 2.17(b)
        (a
“New
        Bank Agreement”)
        setting forth its Commitment, whereupon such bank or financial institution
        (a
“New
        Bank”)
        shall
        become a Bank for all purposes and to the same extent as if originally a
        party
        hereto and shall be bound by and entitled to the benefits of this Agreement,
        and
        the signature pages hereof shall be deemed to be amended to add the name
        of such
        New Bank and the definition of Commitment in Annex A of the Credit Agreement
        hereof shall be deemed amended to increase the aggregate Commitments of the
        Banks by the Commitment of such New Bank, provided
        that the
        Commitment of any New Bank shall be an amount not less than
        $5,000,000.

       

      
        
          
          

        

        
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      (c)  Any
        Bank
        that accepts an offer to it by the Borrower to increase its Commitment pursuant
        to this Section
        2.17
        shall,
        in each case, execute a Commitment Increase Agreement with the Borrower and
        the
        Agent, whereupon such Bank shall be bound by and entitled to the benefits
        of
        this Agreement with respect to the full amount of its Commitment as so
        increased, and the definition of Commitment in Annex A hereof shall be deemed
        to
        be amended to reflect such increase.

       

      (d)  The
        effectiveness of any New Bank Agreement or Commitment Increase Agreement
        shall
        be contingent upon receipt by the Agent of such corporate resolutions of
        the
        Borrower and legal opinions of counsel to the Borrower as the Agent shall
        reasonably request with respect thereto, in each case in form and substance
        reasonably satisfactory to the Agent.

       

      (e)  If
        any
        bank or financial institution becomes a New Bank pursuant to Section
        2.17(b)
        or any
        Bank’s Commitment is increased pursuant to Section
        2.17(c),
        additional Loans made on or after the effectiveness thereof (the “Re-Allocation
        Date”)
        shall
        be made pro rata based on their respective Commitments in effect on or after
        such Re-Allocation Date (except to the extent that any such pro rata borrowings
        would result in any Bank making an aggregate principal amount of Loans in
        excess
        of its Commitment, in which case such excess amount will be allocated to,
        and
        made by, such New Bank and/or Banks with such increased Commitments to the
        extent of, and pro rata based on, their respective Commitments), and
        continuations of Loans outstanding on such Re-Allocation Date shall be effected
        by repayment of such Loans on the last day of the Interest Period applicable
        thereto and the making of new Loans of the same Type pro rata based on the
        respective Commitments in effect on and after such Re-Allocation
        Date.

       

      (f)  If
        on any
        Re-Allocation Date there is an unpaid principal amount of Fixed Rate Loans
        or
        Prime Rate Loans, (i) any such Prime Rate Loans shall be reallocated immediately
        among the Banks (including any New Banks and any Banks that have executed
        a
        Commitment Increase Agreement) so that all Borrowing and Loans that are
        outstanding are pro rated based on each Bank’s Commitment, after giving effect
        to the Re-Allocation Date, and (ii) any such Fixed Rate Loans shall remain
        outstanding with the respective holders thereof until the expiration of their
        respective Interest Periods (unless the Borrower elects to prepay any thereof
        in
        accordance with the applicable provisions of this Agreement), and interest
        on
        and repayments of all Loans will be paid thereon to the respective Banks
        holding
        same pro rata based on the respective principal amounts thereof
        outstanding.

       

      ARTICLE
        III.

      CONDITIONS
        OF CREDIT

       

      Section
        3.01 Conditions
        Precedent to the Initial Borrowing.
        The
        obligation of each Bank to make its initial Loan on the occasion of the initial
        Borrowing hereunder is subject to the conditions precedent that the Agent
        shall
        have received on or before the date of such initial Borrowing all of the
        following, each dated (unless otherwise indicated) the date hereof, in form
        and
        substance reasonably satisfactory to the Bank Group and in such number of
        counterparts as may be reasonably requested by the Agent:

       

      (a)  The
        following Loan Documents duly executed by the Persons indicated
        below:

       

      
        
          
          

        

        
          -19-

          
            

          

        

        
          
          

        

      

       

      (i)  this
        Agreement executed by the Borrower and each member of the Bank
        Group,

       

      (ii)     
        the
        Notes
        executed by the Borrower, and

       

      (iii)     
        the
        Fee
        Letter executed by the Borrower and the Agent.

       

      (b)  A
        certificate of a Responsible Officer and of the secretary or an assistant
        secretary of the Borrower certifying, inter
        alia,
        (i)
        true and correct copies of resolutions adopted by the Board of Directors
        of the
        Borrower (A) authorizing the execution, delivery and performance by the Borrower
        of the Loan Documents to which it is or will be a party and the Borrowings
        to be
        made hereunder and the consummation of the transactions contemplated thereby,
        (B) approving the forms of the Loan Documents to which it is a party and
        which
        will be delivered at or prior to the date of the initial Borrowing and (C)
        authorizing officers of the Borrower to execute and deliver the Loan Documents
        to which it is or will be a party and any related documents, (ii) true and
        correct copies of the articles of incorporation and bylaws (or other similar
        charter documents) of the Borrower and (iii) the incumbency and specimen
        signatures of the officers of the Borrower executing any documents on behalf
        of
        it.

       

      (c)  A
        certificate of a Responsible Officer of the Borrower certifying as to the
        satisfaction of the conditions specified in this Article III.

       

      (d)  The
        favorable, signed opinion of Fulbright & Jaworski L.L.P., special counsel to
        the Borrower, addressed to the Bank Group, in form and substance reasonably
        satisfactory to the Bank Group.

       

      (e)  Certificates
        of appropriate public officials as to the existence and good standing of
        the
        Borrower in the States of Nevada and Texas.

       

      (f)  The
        payment to the Bank Group of the fees due to them as of such date under the
        Loan
        Documents, the payment to the Agent of the fees due to it as of such date
        under
        the Fee Letter, and the payment of all legal fees and expenses of Andrews
        Kurth
        LLP, special counsel to the Agent, in connection with the preparation of
        this
        Agreement and the other Loan Documents and the closing of this
        transaction.

       

      (g)  All
        governmental and third party approvals necessary or, in the discretion of
        the
        Agent, advisable in connection with the financing contemplated hereby and
        the
        continuing operations of the Borrower and its Subsidiaries shall have been
        obtained and be in full force and effect.

       

      (h)  The
        Bank
        Group shall have received (i) audited consolidated financial statements of
        the
        Borrower for the two (2) most recent fiscal years ended prior to the Effective
        Date as to which such financial statements are available and (ii) satisfactory
        unaudited interim consolidated financial statements of the Borrower for each
        fiscal quarterly period ended subsequent to the date of the latest financial
        statements delivered pursuant to clause (i) of this paragraph as to which
        such
        financial statements are available, which financial statements shall not
        be
        materially inconsistent with the financial statements or forecasts previously
        provided.

       

      
        
          
          

        

        
          -20-

          
            

          

        

        
          
          

        

      

       

      (i)  There
        shall have been no Material Adverse Effect in regard to the financial condition,
        business, affairs, operations or control of Borrower and no change or event
        shall have occurred which would impair the ability of Borrower to perform
        its
        obligations hereunder or under any of the Loan Documents to which it is a
        party
        or of Agent or any Bank to enforce the obligations hereunder since the date
        of
        its financial statements most recently delivered to Agent.

       

      (j)  The
        Bank
        Group shall have received such documentation and certificates as Agent may
        reasonably request confirming no action, proceeding, investigation, regulation
        or legislation shall have been instituted, threatened or proposed before
        any
        court, governmental agency or legislative body to enjoin, restrain or prohibit,
        or to obtain damages in respect of, or which is related to or arises out
        of this
        Agreement or the consummation of the transactions contemplated hereby or
        which
        could reasonably be expected to have a Material Adverse Effect on Borrower
        and
        its Subsidiaries taken as a whole, or in Agent’s judgment, would make it
        inadvisable to consummate the transactions contemplated by this Agreement
        or any
        of the other Loan Documents .

       

      (k)  A
        certificate of a Responsible Officer of Borrower certifying that Borrower
        and
        its Subsidiaries are in compliance with all existing Debt
        obligations.

       

      (l)      
        Such
        other documents, certificates and opinions as the Agent may reasonably request
        relating to this Agreement and the other Loan Documents.

       

      Section
        3.02 Conditions
        Precedent to All Borrowings.
        The
        obligation of each Bank to make any Loan shall be subject to the further
        conditions precedent that (a) on the Borrowing Date of such Loan the following
        statements shall be true, and the Borrower, by virtue of its delivery of
        a
        Borrowing Request shall be deemed to have certified to the Bank Group as
        of such
        Borrowing Date that (i) the representations and warranties contained in
Article IV
        are true
        and correct on and as of such Borrowing Date, both before and after giving
        effect to such Loan, and as though made on and as of such Borrowing Date
        and
        (ii) no Default has occurred and is continuing, or would result from such
        Loan
        and (b) the Agent shall have received on or before such Borrowing Date such
        other documents, certificates and opinions as the Agent may reasonably request
        relating to this Agreement and the other Loan Documents, each in form and
        substance reasonably satisfactory to the Agent.

       

      ARTICLE
        IV.

      REPRESENTATIONS
        AND WARRANTIES

       

      In
        order
        to induce the Bank Group to enter into this Agreement, the Borrower hereby
        represents and warrants to the Bank Group as follows:

       

      Section
        4.01 Corporate
        Existence; Etc.
        Each of
        the Borrower and each of its Material Subsidiaries is a corporation duly
        organized, validly existing and in good standing under the laws of the
        jurisdiction of its incorporation, and is duly qualified or licensed to transact
        business as a foreign corporation and is in good standing under the laws
        of each
        jurisdiction in which the conduct of its operations or the ownership or leasing
        of its properties requires such qualification or licensing, except where
        the
        failure to be so qualified or licensed will not have a Material Adverse Effect
        on either the Borrower individually or the Borrower and its Subsidiaries
        taken
        as a whole. Schedule 4.01
        sets
        forth a complete list (including the Borrower’s percentage equity interest
        therein) as of the date hereof of (a) all Consolidated Subsidiaries (Part
        A),
        and (b) all Excluded Affiliates (Part B).

       

      
        
          
          

        

        
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      Section
        4.02 Corporate
        Authority; Binding Obligations.
        Each of
        the Borrower and each of its Material Subsidiaries has all requisite power
        and
        authority, corporate or otherwise, to conduct its business and own, operate
        and
        encumber its property. Each of the Borrower and each of its Subsidiaries
        has all
        requisite power and authority, corporate or otherwise, to execute, deliver
        and
        perform all of its obligations under the Loan Documents executed by, or to
        be
        executed by, such Person. The execution, delivery and performance of each
        of the
        Loan Documents to which the Borrower or any of its Subsidiaries is a party
        and
        the consummation of the transactions contemplated thereby, have been duly
        authorized by all necessary corporate and shareholder action. Each of the
        Loan
        Documents to which the Borrower or any of its Subsidiaries is a party has
        been
        duly executed and delivered by such Person, is in full force and effect and
        constitutes the legal, valid and binding obligation of such Person, enforceable
        against it in accordance with its terms, except as such enforceability may
        be
        limited by bankruptcy, insolvency, reorganization, moratorium or other similar
        laws affecting the enforcement of creditor’s rights generally and general
        principles of equity.

       

      Section
        4.03 No
        Conflict.
        The
        execution, delivery and performance by the Borrower or any of its Subsidiaries
        of each Loan Document to which such Person is a party and the consummation
        of
        each of the transactions contemplated thereby do not and shall not, by the
        lapse
        of time, the giving of notice or otherwise: (a) constitute a violation of
        any
        Requirement of Law or a breach of any provision contained in the articles
        or
        certificate of incorporation or bylaws of such Person, or any shareholder
        agreement pertaining to such Person, or contained in any material agreement,
        instrument or document to which it is now a party or by which it or its
        properties is bound, except for such violations or breaches that will not
        have a
        Material Adverse Effect on either the Borrower individually or the Borrower
        and
        its Subsidiaries taken as a whole; or (b) result in or require the creation
        or
        imposition of any Lien whatsoever upon any of the properties or assets of
        the
        Borrower or any of its Subsidiaries.

       

      Section
        4.04 No
        Consent.
        No
        authorization, consent, approval, license, or exemption of or filing or
        registration with, any Governmental Authority or any other Person, was, is
        or
        will be necessary for the valid execution, delivery or performance by the
        Borrower or any of its Subsidiaries of any of the Loan Documents to which
        it is
        a party and the consummation of each of the transactions contemplated thereby
        other than those that the failure to obtain, file or make will not have a
        Material Adverse Effect on either the Borrower individually or the Borrower
        and
        its Subsidiaries taken as a whole.

       

      Section
        4.05 No
        Defaults or Violations of Law.
        No
        Default has occurred and is continuing. No default (or event or circumstance
        occurred which, but for the passage of time or the giving of notice, or both,
        would constitute a default) has occurred and is continuing with respect to
        any
        note, indenture, loan agreement, mortgage, lease, deed or other agreement
        to
        which the Borrower or any of its Subsidiaries is a party or by which any
        of them
        or their properties is bound, except for such defaults that will not have
        a
        Material Adverse Effect on either the Borrower individually or the Borrower
        and
        its Subsidiaries taken as a whole. Neither the Borrower nor any of its
        Subsidiaries is in violation of any applicable Requirement of Law except
        for
        such violations that will not have a Material Adverse Effect on either the
        Borrower individually or the Borrower and its Subsidiaries taken as a
        whole.

       

      
        
          
          

        

        
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      Section
        4.06 Financial
        Position. (a)
        The
        consolidated balance sheet of the Borrower and its Subsidiaries as at December
        31, 2005, and the related consolidated statements of income, retained earnings
        and cash flows for the fiscal year then ended, audited by KPMG LLP, independent
        public accountants, copies of which have been furnished to the Bank Group,
        fairly present the consolidated financial condition of the Borrower and its
        Subsidiaries at such date and the consolidated results of their operations
        and
        the consolidated cash flows of the Borrower and its Subsidiaries for the
        fiscal
        period ended on such date, all in accordance with generally accepted accounting
        principles applied on a consistent basis.

       

      (b)  The
        unaudited consolidated balance sheet of the Borrower and its Subsidiaries
        as at
        March 31, 2006, and the related unaudited consolidated statements of
        income, retained earnings and cash flows for the three month period then
        ended,
        copies of which have been furnished to the Bank Group, fairly present the
        consolidated financial condition of the Borrower and its Subsidiaries at
        such
        date and the consolidated results of their operations and the consolidated
        cash
        flows of the Borrower and its Subsidiaries for the three month period ended
        on
        such date, all in accordance with generally accepted accounting principles
        applied on a consistent basis, subject to normal year-end
        adjustments.

       

      (c)  Since
        December 31, 2005, there has been no Material Adverse Effect in regard to
        the consolidated financial condition or operations of the Borrower and its
        Material Subsidiaries, taken as a whole.

       

      Section
        4.07 Litigation.
        There
        are no actions, suits or proceedings pending or, to the knowledge of the
        Borrower, threatened against or affecting the Borrower or any of its
        Subsidiaries, or the properties of any such Person, before or by any
        Governmental Authority or other Person, which could reasonably be expected
        to
        have a Material Adverse Effect on either the Borrower individually or the
        Borrower and its Subsidiaries taken as a whole.

       

      Section
        4.08 Use
        of
        Proceeds.
        (a)  The
        Borrower’s uses of the proceeds of the Loans are, and will continue to be, legal
        and proper corporate uses (duly authorized by the Borrower’s board of
        directors), and such uses are permitted by the terms of the Loan Documents,
        including, without limitation, Section
        5.09,
        and all
        Requirements of Law.

       

      (b)  Neither
        the Borrower nor any of its Subsidiaries is engaged in the business of extending
        credit for the purpose of purchasing or carrying margin stock (within the
        meaning of Regulation U). No part of the proceeds of any Loan will be used,
        directly or indirectly, (i) to purchase or carry any margin stock or to extend
        credit to others for the purpose of purchasing or carrying any margin stock
        or
        (ii) for the purpose of purchasing, carrying or trading in any securities,
        in
        either case under such circumstances as to involve any member of the Bank
        Group
        in a violation of Regulation U or the Borrower or any of its Subsidiaries
        in a
        violation of Regulation X. Following the application of the proceeds of each
        Loan, not more than 25% of the value of the assets of the Borrower, or of
        the
        Borrower and its Subsidiaries, which are subject to any arrangement with
        any
        member of the Bank Group (herein or otherwise) whereby the right or ability
        of
        the Borrower or its Subsidiaries to sell, pledge or otherwise dispose of
        such
        assets is in any way restricted, will be such margin stock.

       

      
        
          
          

        

        
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      Section
        4.09 Governmental
        Regulation.
        Neither
        the Borrower nor any of its Subsidiaries is subject to regulation under the
        Interstate Commerce Act, as amended, the Investment Company Act of 1940,
        as
        amended, or any other Requirement of Law such that the ability of any such
        Person to incur indebtedness is limited or its ability to consummate the
        transactions contemplated by this Agreement, the other Loan Documents or
        any
        document executed in connection therewith is impaired.

       

      Section
        4.10 Disclosure.
        The
        schedules, documents, exhibits, reports, certificates and other written
        statements and information furnished by or on behalf of the Borrower or any
        of
        its Subsidiaries to the Bank Group do not contain any material misstatement
        of
        fact, or omit to state a material fact necessary in order to make the statements
        contained therein, in light of the circumstances under which they were made,
        not
        misleading. Neither the Borrower nor any of its Subsidiaries has intentionally
        withheld any fact known to it which has or is reasonably likely to have a
        Material Adverse Effect on either the Borrower individually or the Borrower
        and
        its Subsidiaries taken as a whole.

       

      Section
        4.11 ERISA.
        The
        Borrower and its ERISA Affiliates are in compliance in all material respects
        with ERISA and all Requirements of Law related thereto. No Reportable Event
        has
        occurred and is continuing with respect to any Plan. Neither the Borrower
        nor
        any of its ERISA Affiliates has any accumulated funding deficiency (as defined
        in Section 302(a)(2) of ERISA) under any Plan.

       

      Section
        4.12 Payment
        of Taxes.
        The
        Borrower has filed, and has caused each of its Material Subsidiaries to file,
        all federal, state and local tax returns and other reports that the Borrower
        and
        each such Material Subsidiary are required by law to file and have paid all
        taxes and other similar charges that are due and payable pursuant to such
        returns and reports, except to the extent any of the same may be contested
        in
        good faith by appropriate proceedings promptly initiated and diligently
        conducted, and with respect to which adequate reserves have been set aside
        on
        the books of such Person in accordance with generally accepted accounting
        principles.

       

      Section
        4.13 Properties;
        Title and Liens.
        (a)  Each
        of the Borrower and its Material Subsidiaries has good and marketable title
        to
        each of the material properties and assets of such Person. All properties
        of the
        Borrower and its Material Subsidiaries and such Person’s use thereof comply with
        applicable zoning and use restrictions, except where the failure to so comply
        will not have a Material Adverse Effect upon any such Person.

       

      (b)  Each
        of
        the Borrower and its Subsidiaries owns, or is licensed to use, all trademarks,
        tradenames, copyrights, patents and other intellectual property material
        to its
        business, and the use thereof by the Borrower and its Subsidiaries does not
        infringe upon the rights of any other Person, except for any such infringement
        that, individually or in the aggregate, could not reasonably be expected
        to
        result in a Material Adverse Effect.

       

      Section
        4.14 Pari
        Passu
        Ranking.
        The
        obligations of the Borrower to pay the principal of and interest on the Loans
        and all other amounts payable under the Loan Documents will rank at least
        pari
        passu
        as to
        payment with all other Debt of the Borrower now existing or hereafter
        incurred.

       

      
        
          
          

        

        
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      Section
        4.15 Environmental
        Matters.
        The
        Borrower and each of its Subsidiaries possess all environmental, health and
        safety licenses, permits, authorizations, registrations, approvals and similar
        rights necessary under law or otherwise for such Person to conduct its
        operations as now being conducted, each of such licenses, permits,
        authorizations, registrations, approvals and similar rights is valid and
        subsisting, in full force and effect and enforceable by such Person, and
        such
        Person is in compliance with all terms, conditions or other provisions of
        such
        permits, authorizations, registrations, approvals and similar rights except
        for
        such noncompliance that will not have a Material Adverse Effect on either
        the
        Borrower individually or the Borrower and its Subsidiaries taken as a whole.
        Neither the Borrower nor any of its Subsidiaries has received any notices
        of any
        violation of, noncompliance with, or remedial obligation under, Requirements
        of
        Environmental Laws, and there are no writs, injunctions, decrees, orders
        or
        judgments outstanding, or lawsuits, claims, proceedings, investigations or
        inquiries pending or, to the knowledge of the Borrower, threatened, relating
        to
        the ownership, use, condition, maintenance, or operation of, or conduct of
        business related to, any property owned, leased or operated by the Borrower
        or
        any of its Subsidiaries, or other assets of the Borrower or any of its
        Subsidiaries, other than those violations, instances of noncompliance,
        obligations, writs, injunctions, decrees, orders, judgments, lawsuits, claims,
        proceedings, investigations or inquiries that will not have a Material Adverse
        Effect on either the Borrower individually or the Borrower and its Subsidiaries
        taken as a whole. There are no material obligations, undertakings or liabilities
        arising out of or relating to Environmental Laws to which the Borrower or
        any of
        its Material Subsidiaries has agreed to, assumed or retained, or by which
        the
        Borrower or any of its Material Subsidiaries is adversely affected, by contract
        or otherwise. Neither the Borrower nor any of its Material Subsidiaries has
        received a written notice or claim to the effect that such Person is or may
        be
        liable to any Person as the result of a Release or threatened Release of
        a
        Hazardous Material.

       

      Section
        4.16 No
        Undisclosed Liabilities.
        Except
        as set forth in Schedule
        4.16,
        the
        Borrower and its Subsidiaries have no liabilities or obligations of any nature
        (whether known or unknown, and whether absolute, accrued, contingent or
        otherwise) except for (i) liabilities or obligations reflected or reserved
        against in the financial statements most recently delivered by the Borrower
        pursuant to Section
        5.01,
        (ii)
        current liabilities incurred in the ordinary course of business since the
        date
        of such financial statements, (iii) liabilities or obligations that are not
        required to be included in financial statements prepared in accordance with
        generally accepted accounting principles, and (iv) liabilities or obligations
        arising under governmental approvals or contracts to which the Borrower or
        its
        Subsidiaries is a party or otherwise subject.

       

      Section
        4.17 Labor
        Matters.
        As of
        the Effective Date, there are no strikes, lockouts or slowdowns against the
        Borrower or its Subsidiaries pending or, to the knowledge of the Borrower,
        threatened. The hours worked by and payments made to employees of the Borrower
        and its Subsidiaries have not been in violation of the Fair Labor Standards
        Act
        or any other Requirement of Law dealing with such matters in any manner that
        could reasonably be expected to have a Material Adverse Effect. All payments
        due
        from the Borrower or any Subsidiary, or for which any claim may be made against
        any of them, on account of wages and employee health and welfare insurance
        and
        other benefits, have been paid or accrued as a liability on the books of
        the
        Borrower and its Subsidiaries. The consummation of the transactions contemplated
        by the Loan Documents will not give rise to any right of termination or right
        of
        renegotiation on the part of any union under any collective bargaining agreement
        to which the Borrower or any of its Subsidiaries is bound.

       

      
        
          
          

        

        
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      ARTICLE
        V.

      AFFIRMATIVE
        COVENANTS

       

      So
        long
        as any principal amount of any Loan, any amount of interest accrued under
        any
        Loan Document, or any commitment, facility or other fee, expense, compensation
        or any other amount payable to any member of the Bank Group under the Loan
        Documents shall remain unpaid or outstanding or any Bank shall have any
        Commitment hereunder:

       

      Section
        5.01 Reporting
        Requirements.
        The
        Borrower shall deliver or cause to be delivered to the Agent (with sufficient
        copies for the Agent to distribute the same to the other members of the Bank
        Group):

       

      (a)  As
        soon
        as available and in any event within forty five (45) days after the end of
        each
        calendar quarter (other than the fourth quarter):

       

      (i)     
        copies
        of
        the consolidated and consolidating balance sheets of the Borrower and its
        Subsidiaries as of the end of such period, and consolidated and consolidating
        statements of income and retained earnings and a statement of cash flows
        of the
        Borrower and its Subsidiaries for that fiscal period and for the portion
        of the
        fiscal year ending with such period, in each case setting forth in comparative
        form (on a consolidated, but not a consolidating basis) the figures for the
        corresponding period of the preceding fiscal year, all in reasonable detail;
        and

       

      (ii)  a
        certificate of a Responsible Officer of the Borrower (A) stating that such
        financial statements fairly present the consolidated financial position and
        results of operations of the Borrower and its Subsidiaries in accordance
        with
        generally accepted accounting principles consistently applied, subject to
        normal
        year-end adjustments, (B) stating that no Default has occurred and is
        continuing or, if any Default has occurred and is continuing, the action
        the
        Borrower is taking or proposes to take with respect thereto, (C) setting
        forth
        calculations demonstrating compliance by the Borrower with Section
        6.01
        and
Section
        6.07,
        accompanied by a summary (on an entity-by-entity basis) of Investments in
        Excluded Affiliates and Funded Debt of the Borrower and its Consolidated
        Subsidiaries, as well as any Funded Debt resulting from a Guaranty of Debt
        of an
        Excluded Affiliate, and (D) identifying any changes in the Consolidated
        Subsidiaries and Excluded Affiliates since the date of the most recent
        certificate delivered pursuant to this Section
        5.01(a)(ii)
        or
Section
        5.01(b)(ii)
        (or in
        the case of the initial certificate, any changes from those specified in
        Schedule 4.01).

       

      (b)  As
        soon
        as available and in any event within ninety (90) days after the end of each
        calendar year:

       

      (i)      
        copies
        of
        the consolidated and consolidating balance sheet of the Borrower and its
        Subsidiaries as of the close of such calendar year and consolidated and
        consolidating statements of income and retained earnings and a statement
        of cash
        flows of the Borrower and its Subsidiaries for such calendar year, in each
        case
        setting forth in comparative form (on a consolidated basis) the figures for
        the
        preceding calendar year, all in reasonable detail and accompanied by an opinion
        thereon (which shall not be qualified by reason of any limitation imposed
        by the
        Borrower) of independent accountants of recognized national standing selected
        by
        the Borrower and reasonably satisfactory to the Majority Banks, to the effect
        that such consolidated financial statements have been prepared in accordance
        with generally accepted accounting principles consistently applied (except
        for
        changes in which such accountants concur) and that the examination of such
        accounts in connection with such financial statements has been made in
        accordance with generally accepted auditing standards; and

       

      
        
          
          

        

        
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      (ii)  a
        certificate of a Responsible Officer of the Borrower (A) stating that no
        Default
        has occurred and is continuing or, if any Default has occurred and is
        continuing, the action the Borrower is taking or proposes to take with respect
        thereto, (B) setting forth calculations demonstrating compliance by the Borrower
        with Section
        6.01
        and
Section
        6.07,
        accompanied by a summary (on an entity-by-entity basis) of Investments in
        Excluded Affiliates and Funded Debt of the Borrower and its Consolidated
        Subsidiaries, as well as any Funded Debt resulting from a Guaranty of Debt
        of an
        Excluded Affiliate, and (C) identifying any changes in the Consolidated
        Subsidiaries and Excluded Affiliates since the date of the most recent
        certificate delivered pursuant to Section
        5.01(a)(ii)
        or this
Section
        5.01(b)(ii).

       

      (c)  Promptly
        after the sending or filing thereof, copies of all proxy statements and reports
        which the Borrower or any of its Subsidiaries sends to any holders of its
        respective securities, and copies of all regular, periodic and special reports
        and all registration statements which the Borrower or any of its Subsidiaries
        files with the Securities and Exchange Commission or any national securities
        exchange.

       

      (d)  Promptly
        after the receipt thereof, copies of any reports or notices that the Borrower
        may receive from the PBGC or the U. S. Department of Labor indicating that
        a
        Reportable Event has occurred or an accumulated funding deficiency (as defined
        in Section 302(a)(2) of ERISA) exists under any Plan or that any such Person
        or
        its ERISA Affiliates has failed to comply in all material respects with ERISA
        and all Requirements of Law related thereto.

       

      (e)  As
        soon
        as possible and in any event within ten (10) days after a Responsible Officer
        of
        the Borrower becomes aware of the occurrence of a Default, a certificate
        of a
        Responsible Officer of the Borrower setting forth details of such Default
        and
        the action which has been taken or is to be taken with respect
        thereto.

       

      (f)  As
        soon
        as possible and in any event within ten (10) days after a Responsible Officer
        of
        the Borrower becomes aware thereof, written notice from a Responsible Officer
        of
        the Borrower of (i) the institution of or threat of, any action, suit,
        proceeding, governmental investigation or arbitration by any Governmental
        Authority or other Person against or affecting the Borrower or any of its
        Subsidiaries that could have a Material Adverse Effect on the Borrower or
        any of
        its Material Subsidiaries and that has not previously disclosed in writing
        to
        the Bank Group pursuant to this Section
        5.01(f)
        or (ii)
        any material development in any action, suit, proceeding, governmental
        investigation or arbitration already disclosed to the Bank Group pursuant
        to
        this Section
        5.01(f).

       

      
        
          
          

        

        
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      (g)  Promptly
        upon a Responsible Officer of the Borrower obtaining knowledge thereof, notice
        of (i) any violation of, noncompliance with, or remedial obligations under,
        Requirements of Environmental Laws that could have a Material Adverse Effect
        on
        the Borrower or any of its Material Subsidiaries, (ii) any Release or threatened
        Release affecting any property owned, leased or operated by the Borrower
        or any
        of its Subsidiaries that could have a Material Adverse Effect on the Borrower
        or
        any of its Material Subsidiaries, (iii) the amendment or revocation of any
        permit, authorization, registration, approval or similar right that could
        have a
        Material Adverse Effect on the Borrower or any of its Material Subsidiaries
        or
        (iv) new or proposed changes to Requirements of Environmental Laws that could
        have a Material Adverse Effect on the Borrower or any of its Material
        Subsidiaries.

       

      (h)  Such
        other information as any member of the Bank Group may from time to time
        reasonably request respecting the business, properties, operations or condition,
        financial or otherwise, of the Borrower or any of its Subsidiaries.

       

      Section
        5.02 Taxes;
        Claims.
        The
        Borrower will pay and discharge, and will cause each of its Subsidiaries
        to pay
        and discharge, all taxes, assessments and governmental charges or levies
        imposed
        upon such Person or upon its income or profits, or upon any properties belonging
        to such Person, prior to the date on which penalties attach thereto, and
        all
        lawful claims which, if unpaid, might become a Lien upon any properties of
        the
        Borrower or any of its Material Subsidiaries, other than any such tax,
        assessment, charge, levy or claim which is being contested in good faith
        by
        appropriate proceedings promptly initiated and diligently conducted, and
        with
        respect to which adequate reserves are set aside on the books of such Person
        in
        accordance with generally accepted accounting principles.

       

      Section
        5.03 Compliance
        with Laws
        and
        Agreements.
        The
        Borrower will comply, and will cause each of its Subsidiaries to comply,
        with
        all applicable Requirements of Law imposed by any Governmental Authority
        and all
        indentures, notes, loan agreements, mortgages, leases, material agreements
        and
        other material instruments binding upon it or its property, noncompliance
        with
        which might have a Material Adverse Effect on the Borrower or any of its
        Material Subsidiaries. Without limitation of the foregoing, the Borrower
        shall,
        and shall cause each of its Subsidiaries to, comply with all Requirements
        of
        Environmental Laws, operate its properties and conduct its business in
        accordance with good environmental practices, and handle, treat, store and
        dispose of Hazardous Materials in accordance with such practices, except
        where
        the failure to do so will not have a Material Adverse Effect on the Borrower
        or
        any of its Material Subsidiaries.

       

      Section
        5.04 Insurance.
        The
        Borrower will maintain, and will cause each of its Subsidiaries to maintain,
        with financially sound, responsible and reputable insurance companies or
        associations, insurance, or self-insure against such risks, and in such amounts
        (and with co-insurance and deductibles), as are usually insured against by
        Persons of established reputation engaged in the same or similar businesses
        and
        similarly situated.

       

      
        
          
          

        

        
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      Section
        5.05 Corporate
        Existence; Etc.
        The
        Borrower will preserve and maintain, and (except as otherwise permitted by
        Section
        6.04
        and
6.06)
        will
        cause each of its Material Subsidiaries to preserve and maintain, its existence,
        rights, franchises and privileges in the jurisdiction of its incorporation,
        and
        qualify and remain qualified, and cause each of its Material Subsidiaries
        to
        qualify and remain qualified, as a foreign corporation in each jurisdiction
        in
        which such qualification is material to the business and operations of such
        Person or the ownership or leasing of the properties of such Person. The
        Borrower will, and will cause each of its Subsidiaries to, carry on and conduct
        its business in substantially the same manner and in substantially the same
        lines of business as it is presently conducted, provided that the Borrower
        may,
        in its reasonable business judgment, dispose of any subsidiary or exit any
        line
        of business if it determines it to be in the Borrower’s best interest to do so,
        subject to the provisions of Sections 6.04
        and
6.06.

       

      Section
        5.06 Inspections;
        Etc.
        From
        time to time during regular business hours upon reasonable prior notice,
        the
        Borrower will permit, and will cause each of its Subsidiaries to permit,
        any
        agents or representatives of any member of the Bank Group to examine and
        make
        copies of and abstracts from the records and books of account of, and visit
        the
        properties of, the Borrower and its Subsidiaries and to discuss the affairs,
        finances and accounts of any such Person with any of their respective
        independent public accountants, officers or directors, all at the expense
        of the
        Borrower.

       

      Section
        5.07 Maintenance
        of Properties.
        The
        Borrower will maintain and preserve, and will cause each of its Material
        Subsidiaries to maintain and preserve, all of its material properties necessary
        for the proper conduct of its business in good working order and condition,
        ordinary wear and tear excepted.

       

      Section
        5.08 Accounting
        Systems; Etc.
        The
        Borrower will keep, and will cause each of its Subsidiaries to keep, adequate
        records and books of account in which complete entries will be made in
        accordance with generally accepted accounting principles consistently applied
        (subject to year end adjustments), reflecting all financial transactions
        of such
        Person. The Borrower shall maintain or cause to be maintained a system of
        accounting established and administered in accordance with sound business
        practices to permit preparation of financial statements in conformity with
        generally accepted accounting principles, and each of the financial statements
        described herein shall be prepared from such system and records.

       

      Section
        5.09 Use
        of
        Loan Proceeds.
        The
        Borrower will use the proceeds of all Loans hereunder for the following
        purposes: (a) for general corporate purposes of the Borrower and its
        Consolidated Subsidiaries, (b) payment of all amounts owing by the Borrower
        under this Agreement, (c) to fund any cash consideration payable by the Borrower
        or any of its Consolidated Subsidiaries in connection with a merger or
        acquisition which is not prohibited by Section
        6.06
        or
Section
        6.07,
        or (d)
        to fund Investments in Excluded Affiliates permitted by Section
        6.07;
        provided
        that
        such uses are, at the time made, otherwise consistent with the terms of this
        Agreement and all Requirements of Law and no Default would result
        therefrom.

       

      Section
        5.10 Further
        Assurances in General.
        The
        Borrower at its expense shall, and shall cause each of its Subsidiaries to,
        promptly execute and deliver all such other and further documents, agreements
        and instruments in compliance with or accomplishment of the covenants and
        agreements of the Borrower or any of its Subsidiaries in the Loan Documents,
        including, without limitation, the accomplishment of any condition precedent
        that may have been waived by the Banks prior to the initial Borrowing or
        any
        subsequent Borrowings.

       

      
        
          
          

        

        
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      ARTICLE
        VI.

      NEGATIVE
        COVENANTS

       

      So
        long
        as any principal amount of any Loan, any amount of interest accrued under
        any
        Loan Document, or any commitment, facility or other fee, expense, compensation
        or any other amount payable to any member of the Bank Group under the Loan
        Documents shall remain unpaid or outstanding or any Bank shall have any
        Commitment hereunder:

       

      Section
        6.01 Financial
        Covenants.
        The
        Borrower will not:

       

      (a)  Interest
        Coverage Ratio.
        Permit
        the ratio of (i) EBITDA to (ii) Interest Expense, measured as of the last
        day of
        any calendar quarter for the twelve month period then ended to be less than
        2.5
        to 1.0.

       

      (b)  Debt
        to Capitalization Ratio.
        Permit
        the ratio of (i) Funded Debt as of the last day of any calendar quarter to
        (ii)
        Total Capitalization for the twelve month period then ended to equal or exceed
        0.6 to 1.0.

       

      Section
        6.02 Restrictions
        on Debt.
        (a)
        The
        Borrower will not, and will not permit any of its Consolidated Subsidiaries
        to,
        create, incur, assume or suffer to exist, any Debt, including obligations
        in
        respect of Capital Leases, other than:

       

      (i)      
        Debt
        of
        the Borrower under the Loan Documents, and, prior to the initial Borrowing
        hereunder, the loans outstanding under the Existing Credit
        Agreement;

       

      (ii)  unsecured
        Debt owing by the Borrower to any Consolidated Subsidiary;

       

      (iii)    
        unsecured
        Debt owing by any Consolidated Subsidiary to the Borrower or any other
        Consolidated Subsidiary so long as such Debt ranks pari
        passu
        with all
        other Debt of such Consolidated Subsidiary;

       

      (iv)    
        Debt
        (other than Derivative Obligations) of Consolidated Subsidiaries, so long
        as (A)
        no Default or Event of Default exists on the date such Debt is incurred or
        would
        result from the incurrence of such Debt, and (B) the aggregate amount of
        such
        Debt does not exceed ten percent (10%) of Net Worth;

       

      (v)     
        Debt
        (other than Derivative Obligations) of the Borrower, so long as (A) such
        Debt is
        not Guaranteed by any Subsidiary of the Borrower and (B) no Default or Event
        of
        Default exists on the date such Debt is incurred or would result from the
        incurrence of such Debt; and

       

      (vi)    
        Derivative
        Obligations of the Borrower and its Consolidated Subsidiaries, so long as
        (A) no
        Default or Event of Default exists on the date such Derivative Obligations
        are
        incurred or would result from the incurrence thereof and (B) the aggregate
        amount of such Derivative Obligations does not exceed ten percent
        (10%) of
        Net
        Worth.

       

      
        
          
          

        

        
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      (b)  The
        Borrower will not, and will not permit any of its Consolidated Subsidiaries
        to,
        create, incur, assume or suffer to exist, any Guaranties or other contingent
        liabilities other than (i) Guaranties by Consolidated Subsidiaries that
        constitute Debt permitted by Section
        6.02(a)(iv),
        (ii)
        Guaranties by the Borrower that constitute Debt permitted by Section
        6.02(a)(v),
        (iii)
        other contingent liabilities (including undrawn letters of credit not issued
        under the Agreement) in an amount not exceeding $10,000,000 at any time,
        and
        (iv) contingent liabilities arising under guaranties by the Borrower or its
        Subsidiaries of the obligations of the Borrower’s Subsidiaries under
        Environmental Laws, including the Comprehensive Environmental Response,
        Compensation and Liability Act, as amended, and the Oil Pollution Act of
        1990,
        as amended.

       

      (c)  The
        Borrower will not permit any Excluded Affiliate to create, incur, assume
        or
        suffer to exist any Debt unless the agreements evidencing or providing for
        such
        Debt contain a provision to the effect that the holders of such Debt shall
        have
        no recourse against the Borrower or any of its Consolidated Subsidiaries,
        or any
        of their respective assets, for the payment of such Debt; provided,
        however,
        that
        the foregoing shall not apply to any such Debt of an Excluded Affiliate that
        is
        covered by a Guaranty from the Borrower or a Consolidated Subsidiary permitted
        by Section
        6.02(b).

       

      Section
        6.03 Restriction
        on Liens.
        The
        Borrower will not, and will not permit any of its Consolidated Subsidiaries
        to,
        create, incur, assume or suffer to be created, assumed or incurred or to
        exist,
        any Lien upon any of their property or assets, whether now owned or hereafter
        acquired other than:

       

      (a)  Liens
        against assets of the Borrower or a Consolidated Subsidiary securing Debt
        of
        such Person, so long as (i) the aggregate amount of all such secured Debt
        does
        not exceed $5,000,000, and (ii) such secured Debt is otherwise permitted
        by
Section
        6.02(a)(v),
        in the
        case of the Borrower, or Section
        6.02(a)(iv),
        in the
        case of a Consolidated Subsidiary;

       

      (b)  Liens
        imputed to Capital Leases under which a Consolidated Subsidiary is the lessee,
        so long as the Debt of such Consolidated Subsidiary in respect of such Capital
        Lease is permitted by Section
        6.02(a)(iv);

       

      (c)  Liens
        on
        property of any Consolidated Subsidiary that attach concurrently with such
        Consolidated Subsidiary’s purchase thereof, and securing only Debt of such
        Consolidated Subsidiary permitted by Section
        6.02(a)(iv)
        and
        incurred to finance all or part of the purchase price of such property, and
        any
        extensions and renewals of such Liens so long as the Debt secured thereby
        is not
        greater than the Debt secured immediately prior to such extension and renewal
        and such Debt is permitted by Section
        6.02(a)(iv)
        at the
        time of such extension and renewal;

       

      (d)  Liens
        for
        taxes, assessments or governmental charges or levies if the same shall at
        the
        time not be delinquent or thereafter may be paid without penalty, or the
        validity of which are being contested in good faith by appropriate proceedings
        promptly initiated and diligently conducted and as to which adequate reserves
        shall have been set aside on the books of the Borrower in accordance with
        generally accepted accounting principles;

       

      
        
          
          

        

        
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      (e)  carriers’,
        warehousemen’s and mechanics’ liens and other similar Liens which arise in the
        ordinary course of business, do not materially impair the use or value of
        its
        properties or assets or the conduct of its business, and secure obligations
        that
        are not yet due and payable or are being contested in good faith by appropriate
        proceedings promptly initiated and diligently conducted and as to which adequate
        reserves shall have been set aside on the books of the Borrower in accordance
        with generally accepted accounting principles or as to which adequate bonds
        shall have been obtained;

       

      (f)  pledges
        or deposits to secure obligations under workmen’s compensation laws or similar
        legislation or to secure public or statutory obligations of the
        Borrower;

       

      (g)  Liens
        created in favor of a Governmental Authority to secure partial, progress,
        advance or other contractual payments pursuant to any agreement or
        statute;

       

      (h)  attachment,
        judgment and other similar Liens arising in connection with court proceedings,
        provided the execution or other enforcement of such Liens is effectively
        stayed
        and the claims secured thereby are being actively contested in good faith
        and by
        appropriate proceedings in such manner as not to have the property subject
        to
        such Liens forfeitable; and

       

      (i)      
        easements,
        rights-of-way, reservations, exceptions, minor encroachments, restrictions
        and
        similar charges created or incurred in the ordinary course of business which
        in
        the aggregate do not materially interfere with the business operations of
        the
        Borrower and its Subsidiaries taken as a whole, and which were not incurred
        in
        connection with the borrowing of money.

       

      Section
        6.04 Consolidated
        Subsidiary Dispositions.
        The
        Borrower will not, and will not permit any of its Subsidiaries to, sell,
        transfer or otherwise dispose of (i) any capital stock or other equity interests
        of any Consolidated Subsidiary or (ii) all or substantially all of the assets
        of
        any Consolidated Subsidiary (whether in a single transaction or series of
        transactions), in excess of ten percent (10%) of the Consolidated Net Worth
        of
        Borrower and its Consolidated Subsidiaries during any rolling twelve (12)
        month
        period, other than any such dispositions made to the Borrower or a wholly-owned
        Consolidated Subsidiary.

       

      Section
        6.05 Restrictions
        on Consolidated Subsidiary Distributions.
        The
        Borrower will not, and will not permit any of its Subsidiaries to, enter
        into
        any agreement restricting the ability of any Consolidated Subsidiary to (a)
        pay
        dividends or make other distributions on the capital stock or other equity
        interests of such Consolidated Subsidiary or (b) make loans or advances to
        the Borrower or any Subsidiary of the Borrower, other than this
        Agreement.

       

      Section
        6.06 Mergers
        and Acquisitions.
        The
        Borrower will not, and will not permit any of its Consolidated Subsidiaries
        to,
        acquire (whether in one transaction or a series of transactions) all or
        substantially all of the assets of any Person or the capital stock or securities
        of any Person, or consolidate with or merge into any Person or permit any
        Person
        to consolidate or merge into it, unless: (a) any business acquired in such
        transaction is similar or related to the businesses engaged in by the Borrower
        and its Consolidated Subsidiaries on the date hereof; (b) in the case of a
        merger (i) if the Borrower is a party to such merger, the Borrower is the
        surviving entity and the management of the Borrower shall be substantially
        unchanged and (ii) if a Consolidated Subsidiary is a party to such merger,
        either the Borrower or a Consolidated Subsidiary is the surviving entity;
        and
        (d) immediately after giving effect and pro forma effect thereto, no Default
        shall exist. The Agent shall have received (A) a certificate of a Responsible
        Officer of the Borrower showing satisfaction of the condition set forth in
        this
Section
        6.06,
        and (B)
        such other documents, opinions and information that the Agent or the Majority
        Banks may reasonably request in order to substantiate the same.

       

      
        
          
          

        

        
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      Section
        6.07 Restricted
        Investments.
        (a)
        The
        Borrower will not, and will not permit any Consolidated Subsidiary to, make,
        or
        enter into any commitment to make, any Restricted Investment if a Default
        exists
        either before or after giving effect thereto.

       

      (b)  The
        Borrower will not, and will not permit any Consolidated Subsidiary to, make,
        or
        enter into any commitment to make, or permit to exist any Restricted Investment
        other than Restricted Investments that do not in the aggregate exceed twenty
        percent (20%) of Net Worth.

       

      (c)  The
        Borrower will not permit the sum (without duplication) of (i) all Restricted
        Investments, made by the Borrower and its Consolidated Subsidiaries,
plus
        (ii) all
        commitments by the Borrower and its Consolidated Subsidiaries to make Restricted
        Investments, plus
        (iii)
        all Debt (other than Derivative Obligations) of Consolidated Subsidiaries,
        to at
        any time exceed thirty-five percent (35%) of Net Worth.

       

      Section
        6.08 Lines
        of Business.
        The
        Borrower will not, and will not permit any of its Consolidated Subsidiaries
        to,
        directly or indirectly engage to a material extent in any business other
        than
        those in which it is presently engaged or that are directly related thereto,
        or
        discontinue any of its existing lines of business or substantially alter
        its
        method of doing business.

       

      Section
        6.09 Transactions
        with Affiliates.
        Neither
        the Borrower, nor any of its Consolidated Subsidiaries, will enter into any
        transaction with an Affiliate other than (a) transactions entered into in
        the ordinary course of business and upon terms no less favorable than those
        that
        the Borrower or its Consolidated Subsidiary, as applicable, could obtain
        in an
        arms length transaction with a Person that is not an Affiliate and (b)
        transactions between the Borrower and any of its Consolidated Subsidiaries,
        or
        between such Consolidated Subsidiaries, that do not and will not, either
        directly or indirectly, cause a Default.

       

      Section
        6.10 Restricted
        Payments.
        The
        Borrower will not, and will not permit any of its Subsidiaries to, at any
        time,
        declare or make, any Restricted Payment unless, immediately after giving
        effect
        to such action, no Default or Event of Default would exist; provided,
        any
        Subsidiary may pay a dividend of any type to the Borrower.

       

      
        
          
          

        

        
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      ARTICLE
        VII.

      DEFAULT

       

      Section
        7.01 Events
        of Default.
        If any
        of the following events (each an “Event
        of Default”)
        shall
        occur and be continuing:

       

      (a)  the
        Borrower shall fail to pay when due any installment of principal of the Loans;
        or

       

      (b)  the
        Borrower shall fail to pay any interest on any Loan or any arrangement fee,
        commitment fee, administration fee, commission, expense, compensation,
        reimbursement or other amount when due, or any Person (other than a member
        of
        the Bank Group) shall fail to pay any amount payable by such Person hereunder
        or
        under any other Loan Document or other agreement or security document
        contemplated by or delivered pursuant to or in connection with this Agreement
        when due, and, in either event, such failure shall continue for five (5)
        Business Days; or

       

      (c)  the
        Borrower shall fail to perform any term, covenant or agreement contained
        in
Article VI
        or
Section 5.01(e)
        of this
        Agreement; or

       

      (d)  the
        Borrower shall fail to perform any term, covenant or agreement contained
        in this
        Agreement (other than those referenced in subsections (a), (b) and (c) of
        this
Section
        7.01)
        and
        such failure shall not have been remedied within ten (10) days after the
        earlier
        of (i) notice thereof from the Agent to the Borrower or (ii) discovery thereof
        by the Borrower; or

       

      (e)  any
        Person (other than a member of the Bank Group) shall fail to perform any
        term,
        covenant or agreement contained in any Loan Document (other than those
        referenced in subsections (a), (b), (c) and (d) of this Section
        7.01)
        to
        which it is a party and such failure shall not have been remedied within
        thirty
        (30) days after the earlier of (i) notice thereof from the Agent to the Borrower
        or (ii) discovery thereof by the Borrower; or

       

      (f)  any
        representation or warranty made by any Person (other than a member of the
        Bank
        Group), or any such Person’s officers, in any Loan Document to which it is a
        party or in any certificate, agreement, instrument or statement contemplated
        by
        or delivered pursuant to, or in connection with, any Loan Document shall
        prove
        to have been incorrect in any material respect when made or deemed made;
        or

       

      (g)  the
        Borrower or any of its Subsidiaries shall (i) default in the payment of any
        Debt
        (other than the amounts referred to in subsections (a) and (b) of this
Section
        7.01)
        owing
        by such Person that constitutes Material Debt as of the date of such default,
        or
        any interest or premium thereon, when due (or, if permitted by the terms
        of the
        relevant document, within any applicable grace period), whether such Debt
        shall
        become due by scheduled maturity, by required prepayment, by acceleration,
        by
        demand or otherwise; or (ii) fail to perform any term, covenant or condition
        on
        its part to be performed under any agreement or instrument evidencing, securing
        or relating to any such Debt, when required to be performed, and such failure
        shall continue after the applicable grace period, if any, specified in such
        agreement or instrument, if the effect of such failure is to accelerate,
        or to
        permit the holder or holders of such Debt to accelerate, the maturity of
        such
        Debt; or

       

      
        
          
          

        

        
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      (h)  any
        Loan
        Document shall (other than with the consent of the Banks required pursuant
        to
Section
        9.02),
        at any
        time after its execution and delivery and for any reason, cease to be in
        full
        force and effect (except for such provisions that the Banks required to give
        consent pursuant to Section
        9.02
        determine are not material either individually or in the aggregate), or shall
        be
        declared to be null and void, or the validity or enforceability thereof shall
        be
        contested by any Person party to the Loan Documents or any such Person shall
        deny that it has any or further liability or obligation under any Loan Document;
        or

       

      (i)       
        any
        Reportable Event that might constitute grounds for the termination of any
        Plan,
        or for the appointment by an appropriate United States district court of
        a
        trustee to administer any Plan, shall have occurred and be continuing for
        at
        least thirty (30) days, or any Plan shall be terminated, or a trustee shall
        be
        appointed by an appropriate United States district court to administer any
        Plan,
        or the PBGC shall institute proceedings to terminate any Plan or to appoint
        a
        trustee to administer any Plan, and, in any such event, the then-current
        value
        of such Plan’s benefits guaranteed under Title IV of ERISA at the time shall
        exceed by more than $5,000,000 the then-current value of such Plan’s assets
        allocable to such benefits at such time; or

       

      (j)       
        the
        Borrower or any of its Subsidiaries shall be adjudicated insolvent, or shall
        make a general assignment for the benefit of creditors, or any proceeding
        shall
        be instituted by any such Person seeking to adjudicate it insolvent, seeking
        liquidation, winding-up, reorganization, arrangement, adjustment, protection,
        relief or composition of it or its debts under any law relating to bankruptcy,
        insolvency or reorganization or relief of debtors, or seeking the entry of
        an
        order for relief or the appointment of a receiver, trustee, or other similar
        official for it or for any substantial part of its property, or the Borrower
        or
        any of its Subsidiaries shall take any action in furtherance of any of the
        actions set forth above in this Section
        7.01(j);
        or

       

      (k)  any
        proceeding of the type referred to in Section
        7.01(j)
        is
        filed, or any such proceeding is commenced against the Borrower or any of
        its
        Subsidiaries or any such Person by any act indicates its approval thereof,
        consent thereto or acquiescence therein, or an order for relief is entered
        in an
        involuntary case under the bankruptcy law of the United States, or an order,
        judgment or decree is entered appointing a trustee, receiver, custodian,
        liquidator or similar official or adjudicating any such Person insolvent,
        or
        approving the petition in any such proceedings, and such order, judgment
        or
        decree remains in effect for sixty (60) days; or

       

      (l)       
        a
        final
        judgment or order for the payment of money in excess of $5,000,000 (net of
        acknowledged, uncontested insurance coverage from a financially sound,
        responsible and reputable insurance company or association) shall be rendered
        against the Borrower or any of its Subsidiaries and either (i) enforcement
        proceedings shall have been commenced by any creditor upon such judgment
        or
        order or (ii) a stay of enforcement of such judgment or order by reason of
        a
        pending appeal or otherwise, shall not be in effect for any period of thirty
        (30) consecutive days; or

       

      (m)  a
        Change
        of Control occurs with respect to the Borrower;

       

      then,
        (i)
        upon the occurrence of any Event of Default described in Section
        7.01(j)
        or
Section
        7.01(k),
        (A) the
        Commitments shall automatically terminate and (B) the entire unpaid principal
        amount of all Loans, all interest accrued and unpaid thereon, and all other
        amounts payable by the Borrower or any other Person under this Agreement,
        the
        Notes and the other Loan Documents shall automatically become immediately
        due
        and payable, without presentment for payment, demand, protest, notice of
        intent
        to accelerate, notice of acceleration or further notice of any kind, all
        of
        which are hereby expressly waived by the Borrower and each other Person,
        and
        (ii) upon the occurrence of any Event of Default, the Agent may, and upon
        the
        direction of the Majority Banks shall, by notice to the Borrower (A) declare
        the
        Commitments to be terminated, whereupon the same shall forthwith terminate
        and
        (B) declare the entire unpaid principal amount of all Loans, all interest
        accrued and unpaid thereon, and all other amounts payable by the Borrower
        or any
        other Person under this Agreement, the Notes and the other Loan Documents,
        to be
        forthwith due and payable, whereupon all such amounts shall become and be
        forthwith due and payable, without presentment for payment, demand, protest,
        notice of intent to accelerate, notice of acceleration or further notice
        of any
        kind, all of which are hereby expressly waived by the Borrower and each other
        Person.

       

      
        
          
          

        

        
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      Section
        7.02 Setoff
        in Event of Default.
        Upon
        the occurrence and during the continuance of any Event of Default, each member
        of the Bank Group is hereby authorized, at any time and from time to time,
        without notice to the Borrower (any such notice being expressly waived by
        the
        Borrower) and to the fullest extent permitted by applicable law, to setoff
        and
        apply any and all deposits at any time held and other indebtedness at any
        time
        owing by such member of the Bank Group (or any branch, subsidiary or affiliate
        of such member of the Bank Group) to or for the credit or the account of
        the
        Borrower against any and all of the obligations of the Borrower or any other
        Person, now or hereafter existing under this Agreement, the Notes or the
        other
        Loan Documents, irrespective of whether or not such member of the Bank Group
        shall have made any demand for satisfaction of such obligations and although
        such obligations may be unmatured. Any member of the Bank Group exercising
        such
        right agrees to notify the Borrower promptly after any such setoff and
        application made by such Person; provided,
        that
        the failure to give such notice shall not affect the validity of such setoff
        and
        application. The rights of the Bank Group under this Section
        7.02
        are in
        addition to other rights and remedies (including, without limitation, other
        rights of setoff) which the Bank Group may have hereunder or under any
        applicable law.

       

      Section
        7.03 No
        Waiver; Remedies.
        No
        failure on the part of any member of the Bank Group to exercise, or any delay
        in
        exercising, any right hereunder shall operate as a waiver thereof, nor shall
        any
        single or partial exercise of any right hereunder preclude any other or further
        exercise thereof or the exercise of any other right. The remedies provided
        in
        this Agreement are cumulative and not exclusive of any remedies provided
        in any
        of the other Loan Documents or by applicable law.

       

      Section
        7.04 No
        Preservation of Security for Unmatured Reimbursement Obligations.
        In the
        event that, following (i) the occurrence and during the continuation of an
        Event
        of Default and the exercise of any rights available to Agent, Issuer or any
        Bank
        under the Loan Documents and (ii) payment in full of the principal amount
        then
        outstanding of and the accrued interest on the Loans and fees and all other
        amounts payable hereunder and under the Notes, any Letters of Credit shall
        remain outstanding and undrawn, Agent shall be entitled to hold (and Borrower
        hereby grants and conveys to Agent a security interest in and to) all cash
        or
        other Property (“Proceeds
        of Remedies”)
        realized or arising out of the exercise of any rights available under the
        Loan
        Documents, at law or in equity, including, without limitation, the proceeds
        of
        any foreclosure, as collateral for the payment of any amounts due or to become
        due under or in respect of such outstanding Letters of Credit. Such Proceeds
        of
        Remedies shall be held by the Agent for the ratable benefit of the Banks.
        The
        rights, titles, benefits, privileges, duties and obligations of Agent with
        respect thereto shall be governed by the terms and provisions of this Agreement.
        Agent may, but shall have no obligation to, invest any such Proceeds of Remedies
        in such manner as Agent, in the exercise of its sole discretion, deems
        appropriate. Such Proceeds of Remedies shall be applied to amounts owing
        in
        respect of any such Letters of Credit and/or the payment of Borrower’s or any
        Bank’s obligations under any such Letter of Credit when such Letter of Credit
        is
        drawn upon. Nothing in this Section
        7.04
        shall
        cause or permit an increase in the maximum amount permitted to be outstanding
        from time to time under this Agreement.

       

      
        
          
          

        

        
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      ARTICLE
        VIII.

      THE
        AGENTS AND THE FUNDS ADMINISTRATOR

       

      Section
        8.01 Authorization
        and Action.
        Each
        Bank hereby appoints and authorizes the Agent and the Funds Administrator
        to
        take such action in such capacity on such Bank’s behalf and to exercise such
        powers under this Agreement and the other Loan Documents as are delegated
        to the
        Agent and the Funds Administrator, as the case may be, by the terms hereof
        and
        thereof, together with such powers as are reasonably incidental thereto.
        As to
        any matters not expressly provided for by this Agreement (including, without
        limitation, enforcement or collection of the Notes or of amounts owing under
        the
        other Loan Documents), the Agent and the Funds Administrator shall not be
        required to exercise any discretion or take any action, but such Person shall
        be
        required to act or to refrain from acting (and shall be fully protected in
        so
        acting or refraining from acting) upon the instructions of the Majority Banks,
        and such instructions shall be binding upon all Banks and any other holders
        of
        Notes; provided,
        however,
        that
        the Agent and the Funds Administrator shall not be required to take any action
        which exposes such Person to personal liability or which is contrary to the
        Loan
        Documents or applicable law. Each of the Agent and the Funds Administrator
        is
        hereby expressly authorized on behalf of the other members of the Bank Group,
        (a) to receive on behalf of each of the other members of the Bank Group any
        payment of principal of or interest on the Loans outstanding hereunder and
        all
        other amounts accrued hereunder paid to such Persons, and promptly to distribute
        to each other member of the Bank Group its proper share of all payments so
        received; (b) in the case of the Agent only, to give notice within a reasonable
        time on behalf of each other member of the Bank Group to the Borrower of
        any
        Default of which the Agent has actual knowledge as provided in Section
        8.09;
        (c) to
        distribute to the other members of the Bank Group copies of all notices,
        agreements and other material as provided for in this Agreement as received
        by
        such Person; and (d) to distribute to the Borrower any and all requests,
        demands
        and approvals received by such Person from any other member of the Bank Group.
        Nothing herein contained shall be construed to constitute either the Agent
        or
        the Funds Administrator as a trustee for any holder of the Notes or of a
        participation therein, nor to impose on any such Person any duties or
        obligations other than those expressly provided for in the Loan
        Documents.

       

      Section
        8.02 Reliance,
        Etc.
        The
        Agent, the Funds Administrator and their respective directors, officers,
        agents
        or employees shall not be liable for any action taken or omitted to be taken
        by
        it or them under or in connection with this Agreement, except for such acts
        or
        omissions of such Person constituting gross negligence or willful misconduct
        on
        the part of such Person (IT
        BEING THE EXPRESS INTENTION OF THE PARTIES THAT THE AGENT, THE FUNDS
        ADMINISTRATOR AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
        SHALL HAVE NO LIABILITY FOR ACTIONS AND OMISSIONS HEREUNDER RESULTING THAT
        CONSTITUTE ORDINARY NEGLIGENCE, WHETHER SOLE OR CONTRIBUTORY) OR RESULT IN
        STRICT LIABILITY.
        Without
        limitation of the generality of the foregoing, each of the Agent and the
        Funds
        Administrator: (a) may treat the payee of any Note as the holder thereof
        until
        the Agent receives and accepts an Assignment and Acceptance entered into
        by the
        Bank which is the payee of such Note, as assignor, and an Eligible Assignee,
        as
        assignee, as provided in Section
        9.02,
        and the
        Agent notifies such Person thereof; (b) may consult with legal counsel
        (including counsel for the Borrower), independent public accountants and
        other
        experts selected by it and shall not be liable for any action taken or omitted
        to be taken in good faith by it in accordance with the advice of such counsel,
        accountants or experts; (c) makes no warranty or representation to any Bank
        and
        shall not be responsible to any Bank for any statements, warranties or
        representations (whether written or oral) made in or in connection with this
        Agreement or the other Loan Documents; (d) shall not have any duty to ascertain
        or to inquire as to the performance or observance of any of the terms, covenants
        or conditions of this Agreement or the other Loan Documents on the part of
        the
        Borrower or any other Person or to inspect the property (including the books
        and
        records) of the Borrower or any other Person; (e) shall not be responsible
        to
        any Bank for the due execution, legality, validity, enforceability, genuineness,
        sufficiency or value of any Loan Document, any collateral provided for therein,
        or any other instrument or document furnished pursuant thereto; and (f) shall
        incur no liability under or in respect of this Agreement by acting upon any
        notice, consent, certificate or other instrument or writing (which may be
        by
        telecopier, telegram, cable or telex) believed by it to be genuine and signed
        or
        sent by the proper party or parties. The Agent, the Funds Administrator and
        their respective directors, officers, employees or agents shall not have
        any
        responsibility to the Borrower on account of the failure or delay in performance
        or breach by any Bank of any of its obligations hereunder or to any Bank
        on
        account of the failure of or delay in performance or breach by any other
        Bank or
        the Borrower of any of their respective obligations hereunder or in connection
        herewith.

       

      
        
          
          

        

        
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      Section
        8.03 Chase
        and Affiliates.
        Without
        limiting the right of any other Bank to engage in any business transactions
        with
        the Borrower or any of its Affiliates, with respect to its Commitment, the
        Loans
        made by it, the Note issued to it, and its interest in the Loan Documents,
        Chase
        shall have the same rights and powers under this Agreement as any other Bank
        and
        may exercise the same as though it were not the Funds Administrator or the
        Agent; and the term “Bank” or “Banks” shall, unless otherwise expressly
        indicated, include Chase in its individual capacity. Chase, or any of its
        Affiliates, may be engaged in, or may hereafter engage in, one or more loan,
        letter of credit, leasing or other financing activities not the subject of
        the
        Loan Documents (such financing activities of Chase being, collectively, the
        “Other
        Financings”)
        with
        the Borrower or any of its Affiliates, or may act as trustee on behalf of,
        or
        depositary for, or otherwise engage in other business transactions with the
        Borrower or any of its Affiliates (all Other Financings and other such business
        transactions of Chase being, collectively, the “Other
        Activities”)
        with
        no responsibility to account therefor to the Banks. Without limiting the
        rights
        and remedies of the Banks specifically set forth in the Loan Documents, no
        other
        Bank shall have any interest in (a) any Other Activities, (b) any present
        or
        future guarantee by or for the account of the Borrower not contemplated or
        included in the Loan Documents, (c) any present or future offset exercised
        by
        the Agent or the Funds Administrator in respect of any such Other Activities,
        (d) any present or future property taken as security for any such Other
        Activities or (e) any property now or hereafter in the possession or
        control of the Agent or the Funds Administrator which may be or become security
        for the obligations of the Borrower under the Loan Documents by reason of
        the
        general description of indebtedness secured, or of property, contained in
        any
        other agreements, documents or instruments related to such Other Activities;
        provided,
        however,
        that if
        any payment in respect of such guarantees or such property or the proceeds
        thereof shall be applied to reduction of the obligations evidenced hereunder
        and
        by the Notes, then each Bank shall be entitled to share in such application
        according to its pro rata portion of such obligations.

       

      
        
          
          

        

        
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      Section
        8.04 Bank
        Credit Decision.
        Each
        Bank acknowledges that it has, independently and without reliance upon any
        other
        member of the Bank Group and based on the financial statements referred to
        in
Section
        4.06
        and such
        other documents and information as it has deemed appropriate, made its own
        credit analysis and decision to enter into this Agreement. Each Bank also
        acknowledges that it will, independently and without reliance upon any other
        member of the Bank Group and based on such documents and information as it
        shall
        deem appropriate at the time, continue to make its own credit decisions in
        taking or not taking action under this Agreement.

       

      Section
        8.05 Indemnification.
        The
        Banks agree to indemnify each of the Agent and the Funds Administrator (to
        the
        extent not reimbursed by the Borrower), ratably according to their respective
        Commitment Percentages, from and against any and all liabilities, obligations,
        losses, damages, penalties, actions, judgments, suits, costs, expenses or
        disbursements of any kind or nature whatsoever which may be imposed on, incurred
        by, or asserted against the Agent or the Funds Administrator, as the case
        may
        be, in any way relating to or arising out of this Agreement or the other
        Loan
        Documents or any action taken or omitted by the Agent or the Funds Administrator
        under this Agreement or the other Loan Documents, provided,
        that no
        Bank shall be liable for any portion of such liabilities, obligations, losses,
        damages, penalties, actions, judgments, suits, costs, expenses or disbursements
        resulting from such Person’s gross negligence or willful misconduct.
IT
        IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT THE AGENT AND THE FUNDS
        ADMINISTRATOR SHALL BE INDEMNIFIED AND HELD HARMLESS AGAINST ANY AND ALL
        LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
        SUITS,
        COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND ARISING OUT OF OR RESULTING
        FROM
        THE ORDINARY NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY) OR STRICT LIABILITY
        OF
        SUCH PERSON.
        The
        Agent and the Funds Administrator shall not be required to do any act hereunder
        or under any other document or instrument delivered hereunder or in connection
        herewith or take any action toward the execution or enforcement of the agencies
        hereby created, or to prosecute or defend any suit in respect of this Agreement
        or the Loan Documents or any collateral security, unless indemnified to its
        satisfaction by the holders of the Notes against loss, cost, liability, and
        expense. If any indemnity furnished to the Agent or the Funds Administrator
        for
        any purpose is, in the opinion of such Person insufficient or becomes impaired,
        such Person may call for additional indemnity and not commence or cease to
        do
        the acts indemnified against until such additional indemnity is furnished.
        Without limitation of the foregoing, each Bank agrees to reimburse the Agent
        and
        the Funds Administrator promptly upon demand for its ratable share of any
        out-of-pocket expenses (including counsel fees) incurred by such Person in
        connection with the preparation, execution, delivery, administration,
        modification, amendment or enforcement (whether through negotiations, legal
        proceedings or otherwise) of, or legal advice in respect of rights or
        responsibilities under, this Agreement and the other Loan Documents, to the
        extent that the Agent and the Funds Administrator are not reimbursed for
        such
        expenses by the Borrower.

       

      
        
          
          

        

        
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      Section
        8.06 Employees
        of the Agent, Etc.
        Each of
        the Agent and the Funds Administrator may execute any of their respective
        duties
        under this Agreement, the other Loan Documents and any instrument, agreement
        or
        document executed, issued or delivered pursuant hereto or thereto or in
        connection herewith or therewith, by or through employees, agents and
        attorneys-in-fact, and shall not be answerable for the default or misconduct
        of
        any such employee, agent or attorney-in-fact selected by it with reasonable
        care. Each of the Agent and the Funds Administrator may, and upon the written
        instruction of the Majority Banks shall, enforce on behalf of the Banks any
        claims which the Agent, the Funds Administrator and/or the Banks may have
        against any such employee, agent or attorney-in-fact, and any recovery therefrom
        shall be applied for the pro rata benefit of the Banks.

       

      Section
        8.07 Successor
        Agent.
        The
        Agent may resign at any time by giving written notice thereof to the other
        members of the Bank Group and the Borrower and may be removed at any time
        with
        or without cause by the Majority Banks. Upon any such resignation or removal,
        the Majority Banks shall have the right to appoint a successor Agent. If
        no
        successor Agent shall have been so appointed by the Majority Banks, and shall
        have accepted such appointment, within thirty (30) days after the retiring
        Agent’s giving of notice of resignation or the Majority Banks’ removal of the
        retiring Agent, then the retiring Agent may, on behalf of the Banks, appoint
        a
        successor Agent, which shall be a commercial bank organized under the laws
        of
        the United States of America or of any State thereof and having a combined
        capital and surplus of at least $500,000,000. Upon the acceptance of any
        appointment as Agent hereunder by a successor Agent, such successor Agent
        shall
        thereupon succeed to and become vested with all the rights, powers, privileges
        and duties of the retiring Agent, and the retiring Agent shall be discharged
        from its duties and obligations under this Agreement, subject to the requirement
        that such retiring Agent will execute such documents and take such actions
        as
        may be necessary or desirable to cause the successor Agent to be vested with
        all
        such rights, powers, privileges and duties. After any retiring Agent’s
        resignation or removal hereunder as Agent, the provisions of this Article VIII
        shall
        inure to its benefit as to any actions taken or omitted to be taken by it
        while
        it was Agent under this Agreement. All costs and expenses incurred by the
        Bank
        Group in connection with any amendments or other documentation required by
        this
Section
        8.07
        shall be
        paid by the Borrower pursuant to Section
        9.04
        hereof.

       

      Section
        8.08 Successor
        Funds Administrator.
        The
        Funds Administrator may resign at any time by giving written notice thereof
        to
        the other members of the Bank Group and the Borrower and may be removed at
        any
        time with or without cause by the Majority Banks. Upon any such resignation
        or
        removal, the Majority Banks shall have the right to appoint a successor Funds
        Administrator. If no successor Funds Administrator shall have been so appointed
        by the Majority Banks, and shall have accepted such appointment, within thirty
        (30) days after the retiring Funds Administrator’s giving of notice of
        resignation or the Majority Banks’ removal of the retiring Funds Administrator,
        then the retiring Funds Administrator may, on behalf of the Banks, appoint
        a
        successor Funds Administrator, which shall be a commercial bank organized
        under
        the laws of the United States of America or of any State thereof and having
        a
        combined capital and surplus of at least $500,000,000. Upon the acceptance
        of
        any appointment as Funds Administrator hereunder by a successor Funds
        Administrator, such successor Funds Administrator shall thereupon succeed
        to and
        become vested with all the rights, powers, privileges and duties of the retiring
        Funds Administrator, and the retiring Funds Administrator shall be discharged
        from its duties and obligations under this Agreement, subject to the requirement
        that such retiring Funds Administrator will execute such documents and take
        such
        actions as may be necessary or desirable to cause the successor Funds
        Administrator to be vested with all such rights, powers, privileges and duties.
        After any retiring Funds Administrator’s resignation or removal hereunder as
        Funds Administrator, the provisions of this Article VIII
        shall
        inure to its benefit as to any actions taken or omitted to be taken by it
        while
        it was Funds Administrator under this Agreement. All costs and expenses incurred
        by the Bank Group in connection with any amendments or other documentation
        required by this Section
        8.08
        shall be
        paid by the Borrower pursuant to Section
        9.04
        hereof.

       

      
        
          
          

        

        
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      Section
        8.09 Notice
        of Default.
        Neither
        the Agent nor the Funds Administrator shall be deemed to have knowledge or
        notice of the occurrence of any Default unless such Person shall have received
        notice from a Bank or the Borrower referring to this Agreement, describing
        such
        Default and stating that such notice is a “notice of default” or “notice of
        event of default,” as applicable. If the Agent receives such a notice from the
        Borrower, the Agent shall give notice thereof to the other members of the
        Bank
        Group and, if such notice is received from a Bank, the Agent shall give notice
        thereof to the other members of the Bank Group and the Borrower. The Agent
        shall
        be entitled to take action or refrain from taking action with respect to
        such
        Default as provided in this Article VIII.

       

      Section
        8.10 Execution
        of Loan Documents.
        Each
        member of the Bank Group hereby authorizes and directs the Agent and the
        Funds
        Administrator to execute and deliver each Loan Document (including, without
        limitation, those specified in Section
        3.01)
        to be
        executed by the Agent or the Funds Administrator on or about the Effective
        Date
        pursuant to the terms of this Agreement and the other Loan
        Documents.

       

      Section
        8.11 Duties
        of Syndication Agent and Documentation Agent.
        The
        Syndication Agent and the Document Agent shall have no duties under this
        Agreement other than those of a Bank.

       

      ARTICLE
        IX.

      MISCELLANEOUS

       

      Section
        9.01 Amendments,
        Etc.
        No
        amendment or waiver of any provision of this Agreement, any Note or any other
        Loan Document, or consent to any departure by any Person herefrom or therefrom,
        shall in any event be effective unless the same shall be in writing and signed
        by the Borrower and the Majority Banks, and then such waiver or consent shall
        be
        effective only in the specific instance and for the specific purpose for
        which
        given; provided,
        however,
        that no
        amendment, waiver or consent shall: (a) increase the Commitment of any Bank
        or subject a Bank to any additional obligations without the written consent
        of
        such Bank, (b) reduce the principal of, or interest on, the Notes or any
        fees or other amounts payable hereunder, without the written consent of each
        Bank directly affected thereby, (c) postpone any date fixed for any payment
        of principal of, or interest on, the Notes or any fees or other amounts payable
        hereunder, without the written consent of each Bank directly affected thereby,
        (d) release the Borrower or any other Person from its payment obligations
        to the Bank Group, regardless of whether such obligations are those of a
        primary
        obligor, a guarantor or surety, or otherwise, without the consent of each
        Bank,
        (e) take action which expressly requires the signing of all the Banks pursuant
        to the terms of this Agreement, without the consent of each Bank,
        (f) change the Commitment Percentages or the aggregate unpaid principal
        amount of the Notes, or the number of Banks, as the case may be, required
        for
        the Agent, the Funds Administrator or the Banks or any of them to take any
        action under this Agreement or amend the definition of Majority Banks, without
        the consent of each Bank or (g) amend Article II,
        without
        the written consent of each Bank directly affected thereby or this Section
        9.01,
        without
        the consent of each Bank; provided,
        further,
        that no
        amendment, waiver or consent shall (1) unless in writing and signed by the
        Agent in addition to the Banks required above to take such action, affect
        the
        rights or duties of the Agent under this Agreement or any other Loan Document,
        and (2) unless in writing and signed by the Funds Administrator in addition
        to
        the Banks required above to take such action, affect the rights or duties
        of the
        Funds Administrator under this Agreement or any other Loan Document. No notice
        to or demand on Borrower or any other Person in any case shall entitle them
        to
        any other or further notice or demand in similar or other
        circumstances.

       

      
        
          
          

        

        
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      Section
        9.02 Participation
        Agreements and Assignments.
        (a) (1)
        Subject
        to Section
        9.02(a)(ii),
        each
        Bank may assign to one or more Eligible Assignees all or a portion of its
        rights
        and obligations under this Agreement (including, without limitation, all
        or a
        portion of its Commitment, the Loans owing to it and the Note held by it)
        and
        the other Loan Documents by executing an Assignment and Acceptance substantially
        in the form of Exhibit 9.02(a)
        (an
“Assignment
        and Acceptance”);
        provided,
        that
        (A)
        no such assignment shall be made unless such assignment and assignee have
        been
        approved by the Agent and, so long as no Default exists, the Borrower, such
        approvals not to be unreasonably withheld, provided
        that
        such approvals shall not be required if the assignee is an Affiliate of the
        assignor Bank, (B) each such assignment shall be of a constant, and not a
        varying, percentage of all rights and obligations of the assignor under this
        Agreement and the other Loan Documents, and no assignment shall be made unless
        it covers a pro rata share of all rights and obligations of such assignor
        under
        this Agreement and the other Loan Documents, (C) the amount of the Commitment
        of
        the assigning Bank being assigned pursuant to each such assignment (determined
        as of the date of the Assignment and Acceptance with respect to such assignment)
        shall, unless otherwise agreed to by the Agent, in no event be less than
        $5,000,000 and shall be an integral multiple of $1,000,000, (D) each such
        assignment shall be to an Eligible Assignee and (E) the parties to each such
        assignment shall execute and deliver to the Agent, for its acceptance and
        recording in the Register (defined below), an Assignment and Acceptance,
        together with any Note subject to such assignment. Upon such execution,
        delivery, acceptance and recording, from and after the effective date specified
        in each Assignment and Acceptance, (1) the assignee thereunder shall be a
        party
        hereto and, to the extent that rights and obligations under the Loan Documents
        have been assigned to it pursuant to such Assignment and Acceptance, have
        the
        rights and obligations of a Bank under the Loan Documents and (2) the assigning
        Bank thereunder shall, to the extent that rights and obligations under the
        Loan
        Documents have been assigned by it pursuant to such Assignment and Acceptance,
        relinquish its rights and be released from its obligations under the Loan
        Documents (and, in the case of an Assignment and Acceptance covering all
        or the
        remaining portion of an assigning Bank’s rights and obligations under this
        Agreement, such Bank shall cease to be a party hereto).

       

      
        
          
          

        

        
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      (ii)  In
        the
        event any Bank desires to transfer all or any portion of its rights and
        obligations under the Loan Documents to any Person other than an Affiliate
        of
        such Bank, it shall give the Borrower and the Agent prior written notice
        of the
        identity of such transferee and the terms and conditions of such transfer
        (a
“Transfer
        Notice”).
        So
        long as no Default has occurred and is continuing, the Borrower may, no later
        than ten (10) days following receipt of such Transfer Notice, designate an
        alternative transferee and such Bank shall thereupon be obligated to sell
        the
        interests specified in such Transfer Notice to such alternative transferee,
        subject to the following: (A) such transfer shall be made on the same terms
        and
        conditions outlined in such Transfer Notice, (B) such transfer shall otherwise
        comply with the terms and conditions of the Loan Documents (including
Section
        9.02(a)(i)),
        and
        (C) such alternative transferee must be an Eligible Assignee approved by
        the
        Agent. If the Borrower shall fail to designate an alternative transferee
        within
        such ten (10) day period, such Bank shall, subject to compliance with the
        other
        terms and provisions hereof, be free to consummate the transfer described
        in
        such Transfer Notice.

       

      (b)  By
        executing and delivering an Assignment and Acceptance, the assigning Bank
        thereunder and the assignee thereunder confirm to and agree with each other
        and
        the other parties hereto as follows: (i) other than as provided in such
        Assignment and Acceptance, such assigning Bank makes no representation or
        warranty and assumes no responsibility with respect to any statements,
        warranties or representations made in or in connection with the Loan Documents
        or the execution, legality, validity, enforceability, genuineness, sufficiency
        or value of this Agreement or any other instrument or document furnished
        pursuant hereto; (ii) such assigning Bank makes no representation or warranty
        and assumes no responsibility with respect to the financial condition of
        the
        Borrower or the performance or observance by the Borrower of any of its
        obligations under this Agreement or any other instrument or document furnished
        pursuant hereto; (iii) such assignee confirms that it has received a copy
        of
        this Agreement and the other Loan Documents, together with copies of the
        financial statements referred to in Section
        4.06
        and such
        other documents and information as it has deemed appropriate to make its
        own
        credit analysis and decision to enter into such Assignment and Acceptance;
        (iv)
        such assignee will, independently and without reliance upon any member of
        the
        Bank Group (including such assigning Bank) and based on such documents and
        information as it shall deem appropriate at the time, continue to make its
        own
        credit decisions in taking or not taking action under this Agreement; (v)
        such
        assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints
        and authorizes the Agent and the Funds Administrator to take such action
        on its
        behalf and to exercise such powers under this Agreement and the other Loan
        Documents as are delegated to such Person by the terms thereof, together
        with
        such powers as are reasonably incidental thereto; and (vii) such assignee
        agrees
        that it will perform in accordance with their terms all of the obligations
        which
        by the terms of this Agreement and the other Loan Documents are required
        to be
        performed by it as a Bank.

       

      (c)  The
        Agent
        shall maintain at its address referred to in Section
        9.03
        a copy
        of each Assignment and Acceptance delivered to and accepted by it and a register
        for the recordation of the names and addresses of the Banks and the Commitment
        of, and principal amount of the Loans owing to, each Bank from time to time
        (the
“Register”).
        The
        entries in the Register shall be conclusive and binding for all purposes,
        absent
        manifest error, and the Borrower and each member of the Bank Group may treat
        each Person whose name is recorded in the Register as a Bank hereunder for
        all
        purposes of this Agreement. The Register shall be available for inspection
        by
        the Borrower or any member of the Bank Group at any reasonable time and from
        time to time upon reasonable prior notice.

       

      
        
          
          

        

        
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      (d)  Upon
        its
        receipt of an Assignment and Acceptance executed by an assigning Bank and
        an
        assignee representing that it is an Eligible Assignee, together with any
        Note
        subject to such assignment, the Agent shall, if such Assignment and Acceptance
        has been completed and is in substantially the form of Exhibit 9.02
        and
        satisfies all other requirements set forth in this Section
        9.02,
        (i)
        accept such Assignment and Acceptance, (ii) record the information contained
        therein in the Register and (iii) give prompt notice thereof to the Borrower
        and
        the other members of the Bank Group. Within five (5) Business Days after
        its
        receipt of such notice, the Borrower, at its own expense, shall execute and
        deliver to the Agent, in exchange for the surrendered Notes, new Notes to
        the
        order of such Eligible Assignee in an amount corresponding to the Commitment
        assumed by such Eligible Assignee pursuant to such Assignment and Acceptance
        and, if the assigning Bank has retained a Commitment hereunder, new Notes
        to the
        order of the assigning Bank in an amount corresponding to the Commitment
        retained by it hereunder. Such new Notes shall be in an aggregate principal
        amount equal to the aggregate principal amount of such surrendered Notes,
        shall
        be dated the effective date of such Assignment and Acceptance and shall
        otherwise be in substantially the form prescribed by Section
        2.04
        hereto.

       

      (e)  Each
        Bank
        may sell participations to one or more banks or other entities in or to all
        or a
        portion of its rights and obligations under this Agreement and the other
        Loan
        Documents (including, without limitation, all or a portion of its Commitment
        and
        the Loans owing to it); provided,
        however,
        that
        (i) such Bank’s obligations under this Agreement (including, without limitation,
        its Commitment to the Borrower hereunder) and the other Loan Documents shall
        remain unchanged, (ii) such Bank shall remain solely responsible to the other
        parties hereto for the performance of such obligations, and the participating
        banks or other entities shall not be considered a “Bank” for purposes of the
        Loan Documents, (iii) the participating banks or other entities shall be
        entitled to the cost protection provisions contained in Section
        2.11
        through
Section
        2.14
        and the
        rights of setoff contained in Section
        7.02,
        in each
        case to the same extent that the Bank from which such participating bank
        or
        other entity acquired its participation would be entitled to the benefit
        of such
        cost protection provisions and rights of setoff and (iv) the Borrower and
        the
        other members of the Bank Group shall continue to deal solely and directly
        with
        such Bank in connection with such Bank’s rights and obligations under this
        Agreement and the other Loan Documents, and such Bank shall retain the sole
        right to enforce the obligations of the Borrower relating to the Loans and
        to
        approve any amendment, modification or waiver of any provision of this Agreement
        (other than amendments, modifications or waivers with respect to the amounts
        of
        any fees payable hereunder or the amount of principal of or the rate at which
        interest is payable on the Loans, or the dates fixed for payments of principal
        or interest on the Loans).

       

      (f)  Anything
        in this Section
        9.02
        to the
        contrary notwithstanding, any Bank may at any time, without the consent of
        the
        Borrower or the Agent, assign and pledge all or any portion of its Commitment
        and the Loans owing to it to any Federal Reserve Bank (and its transferees)
        as
        collateral security pursuant to Regulation A of the Federal Reserve Board
        and
        any Operating Circular issued by such Federal Reserve Bank. No such assignment
        shall release the assigning Bank from its obligations hereunder.

       

      
        
          
          

        

        
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      (g)  Any
        Bank
        may, in connection with any assignment or participation or proposed assignment
        or participation pursuant to this Section
        9.02,
        disclose to the assignee or participant or proposed assignee or participant,
        any
        information relating to the Borrower furnished to such Bank by or on behalf
        of
        the Borrower; provided
        that
        prior to any such disclosure, each such assignee or participant or proposed
        assignee or participant shall agree (subject to customary exceptions) to
        preserve the confidentiality of any confidential information relating to
        the
        Borrower received from such Bank.

       

      Section
        9.03 Notices.
        All
        correspondence, statements, notices, requests and demands (collectively
“Communications”)
        shall
        be in writing (including telegraphic Communications) and mailed, telegraphed,
        telecopied, facsimile transmitted or delivered as follows:

       

      if
        to the
        Borrower --

       

      Kirby
        Corporation

      55
        Waugh
        Drive, Suite 1000

      Houston,
        Texas 77007

      Attention:
        Chief Financial Officer

      Telephone:
        (713) 435-1102

      Telecopier:
        (713) 435-1011

       

      if
        to the
        Funds Administrator or the Agent --

       

      JPMorgan
        Chase Bank, N.A.

      10
        South
        Dearborn St., Floor 19

      Chicago,
        Illinois 60603

      Attention:
        Judy Warren

      Telecopier:
        (312) 385-7096

      Telephone:
        (312) 732-4860

      Judy.a.warren@jpmchase.com

      

      with
        a
        copy to --

       

      JPMorgan
        Chase Bank, N.A.

      707
        Travis, Floor 8

      Houston,
        Texas 77002

      Attention:
        Janice Carter

      Telecopier:
        (713) 216- 4651 

      Telephone:
        (713) 216-4383

      Janice.Carter@Chase.com

       

      
        
          
          

        

        
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      if
        to any
        Bank, at its Domestic Lending Office, or as to each such party, at such other
        address as such party shall designate in a written Communication to each
        of the
        other parties hereto. All such Communications shall be effective, in the
        case of
        written or telegraphed Communications, when deposited in the mails or delivered
        to the telegraph company, respectively, and, in the case of a Communication
        by
        telecopy or facsimile transmission, when telecopied or transmitted against
        receipt of a confirmation, in each case addressed as aforesaid, except that
        Communications to any member of the Bank Group pursuant to Article II
        and
Article VIII
        shall
        not be effective until received by such Persons.

       

      Section
        9.04 Costs
        and Expenses.
        The
        Borrower agrees to pay on demand (a) all reasonable costs and expenses of
        the Agent and the Funds Administrator incurred in connection with the
        preparation, execution, delivery, filing, administration and recording of
        the
        Loan Documents and any other agreements or security documents delivered in
        connection with or pursuant to any of the Loan Documents and the syndication
        of
        this Agreement both before and after the date hereof, including, without
        limitation, the reasonable fees and out-of-pocket expenses of Andrews Kurth
        LLP,
        special counsel to the Agent, and local counsel who may be retained by such
        special counsel, with respect thereto, and (b) all reasonable costs and expenses
        of the Agent and the Funds Administrator, and during the existence of an
        Event
        of Default any Bank, incurred in connection with the enforcement of the Loan
        Documents and any other agreements or security documents executed in connection
        with or pursuant to any of the Loan Documents, including, but not limited
        to,
        the reasonable fees and out-of-pocket expenses of counsel to the Agent, and
        local counsel who may be retained by such counsel, with respect thereto,
        and the
        costs and expenses in connection with the custody, preservation, use or
        operation of, or the sale of, or collection from, or other realization upon
        the
        sale of, or collection from, or other realization upon any collateral covered
        by
        any of the Loan Documents or any other documents executed in connection with
        or
        pursuant to any of the Loan Documents. The agreements of Borrower contained
        in
        this Section
        9.04
        shall
        survive the termination of the Commitments and the payment of all other amounts
        owing hereunder or under any of the other Loan Documents.

       

      Section
        9.05 Successors
        and Assigns.
        This
        Agreement shall be binding upon and inure to the benefit of the Borrower,
        the
        Agent, the Funds Administrator, the Banks and their respective successors
        and
        assigns, except that the Borrower may not assign or transfer its rights
        hereunder without the prior written consent of the Banks.

       

      Section
        9.06 Independence
        of Covenants.
        All
        covenants contained in the Loan Documents shall be given independent effect
        so
        that if a particular action or condition is not permitted by any of such
        covenants, the fact that such action or condition would be permitted by an
        exception to, or otherwise be within the limitations of, another covenant
        shall
        not avoid the occurrence of a Default or an Event of Default if such action
        is
        taken or condition exists.

       

      Section
        9.07 Survival
        of Representations and Warranties.
        All
        representations and warranties contained in this Agreement and the other
        Loan
        Documents or made in writing by the Borrower in connection herewith or
        therewith, shall survive the execution and delivery of this Agreement, the
        Notes
        and the other Loan Documents and the repayment of the Loans. Any investigation
        by any member of the Bank Group shall not diminish in any respect whatsoever
        its
        right to rely on such representations and warranties.

       

      
        
          
          

        

        
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      Section
        9.08 Separability.
        Should
        any clause, sentence, paragraph, subsection, Section or Article of this
        Agreement be judicially declared to be invalid, unenforceable or void, such
        decision will not have the effect of invalidating or voiding the remainder
        of
        this Agreement, and the parties hereto agree that the part or parts of this
        Agreement so held to be invalid, unenforceable or void will be deemed to
        have
        been stricken herefrom by the parties hereto, and the remainder will have
        the
        same force and effectiveness as if such stricken part or parts had never
        been
        included herein.

       

      Section
        9.09 Captions.
        The
        captions in this Agreement have been inserted for convenience only and shall
        be
        given no substantive meaning or significance whatsoever in construing the
        terms
        and provisions of this Agreement.

       

      Section
        9.10 Limitation
        by Law.
        All
        provisions of this Agreement and the other Loan Documents are intended to
        be
        subject to all applicable mandatory provisions of law which may be controlling
        and to be limited to the extent necessary so that they will not render this
        Agreement or any other Loan Document invalid or unenforceable, in whole or
        in
        part, or not entitled to be recorded, registered or filed under the provisions
        of any applicable law.

       

      Section
        9.11 Counterparts.
        This
        Agreement may be executed in any number of counterparts and by different
        parties
        hereto in separate counterparts, each of which when so executed shall be
        deemed
        to be an original, and all of which taken together shall constitute one and
        the
        same agreement.

       

      Section
        9.12 Governing
        Law.
        This
        Agreement shall be governed by, and construed in accordance with, the laws
        of
        the State of Texas and applicable federal law; provided,
        however,
        notwithstanding the foregoing or any other provision of this Agreement, nothing
        in this Agreement, the Notes or the other Loan Documents shall be deemed
        to
        constitute a waiver of any rights which any Bank may have under federal
        legislation relating to the rate of interest which such Bank may contract
        for,
        take, reserve, receive or charge in respect of any Debt owing to such Bank
        hereunder. Chapter 15, Subtitle 3, Title 79, of the Revised Civil Statutes
        of
        Texas, 1925, as amended (relating to revolving loan and revolving triparty
        accounts), shall not apply to this Agreement or the Notes or the transactions
        contemplated hereby.

       

      Section
        9.13 Limitation
        on Interest.
        Each
        provision in this Agreement and each other Loan Document is expressly limited
        so
        that in no event whatsoever shall the amount paid, or otherwise agreed to
        be
        paid, by the Borrower for the use, forbearance or detention of the money
        to be
        loaned under this Agreement or any other Loan Document or otherwise (including
        any sums paid as required by any covenant or obligation contained herein
        or in
        any other Loan Document which is for the use, forbearance or detention of
        such
        money), exceed that amount of money which would cause the effective rate
        of
        interest thereon to exceed the Highest Lawful Rate, and all amounts owed
        under
        this Agreement and each other Loan Document shall be held to be subject to
        reduction to the effect that such amounts so paid or agreed to be paid which
        are
        for the use, forbearance or detention of money under this Agreement or such
        Loan
        Document shall in no event exceed that amount of money which would cause
        the
        effective rate of interest thereon to exceed the Highest Lawful Rate. To
        the
        extent that the Highest Lawful Rate applicable to a Bank is at any time
        determined by Texas law, such rate shall be the “indicated rate ceiling”
described in the Texas Finance Code, Chapter 303, as amended; provided,
        however,
        to the
        extent permitted by such Finance Code, the Banks from time to time by notice
        from the Agent to Borrower may revise the aforesaid election of such interest
        rate ceiling as such ceiling affects the then-current or future balances
        of the
        Loans outstanding under the Notes. Notwithstanding any provision in this
        Agreement or any other Loan Document to the contrary, if the maturity of
        the
        Notes or the obligations in respect of the other Loan Documents are accelerated
        for any reason, or in the event of prepayment of all or any portion of the
        Notes
        or the obligations in respect of the other Loan Documents by the Borrower
        or in
        any other event, earned interest on the Loans and such other obligations
        of the
        Borrower may never exceed the maximum amount permitted by applicable law,
        and
        any unearned interest otherwise payable under the Notes or the obligations
        in
        respect of the other Loan Documents that is in excess of the maximum amount
        permitted by applicable law shall be cancelled automatically as of the date
        of
        such acceleration or prepayment or other such event and, if theretofore paid,
        shall be credited on the principal of the Notes or, if the principal of the
        Notes has been paid in full, refunded to the Borrower. In determining whether
        or
        not the interest paid or payable, under any specific contingency, exceeds
        the
        Highest Lawful Rate, the Borrower and the Banks shall, to the maximum extent
        permitted by applicable law, amortize, prorate, allocate and spread, in equal
        parts during the period of the actual term of this Agreement, all interest
        at
        any time contracted for, charged, received or reserved in connection with
        the
        Loan Documents.

       

      
        
          
          

        

        
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      Section
        9.14 Indemnification.
        The
        Borrower agrees to indemnify, defend and hold each member of the Bank Group,
        as
        well as their respective officers, employees, agents, Affiliates, directors
        and
        shareholders (collectively, “Indemnified
        Persons”)
        harmless from and against any and all loss, liability, damage, judgment,
        claim,
        deficiency or reasonable expense (including interest, penalties, reasonable
        attorneys’ fees and amounts paid in settlement) incurred by or asserted against
        any Indemnified Person arising out of, in any way connected with, or as a
        result
        of (i) the execution and delivery of this Agreement and the other documents
        contemplated hereby, the performance by the parties hereto and thereto of
        their
        respective obligations hereunder and thereunder (including but not limited
        to
        the making of the Loans by each Bank) and consummation of the transactions
        contemplated hereby and thereby, (ii) the actual or proposed use of the proceeds
        of the Loans, (iii) any violation by the Borrower or any of its Subsidiaries
        of
        any Requirement of Law, including but not limited to Environmental Laws,
        (iv) any member of the Bank Group being deemed an operator of any real or
        personal property of the Borrower or any of its Subsidiaries in circumstances
        in
        which no member of the Bank Group is generally operating or generally exercising
        control over such property, to the extent such losses, liabilities, damages,
        judgments, claims, deficiencies or expenses arise out of or result from any
        Hazardous Materials located in, on or under such property or (v) any claim,
        litigation, investigation or proceeding relating to any of the foregoing,
        whether or not any Indemnified Person is a party thereto; provided
        that
        such indemnity shall not apply to any such losses, claims, damages, liabilities
        or related expenses that are determined by a court of competent jurisdiction
        by
        final and nonappealable judgment to have resulted from the gross negligence
        or
        willful misconduct of, or willful violation of the Loan Documents by, such
        Indemnified Person. WITHOUT
        LIMITING ANY PROVISION OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS,
        IT
        IS THE EXPRESS INTENTION OF THE BORROWER THAT EACH INDEMNIFIED PERSON SHALL
        BE
        INDEMNIFIED AND HELD HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS,
        DEFICIENCIES, JUDGMENTS OR REASONABLE EXPENSES ARISING OUT OF OR RESULTING
        FROM
        THE ORDINARY NEGLIGENCE (WHETHER SOLE OR CONTRIBUTORY) OR STRICT LIABILITY
        OF
        SUCH INDEMNIFIED PERSON.
        Each
        Indemnified Person will attempt to consult with the Borrower prior to entering
        into any settlement of any lawsuit or proceeding that could give rise to
        a claim
        for indemnity under this Section
        9.14,
        although nothing herein shall give the Borrower the right to direct or control
        any such settlement negotiations or any related lawsuit or proceeding on
        behalf
        of such Indemnified Party. The obligations of the Borrower under this
Section
        9.14
        shall
        survive the termination of this Agreement.

       

      
        
          
          

        

        
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      Section
        9.15 Submission
        to Jurisdiction.
        The
        Borrower hereby irrevocably submits to the jurisdiction of any Texas state
        or
        federal court sitting in Houston, Texas over any action or proceeding arising
        out of or relating to this Agreement or any of the other Loan Documents,
        and the
        Borrower irrevocably agrees that all claims in respect of such action or
        proceeding may be heard and determined in such Texas state or federal court;
        provided, however, nothing in this Section
        9.15
        is
        intended to waive the right of any member of the Bank Group to remove any
        such
        action or proceeding commenced in any such Texas state court to an appropriate
        Texas federal court to the extent the basis for such removal exists under
        applicable law. The Borrower irrevocably consents to the service of any and
        all
        process in any such action or proceeding by the mailing by certified mail
        of
        copies of such process to it at its address specified herein. The Borrower
        agrees that a final judgment in any such action or proceeding shall be
        conclusive and may be enforced in other jurisdictions by suit on the judgment
        or
        in any other manner provided by law. Nothing in this Section
        9.15
        shall
        affect the right of any member of the Bank Group to serve legal process in
        any
        other manner permitted by law or affect the right of any member of the Bank
        Group to bring any action or proceeding against the Borrower, or its properties,
        in the courts of any other jurisdiction.

       

      Section
        9.16 WAIVER
        OF JURY TRIAL.
        TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER AND THE BANK
        GROUP HEREBY IRREVOCABLY AND EXPRESSLY WAIVE ALL RIGHT TO A TRIAL BY JURY
        IN ANY
        ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR
        OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES, OR ANY
        OTHER
        LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF
        THE
        BANK GROUP IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT
        THEREOF.

       

      Section
        9.17 FINAL
        AGREEMENT OF THE PARTIES.
        THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS CONSTITUTE A LOAN AGREEMENT FOR
        PURPOSES OF SECTION 26.02(a) OF THE TEXAS BUSINESS AND COMMERCE CODE, AND
        REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
        BY
        EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
        THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
        PARTIES.

       

      Section
        9.18 Patriot
        Act.
        Each
        Bank hereby notifies the Borrower that pursuant to the requirements of the
        USA
        Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26,
        2001)) (the “Act”), it is required to obtain, verify and record information that
        identifies the Borrower, which information includes the name and address
        of the
        Borrower and other information that will allow such Bank to identify the
        Borrower in accordance with the Act.

       

      
        
          
          

        

        
          -49-

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF,
        the
        parties hereto have caused this Agreement to be executed by their respective
        officers thereunto duly authorized as of the date first above
        written.

       

      
        	 	
                BORROWER

              	 
	 	 	 
	 	
                KIRBY
                  CORPORATION

              	 
	 	 	 	 
	 	 	 	 
	 	
                By:

              	
                /s/
                  Norman W. Nolen

              	 
	 	
                Name:

              	
                Norman
                  W. Nolen

              	 
	 	
                Title:

              	
                Executive
                  Vice President and Chief

              	 
	 	 	
                Financial
                  Officer

              	 

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	 	
                BANKS

              	 
	 	 	 
	 	
                JPMORGAN
                  CHASE BANK, N.A.,
                  as Administrative Agent, Issuer and a Bank

              	 
	 	 	 	 
	 	 	 	 
	 	
                By:

              	
                /s/
                  H. David Jones

              	 
	 	
                Name:

              	
                H.
                  David Jones

              	 
	 	
                Title:

              	
                Vice
                  President

              	 

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      
        	 	
                BANK
                  OF AMERICA, N.A.,
                  as Syndication Agent and as a Bank

              	 
	 	 	 	 
	 	 	 	 
	 	
                By:

              	
                /s/
                  David McCauley

              	 
	 	
                Name:

              	
                David
                  McCauley

              	 
	 	
                Title:

              	
                Principal

              	 

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      
        	 	
                THE
                  BANK OF TOKYO-MITSUBISHI UFJ, LTD.,
                  as Documentation Agent and as a Bank

              	 
	 	 	 	 
	 	 	 	 
	 	
                By:

              	
                /s/
                  D. Barnell

              	 
	 	
                Name:

              	
                D.
                  Barnell

              	 
	 	
                Title:

              	
                Vice
                  President and Manager

              	 

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	 	
                DNB
                  NOR BANK ASA,
                  as Documentation Agent and as a Bank

              	 
	 	 	 	 
	 	 	 	 
	 	
                By:

              	
                /s/
                  Kevin O’Hara

              	 
	 	
                Name:

              	
                Kevin
                  O’Hara

              	 
	 	
                Title:

              	
                Vice
                  President

              	 
	 	 	 	 
	 	
                By:

              	
                /s/
                  Sanjiv Nayar

              	 
	 	
                Name:

              	
                Sanjiv
                  Nayar

              	 
	 	
                Title:

              	
                Senior
                  Vice President

              	 

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	 	
                WELLS
                  FARGO BANK, N.A.,
                  as Syndication Agent and as a Bank

              	 
	 	 	 	 
	 	 	 	 
	 	
                By:

              	
                /s/
                  Michael B. Sullivan

              	 
	 	
                Name:

              	
                Michael
                  B. Sullivan

              	 
	 	
                Title:

              	
                Senior
                  Vice President

              	 

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	 	
                COMERICA
                  BANK

              	 
	 	 	 	 
	 	 	 	 
	 	
                By:

              	
                /s/
                  Charles T. Johnson

              	 
	 	
                Name:

              	
                Charles
                  T. Johnson

              	 
	 	
                Title:

              	
                Vice
                  President

              	 

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      
        	 	
                THE
                  NORTHERN TRUST COMPANY

              	 
	 	 	 
	 	 	 
	 	
                By:

              	
                /s/
                  Paul H. Theiss

              	 
	 	
                Name:

              	
                Paul
                  H. Theiss

              	 
	 	
                Title:

              	
                Vice
                  President

              	 

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	 	
                AMEGY
                  BANK

              	 
	 	 	 
	 	 	 
	 	
                By:

              	
                /s/
                  Gary Tolbert

              	 
	 	
                Name:

              	
                Gary
                  Tolbert

              	 
	 	
                Title:

              	
                Senior
                  Vice President

              	 

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      ANNEX
        A

      DEFINITIONS

       

      “Acquisition”
        means a
        transaction resulting in (a) acquisition by the Borrower, directly or
        indirectly, of all or substantially all of the assets of a Person, or of
        any
        business or division of a Person, (b) acquisition by the Borrower of in excess
        of 50% of the capital stock, partnership interests, or other equity of any
        Person, or otherwise causing such Person to become a Subsidiary of the Borrower,
        or (c) a merger or consolidation or other combination of the Borrower with
        another Person.

       

      “Adjusted
        CD Rate”
        means,
        for any Interest Period for each Adjusted CD Rate Loan comprising part of
        the
        same Borrowing, an interest rate per annum equal to the sum of: (a) the rate
        per
        annum obtained by dividing (i) the rate of interest determined by the Agent
        to
        be the arithmetic average (rounded upward to the nearest whole multiple of
        1/100
        of 1% per annum, if such average is not such a multiple) of the consensus
        bid
        rate determined by the Agent for the bid rates per annum, on or about 9:00
        A.M.
        (Houston time) (or as soon thereafter as practicable) one Business Day before
        the first day of such Interest Period, of certificate of deposit dealers
        of
        recognized standing selected by the Agent for the purchase at face value
        of
        certificates of deposit of the Agent in an amount approximately equal to
        the
        Adjusted CD Rate Loan to be made by the Agent in its capacity as a Bank and
        comprising part of such Borrowing and with a maturity equal to such Interest
        Period, by (ii) a percentage equal to 100% minus
        the
        Adjusted CD Rate Reserve Percentage for such Interest Period, plus
        (b)
        the
        Assessment Rate in effect from time to time during such Interest
        Period.

       

      “Adjusted
        CD Rate Borrowing”
        means a
        Borrowing consisting of Adjusted CD Rate Loans.

       

      “Adjusted
        CD Rate Loan”
        means a
        Loan that the Borrower has designated, or is deemed to have designated, as
        such
        in accordance with Article
        II.

       

      “Adjusted
        CD Rate Reserve Percentage”
        means,
        for the Interest Period for each Adjusted CD Rate Loan comprising part of
        the
        same Borrowing, the reserve percentage applicable one Business Day before
        the
        first day of such Interest Period under regulations issued from time to time
        by
        the Board of Governors of the Federal Reserve System (or any successor) for
        determining the maximum reserve requirement (including, but not limited to,
        any
        emergency, supplemental or other marginal reserve requirement) for a member
        bank
        of the Federal Reserve System in Houston, Texas with deposits exceeding one
        billion dollars with respect to liabilities consisting of or including (among
        other liabilities) U.S. dollar nonpersonal time deposits in the United States
        with a maturity equal to such Interest Period.

       

      “Adjusted
        Net Income”
        means,
        for any period, Net Income for such period; less, to the extent otherwise
        included in such Net Income (a) any gain or loss arising from the sale of
        capital assets of the Borrower and its Consolidated Subsidiaries; (b) any
        gain
        arising from any write-up of assets of the Borrower and its Consolidated
        Subsidiaries; (c) earnings of any other Person, substantially all of the
        assets
        of which have been acquired by the Borrower or any of its Consolidated
        Subsidiaries in any manner, to the extent that such earnings were realized
        by
        such other Person prior to the date of such acquisition; (d) net earnings
        of any
        Person (other than a Consolidated Subsidiary) in which the Borrower or any
        of
        its Consolidated Subsidiaries has an ownership interest, except for the portion
        of such net earnings that have been distributed to the Borrower or a
        Consolidated Subsidiary; (e) the earnings of any Person to which assets of
        the
        Borrower or any of its Consolidated Subsidiaries shall have been sold,
        transferred or disposed of, to the extent that such earnings arise after
        the
        date of such transaction; (f) the earnings of any Person into which the Borrower
        or any of its Consolidated Subsidiaries shall have merged, to the extent
        that
        such earnings arise prior to the date of such merger; (g) any gain arising
        from
        the acquisition of any securities of the Borrower or any of its Consolidated
        Subsidiaries; and (h) the taxes, if any, included in the calculation of the
        consolidated net earnings, if any, described in clauses (a) through (g);
        plus,
        to the
        extent not otherwise included in such Net Income, all distributions, other
        than
        returns of capital, which have been made to the Borrower or a Consolidated
        Subsidiary by any Person, other than a Consolidated Subsidiary, in which
        Borrower or any of its Consolidated Subsidiaries has an ownership
        interest.

       

      
        
          
          

        

        
          Annex
            A -
            Page 1

          
            

          

        

        
          
          

        

      

       

      “Affected
        Bank”
        has the
        meaning specified in Section
        2.15.

       

      “Affected
        Interests”
        has the
        meaning specified in Section
        2.15.

       

      “Affiliate”
        means,
        when used with respect to any Person, (a) any other Person (including any
        member
        of the immediate family of any such natural person) who directly or indirectly
        beneficially owns or controls five percent (5%) or more of the total voting
        power of shares of capital stock of such Person having the right to vote
        for
        directors (or other individuals performing similar functions) under ordinary
        circumstances, (b) any Person controlling, controlled by or under common
        control
        with any such Person (within the meaning of Rule 405 under the Securities
        Act of
        1933) and (c) any director or executive officer of such Person.

       

      “Agent”
        has the
        meaning specified in the introduction to this Agreement.

       

      “Agreement”
        means
        this Credit Agreement, as the same may from time to time be amended,
        supplemented or modified and in effect.

       

      “Applicable
        Lending Office”
        means,
        with respect to each Bank, such Bank’s Domestic Lending Office in the case of a
        Prime Rate Loan, such Bank’s CD Lending Office in the case of an Adjusted CD
        Rate Loan and such Bank’s Eurodollar Lending Office in the case of a Eurodollar
        Rate Loan.

       

      “Applicable
        Margin”
        has the
        meaning specified in Section
        2.07(d).

       

      “Assessment
        Rate”
        means,
        for any day, the annual assessment rate in effect on such day which is payable
        by a member of the Bank Insurance Fund classified as well capitalized and
        within
        supervisory subgroup “B” (or a comparable successor assessment risk
        classification) within the meaning of 12 C.F.R. §327.4 (or any successor
        provision) to the Federal Deposit Insurance Corporation (or any successor
        thereto) for such Corporation’s (or such successor’s) insuring time deposits at
        offices of such institution in the United States. The Adjusted CD Rate shall
        be
        adjusted automatically on and as of the effective date of any change in the
        Assessment Rate.

       

      “Assignment
        and Acceptance”
        has the
        meaning specified in Section
        9.02(a).
        

       

      
        
          
          

        

        
          Annex
            A -
            Page 2

          
            

          

        

        
          
          

        

      

       

      “Bank
        Group”
        means,
        collectively, the Agent, the Funds Administrator and the Banks.

       

      “Banks”
        has the
        meaning specified in the introduction to this Agreement.

       

      “Borrower”
        has the
        meaning specified in the introduction to this Agreement.

       

      “Borrowing”
        means
        (a) a group of Revolving Loans of a single Type made by the Banks, or
        Converted into such, as applicable, on a single date and as to which a single
        Interest Period is in effect; or (b) a Swingline Loan.

       

      “Borrowing
        Date”
        means,
        with respect to the initial funding of any Borrowing, the date on which the
        proceeds of such Borrowing are to be made available to the
        Borrower.

       

      “Borrowing
        Request”
        has the
        meaning specified in Section
        2.02(a).

       

      “Business
        Day”
        means a
        day of the year on which banks are not required or authorized to close in
        Houston, Texas and, if the applicable Business Day relates to any Eurodollar
        Rate Loans, on which dealings are carried on in the applicable eurodollar
        interbank market.

       

      “Capital
        Lease”
        means,
        as to any Person, any lease or rental agreement in respect of which such
        Person’s obligations as lessee under such lease or rental agreement, constitute
        obligations which shall have been or should be, in accordance with generally
        accepted accounting principles consistently applied, capitalized on the balance
        sheet of such Person.

       

      “CD
        Lending Office”
        means,
        with respect to any Bank, the office of such Bank specified as its “CD Lending
        Office” on Schedule 2.01
        (or, if
        no such office is specified, its Domestic Lending Office), or such other
        office
        of such Bank as such Bank may from time to time specify to the Borrower,
        the
        Agent and the Funds Administrator.

       

      “Change
        of Control”
        means
        any of (a) the acquisition by any Person or two or more Persons (excluding
        underwriters in the course of their distribution of voting stock in an
        underwritten public offering) acting in concert, of beneficial ownership
        (within
        the meaning of Rule 13d-3 of the Securities and Exchange Commission) of 25%
        or
        more of the outstanding shares of voting stock of the Borrower, (b) 30% or
        more
        of the members of the Board of Directors of the Borrower on any date shall
        not
        have been (i) members of the Board of Directors of the Borrower on the date
        12
        months prior to such date or (ii) approved by Persons who constitute at least
        a
        majority of the members of the Board of Directors of the Borrower as constituted
        on the date 12 months prior to such date, (c) all or substantially all of
        the
        assets of the Borrower are sold in a single transaction or series or related
        transactions to any Person or (d) the Borrower merges or consolidates with
        or
        into any other Person, with the effect that immediately after such transaction
        the stockholders of the Borrower immediately prior to such transaction hold
        less
        than 75% of the total voting power entitled to vote in the election of
        directors, managers or trustees of the Person surviving such
        transaction.

       

      “Chase”
        means
        JPMorgan Chase Bank, N.A.

       

      
        
          
          

        

        
          Annex
            A -
            Page 3

          
            

          

        

        
          
          

        

      

       

      “Commitment”
        means as
        to any Bank, the amount of such Bank’s Commitment set forth on Schedule
        2.01,
        as the
        same may be increased pursuant to Section
        2.17
        or
        reduced or terminated pursuant to Sections
        2.05
        or
7.01.

       

      “Commitment
        Increase Agreement”
        means an
        Agreement, substantially in the form of Exhibit
        2.17A
        attached
        hereto, executed by a Bank that has increased its Commitment pursuant to
        Section
        2.17
        hereof.

       

      “Commitment
        Increase Notice” has
        the
        meaning specified in Section
        2.17(a).

       

      “Commitment
        Percentage”
        means,
        as to any Bank, a percentage determined pursuant to the following formula:
        (C ÷
T) × 100 = CP; where C is such Bank’s Commitment (without giving effect to any
        termination of the Commitments pursuant to Section
        7.01),
        T is
        the Total Commitment (without giving effect to any termination of the
        Commitments pursuant to Section
        7.01)
        and CP
        is such percentage.

       

      “Communications”
        has the
        meaning specified in Section
        9.03.

       

      “Consolidated
        Subsidiary”
        means,
        as of any date, any Subsidiary of the Borrower that, in accordance with
        generally accepted accounting principles, would be included in the consolidated
        financial statements of the Borrower prepared as of such date.

       

      “Conversion
        Date”
        means,
        when used with respect to the Conversion of any group of Loans, the date
        such
        Loans are to be Converted into Loans of another Type pursuant to Section
        2.02
        or
        otherwise in accordance with Article II.

       

      “Conversion
        Notice”
        has the
        meaning specified in Section
        2.02(c).

       

      “Convert,” “Conversion”
        and
“Converted”
        each
        refers to a conversion of Loans of one Type into Loans of another Type pursuant
        to Section
        2.02
        or
        otherwise in accordance with Article II.

       

      “Current
        Liabilities”
        means,
        as of any date, all liabilities (including, without limitation, accounts
        payable
        incurred for services rendered and property purchased in the ordinary course
        of
        business) which would be reflected as current liabilities on a consolidated
        balance sheet of the Borrower and its Consolidated Subsidiaries prepared
        as of
        such date in accordance with generally accepted accounting principles
        consistently applied, but excluding current maturities of Funded Debt of
        the
        Borrower and its Consolidated Subsidiaries as of such date.

       

      “Debt”
        of any
        Person shall mean, without duplication: (a) any obligation of such Person
        for
        borrowed money, (b) any obligation of such Person evidenced by bonds,
        debentures, notes or other similar debt instruments, (c) all obligations
        of such
        Person under conditional sale or other title retention agreements relating
        to
        property purchased by such Person, (d) any obligation of such Person for
        the
        deferred purchase price of any property or services, except accounts payable
        arising in the ordinary course of such Person’s business that have been
        outstanding less than ninety (90) days since the date of the related invoice,
        (e) the present value (discounted at the implicit rate, if known, or ten
        percent
        (10%) per annum otherwise) of all Capital Leases of such Person, (f) any
        Derivative Obligations of such Person, (g) any reimbursement obligations
        of such
        Person in respect of drawings under a letter of credit or similar instrument,
        and (h) any indebtedness or obligations of others of the type described in
        clauses (a) through (g) that is Guaranteed by such Person or secured by a
        Lien
        on any asset of such Person.

       

      
        
          
          

        

        
          Annex
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      “Default”
        means an
        Event of Default or an event which with the giving of notice or the lapse
        of
        time or both could, unless cured or waived, become an Event of
        Default.

       

      “Default
        Rate”
        has the
        meaning specified in Section
        2.07.

       

      “Derivative
        Obligations”
        means,
        with respect to any Person, payment obligations with respect to foreign exchange
        transactions and interest rate, currency and commodity swaps, caps, floors,
        collars, forward sale contracts, other similar obligations and combinations
        of
        the foregoing (collectively, “swaps”). For the purposes of this Agreement, the
        amount of any Derivative Obligations shall be the amount determined in respect
        thereof as of the end of the then most recently ended fiscal quarter of such
        Person, based on the assumption that all swaps had terminated at the end
        of such
        fiscal quarter, and in making such determination, if any agreement relating
        to
        any such swap provides for the netting of amounts payable by and to such
        Person
        thereunder or if any such agreement provides for the simultaneous payment
        of
        amounts by and to such Person, then in each such case, the amount of such
        obligation shall be the net amount so determined.

       

      “Dollars”
        and
“$”
        each
        means lawful money of the United States.

       

      “Domestic
        Lending Office”
        means,
        with respect to any Bank, the office of such Bank specified as its “Domestic
        Lending Office” on Schedule 2.01,
        or such
        other office of such Bank as such Bank may from time to time specify to the
        Borrower, the Agent and the Funds Administrator.

       

      “EBITDA”
        means
        Adjusted Net Income plus, to the extent same caused a reduction in Adjusted
        Net
        Income, Interest Expense, depreciation, amortization and income tax
        expense.

       

      “Effective
        Date”
        means
        the date on which the conditions to effectiveness set forth in Article III
        to this
        Agreement are first satisfied.

       

      “Eligible
        Assignee”
        means
        (a) any Bank or any Affiliate of any Bank; (b) a commercial bank organized
        under
        the laws of the United States, or any state thereof, and having total assets
        in
        excess of $1,000,000,000 and having deposits rated in either of the two highest
        generic letter rating categories (without regard to subcategories) from either
        Standard & Poor’s Rating Group or Moody’s Investors Service, Inc.; (c) a
        commercial bank organized under the laws of any other country which is a
        member
        of the Organization for Economic Cooperation and Development (“OECD”),
        or a
        political subdivision of any such country, and having total assets in excess
        of
        $1,000,000,000, provided that such bank is acting through a branch or agency
        located in the country in which it is organized or another country which
        is also
        a member of the OECD; (d) the central bank of any country which is a member
        of
        the OECD; and (e) any other financial institution approved by the
        Agent.

       

      
        
          
          

        

        
          Annex
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      “Environmental
        Laws”
        means
        federal, state or local laws, rules or regulations, and any judicial, arbitral
        or administrative interpretations thereof, including, without limitation,
        any
        judicial, arbitral or administrative order, judgment, permit, approval, decision
        or determination pertaining to health, safety or the environment in effect
        at
        the time in question, including, without limitation, the Clean Air Act, as
        amended, the Oil Pollution Act of 1990, as amended, the Comprehensive
        Environmental Response, Compensation and Liability Act, as amended, the Federal
        Water Pollution Control Act, as amended, the Occupational Safety and Health
        Act,
        as amended, the Resource Conservation and Recovery Act, as amended, the Safe
        Drinking Water Act, as amended, the Toxic Substances Control Act, as amended,
        the Superfund Amendment and Reauthorization Act of 1986, as amended, the
        Hazardous Materials Transportation Act, as amended, comparable state and
        local
        laws, and other environmental conservation and protection laws.

       

      “ERISA”
        means
        the Employee Retirement Income Security Act of 1974, and any successor statute
        of similar import, together with the regulations thereunder, in each case
        as in
        effect from time to time. References to sections of ERISA shall be construed
        to
        also refer to any successor sections.

       

      “ERISA
        Affiliate”
        means
        any (i) corporation which is a member of the same controlled group of
        corporations (within the meaning of Section 414(b) of the Internal Revenue
        Code)
        as the Borrower, (ii) partnership or other trade or business (whether or
        not
        incorporated) under common control (within the meaning of Section 414(c)
        of the
        Internal Revenue Code) with the Borrower, (iii) member of the same affiliated
        service group (within the meaning of Section 414(m) of the Internal Revenue
        Code) as the Borrower, any corporation described in clause (i) above or any
        partnership or trade or business described in clause (ii) above or (iv) other
        Person required to be aggregated with the Borrower or an ERISA Affiliate
        thereof, as defined above, pursuant to Section 414(o) of the Internal Revenue
        Code.

       

      “Eurocurrency
        Liabilities”
        has the
        meaning assigned to that term in Regulation D of the Board of Governors of
        the
        Federal Reserve System, as in effect from time to time.

       

      “Eurodollar
        Event”
        has the
        meaning specified in Section
        2.13.

       

      “Eurodollar
        Lending Office”
        means,
        with respect to any Bank, the office of such Bank specified as its “Eurodollar
        Lending Office” on Schedule 2.01
        (or, if
        no such office is specified, its Domestic Lending Office), or such other
        office
        of such Bank as such Bank may from time to time specify to the Borrower,
        the
        Agent and the Funds Administrator.

       

      “Eurodollar
        Rate”
        means,
        for the Interest Period for each Eurodollar Rate Loan comprising part of
        the
        same Borrowing, an interest rate per annum equal to the average (rounded
        upward
        to the nearest whole multiple of 1/16 of 1% per annum, if such average is
        not
        such a multiple) of the rates per annum at which deposits in U.S. dollars
        are
        offered to the Agent by prime banks in whatever eurodollar interbank market
        may
        be selected by the Agent in its sole discretion, acting in good faith, on
        or
        about 9:00 a.m. (Houston time) (or as soon thereafter as practicable) two
        Business Days before the first day of such Interest Period, and in accordance
        with the then existing practice in such eurodollar interbank market for delivery
        of such deposits on the first day of such Interest Period in immediately
        available funds, in an amount substantially equal to the Eurodollar Rate
        Loan to
        be made by the Agent in its capacity as a Bank and comprising part of such
        Borrowing and for a period equal to such Interest Period.

       

      
        
          
          

        

        
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      “Eurodollar
        Rate Borrowing”
        means a
        Borrowing consisting of Eurodollar Rate Loans.

       

      “Eurodollar
        Rate Loan”
        means a
        Loan that the Borrower has designated, or is deemed to have designated, as
        such
        in accordance with Article II.

       

      “Eurodollar
        Rate Reserve Percentage”
        means,
        as to any Bank for the Interest Period for any Eurodollar Rate Loan, the
        reserve
        percentage applicable during such Interest Period (or if more than one such
        percentage shall be so applicable, the daily average of such percentages
        for
        those days in such Interest Period during which any such percentage shall
        be so
        applicable) under regulations issued from time to time by the Board of Governors
        of the Federal Reserve System (or any successor) for determining the maximum
        reserve requirement (including, without limitation, any emergency, supplemental
        or other marginal reserve requirement) for such Bank with respect to liabilities
        or assets consisting of or including Eurocurrency Liabilities having a term
        equal to such Interest Period.

       

      “Events
        of Default”
has
        the
        meaning specified in Section
        7.01.

       

      “Excluded
        Affiliate”
        means
        (a) any Subsidiary of the Borrower other than a Consolidated Subsidiary,
        and (b)
        all Persons, other than Subsidiaries, in which the Borrower, directly or
        indirectly, owns or controls five percent (5%) or more of the equity interests
        of such Person.

       

      “Existing
        Credit Agreement”
        has the
        meaning specified in the Preliminary Statement to this Agreement.

       

      “Fair
        Market Value”
        shall
        mean (a) with respect to any asset (other than Dollars) the price at which
        a
        willing buyer would buy and a willing seller would sell such asset in an
        arms’
length transaction and (b) with respect to Dollars, the amount of such
        Dollars.

       

      “Federal
        Funds Rate”
        means,
        for any period, a fluctuating interest rate per annum equal for each day
        during
        such period to the weighted average of the rates on overnight Federal funds
        transactions with members of the Federal Reserve System arranged by Federal
        funds brokers, as published for such day (or, if such day is not a Business
        Day,
        for the next preceding Business Day) by the Federal Reserve Bank of Dallas,
        or,
        if such rate is not so published for any day which is a Business Day, the
        average of the quotations for such day on such transactions received by the
        Agent from three Federal funds brokers of recognized standing selected by
        it.

       

      “Fee
        Letter”
        has the
        meaning specified in Section
        2.10.

       

      “Fitch
        Rating”
        means
        the rating classification of the Borrower’s senior debt, classified according to
        risk, issued by Fitch, Inc.

       

      “Fixed
        Rate”
        means
        the Adjusted CD Rate or the Eurodollar Rate.

       

      
        
          
          

        

        
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      “Fixed
        Rate Borrowing”
        means an
        Adjusted CD Rate Borrowing or a Eurodollar Rate Borrowing.

       

      “Fixed
        Rate Loan”
        means an
        Adjusted CD Rate Loan or a Eurodollar Rate Loan.

       

      “Funded
        Debt”
        means,
        as of any date, the sum of the following: (a) all Debt of the Borrower and
        its
        Consolidated Subsidiaries on a consolidated basis as of such date, less (b)
        to
        the extent included in the amount described in clause (a), the sum of the
        following (without duplication): (i) all Current Liabilities (other than
        Current
        Liabilities that represent Debt for borrowed money or Capital Leases) on
        a
        consolidated basis as of such date, (ii) any Debt of any Consolidated Subsidiary
        in excess of the Borrower’s proportionate share thereof (based on its direct or
        indirect equity interest therein), (iii) all other deferred long term
        liabilities that do not represent Debt for borrowed money or Capital Leases,
        including deferred compensation, deferred revenue and other deferred items
        classified as other liabilities of the Borrower and its Consolidated
        Subsidiaries on a consolidated basis as of such date, and (iv) all Derivative
        Obligations of the Borrower and its Consolidated Subsidiaries as of such
        date;
plus
        (c) to
        the extent not otherwise included in the amount described in clause (a),
        the sum
        of the following (without duplication): (i) all Debt of the Borrower and
        its
        Consolidated Subsidiaries outstanding under a revolving credit or similar
        agreement, (ii) the present value (discounted at the implicit rate, if known,
        or
        ten percent (10%) per annum otherwise) of all obligations in respect of Capital
        Leases of the Borrower and its Consolidated Subsidiaries, and (iii) all
        obligations of the Borrower and its Consolidated Subsidiaries under Guaranties
        of Debt.

       

      “Funds
        Administrator”
        has the
        meaning specified in the introduction to this Agreement.

       

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

       

      “Guaranties”
        means,
        as to any Person, all obligations (other than endorsements in the ordinary
        course of business of negotiable instruments for deposit or collection) of
        such
        Person guaranteeing or, in effect, guaranteeing any Debt of any other Person
        (the “primary obligor”) in any manner, whether directly or indirectly, including
        all obligations incurred through an agreement, contingent or otherwise, by
        such
        Person: (a) to purchase such Debt or any property or assets constituting
        security therefor, (b) to advance or supply funds (i) for the purchase or
        payment of such Debt or (ii) to maintain working capital or other balance
        sheet
        conditions or otherwise to advance or make available funds for the purchase
        or
        payment of such Debt, (c) to lease property or to purchase securities or
        other
        property or services primarily for the purpose of assuring the owner of such
        Debt of the ability of the primary obligor to make payment of the Debt or
        (d)
        otherwise to assure the owner of the Debt of the primary obligor against
        loss in
        respect thereof.

       

      “Hazardous
        Materials”
        means
        any pollutant, contaminant, solid waste, asbestos, petroleum product, crude
        oil
        or a fraction thereof, any toxic or hazardous substance, material or waste,
        any
        flammable, explosive or radioactive material, any chemical which causes cancer
        or reproductive effects, or any other material or substance not mentioned
        above
        which is regulated under any Environmental Law.

       

      
        
          
          

        

        
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      “Highest
        Lawful Rate”
        means,
        as to any Bank, at the particular time in question, the maximum nonusurious
        rate
        of interest which, under applicable law, such Bank is then permitted to charge
        the Borrower on the Loans or the other obligations of the Borrower under
        the
        Loan Documents, and as to any other Person, at the particular time in question,
        the maximum nonusurious rate of interest which, under applicable law, such
        Person is then permitted to charge with respect to the obligation in question.
        If the maximum rate of interest which, under applicable law, the Banks are
        permitted to charge the Borrower on the Loans or the other obligations of
        the
        Borrower under the Loan Documents shall change after the date hereof, the
        Highest Lawful Rate shall be automatically increased or decreased, as the
        case
        may be, as of the effective time of such change without notice to the Borrower
        or any other Person.

       

      “Interest
        Expense”
        means,
        for any period, the aggregate of all interest expense deducted in the
        calculation of the Net Income of the Borrower for such period, determined
        in
        accordance with generally accepted accounting principles.

       

      “Interest
        Period”
        means,
        for each Loan comprising part of the same Borrowing, the period commencing
        on
        the date of such Loan or the date of the Conversion of such Loan, as applicable,
        and ending on the last day of the period selected by the Borrower pursuant
        to
        the provisions below. The duration of each such Interest Period shall be
        (a) in
        the case of an Adjusted CD Rate Loan, 30, 60, 90 or 180 days, (b) in the
        case of
        a Prime Rate Loan, a period ending on the Termination Date, and (c) in the
        case
        of a Eurodollar Rate Loan, 1, 2, 3 or 6 months; provided,
        however,
        that:

       

      (i)    the
        Borrower may not select any Interest Period for a Loan that ends after the
        Termination Date;

       

      (ii)   Interest
        Periods commencing on the same date for Loans comprising part of the same
        Borrowing shall be of the same duration; and

       

      (iii)   whenever
        the last day of any Interest Period would otherwise occur on a day other
        than a
        Business Day, the last day of such Interest Period shall be extended to occur
        on
        the next succeeding Business Day, provided,
        in the
        case of any Interest Period for a Eurodollar Rate Loan, that if such extension
        would cause the last day of such Interest Period to occur in the next following
        calendar month, the last day of such Interest Period shall occur on the next
        preceding Business Day.

       

      “Internal
        Revenue Code”
        means
        the Internal Revenue Code of 1986, as amended from time to time (or any
        successor statute), and the regulations promulgated thereunder.

       

      “Investment”
        means
        any direct or indirect investment by one Person (the “investor”) in another
        Person (the “investee”), including, without limitation, (a) any loan or advance,
        whether initially funded by the investor or acquired by the investor from
        a
        third party, (b) any acquisition of equity interests by the investor, whether
        directly from the investee or from a third party by way of share purchase,
        merger or otherwise, (c) any capital or other contribution to the investee,
        whether made in cash or other assets, or by contributing a promissory note
        payable by the investor to the investee, (d) any Guarantee by the investor
        of
        Debt of the investee, and (e) the Fair Market Value of any assets or services
        transferred to the investee less the Fair Market Value of any consideration
        received by the investor in exchange therefor; provided,
        however,
        that
        the term “Investment” shall not include undistributed earnings on an Investment;
        and the amount of an “Investment,” for purposes of Section
        6.07
        hereof,
        shall be reduced by the amount of capital returned to the investor by the
        investee. The amount of any Investment that is made by transferring property
        other than Dollars shall be the Fair Market Value of the property so
        transferred.

       

      
        
          
          

        

        
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      “Issuer”
        means
        JPMorgan Chase Bank, N.A. and its successors and assigns, or any other Bank
        that
        agrees to be an issuer of a Letter of Credit hereunder.

       

      “Letter
        of Credit”
        means a
        letter of credit issued pursuant to Section
        2.16
        hereof.

       

      “Letter
        of Credit Liabilities”
        means,
        at any time and in respect of any Letter of Credit, the sum of (i) the amount
        available for drawings under such Letter of Credit plus
        (ii) the
        aggregate unpaid amount of all payments made by Issuer to the beneficiary
        of a
        Letter of Credit that are not either repaid by Borrower or added to the amounts
        outstanding under the Notes.

       

      “Lien”
        means,
        when used with respect to any Person, any mortgage, lien, charge, pledge,
        security interest or encumbrance of any kind (whether voluntary or involuntary,
        and whether imposed or created by operation of law or otherwise) upon, or
        pledge
        of, any of its property or assets, whether now owned or hereafter acquired,
        or
        any conditional sale agreement, Capital Lease or other title retention
        agreement.

       

      “Loans”
        means
        the Loans made by the Banks to the Borrower pursuant to this
        Agreement.

       

      “Loan
        Documents”
        shall
        mean this Agreement, the Notes, the Fee Letter and all other agreements,
        instruments and documents, including, without limitation, security agreements,
        notes, warrants, guaranties, mortgages, deeds of trust, subordination
        agreements, pledges, powers of attorney, consents, assignments, collateral
        assignments, letter agreements, contracts, notices, leases, amendments,
        financing statements, letter of credit applications and reimbursement
        agreements, and all other writings heretofore, now, or hereafter executed
        by or
        on behalf of the Borrower, any of its Affiliates or any other Person in
        connection with or relating to this Agreement, together with all agreements,
        instruments and documents referred to therein or contemplated
        thereby.

       

      “Majority
        Banks”
        means at
        any time Banks holding at least fifty-one percent (51%) of the then aggregate
        unpaid principal amount of the Loans or, if no Loans are outstanding, Banks
        having Commitment Percentages in the aggregate equal to at least fifty-one
        percent (51%).

       

      “Material
        Adverse Effect”
        means,
        as to any Person, the occurrence of any event that has, or could reasonably
        be
        expected to have, a material adverse effect on the business, property, assets,
        operations or condition, financial or otherwise, of such Person or on the
        ability of such Person to perform its obligations under the Loan Documents
        to
        which it is a party or to consummate the transactions contemplated
        thereby.

       

      
        
          
          

        

        
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      “Material
        Debt”
        means,
        as at any date, an amount equal to five percent (5%) of the Borrower’s Funded
        Debt as of such date.

       

      “Material
        Subsidiaries”
        means,
        collectively, each Consolidated Subsidiary of the Borrower that meets any
        of the
        following conditions: (a) the aggregate Investment of the Borrower and its
        other
        Consolidated Subsidiaries in such Consolidated Subsidiary exceeds five percent
        (5%) of the total assets of the Borrower and its Consolidated Subsidiaries
        as of
        the end of the most recently completed calendar year; or (b) the Borrower
        and
        its other Consolidated Subsidiaries’ proportionate share of the total assets
        (after intercompany eliminations) of such Consolidated Subsidiary exceeds
        five
        percent (5%) of the total assets of the Borrower and its Consolidated
        Subsidiaries as of the end of the most recently completed calendar year;
        or (c)
        the Borrower and its other Consolidated Subsidiaries’ equity in the income from
        continuing operations before income taxes, extraordinary items and cumulative
        effect of a change in accounting principle of such Consolidated Subsidiary
        exceeds five percent (5%) of Net Income for the most recently completed calendar
        year.

       

      “Moody’s
        Rating”
        means
        the rating classification of the Borrower’s senior debt, classified according to
        risk, issued by Moody’s Investors Service.

       

      “Net
        Income”
        means,
        for any period, the consolidated net earnings of the Borrower and its
        Consolidated Subsidiaries for such period, determined in accordance with
        generally accepted accounting principles.

       

      “Net
        Worth”
        means,
        as of any date, the total shareholder’s equity (including capital stock,
        additional paid-in capital and retained earnings after deducting treasury
        stock)
        which would appear on a consolidated balance sheet of the Borrower and its
        Consolidated Subsidiaries prepared as of such date in accordance with generally
        accepted accounting principles.

       

      “New
        Bank” has
        the
        meaning specified in Section
        2.17(b).

       

      “New
        Bank Agreement” has
        the
        meaning specified in Section
        2.17(b).

       

      “Note”
        shall
        mean a Note issued pursuant to Section
        2.04,
        together with all modifications, extensions, renewals and rearrangements
        thereof
        from time to time in effect.

       

      “Other
        Activities”
        has the
        meaning specified in Section
        8.03.

       

      “Other
        Financings”
        has the
        meaning specified in Section
        8.03

       

      “Other
        Taxes”
        has the
        meaning specified in Section
        2.11.

       

      “PBGC”
        means
        the Pension Benefit Guaranty Corporation established pursuant to Subtitle
        A of
        Title IV of ERISA and any successor thereto.

       

      
        
          
          

        

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

       

      “Plan”
        means
        any employee pension benefit plan which is covered by Title IV of ERISA or
        subject to the minimum funding standards under Section 412 of the Internal
        Revenue Code, and in respect of which the Borrower, or any ERISA Affiliate
        is an
“employer” as defined in Section 3(5) of ERISA.

       

      “Prime
        Rate”
        means,
        as of any particular date, a rate per annum equal to the highest of (a) the
        Federal Funds Rate plus one-half of one percent (1⁄2%), (b) the secondary
        market rate for three-month Certificates of Deposit (adjusted for statutory
        reserve requirements) plus one percent (1%), and (c) the prime rate per annum
        most recently announced by the Agent as its prime rate of interest per annum,
        automatically fluctuating upward or downward, as the case may be, on the
        day of
        each announcement without special notice to the Borrower or any other Person.
        The Borrower acknowledges that the prime rate referred to in clause (c) of
        the
        preceding sentence may not be the Agent’s best or lowest rate, or favored rate,
        and any statement, representation or warranty in that regard or to that effect
        is hereby expressly disclaimed by the Agent.

       

      “Prime
        Rate Borrowing”
        means a
        Borrowing consisting of Prime Rate Loans.

       

      “Prime
        Rate Loan”
        means a
        Loan that the Borrower has designated, or is deemed to have designated, as
        such
        in accordance with Article
        II.

       

      “Proceeds
        of Remedies”
        has the
        meaning specified in Section
        7.04.

       

      “Quarterly
        Payment Date”
        means
        each of September 30, December 31, March 31 and June 30 of each
        year.

       

      “Re-Allocation
        Date” has
        the
        meaning specified in Section
        2.17(e).

       

      “Register”
        has the
        meaning specified in Section
        9.02.

       

      “Regulation
        U”
        means
        Regulation U of the Board of Governors of the Federal Reserve System (respecting
        margin credit extended by banks), as the same is from time to time in effect,
        and all official rulings and interpretations thereunder or thereof.

       

      “Regulation
        X”
        means
        Regulation X of the Board of Governors of the Federal Reserve System (respecting
        borrowers who obtain margin credit) as the same is from time to time in effect,
        and all official rulings and interpretations thereunder or thereof.

       

      “Release”
        means
        any spilling, leaking, pumping, pouring, emitting, emptying, discharging,
        injecting, escaping, leaching, dumping or disposing into the environment
        (including the abandonment or discarding of barrels, containers and other
        closed
        receptacles).

       

      “Reportable
        Event”
        means
        any of the events set forth in Section 4043(b) of ERISA or the regulations
        thereunder.

       

      
        
          
          

        

        
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      “Requirements
        of Environmental Laws”
        means
        the requirements of any applicable Environmental Law relating to or affecting
        the Borrower or any of its Subsidiaries or the condition or operation of
        such
        Person’s business or its properties, both real and personal.

       

      “Requirements
        of Law”
        shall
        mean any federal, state or local law, rule or regulation, permit or other
        binding determination of any Governmental Authority.

       

      “Responsible
        Officer”
        means,
        as to any Person, the Chief Executive Officer, the President, the Chief
        Financial Officer or the Treasurer of such Person, or any employee of such
        Person designated in writing as a Responsible Officer by the Chief Executive
        Officer of such Person.

       

      “Restricted
        Investment”
        means
        (a) any Investment by the Borrower or a Consolidated Subsidiary in an Excluded
        Affiliate and (b) any payment by the Borrower or any Consolidated Subsidiary
        of
        Debt of any Excluded Affiliate to the extent the Borrower or such Consolidated
        Subsidiary is not legally obligated to make such payment under the terms
        of such
        Debt.

       

      “Restricted
        Payment”
        means
        any dividend or other distribution in respect of the capital stock or other
        equity interest of the Borrower or any Subsidiary of the Borrower (other
        than a
        distribution of capital stock or other equity interests of a Subsidiary of
        the
        Borrower), including, without limitation, any distribution resulting in the
        acquisition by the Borrower of securities which would constitute treasury
        stock.
        For purposes of this Agreement, the amount of any Restricted Payment made
        in
        property shall be the greater of (x) the Fair Market Value of such property
        (as
        determined by good faith by the board of directors (or equivalent governing
        body) of the person making such Restricted Payment) and (y) the net book
        value
        thereof on the books of such Person, in each case determined as of the date
        on
        which such Restricted Payment is made.

       

      “Revolving
        Credit Exposure”
        means,
        with respect to any Bank at any time, the sum of the outstanding principal
        amount of such Bank’s Revolving Loans and its Letter of Credit Liabilities and
        Swingline Exposure at such time.

       

      “Revolving
        Loan”
        means a
        Loan made pursuant to Section
        2.02.

       

      “S&P
        Rating”
        means
        the rating classification of the Borrower’s senior debt, classified according to
        risk, issued by Standard & Poor’s Rating Services, a division of The
        McGraw-Hill Companies, Inc.

       

      “Subsidiary”
        means,
        with respect to any Person, each other Person of which or in which such Person
        and its other Subsidiaries own, hold or control, directly or indirectly,
        securities or other ownership interests having ordinary voting power, in
        the
        absence of contingencies, to elect a majority of the board of directors of
        such
        other Person, or other persons performing similar functions for such Person,
        or,
        if there are no such directors or persons, having general voting power with
        respect to the activities of such Person, it being understood that the power
        to
        elect exactly 50% of the board of directors or such other persons does not
        constitute a “majority” as used herein. Unless the context otherwise requires,
        all references to a Subsidiary shall be considered to be references to
        Subsidiaries of the Borrower.

       

      
        
          
          

        

        
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      “Substitution
        Event”
        has the
        meaning specified in Section
        2.15.

       

      "Swingline
        Bank"
        means
        JPMorgan Chase Bank, in its capacity as lender of Swingline Loans
        hereunder.

       

      "Swingline
        Exposure"
        means,
        at any time, the aggregate principal amount of all Swingline Loans outstanding
        at such time. The Swingline Exposure of any Bank at any time shall be its
        Commitment Percentage of the total Swingline Exposure at such time.

       

      "Swingline
        Loan"
        means a
        Loan made pursuant to Section
        2.03.

       

      “Taxes”
        has the
        meaning specified in Section
        2.11.

       

      “Termination
        Date”
        means
        June 14, 2011, or the earlier termination in whole of the Commitments
        pursuant to Sections 2.05
        or
7.01.

       

      “Total
        Capitalization”
        means
        the total capitalization of the Borrower, including all debt and all equity,
        as
        determined in accordance with generally accepted accounting
        principles.

       

      “Total
        Commitment”
        means an
        amount equal to the sum of the Banks’ Commitments.

       

      “Transfer
        Notice”
        has the
        meaning specified in Section
        9.02.

       

      “Type”
        means,
        with respect to any Loan, the type of interest rate applicable to such Loan
        pursuant to this Agreement, and refers to an Adjusted CD Rate Loan, a Prime
        Rate
        Loan or a Eurodollar Rate Loan, each of which shall is a “Type” of Loan. Loans
        having different Interest Periods, regardless of whether they commence on
        the
        same date or have the same type of interest rate, shall be considered different
        Types of Loans.

       

      
        
          
          

        

        
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      SCHEDULE
        2.01

      ALLOCATION
        AND BANK NAMES

       

      
        	
                1.

              	
                JPMorgan
                  Chase Bank, N.A.

              	 
	 	 	 
	 	
                Allocation

              	
                $45,000,000.00

              

      

      

      JPMorgan
        Chase Bank, N.A.

      707
        Travis Street, 8 CBBN 96

      Houston,
        Texas 77002

      Attention:
        John Stucker

      Telecopier:
        (713) 216-3769

      Telephone:
        (713) 216-2339

      john.stucker@jpmchase.com

      

      
        	
                2.

              	
                Bank
                  of America, N.A.

              	 
	 	 	 
	 	
                Allocation

              	
                $45,000,000.00

              

      

      

      Bank
        of
        America, N.A.

      Attention:
        David McCauley

      901
        Main
        Street, 66th Floor

      Dallas,
        Texas 75202-3714

      Telecopier:
        (214) 209-0985

      Telephone:
        (214) 209-0940

      david.l.mccauley@bankofamerica.com

      

      
        	
                3.

              	
                Wells
                  Fargo Bank, N.A. 

              	 
	 	 	 
	 	
                Allocation

              	
                $35,000,000.00

              

      

      

      Wells
        Fargo Bank, N.A.

      Wells
        Fargo U.S. Corporate Banking

      1445
        Ross
        Ave, Suite 2320

      Dallas,
        Texas 75202

      Attention:
        Stephen C. Melton

      Telecopier
        (214) 969-0371

      Telephone:
        (214) 661-1221

      scmelton@wellsfargo.com

      

      
        	
                4.

              	
                DnB
                  NOR Bank ASA 

              	 
	 	 	 
	 	
                Allocation

              	
                $35,000,000.00

              

      

      

      DnB
        NOR
        Bank ASA

      200
        Park
        Avenue, 31st
        Floor

      New
        York,
        New York 10166

      Attention:
        Kevin O’Hara

      Telecopier:
        (212) 681-3900

      Telephone:
        (212) 681-3860

       

      
        
          
          

        

        
          Schedule
            2.01 - Page 1

          
            

          

        

        
          
          

        

      

       

      
        	
                5.

              	
                The
                  Bank of Tokyo-Mitsubishi UFJ, Ltd.

              	 
	 	 	 
	 	
                Allocation

              	
                $35,000,000.00

              

      

      

      The
        Bank
        of Tokyo-Mitsubishi UFJ, Ltd.

      2001
        Ross
        Avenue, Suite 3150

      Dallas,
        Texas 75201

      Attention:
        Doug Barnell

      Telecopier:
        (214) 954-1007

      Telephone:
        (214) 954-1240

      dbarnell@us.mufg.jp

      

      
        	
                6.

              	
                Comerica
                  Bank

              	 
	 	 	 
	 	
                Allocation

              	
                $20,000,000.00

              

      

      

      Comerica
        Bank

      4100
        Spring Valley Road, Suite 400

      Dallas,
        Texas 75244

      Attention:
        Bancroft Mattei

      Telecopier:
        (972) 361-2550

      Telephone:
        _____________

       

      
        	
                7.

              	
                The
                  Northern Trust Company

              	 
	 	 	 
	 	
                Allocation

              	
                $20,000,000.00

              

      

      

      The
        Northern Trust Company

      50
        South
        LaSalle Street B-2

      Chicago,
        Illinois 60603

      Attention:
        Paul H. Theiss

      Telecopier:
        (312) 444-7028

      Telephone:
        (312) 557-1791

      Pht1@ntrs.com

      

      
        	
                8.

              	
                Amegy
                  Bank

              	 
	 	 	 
	 	
                Allocation

              	
                $15,000,000.00

              

      

      

      Amegy
        Bank 

      4400
        Post
        Oak Parkway

      Houston,
        Texas 77027

      Attention:
        Preston Moore 

      Telecopier:
        (713) 571-5154 

      Telephone:
        _____________

       

       

      Schedule
        2.01 - Page 2EXECUTION COPY

                          SECURITIES PURCHASE AGREEMENT

         SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of June 14,
2006, by and among American United Global, Inc., a Delaware corporation, with
headquarters located at 108 Village Square #327, Somers, New York 10589 (the
"Company"), and the investors listed on the Schedule of Buyers attached hereto
(individually, a "Buyer" and collectively, the "Buyers").

         WHEREAS:

      A. The Company and each Buyer is executing and  delivering  this Agreement
in reliance upon the exemption from securities  registration afforded by Section
4(2) of the Securities Act of 1933, as amended (the "1933 Act"), and Rule 506 of
Regulation D ("Regulation D") as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the 1933 Act.

      B. The Company has authorized a new series of senior  secured  convertible
notes of the Company,  in  substantially  the form attached  hereto as Exhibit A
(the "Notes"), which Notes shall be convertible into the Company's common stock,
par value $0.01 per share (the "Common Stock"),  in accordance with the terms of
the Notes.

      C. Each Buyer wishes to purchase, and the Company wishes to sell, upon the
terms and conditions  stated in this  Agreement,  (i) that  aggregate  principal
amount of the Notes set forth  opposite  such  Buyer's name in column (3) on the
Schedule of Buyers attached hereto (which  aggregate amount for all Buyers shall
be $6,000,000) (as converted,  collectively, the "Conversion Shares"), (ii) that
aggregate  number of shares of the Common Stock set forth  opposite such Buyer's
name in column (4) on the Schedule of Buyers  attached  hereto (which  aggregate
amount for all Buyers  together  shall be  4,800,000  shares of Common Stock and
shall be  collectively  referred  to herein as the  "Common  Shares")  (iii) (A)
Series A Warrants, in substantially the form attached hereto as Exhibit B-1 (the
"Series A Warrants"), to acquire up to that number of shares of Common Stock set
forth  opposite  such  Buyer's  name in column (2) of the  Schedule  of Warrants
attached  hereto,  (B) Series B Warrants,  in  substantially  the form  attached
hereto as Exhibit B-2 (the "Series B Warrants"), to acquire up to that number of
shares of Common Stock set forth opposite such Buyer's name in column (3) of the
Schedule of Warrants  attached  hereto  following  the  exercise of the Series A
Warrants on a share by share basis, (C) Series C Warrants,  in substantially the
form attached hereto as Exhibit B-3 (the "Series C Warrants"),  to acquire up to
that number of shares of Common  Stock set forth  opposite  such Buyer's name in
column  (4) of the  Schedule  of  Warrants  attached  hereto,  and (D)  Series D
Warrants,  in substantially the form attached hereto as Exhibit B-4 (the "Series
D  Warrants"),  to acquire up to that number of shares of Common Stock set forth
opposite  such Buyer's  name in column (5) of the Schedule of Warrants  attached
hereto following the exercise of the Series C Warrants on a share by share basis
(the Series A Warrants,  the Series B  Warrants,  the Series C Warrants  and the
Series D Warrants are collectively referred to as the "Warrants") (as exercised,
collectively, the "Warrant Shares").

<PAGE>

      D.  Contemporaneously  with the execution and delivery of this  Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
substantially in the form attached hereto as Exhibit C (the "Registration Rights
Agreement"),  pursuant  to which  the  Company  has  agreed to  provide  certain
registration rights with respect to the Conversion Shares, the Common Shares and
the Warrant Shares under the 1933 Act and the rules and regulations  promulgated
thereunder, and applicable state securities laws.

      E. The Notes, the Conversion  Shares,  the Common Shares, the Warrants and
the Warrant Shares collectively are referred to herein as the "Securities".

      F. The Notes will rank senior to all outstanding  and future  indebtedness
of the Company other than the Senior  Indebtedness (as defined in the Notes) and
will be secured by a first priority, perfected security interest, subject to the
Senior  Indebtedness  (as  defined  in the  Notes)  in all of the  assets of the
Company  and  the  stock  and  assets  of  each  of the  Company's  subsidiaries
(collectively,  the  "Collateral"),  as evidenced by (i) the security  agreement
attached  hereto as  Exhibit  D-1 (the  "Security  Agreement"),  (ii) the pledge
agreement  attached  hereto as  Exhibit  E (the  "Pledge  Agreement"),  (ii) the
guarantee  attached hereto as Exhibit F (the "Guarantee",  and together with the
Security  Agreement,  the Pledge Agreement and any ancillary  documents  related
thereto, collectively the "US Security Documents"), (iii) the Hungarian Security
Agreement  attached  hereto as  Exhibit  D-2 (the  "Hungarian  General  Security
Agreement") and (iv) the Hungarian security agreement attached hereto as Exhibit
D-3 (the "Hungarian Other Security  Agreement",  and together with the Hungarian
General Security  Agreement and any ancillary  documents  related  thereto,  the
"Hungarian Security Documents", and together with the US Security Documents, the
"Security Documents").

      G. The Company has entered  into a  Securities  Purchase  Agreements  (the
"Acquisition  Agreement")  with the  stockholders  of  Kraft  Rt.,  a  Hungarian
corporation ("Kraft"),  pursuant to which the Company shall acquire 95.5% of the
outstanding capital stock of Kraft (the  "Acquisition")  simultaneously with the
Closing (as defined below).

      NOW, THEREFORE, the Company and each Buyer hereby agree as follows:

      1.    PURCHASE AND SALE OF SECURITIES.

            (a)   Purchase of Securities.

                  (i) Subject to the  satisfaction (or waiver) of the conditions
set forth in Sections 6 and 7 below,  the  Company  shall issue and sell to each
Buyer,  and each Buyer severally,  but not jointly,  agrees to purchase from the
Company on the Closing Date (as defined below),  (A) a principal amount of Notes
as is set forth  opposite  such  Buyer's  name in column (3) on the  Schedule of
Buyers,  (B) the number of Common Shares set forth opposite such Buyer's name in
column (4) on the  Schedule  of  Buyers,  (C) one or more  Series A Warrants  to
acquire  up to that  number of  Warrant  Shares as is set  forth  opposite  such
Buyer's name in column (2) on the Schedule of Warrants, (D) one or more Series B
Warrants to acquire up to that number of Warrant Shares as is set forth opposite
such Buyer's  name in column (3) on the  Schedule of  Warrants,  (E) one or more
Series C Warrants to acquire up to that number of Warrant Shares as is set forth
opposite such Buyer's name in column (4) on the Schedule of Warrants and (F) one
or more Series D Warrants  to acquire up to that number of Warrant  Shares as is
set forth  opposite  such Buyer's name in column (5) on the Schedule of Warrants
(the "Closing").

                                     - 2 -
<PAGE>

                  (ii)  Closing.  The date and time of the Closing (the "Closing
Date")  shall be 10:00  a.m.,  New York City Time,  on the date  hereof (or such
later  date as is  mutually  agreed  to by the  Company  and each  Buyer)  after
notification  of  satisfaction  (or waiver) of the conditions to the Closing set
forth in Sections 6 and 7 below at the offices of Schulte  Roth & Zabel LLP, 919
Third Avenue, New York, New York 10022.

                  (iii) Purchase Price.

                        (1) The aggregate  purchase price for the Notes,  Common
      Shares and the  Warrants to be purchased by each Buyer at the Closing (the
      "Purchase Price") shall be the amount set forth opposite such Buyer's name
      in column (6) of the  Schedule  of Buyers.  Each Buyer shall pay $1.00 for
      each $1.00 of principal amount of Notes, related Common Shares and related
      Warrants to be purchased by such Buyer at the Closing.

                        (2) The Buyers and the Company agree that the Notes, the
      Common  Shares  and the  Warrants  constitute  an  "investment  unit"  for
      purposes of Section  1273(c)(2)  of the Internal  Revenue Code of 1986, as
      amended (the "Code"). Not later than two days before the Closing Date, the
      Buyers shall notify the Company of their  determination  of the allocation
      of the issue  price of such  investment  unit among the Notes,  the Common
      Shares and the Warrants in accordance with Section  1273(c)(2) of the Code
      and Treasury  Regulation Section  1.1273-2(h),  and neither the Buyers nor
      the Company shall take any position  inconsistent  with such allocation in
      any tax return or in any judicial or administrative  proceeding in respect
      of taxes.

            (b) Form of Payment.  On the Closing Date,  (i) each Buyer shall pay
its  Purchase  Price to the  Company  for the Notes,  the Common  Shares and the
Warrants to be issued and sold to such Buyer at the Closing by wire  transfer of
immediately  available  funds in  accordance  with the  Company's  written  wire
instructions  and (ii) the Company shall deliver to each Buyer (A) the Notes (in
the  principal  amounts as such Buyer  shall  request)  which such Buyer is then
purchasing,  (B) a stock certificate evidencing the number of Common Shares such
Buyer is  purchasing  and (C) the  Warrants  (in the amounts as such Buyer shall
request) which such Buyer is purchasing, in each case duly executed on behalf of
the Company and registered in the name of such Buyer or its designee.

      2.    BUYER'S REPRESENTATIONS AND WARRANTIES.

            Each Buyer represents and warrants with respect to only itself that:

            (a) No Public Sale or Distribution.  Such Buyer is (i) acquiring the
Notes,  the Common Shares and the Warrants and (ii) upon conversion of the Notes
and exercise of the  Warrants  (other than  pursuant to a Cashless  Exercise (as
defined in the  Warrants))  will acquire the  Conversion  Shares  issuable  upon
conversion  of the Notes and  Warrants  and the  Warrant  Shares  issuable  upon
exercise of the Warrants,  for its own account and not with a view  towards,  or
for resale in connection with, the public sale or distribution  thereof,  except
pursuant to sales registered or exempted under the 1933 Act; provided,  however,
that by making the representations herein, such Buyer does not agree to hold any
of the  Securities for any minimum or other specific term and reserves the right
to dispose of the  Securities  at any time in  accordance  with or pursuant to a
registration  statement  or an  exemption  under  the 1933  Act.  Such  Buyer is
acquiring the Securities hereunder in the ordinary course of its business.  Such
Buyer does not  presently  have any  agreement  or  understanding,  directly  or
indirectly, with any Person to distribute any of the Securities.

                                     - 3 -
<PAGE>

            (b)  Accredited  Investor  Status.  Such  Buyer  is  an  "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.

            (c)  Reliance  on  Exemptions.   Such  Buyer  understands  that  the
Securities  are being offered and sold to it in reliance on specific  exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's  compliance  with,  the  representations,  warranties,  agreements,
acknowledgments  and  understandings  of such Buyer set forth herein in order to
determine the  availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.

            (d)  Information.  Such Buyer and its  advisors,  if any,  have been
furnished with all materials  relating to the business,  finances and operations
of the Company and  materials  relating to the offer and sale of the  Securities
which have been  requested by such Buyer.  Such Buyer and its advisors,  if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence  investigations conducted by such Buyer or
its advisors,  if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's  representations and warranties contained
herein.  Such Buyer understands that its investment in the Securities involves a
high degree of risk. Such Buyer has sought such accounting, legal and tax advice
as it has  considered  necessary to make an informed  investment  decision  with
respect to its acquisition of the Securities.

            (e) No Governmental  Review.  Such Buyer  understands that no United
States federal or state agency or any other  government or  governmental  agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness  or  suitability  of the  investment  in the  Securities  nor have such
authorities  passed  upon  or  endorsed  the  merits  of  the  offering  of  the
Securities.

            (f)  Transfer  or Resale.  Such  Buyer  understands  that  except as
provided in the Registration Rights Agreement:  (i) the Securities have not been
and are not being  registered  under the 1933 Act or any state  securities laws,
and may not be  offered  for sale,  sold,  assigned  or  transferred  unless (A)
subsequently  registered thereunder,  (B) such Buyer shall have delivered to the
Company an opinion of counsel,  in a generally  acceptable  form,  to the effect
that such Securities to be sold,  assigned or transferred may be sold,  assigned
or  transferred  pursuant to an exemption  from such  registration,  or (C) such
Buyer provides the Company with reasonable assurance that such Securities can be
sold,  assigned or  transferred  pursuant  to Rule 144 or Rule 144A  promulgated
under the 1933 Act, as amended,  (or a successor  rule  thereto)  (collectively,
"Rule 144"); (ii) any sale of the Securities made in reliance on Rule 144 may be
made only in accordance  with the terms of Rule 144 and further,  if Rule 144 is
not applicable,  any resale of the Securities  under  circumstances in which the
seller (or the Person (as  defined  in Section  3(s))  through  whom the sale is
made) may be deemed to be an  underwriter  (as that term is  defined in the 1933
Act) may require  compliance with some other exemption under the 1933 Act or the
rules and regulations of the SEC  thereunder;  and (iii) neither the Company nor
any other Person is under any  obligation to register the  Securities  under the
1933 Act or any state securities laws or to comply with the terms and conditions
of any exemption thereunder.

                                     - 4 -
<PAGE>

            (g) Legends.  Such Buyer  understands that the certificates or other
instruments  representing  the Notes,  the Common  Shares and the Warrants  and,
until such time as the resale of the Common Shares,  the  Conversion  Shares and
the Warrant Shares have been  registered  under the 1933 Act as  contemplated by
the  Registration  Rights  Agreement,  the stock  certificates  representing the
Common Shares, the Conversion Shares and the Warrant Shares, except as set forth
below, shall bear any legend as required by the "blue sky" laws of any state and
a restrictive  legend in  substantially  the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):

            [NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
            CERTIFICATE  NOR THE  SECURITIES  INTO WHICH  THESE  SECURITIES  ARE
            [CONVERTIBLE] [EXERCISABLE] HAVE BEEN][THE SECURITIES REPRESENTED BY
            THIS  CERTIFICATE HAVE NOT BEEN] REGISTERED UNDER THE SECURITIES ACT
            OF 1933,  AS AMENDED,  OR  APPLICABLE  STATE  SECURITIES  LAWS.  THE
            SECURITIES  MAY  NOT BE  OFFERED  FOR  SALE,  SOLD,  TRANSFERRED  OR
            ASSIGNED  (I)  IN THE  ABSENCE  OF  (A)  AN  EFFECTIVE  REGISTRATION
            STATEMENT FOR THE  SECURITIES  UNDER THE  SECURITIES ACT OF 1933, AS
            AMENDED,  OR (B) AN OPINION OF COUNSEL,  IN A  GENERALLY  ACCEPTABLE
            FORM,  THAT  REGISTRATION  IS NOT  REQUIRED  UNDER  SAID ACT OR (II)
            UNLESS  SOLD  PURSUANT  TO RULE 144 OR RULE  144A  UNDER  SAID  ACT.
            NOTWITHSTANDING  THE  FOREGOING,  THE  SECURITIES  MAY BE PLEDGED IN
            CONNECTION  WITH A  BONA  FIDE  MARGIN  ACCOUNT  OR  OTHER  LOAN  OR
            FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

The legend  set forth  above  shall be removed  and the  Company  shall  issue a
certificate without such legend to the holder of the Securities upon which it is
stamped,  if,  unless  otherwise  required by state  securities  laws,  (i) such
Securities are registered for resale under the 1933 Act, (ii) in connection with
a sale,  assignment or other transfer,  such holder provides the Company with an
opinion of counsel,  in a  generally  acceptable  form,  to the effect that such
sale,  assignment or transfer of the Securities may be made without registration
under the applicable requirements of the 1933 Act, or (iii) such holder provides
the Company with reasonable  assurance that the Securities can be sold, assigned
or transferred pursuant to Rule 144 or Rule 144A.

            (h) Validity;  Enforcement.  This Agreement, the Registration Rights
Agreement  and the  Security  Documents to which such Buyer is a party have been
duly and validly authorized,  executed and delivered on behalf of such Buyer and
shall  constitute  the  legal,  valid  and  binding  obligations  of such  Buyer
enforceable against such Buyer in accordance with their respective terms, except
as such  enforceability  may be limited by  general  principles  of equity or to
applicable bankruptcy, insolvency,  reorganization,  moratorium, liquidation and
other  similar laws  relating to, or affecting  generally,  the  enforcement  of
applicable creditors' rights and remedies.

                                     - 5 -
<PAGE>

            (i) No Conflicts.  The execution,  delivery and  performance by such
Buyer of this  Agreement,  the  Registration  Rights  Agreement and the Security
Documents to which such Buyer is a party and the  consummation  by such Buyer of
the  transactions  contemplated  hereby  and  thereby  will not (i)  result in a
violation of the  organizational  documents of such Buyer or (ii) conflict with,
or  constitute a default (or an event which with notice or lapse of time or both
would  become a default)  under,  or give to others  any rights of  termination,
amendment,   acceleration  or  cancellation  of,  any  agreement,  indenture  or
instrument to which such Buyer is a party, or (iii) result in a violation of any
law, rule,  regulation,  order,  judgment or decree (including federal and state
securities  laws)  applicable to such Buyer,  except in the case of clauses (ii)
and (iii) above, for such conflicts,  defaults, rights or violations which would
not, individually or in the aggregate, reasonably be expected to have a material
adverse  effect  on the  ability  of  such  Buyer  to  perform  its  obligations
hereunder.

            (j)  Residency.  Such  Buyer  is a  resident  of  that  jurisdiction
specified below its address on the Schedule of Buyers.

      3.    REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

            The Company represents and warrants to each of the Buyers that:

            (a)   Organization   and   Qualification.   The   Company   and  its
"Subsidiaries"  (which for purposes of this Agreement  means any entity in which
the Company,  directly or  indirectly,  owns capital stock or holds an equity or
similar  interest)  are entities  duly  organized  and validly  existing in good
standing under the laws of the  jurisdiction in which they are formed,  and have
the requisite power and  authorization  to own their  properties and to carry on
their business as now being conducted.  Each of the Company and its Subsidiaries
is duly  qualified as a foreign entity to do business and is in good standing in
every  jurisdiction  in which its  ownership  of  property  or the nature of the
business  conducted  by it makes  such  qualification  necessary,  except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect. As used in this Agreement,  "Material Adverse Effect"
means  any  material  adverse  effect  on  the  business,   properties,  assets,
operations,  results  of  operations,  condition  (financial  or  otherwise)  or
prospects  of the  Company  and its  Subsidiaries,  taken as a whole,  or on the
transactions  contemplated hereby and the other Transaction  Documents or by the
agreements  and  instruments  to be  entered  into  in  connection  herewith  or
therewith,  or on the  authority  or  ability  of the  Company  to  perform  its
obligations under the Transaction  Documents (as defined below). The Company has
no Subsidiaries except as set forth on Schedule 3(a).

            (b)  Authorization;  Enforcement;  Validity.  The  Company  has  the
requisite  power and authority to enter into and perform its  obligations  under
this Agreement,  the Notes,  the  Registration  Rights  Agreement,  the Security
Documents,  the Voting Agreements,  the Irrevocable  Transfer Agent Instructions
(as defined in Section 5(b)), the Warrants,  the Acquisition  Agreement and each
of the other  agreements  entered into by the parties hereto in connection  with
the transactions contemplated hereby and thereby (collectively, the "Transaction
Documents")  and to issue the Securities in accordance with the terms hereof and
thereof. The execution and delivery of the Transaction  Documents by the Company
and the consummation by the Company of the transactions  contemplated hereby and
thereby,  including,  without limitation,  the issuance of the Notes, the Common
Shares and the Warrants,  the  reservation  for issuance and the issuance of the
Conversion  Shares  issuable upon  conversion of the Notes,  the reservation for
issuance and issuance of Warrant Shares  issuable upon exercise of the Warrants,
and the  granting of a security  interest in the  Collateral  (as defined in the
Security  Documents)  have  been  duly  authorized  by the  Company's  Board  of
Directors and (other than (i) the filing of appropriate UCC financing statements
with the  appropriate  states and other  authorities  pursuant to the Pledge and
Security Agreement, and (ii) the filing with the SEC of one or more Registration
Statements  in  accordance  with the  requirements  of the  Registration  Rights
Agreement)  no further  filing,  consent,  or  authorization  is required by the
Company,  its Board of Directors or its  stockholders.  This  Agreement  and the
other  Transaction  Documents of even date  herewith have been duly executed and
delivered  by  the  Company,   and  constitute  the  legal,  valid  and  binding
obligations of the Company,  enforceable  against the Company in accordance with
their respective terms,  except as such enforceability may be limited by general
principles  of  equity or  applicable  bankruptcy,  insolvency,  reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.

                                     - 6 -
<PAGE>

            (c) Issuance of  Securities.  The Notes,  the Common  Shares and the
Warrants are duly  authorized  and, upon  issuance in accordance  with the terms
hereof,  shall be validly issued and free from all taxes, liens and charges with
respect  to the issue  thereof  and the  Common  Shares  shall be fully paid and
nonassessable with the holders being entitled to all rights accorded to a holder
of Common  Stock.  As of the  Closing,  a number of shares of Common Stock shall
have been duly  authorized  and reserved  for issuance  which equals 130% of the
maximum number of shares Common Stock issuable upon  conversion of the Notes and
upon exercise of the Warrants.  Upon  conversion in accordance with the Notes or
exercise in  accordance  with the Warrants,  as the case may be, the  Conversion
Shares and the Warrant Shares, respectively,  will be validly issued, fully paid
and nonassessable and free from all preemptive or similar rights,  taxes,  liens
and charges with respect to the issue  thereof,  with the holders being entitled
to all rights  accorded to a holder of Common  Stock.  The offer and issuance by
the Company of the Securities is exempt from registration under the 1933 Act.

            (d) No Conflicts.  The  execution,  delivery and  performance of the
Transaction  Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Notes,  the Common  Shares and the  Warrants,  the granting of a
security interest in the Collateral and reservation for issuance and issuance of
the Conversion Shares and the Warrant Shares) will not (i) result in a violation
of the Certificate of Incorporation  (as defined in Section 3(r)) of the Company
or any of its  Subsidiaries,  any  capital  stock of the  Company  or Bylaws (as
defined  in Section  3(r)) of the  Company  or any of its  Subsidiaries  or (ii)
conflict  with,  or constitute a default (or an event which with notice or lapse
of time or both would become a default)  under,  or give to others any rights of
termination,   amendment,   acceleration  or  cancellation  of,  any  agreement,
indenture or  instrument  to which the Company or any of its  Subsidiaries  is a
party,  or (iii)  result in a violation  of any law,  rule,  regulation,  order,
judgment or decree (including  federal and state securities laws and regulations
and the rules and  regulations  of the Pink  Sheets  (the  "Principal  Market"))
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or affected.

                                     - 7 -
<PAGE>

            (e)  Consents.  The Company is not  required to obtain any  consent,
authorization  or order of, or make any filing or registration  with, any court,
governmental  agency or any  regulatory or  self-regulatory  agency or any other
Person in order for it to  execute,  deliver or perform  any of its  obligations
under or contemplated by the Transaction  Documents,  in each case in accordance
with the terms hereof or thereof. All consents, authorizations,  orders, filings
and  registrations  which the  Company is  required  to obtain  pursuant  to the
preceding  sentence  have been  obtained  or effected on or prior to the Closing
Date,  and  the  Company  and its  Subsidiaries  are  unaware  of any  facts  or
circumstances which might prevent the Company from obtaining or effecting any of
the registration, application or filings pursuant to the preceding sentence. The
Company is not in violation of the listing  requirements of the Principal Market
and has no  knowledge of any facts which would  reasonably  lead to delisting or
suspension of the Common Stock in the foreseeable future.

            (f)  Acknowledgment  Regarding  Buyer's Purchase of Securities.  The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of arm's length  purchaser  with respect to the  Transaction  Documents  and the
transactions contemplated hereby and thereby and that no Buyer is (i) an officer
or director of the Company,  (ii) an  "affiliate"  of the Company (as defined in
Rule 144) or (iii) to the knowledge of the Company, a "beneficial owner" of more
than 10% of the shares of Common Stock (as defined for purposes of Rule 13d-3 of
the Securities  Exchange Act of 1934, as amended (the "1934 Act")).  The Company
further acknowledges that no Buyer is acting as a financial advisor or fiduciary
of the Company  (or in any similar  capacity)  with  respect to the  Transaction
Documents and the transactions  contemplated hereby and thereby,  and any advice
given by a Buyer or any of its  representatives or agents in connection with the
Transaction  Documents and the transactions  contemplated  hereby and thereby is
merely  incidental  to such  Buyer's  purchase  of the  Securities.  The Company
further  represents to each Buyer that the Company's  decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.

            (g) No General  Solicitation;  Placement  Agent's Fees.  Neither the
Company,  nor any of its  affiliates,  nor any  Person  acting  on its or  their
behalf, has engaged in any form of general  solicitation or general  advertising
(within the meaning of Regulation D) in connection with the offer or sale of the
Securities.  The Company shall be  responsible  for the payment of any placement
agent's fees,  financial advisory fees, or brokers'  commissions (other than for
persons engaged by any Buyer or its investment  advisor)  relating to or arising
out of the  transactions  contemplated  hereby.  The Company shall pay, and hold
each Buyer harmless against, any liability, loss or expense (including,  without
limitation,  attorney's fees and  out-of-pocket  expenses) arising in connection
with any such  claim.  The  Company  acknowledges  that it has  engaged  Olympus
Securities,  LLC as placement agent (the "Agent") in connection with the sale of
the Securities.  Other than the Agent, the Company has not engaged any placement
agent or other agent in connection with the sale of the Securities.

                                     - 8 -
<PAGE>

            (h) No Integrated  Offering.  None of the Company, its Subsidiaries,
any of their affiliates,  and any Person acting on 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 require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated  with prior  offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions,  including,  without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or designated. None of the
Company,  its  Subsidiaries,  their  affiliates  and any Person  acting on their
behalf will take any action or steps referred to in the preceding  sentence that
would require  registration of any of the Securities under the 1933 Act or cause
the offering of the Securities to be integrated with other offerings.

            (i) Dilutive Effect.  The Company  understands and acknowledges that
the number of Conversion  Shares  issuable upon  conversion of the Notes and the
Warrant  Shares  issuable upon exercise of the Warrants will increase in certain
circumstances.  The Company  further  acknowledges  that its obligation to issue
Conversion Shares upon conversion of the Notes in accordance with this Agreement
and the Notes and its  obligation  to issue the Warrant  Shares upon exercise of
the Warrants in accordance  with this Agreement and the Warrants,  in each case,
is  absolute  and  unconditional  regardless  of the  dilutive  effect that such
issuance  may  have on the  ownership  interests  of other  stockholders  of the
Company.

            (j)  Application  of Takeover  Protections;  Rights  Agreement.  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 Certificate of Incorporation
or the laws of the  jurisdiction  of its  formation  which  is or  could  become
applicable  to any Buyer as a result of the  transactions  contemplated  by this
Agreement,   including,  without  limitation,  the  Company's  issuance  of  the
Securities and any Buyer's  ownership of the Securities.  Except as set forth on
Schedule 3(j), the Company has not adopted a stockholder  rights plan or similar
arrangement relating to accumulations of beneficial ownership of Common Stock or
a change in control of the Company.

            (k) SEC  Documents;  Financial  Statements.  Except as  disclosed in
Schedule  3(k),  during the two (2) years prior to the date hereof,  the Company
has filed all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC  pursuant to the  reporting  requirements  of the
1934 Act (all of the  foregoing  filed prior to the date hereof and all exhibits
included  therein and  financial  statements,  notes and  schedules  thereto and
documents incorporated by reference therein being hereinafter referred to as the
"SEC  Documents").  The Company has delivered to the Buyers or their  respective
representatives  true,  correct and  complete  copies of the SEC  Documents  not
available on the EDGAR system.  As of their respective  dates, the SEC Documents
complied in all material  respects with the requirements of the 1934 Act and the
rules and  regulations of the SEC promulgated  thereunder  applicable to the SEC
Documents,  and none of the SEC Documents,  at the time they were filed with the
SEC,  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 the light of the  circumstances  under  which they were
made, not misleading.  As of their respective dates, the financial statements of
the Company  included in the SEC  Documents  complied as to form in all material
respects with  applicable  accounting  requirements  and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared  in  accordance   with  generally   accepted   accounting   principles,
consistently  applied,  during  the  periods  involved  (except  (i)  as  may be
otherwise  indicated in such financial  statements or the notes thereto, or (ii)
in the case of  unaudited  interim  statements,  to the extent  they may exclude
footnotes or may be condensed or summary  statements)  and fairly present in all
material respects the financial  position of the Company as of the dates thereof
and the  results of its  operations  and cash flows for the  periods  then ended
(subject,  in the  case  of  unaudited  statements,  to  normal  year-end  audit
adjustments).  No other  information  provided by or on behalf of the Company to
the  Buyers  which is not  included  in the SEC  Documents,  including,  without
limitation,  information referred to in Section 2(d) of this Agreement, contains
any untrue  statement  of a material  fact or omits to state any  material  fact
necessary  in  order  to  make  the  statements  therein,  in the  light  of the
circumstance under which they are or were made, not misleading.

                                     - 9 -
<PAGE>

            (l)  Absence of Certain  Changes.  Except as  disclosed  in Schedule
3(l),  since [December 31, 2005],  there has been no material adverse change and
no  material  adverse  development  in  the  business,  properties,  operations,
condition  (financial or  otherwise),  results of operations or prospects of the
Company  or its  Subsidiaries.  Except as  disclosed  in  Schedule  3(l),  since
[December  31,  2005],  the Company has not (i) declared or paid any  dividends,
(ii) sold any assets,  individually  or in the  aggregate,  in excess of $50,000
outside of the  ordinary  course of business or (iii) had capital  expenditures,
individually  or in the  aggregate,  in excess of  $50,000.  The Company has not
taken any steps to seek  protection  pursuant to any bankruptcy law nor does the
Company have any  knowledge or reason to believe  that its  creditors  intend to
initiate involuntary  bankruptcy proceedings or any actual knowledge of any fact
which  would  reasonably  lead a creditor to do so. The Company is not as of the
date hereof, and after giving effect to the transactions  contemplated hereby to
occur at the Closing,  will not be Insolvent (as defined below). For purposes of
this Section 3(l),  "Insolvent" means (i) the present fair saleable value of the
Company's  assets is less than the amount  required to pay the  Company's  total
Indebtedness (as defined in Section 3(s)), (ii) the Company is unable to pay its
debts and liabilities,  subordinated, contingent or otherwise, as such debts and
liabilities  become absolute and matured,  (iii) the Company intends to incur or
believes  that it will incur  debts  that would be beyond its  ability to pay as
such debts mature or (iv) the Company has unreasonably  small capital with which
to conduct the business in which it is engaged as such business is now conducted
and is proposed to be conducted.

            (m)   No   Undisclosed   Events,   Liabilities,    Developments   or
Circumstances. No event, liability,  development or circumstance has occurred or
exists,  or  is  contemplated  to  occur  with  respect  to  the  Company,   its
Subsidiaries or their respective business, properties,  prospects, operations or
financial condition, that would be required to be disclosed by the Company under
applicable  securities  laws on a registration  statement on Form S-1 filed with
the SEC  relating to an issuance and sale by the Company of its Common Stock and
which has not been publicly announced.

            (n) Conduct of Business; Regulatory Permits. Neither the Company nor
its  Subsidiaries  is in  violation  of any  term  of or in  default  under  its
Certificate  of  Incorporation  or Bylaws  or their  organizational  charter  or
certificate of  incorporation or bylaws,  respectively.  Neither the Company nor
any of its Subsidiaries is in violation of any judgment,  decree or order or any
statute,  ordinance,  rule  or  regulation  applicable  to  the  Company  or its
Subsidiaries,  and neither the Company nor any of its Subsidiaries  will conduct
its  business  in  violation  of any  of  the  foregoing,  except  for  possible
violations  which would not,  individually or in the aggregate,  have a Material
Adverse Effect. Without limiting the generality of the foregoing, the Company is
not in  violation  of  any of the  rules,  regulations  or  requirements  of the
Principal Market and has no knowledge of any facts or circumstances  which would
reasonably  lead to delisting or suspension of the Common Stock by the Principal
Market in the foreseeable future.  Since December 31, 2004, (i) the Common Stock
has been designated for quotation on the Principal  Market,  (ii) trading in the
Common Stock has not been suspended by the SEC or the Principal Market and (iii)
the Company has received no communication,  written or oral, from the SEC or the
Principal  Market regarding the suspension or delisting of the Common Stock from
the Principal Market. The Company and its Subsidiaries possess all certificates,
authorizations  and permits  issued by the  appropriate  regulatory  authorities
necessary to conduct their  respective  businesses,  except where the failure to
possess  such   certificates,   authorizations   or  permits   would  not  have,
individually or in the aggregate,  a Material  Adverse  Effect,  and neither the
Company nor any such Subsidiary has received any notice of proceedings  relating
to the revocation or  modification  of any such  certificate,  authorization  or
permit.

                                     - 10 -
<PAGE>

            (o) Foreign Corrupt Practices.  Neither the Company,  nor any of its
Subsidiaries,  nor any director, officer, agent, employee or other Person acting
on behalf of the  Company or any of its  Subsidiaries  has, in the course of its
actions for, or on behalf of, the Company (i) used any  corporate  funds for any
unlawful contribution,  gift,  entertainment or other unlawful expenses relating
to political activity;  (ii) made any direct or indirect unlawful payment to any
foreign or domestic  government official or employee from corporate funds; (iii)
violated  or is in  violation  of any  provision  of the  U.S.  Foreign  Corrupt
Practices  Act of 1977,  as amended;  or (iv) made any unlawful  bribe,  rebate,
payoff, influence payment,  kickback or other unlawful payment to any foreign or
domestic government official or employee.

            (p)  Sarbanes-Oxley  Act. The Company is in compliance  with any and
all applicable requirements of the Sarbanes-Oxley Act of 2002 that are effective
as of the  date  hereof,  and any  and  all  applicable  rules  and  regulations
promulgated  by the SEC  thereunder  that are  effective  as of the date hereof,
except  where  such  noncompliance  would  not  have,  individually  or  in  the
aggregate, a Material Adverse Effect.

            (q)  Transactions  With  Affiliates.  Except as set forth in the SEC
Documents  filed at least ten days  prior to the date  hereof and other than the
grant of  stock  options  disclosed  on  Schedule  3(q),  none of the  officers,
directors or  employees  of the Company is presently a party to any  transaction
with the  Company or any of its  Subsidiaries  (other than for  ordinary  course
services as employees, officers or 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 such officer,  director or employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any such officer,  director,  or employee has a substantial interest or is
an officer, director, trustee or partner.

                                     - 11 -
<PAGE>

            (r) Equity  Capitalization.  As of the date hereof,  the  authorized
capital stock of the Company consists of (i) 40,000,000  shares of Common Stock,
of which as of the date hereof, 12,646,396 are issued and outstanding, no shares
are reserved for issuance  pursuant to the  Company's  stock option and purchase
plans and  10,092,130  shares are reserved for issuance  pursuant to  securities
(other than the Notes and the  Warrants)  exercisable  or  exchangeable  for, or
convertible  into, shares of Common Stock and (ii) (w) 1,200,000 shares of 12.5%
cumulative  preferred  stock, par value $0.01 per share, of which as of the date
hereof,  none are issued and  outstanding,  (x)  1,000,000  shares of Series B-1
Preferred  Stock,  par value  $0.01 per share,  of which as of the date  hereof,
255,094 are issued and  outstanding,  (y) 232,500 shares of Series B-3 Preferred
Stock,  par value $0.01 per share,  of which as of the date  hereof,  48,426 are
issued and  outstanding,  and (z) 100,000 shares of Series B-4 Preferred  Stock,
par value $0.01 per share, of which as of the date hereof, 95,500 are issued and
outstanding. All of such outstanding shares have been, or upon issuance will be,
validly  issued and are fully paid and  nonassessable.  Except as  disclosed  in
Schedule 3(r): (i) none of the Company's  capital stock is subject to preemptive
rights or any other  similar  rights or any liens or  encumbrances  suffered  or
permitted  by the  Company;  (ii) there are no  outstanding  options,  warrants,
scrip, rights to subscribe to, calls or commitments of any character  whatsoever
relating  to, or  securities  or rights  convertible  into,  or  exercisable  or
exchangeable  for, any capital stock of the Company or any of its  Subsidiaries,
or contracts,  commitments,  understandings or arrangements by which the Company
or any of its  Subsidiaries is or may become bound to issue  additional  capital
stock of the Company or any of its  Subsidiaries  or options,  warrants,  scrip,
rights  to  subscribe  to,  calls or  commitments  of any  character  whatsoever
relating  to, or  securities  or rights  convertible  into,  or  exercisable  or
exchangeable  for, any capital stock of the Company or any of its  Subsidiaries;
(iii) there are no outstanding debt securities, notes, credit agreements, credit
facilities or other agreements, documents or instruments evidencing Indebtedness
of the Company or any of its  Subsidiaries or by which the Company or any of its
Subsidiaries  is or may become  bound;  (iv) there are no  financing  statements
securing obligations in any material amounts, either singly or in the aggregate,
filed in connection with the Company or any of its  Subsidiaries;  (v) there are
no agreements or arrangements under which the Company or any of its Subsidiaries
is obligated to register the sale of any of their  securities under the 1933 Act
(except  the  Registration  Rights  Agreement);  (vi)  there are no  outstanding
securities  or  instruments  of the  Company  or any of its  Subsidiaries  which
contain  any  redemption  or  similar  provisions,  and there are no  contracts,
commitments,  understandings  or arrangements by which the Company or any of its
Subsidiaries  is or may become  bound to redeem a security of the Company or any
of its  Subsidiaries;  (vii) there are no securities or  instruments  containing
anti-dilution  or similar  provisions  that will be triggered by the issuance of
the Securities;  (viii) the Company does not have any stock appreciation  rights
or "phantom  stock" plans or agreements  or any similar plan or  agreement;  and
(ix)  the  Company  and its  Subsidiaries  have no  liabilities  or  obligations
required to be  disclosed in the SEC  Documents  but not so disclosed in the SEC
Documents,  other than those incurred in the ordinary course of the Company's or
its  Subsidiaries'  respective  businesses  and  which,  individually  or in the
aggregate,  do not or would not have a Material Adverse Effect.  The Company has
furnished  to the Buyer  true,  correct  and  complete  copies of the  Company's
Certificate  of  Incorporation,  as amended  and as in effect on the date hereof
(the "Certificate of  Incorporation"),  and the Company's Bylaws, as amended and
as in effect on the date hereof (the "Bylaws"),  and the terms of all securities
convertible into, or exercisable or exchangeable for, shares of Common Stock and
the material rights of the holders thereof in respect thereto.

                                     - 12 -
<PAGE>

            (s)  Indebtedness  and  Other  Contracts.  Except  as  disclosed  in
Schedule  3(s),  neither  the Company  nor any of its  Subsidiaries  (i) has any
outstanding  Indebtedness  (as defined below),  (ii) is a party to any contract,
agreement or instrument,  the violation of which, or default under which, by the
other  party(ies) to such  contract,  agreement or instrument  would result in a
Material  Adverse  Effect,  (iii) is in  violation  of any term of or in default
under any contract, agreement or instrument relating to any Indebtedness, except
where such  violations  and defaults  would not result,  individually  or in the
aggregate,  in a Material  Adverse  Effect,  or (iv) is a party to any contract,
agreement or instrument relating to any Indebtedness,  the performance of which,
in the judgment of the Company's officers, has or is expected to have a Material
Adverse  Effect.  Schedule 3(s) provides a detailed  description of the material
terms of any such outstanding Indebtedness.  For purposes of this Agreement: (x)
"Indebtedness" of any Person means, without duplication (A) all indebtedness for
borrowed  money,  (B) all  obligations  issued,  undertaken  or  assumed  as the
deferred  purchase  price of  property or  services  (other than trade  payables
entered into in the  ordinary  course of  business),  (C) all  reimbursement  or
payment  obligations  with respect to letters of credit,  surety bonds and other
similar instruments,  (D) all obligations evidenced by notes, bonds,  debentures
or  similar  instruments,   including   obligations  so  evidenced  incurred  in
connection  with the  acquisition  of property,  assets or  businesses,  (E) all
indebtedness  created  or  arising  under any  conditional  sale or other  title
retention  agreement,  or incurred as financing,  in either case with respect to
any property or assets  acquired  with the proceeds of such  indebtedness  (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property),  (F) all
monetary  obligations  under  any  leasing  or  similar  arrangement  which,  in
connection with generally accepted accounting  principles,  consistently applied
for the periods  covered  thereby,  is  classified as a capital  lease,  (G) all
indebtedness  referred to in clauses  (A)  through (F) above  secured by (or for
which the holder of such  Indebtedness  has an  existing  right,  contingent  or
otherwise,  to be secured  by) any  mortgage,  lien,  pledge,  charge,  security
interest  or other  encumbrance  upon or in any  property  or assets  (including
accounts and contract rights) owned by any Person,  even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or  obligations  of others of the kinds  referred  to in clauses (A) through (G)
above;  (y)  "Contingent  Obligation"  means,  as to any  Person,  any direct or
indirect liability,  contingent or otherwise, of that Person with respect to any
indebtedness,  lease,  dividend  or other  obligation  of another  Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect  thereof,  is to provide  assurance to the obligee of such liability that
such  liability  will be paid or  discharged,  or that any  agreements  relating
thereto will be complied  with,  or that the holders of such  liability  will be
protected  (in whole or in part)  against  loss with  respect  thereto;  and (z)
"Person" means an individual,  a limited  liability  company,  a partnership,  a
joint venture,  a corporation,  a trust, an  unincorporated  organization  and a
government or any department or agency thereof.

            (t) Absence of  Litigation.  There is no action,  suit,  proceeding,
inquiry or investigation  before or by the Principal Market,  any court,  public
board,  government agency,  self-regulatory  organization or body pending or, to
the knowledge of the Company,  threatened against or affecting the Company,  the
Common Stock or any of the Company's Subsidiaries or any of the Company's or its
Subsidiaries'  officers or directors in their capacities as such,  except as set
forth in Schedule 3(t).

            (u) Insurance.  The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such  amounts as  management  of the  Company  believes to be prudent and
customary  in the  businesses  in which the  Company  and its  Subsidiaries  are
engaged.  Neither  the  Company  nor any such  Subsidiary  has been  refused any
insurance  coverage  sought or applied  for and neither the Company nor any such
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 at a cost that would not have a Material Adverse Effect.

                                     - 13 -
<PAGE>

            (v)  Employee  Relations.  (i)  Neither  the  Company nor any of its
Subsidiaries  is a party to any collective  bargaining  agreement or employs any
member of a union. The Company and its Subsidiaries believe that their relations
with their employees are good. No executive officer of the Company or any of its
Subsidiaries  (as  defined  in Rule  501(f)  of the 1933 Act) has  notified  the
Company or any such Subsidiary that such officer intends to leave the Company or
otherwise  terminate  such  officer's  employment  with the  Company or any such
Subsidiary.  No executive officer of the Company or any of its Subsidiaries,  to
the knowledge of the Company,  is, or is now expected to be, in violation of any
material  term  of  any  employment  contract,  confidentiality,  disclosure  or
proprietary  information  agreement,  non-competition  agreement,  or any  other
contract or agreement or any restrictive covenant,  and the continued employment
of each such  executive  officer  does not  subject  the  Company  or any of its
Subsidiaries to any liability with respect to any of the foregoing matters.

                  (ii) The Company and its  Subsidiaries  are in compliance with
all federal,  state,  local and foreign laws and regulations  respecting  labor,
employment  and  employment  practices  and  benefits,  terms and  conditions of
employment and wages and hours,  except where failure to be in compliance  would
not, either  individually or in the aggregate,  reasonably be expected to result
in a Material Adverse Effect.

            (w) Title. The Company and its Subsidiaries have good and marketable
title in fee simple to all real  property and good and  marketable  title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as do not  materially  affect the value of such property and
do not  interfere  with the use made and proposed to be made of such property by
the Company and any of its  Subsidiaries  except to the extent that the property
is secured by the  Senior  Indebtedness  (as  defined  in the  Notes).  Any real
property  and  facilities  held  under  lease  by  the  Company  and  any of its
Subsidiaries  are held by them under valid,  subsisting and  enforceable  leases
with such  exceptions as are not material and do not interfere with the use made
and proposed to be made of such  property  and  buildings by the Company and its
Subsidiaries.

            (x) Intellectual  Property Rights.  The Company and its Subsidiaries
own or possess  adequate rights or licenses to use all trademarks,  trade names,
service  marks,  service mark  registrations,  service  names,  patents,  patent
rights,    copyrights,    inventions,    licenses,    approvals,    governmental
authorizations,   trade   secrets  and  other   intellectual   property   rights
("Intellectual   Property   Rights")   necessary  to  conduct  their  respective
businesses as now conducted.  Except as set forth in Schedule 3(x),  none of the
Company's  Intellectual  Property  Rights  have  expired or  terminated,  or are
expected  to expire  or  terminate,  within  three  years  from the date of this
Agreement.  The Company does not have any knowledge of any  infringement  by the
Company or its Subsidiaries of Intellectual  Property Rights of others. There is
no claim, action or proceeding being made or brought, or to the knowledge of the
Company, being threatened, against the Company or its Subsidiaries regarding its
Intellectual   Property  Rights.   The  Company  is  unaware  of  any  facts  or
circumstances  which might give rise to any of the  foregoing  infringements  or
claims,  actions or  proceedings.  The Company and its  Subsidiaries  have taken
reasonable  security measures to protect the secrecy,  confidentiality and value
of all of their intellectual properties.

                                     - 14 -
<PAGE>

            (y) Environmental  Laws. The Company and its Subsidiaries (i) are in
compliance with any and all Environmental  Laws (as hereinafter  defined),  (ii)
have received all permits,  licenses or other  approvals  required of them under
applicable  Environmental Laws to conduct their respective  businesses and (iii)
are in compliance  with all terms and conditions of any such permit,  license or
approval  where,  in each of the  foregoing  clauses  (i),  (ii) and (iii),  the
failure to so comply could be reasonably  expected to have,  individually  or in
the aggregate,  a Material Adverse Effect. The term  "Environmental  Laws" means
all federal, state, local or foreign laws relating to pollution or protection of
human health or the environment  (including,  without  limitation,  ambient air,
surface  water,  groundwater,  land surface or  subsurface  strata),  including,
without  limitation,  laws  relating  to  emissions,   discharges,  releases  or
threatened  releases  of  chemicals,  pollutants,   contaminants,  or  toxic  or
hazardous substances or wastes  (collectively,  "Hazardous  Materials") into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all  authorizations,  codes,  decrees,  demands  or  demand  letters,
injunctions,  judgments,  licenses,  notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.

            (z)  Subsidiary  Rights.  Except as set forth in Schedule  3(z), the
Company  or one of its  Subsidiaries  has the  unrestricted  right to vote,  and
(subject to  limitations  imposed by  applicable  law) to receive  dividends and
distributions  on, all capital  securities of its  Subsidiaries  as owned by the
Company or such Subsidiary.

            (aa) Tax Status.  The Company and each of its  Subsidiaries  (i) has
made or filed all  foreign,  federal and state income and all other tax returns,
reports and  declarations  required by any  jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental  assessments and charges that are
material in amount,  shown or determined to be due on such returns,  reports and
declarations, except those being contested in good faith and (iii) has set aside
on its books  provision  reasonably  adequate  for the  payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim.

            (bb)  Internal  Accounting  Controls.  The  Company  and each of its
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 generally accepted  accounting  principles and to maintain asset
and  liability   accountability,   (iii)  access  to  assets  or  incurrence  of
liabilities  is  permitted  only in  accordance  with  management's  general  or
specific  authorization  and (iv) the  recorded  accountability  for  assets and
liabilities is compared with the existing  assets and  liabilities at reasonable
intervals and appropriate action is taken with respect to any difference.

                                     - 15 -
<PAGE>

            (cc)  Ranking of Notes.  Except as set forth on  Schedule  (cc),  no
Indebtedness  of the  Company is senior to or ranks pari passu with the Notes in
right of payment,  whether  with  respect of payment of  redemptions,  interest,
damages or upon liquidation or dissolution or otherwise.

            (dd) Form SB-2 Eligibility.  The Company is eligible to register the
Common Shares, Conversion Shares and the Warrant Shares for resale by the Buyers
using Form SB-2 promulgated under the 1933 Act.

            (ee)  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) other than the Agent, sold, bid for, purchased,  or
paid any  compensation  for soliciting  purchases of, any of the Securities,  or
(iii) other than the Agent, paid or agreed to pay to any person any compensation
for soliciting another to purchase any other securities of the Company.

            (ff) Disclosure.  The Company confirms that neither it nor any other
Person  acting on its behalf has  provided  any of the Buyers or their agents or
counsel with any information that constitutes or could reasonably be expected to
constitute  material,  nonpublic  information  other  than as set  forth  in the
following sentence. The Company understands and confirms that each of the Buyers
will  rely  on  the  foregoing  representations  in  effecting  transactions  in
securities of the Company.  All disclosure  provided to the Buyers regarding the
Company, its business and the transactions  contemplated  hereby,  including the
Schedules  to this  Agreement,  furnished by or on behalf of the Company is true
and correct and does 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 the light of the  circumstances  under  which they were  made,  not
misleading.  Each press  release  issued by the  Company  during the twelve (12)
months  preceding  the date of this  Agreement  did not at the  time of  release
contain any untrue statement of a material fact or omit to state a material fact
required  to be stated  therein  or  necessary  in order to make the  statements
therein,  in the light of the  circumstances  under  which  they are  made,  not
misleading.  No event or  circumstance  has occurred or information  exists with
respect to the  Company  or any of its  Subsidiaries  or its or their  business,
properties,   prospects,   operations  or  financial  conditions,  which,  under
applicable law, rule or regulation,  requires public  disclosure or announcement
by the Company but which has not been so publicly announced or disclosed.

            (gg) Stockholder Approval.  The Company has received the approval of
its  stockholders in accordance with applicable law and the Company's  governing
documents of  resolutions  (the  "Resolutions")  in the form attached  hereto as
Exhibit L  authorizing  the  Company's  filing  with the  Secretary  of State of
Delaware  of the  amendment  to the  Certificate  of  Incorporation  in the form
attached hereto as Exhibit M (the  "Certificate of Incorporation  Amendment") to
increase  the  authorized  capital  stock  of the  Company  from  40,000,000  to
150,000,000  (such  affirmative   approval  being  referred  to  herein  as  the
"Stockholder Approval").

                                     - 16 -
<PAGE>

      4.    COVENANTS.

            (a) Best  Efforts.  Each party shall use its best efforts  timely to
satisfy each of the  conditions  to be satisfied by it as provided in Sections 6
and 7 of this Agreement.

            (b) Form D and Blue Sky.  The  Company  agrees to file a Form D with
respect to the Securities as required  under  Regulation D and to provide a copy
thereof to each Buyer  promptly  after such  filing.  The Company  shall,  on or
before the  Closing  Date,  take such  action as the  Company  shall  reasonably
determine is  necessary  in order to obtain an  exemption  for or to qualify the
Securities  for sale to the Buyers at the  Closing  pursuant  to this  Agreement
under  applicable  securities  or "Blue  Sky" laws of the  states of the  United
States (or to obtain an exemption  from such  qualification),  and shall provide
evidence  of any such  action so taken to the Buyers on or prior to the  Closing
Date.  The Company shall make all filings and reports  relating to the offer and
sale of the Securities  required under applicable  securities or "Blue Sky" laws
of the states of the United States following the Closing Date.

            (c)  Reporting  Status.  Until the date on which the  Investors  (as
defined in the  Registration  Rights  Agreement)  shall have sold all the Common
Shares,  the  Conversion  Shares  and  Warrant  Shares  and none of the Notes or
Warrants is outstanding  (the  "Reporting  Period"),  the Company shall file all
reports  required  to be filed with the SEC  pursuant  to the 1934 Act,  and the
Company  shall not  terminate  its status as an issuer  required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations  thereunder
would otherwise permit such termination.

            (d) Use of Proceeds. The Company will use the proceeds from the sale
of the  Securities for the purchase of capital  equipment and general  corporate
purposes;  provided, further, that the Company may not use the proceeds from the
sale  of  the  Securities  for  (i)  the  repayment  of  any  other  outstanding
Indebtedness of the Company or any of its Subsidiaries or (ii) the redemption or
repurchase of any of its or its Subsidiaries' equity securities.

            (e) Financial Information.  The Company agrees to send the following
to each Investor during the Reporting  Period (i) unless the following are filed
with the SEC through  EDGAR and are  available  to the public  through the EDGAR
system,  within one (1)  Business  Day after the filing  thereof with the SEC, a
copy of its Annual  Reports on Form 10-K or 10-KSB,  any interim  reports or any
consolidated balance sheets, income statements,  stockholders' equity statements
and/or  cash flow  statements  for any period  other than  annual,  any  Current
Reports on Form 8-K and any registration  statements (other than on Form S-8) or
amendments  filed  pursuant to the 1933 Act, (ii) on the same day as the release
thereof,  facsimile  or  e-mailed  copies  of all press  releases  issued by the
Company or any of its  Subsidiaries,  and (iii)  copies of any notices and other
information  made  available  or  given  to  the  stockholders  of  the  Company
generally,  contemporaneously with the making available or giving thereof to the
stockholders.

            (f) Listing. The Company shall promptly secure the listing of all of
the Registrable  Securities (as defined in the  Registration  Rights  Agreement)
upon each national  securities  exchange and automated quotation system, if any,
upon  which the Common  Stock is then  listed  (subject  to  official  notice of
issuance) and shall  maintain such listing of all  Registrable  Securities  from
time to time issuable under the terms of the Transaction Documents.  The Company
shall maintain the Common Stocks'  authorization  for quotation on the Principal
Market.  Neither the Company nor any of its  Subsidiaries  shall take any action
which would be  reasonably  expected to result in the delisting or suspension of
the Common Stock on the  Principal  Market.  The Company  shall pay all fees and
expenses in connection with satisfying its obligations under this Section 4(f).

                                     - 17 -
<PAGE>

            (g) Fees.  Subject to Section 8 below,  at the Closing,  the Company
shall  pay  up  to  $100,000  to  Highbridge  Capital  Management,  LLC  or  its
designee(s) (in addition to any other expense amounts paid to any Buyer prior to
the date of this Agreement) for legal expenses  incurred and  documented,  which
amount shall be withheld by  Smithfield  Fiduciary LLC  ("Smithfield")  from its
Purchase Price at the Closing.  The Company shall be responsible for the payment
of any placement agent's fees,  financial advisory fees, or broker's commissions
(other than for Persons  engaged by any Buyer) relating to or arising out of the
transactions  contemplated hereby,  including,  without limitation,  any fees or
commissions  payable to the Agent.  The Company  shall pay,  and hold each Buyer
harmless against, any liability, loss or expense (including, without limitation,
reasonable  attorney's fees and  out-of-pocket  expenses)  arising in connection
with any claim  relating to any such  payment.  Except as otherwise set forth in
the  Transaction  Documents,  each  party to this  Agreement  shall bear its own
expenses in connection with the sale of the Securities to the Buyers.

            (h) Pledge of Securities.  The Company  acknowledges and agrees that
the  Securities  may be pledged by an Investor  (as defined in the  Registration
Rights  Agreement) in connection with a bona fide margin agreement or other loan
or  financing  arrangement  that is  secured  by the  Securities.  The pledge of
Securities  shall not be  deemed to be a  transfer,  sale or  assignment  of the
Securities hereunder,  and no Investor effecting a pledge of Securities shall be
required to provide the Company with any notice  thereof or  otherwise  make any
delivery to the  Company  pursuant to this  Agreement  or any other  Transaction
Document,  including, without limitation,  Section 2(f) hereof; provided that an
Investor  and its pledgee  shall be required  to comply with the  provisions  of
Section  2(f)  hereof  in order to  effect a sale,  transfer  or  assignment  of
Securities  to such  pledgee.  The Company  hereby agrees to execute and deliver
such  documentation  as a pledgee of the Securities  may  reasonably  request in
connection with a pledge of the Securities to such pledgee by an Investor.

            (i) Disclosure of Transactions and Other Material Information. On or
before 8:30 a.m., New York Time, on the first Business Day following the date of
this  Agreement,  the Company shall file a Current Report on Form 8-K describing
the terms of the transactions  contemplated by the Transaction  Documents in the
form required by the 1934 Act and attaching the material  Transaction  Documents
(including,  without  limitation,  this  Agreement  (and all  schedules  to this
Agreement), the form of each of the Notes, the form of Warrant, the Registration
Rights  Agreement,  the Security  Documents,  the Acquisition  Agreement and any
other  material  transaction  documents  relating  thereto)  as exhibits to such
filing (including all attachments,  the "8-K Filing"). From and after the filing
of the 8-K Filing with the SEC, no Buyer shall be in possession of any material,
nonpublic  information received from the Company, any of its Subsidiaries or any
of their  respective  officers,  directors,  employees  or  agents,  that is not
disclosed in the 8-K Filing.  The Company shall not, and shall cause each of its
Subsidiaries and its and each of their respective officers, directors, employees
and agents, not to, provide any Buyer with any material,  nonpublic  information
regarding  the Company or any of its  Subsidiaries  from and after the filing of
the 8-K Filing with the SEC without the express  written  consent of such Buyer.
In the event of a breach of the  foregoing  covenant by the Company,  any of its
Subsidiaries,  or any of their  respective  officers,  directors,  employees and
agents,  in addition to any other remedy  provided  herein or in the Transaction
Documents, a Buyer shall have the right to make a public disclosure, in the form
of a press  release,  public  advertisement  or  otherwise,  of  such  material,
nonpublic   information   without  the  prior  approval  by  the  Company,   its
Subsidiaries,  or any of their  respective  officers,  directors,  employees  or
agents. No Buyer shall have any liability to the Company,  its Subsidiaries,  or
any of its or their respective officers, directors,  employees,  stockholders or
agents for any such disclosure.  Subject to the foregoing,  neither the Company,
its  Subsidiaries  nor any Buyer  shall  issue any press  releases  or any other
public  statements  with  respect  to  the  transactions   contemplated  hereby;
provided,  however,  that the  Company  shall be  entitled,  without  the  prior
approval of any Buyer, to make any press release or other public disclosure with
respect to such  transactions (i) in substantial  conformity with the 8-K Filing
and  contemporaneously  therewith and (ii) as is required by applicable  law and
regulations  (provided  that in the  case of  clause  (i)  each  Buyer  shall be
consulted  by the  Company in  connection  with any such press  release or other
public disclosure prior to its release).

                                     - 18 -
<PAGE>

            (j)  Restriction  on Redemption and Cash  Dividends.  So long as any
Notes are outstanding, the Company shall not, directly or indirectly, redeem, or
declare or pay any cash  dividend or  distribution  on, the Common Stock without
the prior  express  written  consent of the Required  Holders (as defined in the
Notes).

            (k) Additional Notes;  Variable Securities;  Dilutive Issuances.  So
long as any Buyer beneficially owns any Securities,  the Company shall not issue
any other  securities that would cause a breach or default under the Notes.  For
long as any Notes or Warrants remain outstanding,  the Company shall not, in any
manner,  issue or sell any  rights,  warrants  or  options to  subscribe  for or
purchase Common Stock or directly or indirectly convertible into or exchangeable
or  exercisable  for Common  Stock at a price which  varies or may vary with the
market price of the Common  Stock,  including by way of one or more  reset(s) to
any fixed price unless the  conversion,  exchange or exercise  price of any such
security cannot be less than the then applicable Conversion Price (as defined in
the Notes) with respect to the Common  Stock into which any Note is  convertible
or the then applicable  Exercise Price (as defined in the Warrants) with respect
to the Common Stock into which any Warrant is exercisable. For long as any Notes
or Warrants remain outstanding, the Company shall not, in any manner, enter into
or affect any Dilutive  Issuance (as defined in the Notes) if the effect of such
Dilutive  Issuance  is to  cause  the  Company  to be  required  to  issue  upon
conversion  of any Note or exercise of any Warrant any shares of Common Stock in
excess of that number of shares of Common Stock which the Company may issue upon
conversion  of the Notes and  exercise of the  Warrants  without  breaching  the
Company's  obligations under the rules or regulations of the Eligible Market (as
defined in the Registration Rights Agreement). For long as any Notes or Warrants
remain outstanding, the Company shall not effect a reverse stock split of one or
more classes of the Company's Common Stock except for one reverse stock split of
the Common  Stock of the Company at a rate of one (1) share of Common  Stock for
each one and six tenths (1.6) shares of Common Stock outstanding.

                                     - 19 -
<PAGE>

            (l) Corporate Existence.  So long as any Buyer beneficially owns any
Securities,  the Company shall not be party to any  Fundamental  Transaction (as
defined in the Notes)  unless the Company is in compliance  with the  applicable
provisions  governing  Fundamental  Transactions  set forth in the Notes and the
Warrants.

            (m) Reservation of Shares. So long as any Buyer owns any Securities,
the Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance,  no less than 130% of the number of shares
of Common Stock  issuable upon  conversion of all of the Notes and issuable upon
exercise of the  Warrants  then  outstanding  (without  taking into  account any
limitations on the conversion of the Notes or exercise of the Warrants set forth
in the Notes and Warrants, respectively).

            (n)  Conduct  of  Business.  The  business  of the  Company  and its
Subsidiaries  shall not be  conducted  in  violation  of any law,  ordinance  or
regulation of any  governmental  entity,  except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.

            (o) Additional Issuances of Securities.

                  (i)  For  purposes  of  this  Section   4(o),   the  following
definitions shall apply.

                        (1)   "Convertible   Securities"   means  any  stock  or
      securities  (other  than  Options)  convertible  into  or  exercisable  or
      exchangeable for shares of Common Stock.

                        (2) "Options"  means any rights,  warrants or options to
      subscribe  for  or  purchase   shares  of  Common  Stock  or   Convertible
      Securities.

                        (3)  "Common  Stock  Equivalents"  means,  collectively,
      Options and Convertible Securities.

                  (ii) From the date  hereof  until the date that is sixty  (60)
Trading Days (as defined in the Notes)  following the Effective Date (as defined
in the  Registration  Rights  Agreement)  (the "Trigger  Date"),  except for the
issuance  Excluded  Securities  as defined in the Notes,  the Company  will not,
directly or indirectly,  offer, sell, grant any option to purchase, or otherwise
dispose of (or  announce  any offer,  sale,  grant or any option to  purchase or
other  disposition  of)  any  of  its  or its  Subsidiaries'  equity  or  equity
equivalent securities, including without limitation any debt, preferred stock or
other  instrument or security that is, at any time during its life and under any
circumstances,  convertible  into or  exchangeable  or exercisable for shares of
Common  Stock  or  Common  Stock  Equivalents  (any  such  offer,  sale,  grant,
disposition or announcement being referred to as a "Subsequent Placement").

                  (iii) From the  Trigger  Date until the later of (x)  eighteen
(18) months  following the Effective  Date and (y) the date on which none of the
Notes is outstanding,  the Company will not, directly or indirectly,  effect any
Subsequent  Placement  unless the Company  shall have first  complied  with this
Section 4(o)(iii).

                                     - 20 -
<PAGE>

                        (1)  The  Company   shall   deliver  to  each  Buyer  an
      irrevocable  written  notice  (the  "Offer  Notice")  of any  proposed  or
      intended  issuance or sale or  exchange  (the  "Offer") of the  securities
      being offered (the "Offered Securities") in a Subsequent Placement,  which
      Offer Notice shall (w) identify and describe the Offered  Securities,  (x)
      describe the price and other terms upon which they are to be issued,  sold
      or  exchanged,  and the number or amount of the Offered  Securities  to be
      issued, sold or exchanged, (y) identify the persons or entities (if known)
      to which or with which the Offered  Securities are to be offered,  issued,
      sold or exchanged and (z) offer to issue and sell to or exchange with such
      Buyers all of the  Offered  Securities,  allocated  among such  Buyers (a)
      based on such Buyer's pro rata portion of the aggregate  principal  amount
      of Notes purchased hereunder (the "Basic Amount"), and (b) with respect to
      each  Buyer that  elects to  purchase  its Basic  Amount,  any  additional
      portion of the Offered  Securities  attributable  to the Basic  Amounts of
      other  Buyers as such Buyer  shall  indicate  it will  purchase or acquire
      should the other Buyers  subscribe  for less than their Basic Amounts (the
      "Undersubscription Amount").

                        (2) To accept an Offer,  in whole or in part, such Buyer
      must deliver a written notice to the Company prior to the end of the fifth
      (5th)  Business  Day after such  Buyer's  receipt of the Offer Notice (the
      "Offer  Period"),  setting  forth the portion of such Buyer's Basic Amount
      that such Buyer  elects to  purchase  and,  if such Buyer  shall  elect to
      purchase all of its Basic Amount,  the  Undersubscription  Amount, if any,
      that such  Buyer  elects to  purchase  (in  either  case,  the  "Notice of
      Acceptance").  If the Basic Amounts  subscribed for by all Buyers are less
      than the total of all of the Basic  Amounts,  then each  Buyer who has set
      forth an  Undersubscription  Amount in its Notice of  Acceptance  shall be
      entitled to purchase, in addition to the Basic Amounts subscribed for, the
      Undersubscription Amount it has subscribed for; provided, however, that if
      the Undersubscription Amounts subscribed for exceed the difference between
      the total of all the Basic  Amounts and the Basic Amounts  subscribed  for
      (the "Available  Undersubscription Amount"), each Buyer who has subscribed
      for any  Undersubscription  Amount shall be entitled to purchase only that
      portion of the Available  Undersubscription  Amount as the Basic Amount of
      such  Buyer  bears to the total  Basic  Amounts  of all  Buyers  that have
      subscribed  for  Undersubscription  Amounts,  subject to  rounding  by the
      Company to the extent its deems reasonably necessary,  which process shall
      be repeated  until the Buyers shall have an  opportunity  to subscribe for
      any remaining Undersubscription Amount.

                        (3) The Company  shall have twenty  (20)  Business  Days
      from the  expiration  of the Offer Period above to offer,  issue,  sell or
      exchange all or any part of such Offered  Securities  as to which a Notice
      of Acceptance has not been given by the Buyers (the "Refused Securities"),
      but only to the  offerees  described  in the Offer Notice (if so described
      therein)  and  only  upon  terms  and   conditions   (including,   without
      limitation, unit prices and interest rates) that are not more favorable to
      the  acquiring  person or persons or less  favorable  to the Company  than
      those set forth in the Offer Notice.

                                     - 21 -
<PAGE>

                        (4) In the event the Company  shall propose to sell less
      than all the Refused  Securities (any such sale to be in the manner and on
      the terms specified in Section  4(o)(iii)(3)  above), then each Buyer may,
      at its sole option and in its sole discretion, reduce the number or amount
      of the Offered  Securities  specified  in its Notice of  Acceptance  to an
      amount  that  shall be not less than the  number or amount of the  Offered
      Securities  that such  Buyer  elected  to  purchase  pursuant  to  Section
      4(o)(iii)(2)  above  multiplied by a fraction,  (i) the numerator of which
      shall be the number or amount of Offered  Securities the Company  actually
      proposes to issue, sell or exchange  (including  Offered  Securities to be
      issued or sold to Buyers pursuant to Section  4(o)(iii)(3)  above prior to
      such  reduction)  and (ii) the  denominator of which shall be the original
      amount of the Offered Securities. In the event that any Buyer so elects to
      reduce the number or amount of Offered Securities  specified in its Notice
      of Acceptance,  the Company may not issue,  sell or exchange more than the
      reduced number or amount of the Offered  Securities  unless and until such
      securities  have again  been  offered  to the  Buyers in  accordance  with
      Section 4(o)(iii)(1) above.

                        (5) Upon the closing of the  issuance,  sale or exchange
      of all or less  than  all of the  Refused  Securities,  the  Buyers  shall
      acquire from the Company,  and the Company shall issue to the Buyers,  the
      number  or  amount of  Offered  Securities  specified  in the  Notices  of
      Acceptance,  as  reduced  pursuant  to Section  4(o)(iii)(4)  above if the
      Buyers have so elected,  upon the terms and  conditions  specified  in the
      Offer. The purchase by the Buyers of any Offered  Securities is subject in
      all cases to the  preparation,  execution  and delivery by the Company and
      the Buyers of a purchase  agreement  relating to such  Offered  Securities
      reasonably  satisfactory  in form and  substance  to the  Buyers and their
      respective counsel.  Notwithstanding anything to the contrary contained in
      this  Agreement,  if the Company  does not  consummate  the closing of the
      issuance,  sale  or  exchange  of  all or  less  than  all of the  Refused
      Securities,  within ten (10) Business Days of the  expiration of the Offer
      Period,  the Company  shall  issue to the Buyers,  the number or amount of
      Offered  Securities  specified  in the Notices of  Acceptance,  as reduced
      pursuant to Section 4(o)(iii)(4) above if the Buyers have so elected, upon
      the terms and conditions specified in the Offer.

                        (6) Any Offered Securities not acquired by the Buyers or
      other persons in  accordance  with Section  4(o)(iii)(3)  above may not be
      issued, sold or exchanged until they are again offered to the Buyers under
      the procedures specified in this Agreement.

                  (iv) The restrictions  contained in subsections (ii) and (iii)
of this  Section  4(o) shall not apply in  connection  with the  issuance of any
Excluded Securities (as defined in the Notes).

                                     - 22 -
<PAGE>

            (p)  Stockholder  Approval.  The Company shall file with the SEC and
provide each stockholder of the Company with an information  statement complying
with the requirements of the Exchange Act and substantially in the form that has
been previously reviewed and approved by Smithfield and Schulte Roth & Zabel LLP
at the expense of the Company  informing such  stockholders of the actions taken
in accordance with the Resolutions and of the Stockholder  Approval. On or prior
to the first  Business  Day  following  the  effective  date of the  Stockholder
Approval, the Company shall file the Certificate of Incorporation Amendment with
the  Secretary of State of Delaware  (the date such filing has been  accepted by
the Secretary of State of Delaware,  the "Amendment  Date").  In addition to the
foregoing,  if required by any  governmental or regulatory  agency,  the Company
shall provide each  stockholder  entitled to vote at a special or annual meeting
of  stockholders  of the Company (the  "Stockholder  Meeting"),  which initially
shall be promptly called and held not later than (x) in the event the applicable
proxy  statement  is not reviewed by the SEC,  June 15, 2006 and (y)  otherwise,
July 15, 2006 (the  "Stockholder  Meeting  Deadline" and the actual date of such
meeting,  the "Stockholder  Meeting Date"), a proxy statement,  substantially in
the form which has been  previously  reviewed and approved by the Buyers and one
counsel of their  choice at the  expense of the  Company,  soliciting  each such
stockholder's  affirmative  vote  at the  Stockholder  Meeting  for  Stockholder
Approval  of  the  Resolutions   (the  date  such  approval  is  obtained,   the
"Stockholder  Approval  Date"),  and the Company shall use its  reasonable  best
efforts to solicit its  stockholders'  approval of the  Resolutions and to cause
the Board to recommend to the  stockholders  that they approve the  Resolutions.
The Company  shall be obligated to seek to obtain such  Stockholder  Approval by
the  Stockholder  Meeting  Deadline.  If, despite the Company's best efforts the
Stockholder  Approval  is not  obtained on or prior to the  Stockholder  Meeting
Deadline,  the Company shall cause an additional  Stockholder Meeting to be held
each calendar  quarter  thereafter (or such longer period as is necessary to the
extent of SEC comments on any proxy statement)  until such Stockholder  Approval
is obtained.

      5.    REGISTER; TRANSFER AGENT INSTRUCTIONS.

            (a) Register.  The Company shall maintain at its principal executive
offices (or such other  office or agency of the Company as it may  designate  by
notice to each holder of Securities),  a register for the Notes and the Warrants
in which the  Company  shall  record the name and address of the Person in whose
name the Notes and the Warrants have been issued (including the name and address
of each  transferee),  the  principal  amount of Notes held by such Person,  the
number of  Conversion  Shares  issuable upon  conversion  of the Notes,  and the
Warrant Shares issuable upon exercise of the Warrants,  held by such Person. The
Company shall keep the register open and available at all times during  business
hours for inspection of any Buyer or its legal representatives.

            (b) Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent  transfer agent, to issue
certificates  or  credit  shares  to  the  applicable  balance  accounts  at The
Depository  Trust Company  ("DTC"),  registered in the name of each Buyer or its
respective  nominee(s),  for the Common  Shares  issued at the  Closing  and the
Conversion  Shares and the Warrant Shares issued upon conversion of the Notes or
exercise of the Warrants in such amounts as specified  from time to time by each
Buyer to the Company upon conversion of the Notes or exercise of the Warrants in
the  form  of  Exhibit  G  attached  hereto  (the  "Irrevocable  Transfer  Agent
Instructions").  The  Company  warrants  that  no  instruction  other  than  the
Irrevocable  Transfer Agent  Instructions  referred to in this Section 5(b), and
stop transfer  instructions to give effect to Section 2(g) hereof, will be given
by the Company to its transfer agent, and that the Securities shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided  in this  Agreement  and the other  Transaction  Documents.  If a Buyer
effects a sale,  assignment or transfer of the  Securities  in  accordance  with
Section 2(f), the Company shall permit the transfer and shall promptly  instruct
its transfer  agent to issue one or more  certificates  or credit  shares to the
applicable  balance  accounts at DTC in such name and in such  denominations  as
specified  by such Buyer to effect  such sale,  transfer or  assignment.  In the
event that such sale, assignment or transfer involves Common Shares,  Conversion
Shares or Warrant Shares sold, assigned or transferred  pursuant to an effective
registration  statement or pursuant to Rule 144, the transfer  agent shall issue
such  Securities  to the  Buyer,  assignee  or  transferee,  as the case may be,
without any restrictive legend.

                                     - 23 -
<PAGE>

            (c)  Breach.  The  Company  acknowledges  that a breach by it of its
obligations hereunder will cause irreparable harm to a Buyer.  Accordingly,  the
Company  acknowledges  that the  remedy at law for a breach  of its  obligations
under this Section 5 will be inadequate and agrees,  in the event of a breach or
threatened  breach by the Company of the  provisions  of this  Section 5, that a
Buyer shall be  entitled,  in addition to all other  available  remedies,  to an
order and/or injunction  restraining any breach and requiring immediate issuance
and  transfer,  without the  necessity of showing  economic loss and without any
bond or other security being required.

            (d) Additional  Relief. If the Company shall fail for any reason (or
for no  reason)  to issue to a holder  unlegended  certificates  or credit  such
holder's  balance  account  with DTC for the  number of  shares of  unrestricted
Common  Stock to which such holder is entitled  within five (5) Trading Days (as
defined in the  Notes)  (the  "Share  Delivery  Date") of  receipt of  documents
necessary  for the  removal  of  legend  set  forth  above  (a  "Share  Delivery
Failure"),  then the  Company  shall pay damages to such holder for each date of
such Share Delivery Failure in an amount equal to 2.0% of the product of (I) the
sum of the number of shares of Common  Stock  requested  by such  holder to have
legends  removed  and not issued  without  legends to such holder or credited to
such holder's  balance  account with DTC on or prior to the Share  Delivery Date
and to which  such  holder is  entitled,  and (II) the  Closing  Sale  Price (as
defined in the Notes) of the Common  Stock on the Share  Delivery  Date.  If the
Company  shall fail for any  reason  (or for no reason) to issue to such  holder
unlegended  certificates or credit the Holder's balance account with DTC for the
number of shares of Common  Stock to which the Holder is entitled  within  three
(3) Trading Days of receipt of documents necessary for the removal of legend set
forth above (the  "Deadline  Date"),  then,  in  addition to all other  remedies
available to the holder,  if on or after such Trading Day, the holder  purchases
(in an open market  transaction or otherwise)  shares of Common Stock to deliver
in  satisfaction  of a sale by the  holder of shares  of Common  Stock  that the
holder  anticipated  receiving  from the Company (a "Buy-In"),  then the Company
shall,  within  three (3)  Trading  Days after the  holder's  request and in the
holder's discretion, either (i) pay cash to the holder in an amount equal to the
holder's total purchase price (including brokerage commissions,  if any) for the
shares of Common Stock so purchased  (the  "Buy-In  Price"),  at which point the
Company's  obligation to deliver such  certificate  (and to issue such shares of
Common Stock) shall terminate,  or (ii) promptly honor its obligation to deliver
to the holder a certificate or certificates  representing  such shares of Common
Stock and pay cash to the  holder in an amount  equal to the  excess (if any) of
the Buy-In Price over the product of (A) such number of shares of Common  Stock,
times (B) the Closing Bid Price on the Deadline Date.

      6.    CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.

            The obligation of the Company hereunder to issue and sell the Notes,
the  Common  Shares and the  related  Warrants  to each Buyer at the  Closing is
subject to the  satisfaction,  at or before  the  Closing  Date,  of each of the
following conditions,  provided that these conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole  discretion  by
providing each Buyer with prior written notice thereof:

                                     - 24 -
<PAGE>

                  (i) Such Buyer  shall have  executed  each of the  Transaction
Documents to which it is a party and delivered the same to the Company.

                  (ii) Such Buyer and each other Buyer shall have  delivered  to
the Company the Purchase  Price (less,  in the case of  Smithfield,  the amounts
withheld  pursuant  to Section  4(g)) for the Notes,  the Common  Shares and the
related  Warrants being  purchased by such Buyer at the Closing by wire transfer
of immediately available funds pursuant to the wire instructions provided by the
Company.

                  (iii) The  representations  and warranties of such Buyer shall
be true and correct in all material  respects as of the date when made and as of
the Closing  Date as though made at that time  (except for  representations  and
warranties  that  speak as of a  specific  date),  and  such  Buyer  shall  have
performed,  satisfied and complied in all material  respects with the covenants,
agreements and conditions required by this Agreement to be performed,  satisfied
or complied with by such Buyer at or prior to the Closing Date.

      7.    CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.

            The  obligation of each Buyer  hereunder to purchase the Notes,  the
related Common Shares and the related  Warrants at the Closing is subject to the
satisfaction,  at  or  before  the  Closing  Date,  of  each  of  the  following
conditions, provided that these conditions are for each Buyer's sole benefit and
may be waived by such Buyer at any time in its sole  discretion by providing the
Company with prior written notice thereof:

                  (i) The Company  shall have  executed  and  delivered  to such
Buyer (A) each of the Transaction  Documents applicable to it, (B) the Notes (in
such  principal  amounts as such Buyer shall  request)  being  purchased by such
Buyer at the Closing pursuant to this Agreement,  (C) the Common Shares (in such
amounts  as such  Buyer  shall  request)  being  purchased  by such Buyer at the
Closing pursuant to this Agreement and (C) the Warrants (in such amounts as such
Buyer shall  request) being  purchased by such Buyer at the Closing  pursuant to
this Agreement.

                  (ii) Such Buyer shall have  received the opinions of Sichenzia
Ross  Friedman  Ference  LLP, the  Company's  outside  counsel,  dated as of the
Closing Date, in substantially the form of Exhibit H-1 attached hereto.

                  (iii)  Such Buyer  shall have  received  the  opinions  of Dr.
Gyorgy  Kratochwill,  the Company's outside Hungarian  counsel,  dated as of the
Closing Date, in substantially the form of Exhibit H-2 attached hereto.

                  (iv) The Company shall have  delivered to such Buyer a copy of
the Irrevocable  Transfer Agent Instructions,  in the form of Exhibit G attached
hereto,  which  instructions  shall have been delivered to and  acknowledged  in
writing by the Company's transfer agent.

                                     - 25 -
<PAGE>

                  (v)  The  Company  shall  have   delivered  to  such  Buyer  a
certificate  evidencing  the formation and good standing of the Company and each
of its  Subsidiaries in such entity's  jurisdiction  of formation  issued by the
Secretary of State (or  comparable  office) of such  jurisdiction,  as of a date
within 10 days of the Closing Date.

                  (vi)  The  Company  shall  have  delivered  to  such  Buyer  a
certificate evidencing the Company's  qualification as a foreign corporation and
good standing  issued by the Secretary of State (or  comparable  office) of each
jurisdiction in which the Company conducts business, as of a date within 10 days
of the Closing Date.

                  (vii)  The  Company  shall  have  delivered  to  such  Buyer a
certified copy of the Certificate of Incorporation as certified by the Secretary
of State of the State of Delaware within ten (10) days of the Closing Date.

                  (viii)  The  Company  shall  have  delivered  to such  Buyer a
certificate,  executed  by the  Secretary  of the  Company  and  dated as of the
Closing Date, as to (i) the resolutions  consistent with Section 3(b) as adopted
by the  Company's  Board of Directors in a form  reasonably  acceptable  to such
Buyer,  (ii) the Certificate of Incorporation  and (iii) the Bylaws,  each as in
effect at the Closing, in the form attached hereto as Exhibit I.

                  (ix) The  representations  and warranties of the Company shall
be true and  correct  as of the date  when  made and as of the  Closing  Date as
though made at that time (except for  representations  and warranties that speak
as of a specific  date) and the  Company  shall have  performed,  satisfied  and
complied in all respects with the covenants,  agreements and conditions required
by the Transaction Documents to be performed,  satisfied or complied with by the
Company  at or prior to the  Closing  Date.  Such Buyer  shall  have  received a
certificate, executed by the Chief Executive Officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer in the form attached hereto as Exhibit J.

                  (x) The  Company  shall  have  delivered  to such  Buyer  duly
executed  Voting  Agreements  from The Rubin Family  Irrevocable  Trust,  Laszlo
Farkas,  Nagyezsda  Kiss,  Zoltan Kiss,  Joseph Gregory Kiss and Maria Gabriella
Kiss, in the form attached hereto as Exhibit K (the "Voting Agreements").

                  (xi) The Company shall have  delivered to such Buyer  executed
Resolutions in the form attached  hereto as Exhibit L authorizing  the Company's
filing  with  the  Secretary  of  State  of  Delaware  of the  amendment  to the
Certificate of Incorporation in the form attached hereto as Exhibit M.

                  (xii) The Company shall have  delivered to such Buyer a letter
from the  Company's  transfer  agent  certifying  the number of shares of Common
Stock outstanding as of a date within five days of the Closing Date.

                  (xiii) The Common Stock (I) shall be designated  for quotation
or listed on the Principal Market and (II) shall not have been suspended,  as of
the  Closing  Date,  by the SEC or the  Principal  Market  from  trading  on the
Principal  Market nor shall  suspension by the SEC or the Principal  Market have
been threatened, as of the Closing Date, either (A) in writing by the SEC or the
Principal  Market  or (B) by  falling  below  the  minimum  listing  maintenance
requirements of the Principal Market.

                                     - 26 -
<PAGE>

                  (xiv)  The  Company  shall  have  obtained  all  governmental,
regulatory or third party consents and approvals, if any, necessary for the sale
of the Securities.

                  (xv) In accordance  with the terms of the Security  Documents,
the Company  shall have  delivered  to the  Collateral  Agent (as defined in the
Pledge and  Security  Agreement)  certificates  representing  the  Subsidiaries'
shares of capital stock, along with duly executed blank stock powers.

                  (xvi) Within six (6) Business  Days prior to the Closing,  the
Company  shall  have  delivered  or caused  to be  delivered  to each  Buyer (A)
certified  copies  of  UCC  search  results,  listing  all  effective  financing
statements which name as debtor the Company or any of its Subsidiaries  filed in
the prior five years to perfect an interest in any assets thereof, together with
copies of such financing  statements,  none of which, except as otherwise agreed
in writing by the Buyers,  shall cover any of the  Collateral (as defined in the
Security  Documents)  and the results of searches  for any tax lien and judgment
lien  filed  against  such  Person or its  property,  which  results,  except as
otherwise  agreed to in writing by the Buyers  shall not show any such Liens (as
defined in the  Security  Documents);  and (B) a  perfection  certificate,  duly
completed and executed by the Company and each of its Subsidiaries,  in form and
substance satisfactory to the Buyers.

                  (xvii) The  Company  shall have  delivered  to such Buyer such
other documents  relating to the transactions  contemplated by this Agreement as
such Buyer or its counsel may reasonably request.

                  (xviii)  The  Acquisitioin  shall  have  been  consummated  in
accordance with the terms of the Acquisition Agreement.

      8.    TERMINATION. In the  event that  the Closing shall not have occurred
with respect to a Buyer on or before five (5) Business Days from the date hereof
due to the Company's or such Buyer's failure to satisfy the conditions set forth
in Sections 6 and 7 above (and the  nonbreaching party's  failure  to waive such
unsatisfied  condition(s)),  the  nonbreaching  party  shall  have the option to
terminate this  Agreement  with respect to such breaching  party at the close of
business  on such  date  without  liability  of any  party to any  other  party;
provided, however, this if this Agreement is terminated pursuant to this Section
8, the Company shall remain obligated to reimburse the non-breaching  Buyers for
the expenses described in Section 4(g) above.

      9.    MISCELLANEOUS.

            (a)  Governing  Law;   Jurisdiction;   Jury  Trial.   All  questions
concerning the construction,  validity,  enforcement and  interpretation of this
Agreement  shall be  governed  by the  internal  laws of the  State of New York,
without  giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other  jurisdictions)  that would cause
the  application  of the laws of any  jurisdictions  other than the State of New
York. Each party hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in The City of New York,  Borough of Manhattan,
for the adjudication of any dispute hereunder or in connection  herewith or with
any transaction  contemplated hereby or discussed herein, 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 brought in an inconvenient  forum or that the
venue of such  suit,  action  or  proceeding  is  improper.  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 to such
party at the address for such 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. EACH PARTY HEREBY  IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE,  AND AGREES NOT TO  REQUEST,  A JURY TRIAL FOR THE
ADJUDICATION  OF ANY DISPUTE  HEREUNDER OR IN CONNECTION  WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

                                     - 27 -
<PAGE>

            (b)  Counterparts.  This  Agreement  may be  executed in two or more
identical  counterparts,  all of  which  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;  provided  that a facsimile  signature
shall be  considered  due  execution  and shall be  binding  upon the  signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.

            (c) Headings.  The headings of this Agreement are for convenience of
reference  and shall not form part of, or affect  the  interpretation  of,  this
Agreement.

            (d)  Severability.  If any  provision  of this  Agreement  shall  be
invalid   or   unenforceable   in   any   jurisdiction,   such   invalidity   or
unenforceability  shall  not  affect  the  validity  or  enforceability  of  the
remainder  of  this   Agreement  in  that   jurisdiction   or  the  validity  or
enforceability of any provision of this Agreement in any other jurisdiction.

            (e)  Entire  Agreement;  Amendments.  This  Agreement  and the other
Transaction  Documents  supersede  all other  prior oral or  written  agreements
between the Buyers,  the Company,  their  affiliates and Persons acting on their
behalf with respect to the matters  discussed  herein,  and this Agreement,  the
other  Transaction  Documents and the instruments  referenced herein and therein
contain  the entire  understanding  of the parties  with  respect to the matters
covered  herein and therein  and,  except as  specifically  set forth  herein or
therein,  neither the Company nor any Buyer makes any representation,  warranty,
covenant or  undertaking  with  respect to such  matters.  No  provision of this
Agreement may be amended  other than by an  instrument in writing  signed by the
Company  and the  holders  of at least a  majority  of the  aggregate  number of
Registrable Securities issued and issuable hereunder; provided, however that any
such holders of Registrable  Securities must include the Collateral  Agent,  and
any amendment to this Agreement  made in conformity  with the provisions of this
Section  9(e)  shall be binding on all  Buyers  and  holders of  Securities,  as
applicable.  No provision  hereof may be waived other than by an  instrument  in
writing  signed  by the  party  against  whom  enforcement  is  sought.  No such
amendment  shall be  effective to the extent that it applies to less than all of
the holders of the applicable  Securities  then  outstanding.  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  also is  offered to all of the  parties to the  Transaction
Documents,  holders  of Notes,  holders  of  Common  Shares  or  holders  of the
Warrants, as the case may be. The Company has not, directly or indirectly,  made
any  agreements  with any  Buyers  relating  to the terms or  conditions  of the
transactions  contemplated by the Transaction  Documents  except as set forth in
the Transaction Documents.

                                     - 28 -
<PAGE>

            (f) Notices. Any notices,  consents, waivers or other communications
required or permitted to be given under the terms of this  Agreement  must be in
writing  and will be deemed  to have  been  delivered:  (i) upon  receipt,  when
delivered  personally;  (ii)  upon  receipt,  when sent by  facsimile  (provided
confirmation of transmission  is  mechanically or  electronically  generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
an overnight  courier service,  in each case properly  addressed to the party to
receive the same.  The addresses and facsimile  numbers for such  communications
shall be:

                           If to the Company:

                                    American United Global, Inc.
                                    108 Village Square #327
                                    Somers, New York 10589
                                    Telephone: 425-869-7410
                                    Facsimile: 631-254-2136
                                    Attention: Robert Rubin, CEO

                           Copy to:

                                    Sichenzia Ross Friedman Ference LLP
                                    1065 Avenue of the Americas, 21st Floor

                                    New York, New York  10018
                                    Telephone: 212-930-9700
                                    Facsimile: 212-930-9725
                                    Attention: Richard A. Friedman, Esq.

                           If to the Transfer Agent:

                                    Corporate Stock Transfer
                                    3200 Cherry Creek Drive South
                                    Suite 430
                                    Denver, Colorado  80209
                                    Telephone: 303-282-4800
                                    Facsimile: 303-282-5800
                                    Attention: Carylyn K. Bell, President

If to a Buyer, to its address and facsimile  number set forth on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers,

                                     - 29 -
<PAGE>

                           with a copy (for informational purposes only) to:

                                    Schulte Roth & Zabel LLP
                                    919 Third Avenue
                                    New York, New York  10022
                                    Telephone:       (212) 756-2000
                                    Facsimile:       (212) 593-5955
                                    Attention:       Eleazer N. Klein, Esq.

or to such other address and/or facsimile number and/or to the attention of such
other Person as the  recipient  party has  specified by written  notice given to
each  other  party  five (5) days  prior to the  effectiveness  of such  change.
Written  confirmation  of receipt  (A) given by the  recipient  of such  notice,
consent,  waiver or other  communication,  (B)  mechanically  or  electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile  number  and an image of the first  page of such  transmission  or (C)
provided  by an  overnight  courier  service  shall be  rebuttable  evidence  of
personal  service,  receipt by facsimile  or receipt  from an overnight  courier
service in accordance with clause (i), (ii) or (iii) above, respectively.

            (g) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including  any  purchasers  of the Notes,  Common  Shares or the  Warrants.  The
Company shall not assign this Agreement or any rights or  obligations  hereunder
without the prior  written  consent of the holders of at least a majority of the
aggregate  number of  Registrable  Securities  issued  and  issuable  hereunder,
including  by  way  of a  Fundamental  Transaction  (unless  the  Company  is in
compliance with the applicable provisions governing Fundamental Transactions set
forth in the Notes, the Common Shares and the Warrants);  provided, however that
any such holders of Registrable  Securities must include the Collateral Agent. A
Buyer may assign some or all of its rights hereunder  without the consent of the
Company,  in which event such assignee  shall be deemed to be a Buyer  hereunder
with respect to such assigned rights.

            (h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties  hereto and their  respective  permitted  successors  and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.

            (i) Survival.  Unless this Agreement is terminated  under Section 8,
the  representations  and warranties of the Company and the Buyers  contained in
Sections 2 and 3 and the agreements and covenants set forth in Sections 4, 5 and
9 shall survive the Closing.  Each Buyer shall be  responsible  only for its own
representations, warranties, agreements and covenants hereunder.

            (j) Further Assurances. Each party shall do and perform, or cause to
be done and performed,  all such further acts and things,  and shall execute and
deliver all such other agreements,  certificates,  instruments and documents, as
any other  party may  reasonably  request  in order to carry out the  intent and
accomplish  the  purposes  of  this  Agreement  and  the   consummation  of  the
transactions contemplated hereby.

                                     - 30 -
<PAGE>

            (k) Indemnification.  In consideration of each Buyer's execution and
delivery of the  Transaction  Documents and acquiring the Securities  thereunder
and in addition to all of the Company's other  obligations under the Transaction
Documents,  the Company shall defend, protect,  indemnify and hold harmless each
Buyer and each other  holder of the  Securities  and all of their  stockholders,
partners,  members,  officers,  directors,  employees  and  direct  or  indirect
investors  and any of the  foregoing  Persons'  agents or other  representatives
(including,   without   limitation,   those  retained  in  connection  with  the
transactions contemplated by this Agreement)  (collectively,  the "Indemnitees")
from and against any and all actions,  causes of action, suits, claims,  losses,
costs,  penalties,  fees,  liabilities  and damages,  and expenses in connection
therewith  (irrespective of whether any such Indemnitee is a party to the action
for  which  indemnification  hereunder  is  sought),  and  including  reasonable
attorneys' fees and disbursements (the "Indemnified  Liabilities"),  incurred by
any  Indemnitee  as a result  of,  or  arising  out of, or  relating  to (a) any
misrepresentation  or  breach  of any  representation  or  warranty  made by the
Company  or  Kraft  in  the  Transaction  Documents  or any  other  certificate,
instrument  or document  contemplated  hereby or thereby,  (b) any breach of any
covenant,  agreement  or  obligation  of the Company or Kraft  contained  in the
Transaction   Documents  or  any  other  certificate,   instrument  or  document
contemplated hereby or thereby or (c) any cause of action, suit or claim brought
or made against such Indemnitee by a third party (including for these purposes a
derivative  action  brought  on behalf of the  Company)  and  arising  out of or
resulting  from (i) the execution,  delivery,  performance or enforcement of the
Transaction   Documents  or  any  other  certificate,   instrument  or  document
contemplated hereby or thereby,  (ii) any transaction financed or to be financed
in whole or in part,  directly or indirectly,  with the proceeds of the issuance
of the  Securities,  (iii) any disclosure made by such Buyer pursuant to Section
4(i),  or (iv) the  status  of such  Buyer or  holder  of the  Securities  as an
investor  in the  Company  pursuant  to  the  transactions  contemplated  by the
Transaction  Documents.  To the extent  that the  foregoing  undertaking  by the
Company may be unenforceable for any reason,  the Company shall make the maximum
contribution  to the  payment  and  satisfaction  of  each  of  the  Indemnified
Liabilities  which is permissible  under applicable law. Except as otherwise set
forth  herein,  the  mechanics  and  procedures  with  respect to the rights and
obligations  under  this  Section  9(k)  shall be the same as those set forth in
Section 6 of the Registration Rights Agreement.

            (l) No Strict  Construction.  The language  used in the  Transaction
Documents  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.

            (m)  Remedies.  Each Buyer and each holder of the  Securities  shall
have all rights and  remedies  set forth in the  Transaction  Documents  and all
rights and  remedies  which such holders have been granted at any time under any
other  agreement or contract and all of the rights which such holders have under
any law.  Any Person  having any rights under any  provision  of this  Agreement
shall be entitled to enforce such rights specifically (without posting a bond or
other security),  to recover damages by reason of any breach of any provision of
this Agreement and to exercise all other rights granted by law. Furthermore, the
Company  recognizes  that in the event  that it fails to  perform,  observe,  or
discharge any or all of its  obligations  under the Transaction  Documents,  any
remedy  at law may prove to be  inadequate  relief to the  Buyers.  The  Company
therefore  agrees  that the  Buyers  shall be  entitled  to seek  temporary  and
permanent  injunctive  relief in any such case without the  necessity of proving
actual damages and without posting a bond or other security.

                                     - 31 -
<PAGE>

            (n)  Payment  Set Aside.  To the  extent  that the  Company  makes a
payment or  payments  to the Buyers  hereunder  or  pursuant to any of the other
Transaction  Documents or the Buyers enforce or exercise their rights  hereunder
or 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, foreign,  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.

            (o)  Independent  Nature of  Buyers'  Obligations  and  Rights.  The
obligations  of each Buyer under any  Transaction  Document  are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the  performance of the  obligations of any other Buyer under any
Transaction  Document.  Nothing  contained  herein or in any  other  Transaction
Document,  and no action taken by any Buyer pursuant hereto or thereto, shall be
deemed to  constitute  the  Buyers as a  partnership,  an  association,  a joint
venture or any other kind of entity, or create a presumption that the Buyers 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 Buyer confirms
that it has  independently  participated  in the  negotiation of the transaction
contemplated hereby with the advice of its own counsel and advisors. Each Buyer,
other than  Smithfield,  acknowledges  that (i) Schulte  Roth & Zabel LLP solely
represented  Smithfield in connection with the transaction  contemplated  hereby
and (ii)  Smithfield did not provide any advice in connection  herewith and such
Buyer's  determination  to  participate  herein  was  based  solely  on its  own
evaluation of the risks and merits of the investment  contemplated  hereby. Each
Buyer  shall be  entitled  to  independently  protect  and  enforce  its rights,
including,  without limitation,  the rights arising out of this Agreement or out
of any other Transaction Documents,  and it shall not be necessary for any other
Buyer to be joined as an additional party in any proceeding for such purpose.

                            [Signature Page Follows]

                                     - 32 -
<PAGE>

      IN  WITNESS  WHEREOF,  each  Buyer  and  the  Company  have  caused  their
respective  signature  page to this  Securities  Purchase  Agreement  to be duly
executed as of the date first written above.

                                            COMPANY:

                                            AMERICAN UNITED GLOBAL, INC.

                                            By: ________________________________
                                                Name:
                                                Title:

<PAGE>

      IN  WITNESS  WHEREOF,  each  Buyer  and  the  Company  have  caused  their
respective  signature  page to this  Securities  Purchase  Agreement  to be duly
executed as of the date first written above.

                                            BUYERS:

                                            SMITHFIELD FIDUCIARY LLC

                                            By: ________________________________
                                                Name:
                                                Title:

<PAGE>

      IN  WITNESS  WHEREOF,  each  Buyer  and  the  Company  have  caused  their
respective  signature  page to this  Securities  Purchase  Agreement  to be duly
executed as of the date first written above.

                                            OTHER BUYERS:

                                            IROQUOIS MASTER FUND, LTD.

                                            By: ________________________________
                                                Name:
                                                Title:

<PAGE>

      IN  WITNESS  WHEREOF,  each  Buyer  and  the  Company  have  caused  their
respective  signature  page to this  Securities  Purchase  Agreement  to be duly
executed as of the date first written above.

                                            OTHER BUYERS:

                                            LILAC VENTURES MASTER FUND, LIMITED

                                            By: ________________________________
                                                Name:
                                                Title:

<PAGE>

      IN  WITNESS  WHEREOF,  each  Buyer  and  the  Company  have  caused  their
respective  signature  page to this  Securities  Purchase  Agreement  to be duly
executed as of the date first written above.

                                            OTHER BUYERS:

                                            CRANSHIRE CAPITAL, L.P

                                            By: ________________________________
                                                Name:
                                                Title:

<PAGE>

      IN  WITNESS  WHEREOF,  each  Buyer  and  the  Company  have  caused  their
respective  signature  page to this  Securities  Purchase  Agreement  to be duly
executed as of the date first written above.

                                            OTHER BUYERS:

                                            GRACE BROTHERS, LTD.

                                            By: ________________________________
                                                Name:
                                                Title:

<PAGE>

      IN  WITNESS  WHEREOF,  each  Buyer  and  the  Company  have  caused  their
respective  signature  page to this  Securities  Purchase  Agreement  to be duly
executed as of the date first written above.

                                            OTHER BUYERS:

                                            RAQ, LLC

                                            By: ________________________________
                                                Name:
                                                Title:

<PAGE>

      IN  WITNESS  WHEREOF,  each  Buyer  and  the  Company  have  caused  their
respective  signature  page to this  Securities  Purchase  Agreement  to be duly
executed as of the date first written above.

                                            OTHER BUYERS:

                                            PARAGON CAPITAL, LP

                                            By: ________________________________
                                                Name:
                                                Title:

<PAGE>

      IN  WITNESS  WHEREOF,  each  Buyer  and  the  Company  have  caused  their
respective  signature  page to this  Securities  Purchase  Agreement  to be duly
executed as of the date first written above.

                                            OTHER BUYERS:

                                            NITE CAPITAL L.P.

                                            By: ________________________________
                                                Name:
                                                Title:

<PAGE>

      IN  WITNESS  WHEREOF,  each  Buyer  and  the  Company  have  caused  their
respective  signature  page to this  Securities  Purchase  Agreement  to be duly
executed as of the date first written above.

                                            OTHER BUYERS:

                                            ALPHA CAPITAL AKTIENGESELLSCHAFT

                                            By: ________________________________
                                                Name:
                                                Title:

<PAGE>

      IN  WITNESS  WHEREOF,  each  Buyer  and  the  Company  have  caused  their
respective  signature  page to this  Securities  Purchase  Agreement  to be duly
executed as of the date first written above.

                                            OTHER BUYERS:

                                            BN VENTURES LLC

                                            By: ________________________________
                                                Name:
                                                Title:

<PAGE>

      IN  WITNESS  WHEREOF,  each  Buyer  and  the  Company  have  caused  their
respective  signature  page to this  Securities  Purchase  Agreement  to be duly
executed as of the date first written above.

                                            OTHER BUYERS:

                                            BRISTOL INVESTMENT FUND, LTD.

                                            By: ________________________________
                                                Name:
                                                Title:

<PAGE>

      IN  WITNESS  WHEREOF,  each  Buyer  and  the  Company  have  caused  their
respective  signature  page to this  Securities  Purchase  Agreement  to be duly
executed as of the date first written above.

                                            OTHER BUYERS:

                                            GLOBAL HUNTER HOLDINGS, L.P

                                            By: ________________________________
                                                Name:
                                                Title:

<PAGE>

      IN  WITNESS  WHEREOF,  each  Buyer  and  the  Company  have  caused  their
respective  signature  page to this  Securities  Purchase  Agreement  to be duly
executed as of the date first written above.

                                            OTHER BUYERS:

                                            HUDSON BAY FUND LP

                                            By: ________________________________
                                                Name:
                                                Title:

<PAGE>

      IN  WITNESS  WHEREOF,  each  Buyer  and  the  Company  have  caused  their
respective  signature  page to this  Securities  Purchase  Agreement  to be duly
executed as of the date first written above.

                                            OTHER BUYERS:

                                            RONALD HART

                                            By: ________________________________
                                                Name:
                                                Title:

<PAGE>

      IN  WITNESS  WHEREOF,  each  Buyer  and  the  Company  have  caused  their
respective  signature  page to this  Securities  Purchase  Agreement  to be duly
executed as of the date first written above.

                                            OTHER BUYERS:

                                            KUEKENHOF EQUITY FUND, L.P.

                                            By: ________________________________
                                                Name:
                                                Title:

<PAGE>

      IN  WITNESS  WHEREOF,  each  Buyer  and  the  Company  have  caused  their
respective  signature  page to this  Securities  Purchase  Agreement  to be duly
executed as of the date first written above.

                                            OTHER BUYERS:

                                            SIMON HALEGOUA

                                            By: ________________________________
                                                Name:
                                                Title:

<PAGE>

      IN  WITNESS  WHEREOF,  each  Buyer  and  the  Company  have  caused  their
respective  signature  page to this  Securities  Purchase  Agreement  to be duly
executed as of the date first written above.

                                    OTHER BUYERS:

                                    ISAAK HALEGOUA & AUDREY HALEGOUA JOINT TRUST

                                    By: ________________________________________
                                        Name:
                                        Title:

<PAGE>

                               SCHEDULE OF BUYERS

<TABLE>
<CAPTION>
            (1)                                  (2)                            (3)                (4)
                                                                             Aggregate
                                                                             Principal          Aggregate
                                             Address and                     Amount of          Number of
           Buyer                           Facsimile Number                    Notes          Common Shares
-----------------------------------------------------------------------------------------------------------
<S>                           <C>                                            <C>                 <C>
Smithfield Fiduciary LLC      c/o Highbridge Capital Management, LLC         $1,000,000          800,000
                              9 West 57th Street
                              27th Floor
                              New York, New York  10019
                              Attention:  Ari J. Storch
                                          Adam J. Chill
                              Facsimile:  (212) 751-0755
                              Telephone:  (212) 287-4720
                              Residence:  Cayman Islands

Iroquois Master Fund, Ltd.                                                    $600,000           480,000
                              641 Lexington Avenue
                              26th Floor
                              New York, New York 10022
                              Attention:  Joshua Silverman
                              Facsimile:  (212) 207-3452
                              Telephone:  (212) 974-3070
                              Residence:  Cayman Islands

Lilac Ventures Master         650 Fifth Avenue                                $500,000           400,000
Fund, Limited                 24th Floor
                              New York, New York 10019
                              Attention:  Bruce Bermnstein
                              Facsimile:  (212) 258-2315
                              Telephone:  (212) 803-5261
                              Residence:  Bermuda

<CAPTION>
            (1)                    (5)               (6)                    (7)
                                                                           Legal
                                Aggregate                             Representative's
                                Number of                               Address and
           Buyer              Warrant Shares    Purchase Price        Facsimile Number
-------------------------------------------------------------------------------------------------
<S>                           <C>               <C>             <C>
Smithfield Fiduciary LLC        2,000,000       $1,000,000      Schulte Roth & Zabel LLP
                                                                919 Third Avenue
                                                                New York, New York  10022
                                                                Attention:  Eleazer Klein, Esq.
                                                                Facsimile: (212) 593-5955
                                                                Telephone:  (212) 756-2376

Iroquois Master Fund, Ltd.      1,200,000         $600,000      Malhotra & Associates
                                                                11 Penn Plaza, 5th Floor
                                                                New York, NY 10001
                                                                Attention: Gary Malhotra, Esq.
                                                                Facsimile: (212) 504-0863
                                                                Telephone: (212) 593-2284

Lilac Ventures Master           1,000,000         $500,000      Malhotra & Associates
Fund, Limited                                                   11 Penn Plaza, 5th Floor
                                                                New York, NY 10001
                                                                Attention: Gary Malhotra, Esq.
                                                                Facsimile: (212) 504-0863
                                                                Telephone: (212) 593-2284
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
            (1)                                  (2)                            (3)                (4)
                                                                             Aggregate
                                                                             Principal          Aggregate
                                             Address and                     Amount of          Number of
           Buyer                           Facsimile Number                    Notes          Common Shares
------------------------------------------------------------------------------------------------------------
<S>                           <C>                                             <C>                <C>
Cranshire Capital, L.P                                                        $500,000           400,000
                              3100 Dundee Road
                              Suite 703
                              Northbrook, IL 60062
                              Attention: Mitch Kopin
                              Facsimile:  (847) 562-9031
                              Telephone:  (847) 562-9030
                              Residence: Illinois

Grace Brothers, Ltd.,         1560 Sherman Ave                               $1,250,000         1,000,000
                              Evanston, Illinois 60201
                              Attention:  Bradford T. Whitmore
                              Facsimile:  (847) 733-0339
                              Telephone:  (847) 733-1230
                              Residence:  Illinois

RAQ, LLC                                                                      $250,000           200,000
                              787 7th Avenue
                              48th Floor
                              New York, New York 10019
                              Attention:  J. Jay Lobell
                                          Steve Rocamboli
                              Facsimile:  (212) 554-4490
                              Telephone:  (212) 554-4300
                              Residence:  New York

Paragon Capital, LP                                                           $350,000           280,000
                              110 East 59th St
                              New York, New York 10022
                              Attention: Alan P. Donenfeld
                              Facsimile:  (212) 593-3157
                              Telephone:  (212) 202-5022
                              Residence:  Delaware
Nite Capital L.P.                                                             $250,000           200,000
                              100 E Cook Avenue
                              #201
                              Libertyville, Illinois 60048
                              Attention:  Keith Goodman
                              Facsimile:  (847) 968-2648
                              Telephone:  (847) 968-2655
                              Residence:  Delaware
Alpha Capital                                                                 $300,000           240,000
Aktiengesellschaft            c/o Alpha Capital, AG
                              160 Central Park South
                              #2701
                              New York, New York 10019
                              Attention:  Joe Hammer
                              Facsimile:  (212) 586-8244
                              Telephone:  (212) 586-8224
                              Residence:  Lichtenstein

<CAPTION>
            (1)                    (5)               (6)                     (7)
                                                                            Legal
                                 Aggregate                             Representative's
                                 Number of                               Address and
           Buyer               Warrant Shares    Purchase Price        Facsimile Number
----------------------------------------------------------------------------------------------------
<S>                            <C>               <C>             <C>
Cranshire Capital, L.P           1,000,000         $500,000      Malhotra & Associates
                                                                 11 Penn Plaza, 5th Floor
                                                                 New York, NY 10001
                                                                 Attention: Gary Malhotra, Esq.
                                                                 Facsimile: (212) 504-0863
                                                                 Telephone: (212) 593-2284

Grace Brothers, Ltd.,            2,500,000       $1,250,000      Sachnoff & Weaver, Ltd
                                                                 10 South Wacker Drive
                                                                 40th Floor
                                                                 Chicago, IL 60606
                                                                 Attention: Evelyn Arkebauer
                                                                 Facsimile:  (312) 207-6400
                                                                 Telephone: (312) 207-3879
RAQ, LLC                          500,000          $250,000      N/A

Paragon Capital, LP               700,000          $350,000      N/A

Nite Capital L.P.                 500,000          $250,000      Michael Gray
                                                                 Schwartz Cooper Greenberger Krauss
                                                                 180 N. LaSalle Street, Suite 2700
                                                                 Chicago, IL  60601
                                                                 Telephone: (312) 845-5113

Alpha Capital                     600,000          $300,000      Ed Grushko
Aktiengesellschaft                                               Grushko & Mittman
                                                                 551 Fifth Avenue, Ste 1601
                                                                 NY, NY 10176
                                                                 Facsimile: 697-3575
                                                                 Telephone: 212-697-9500
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
            (1)                                  (2)                            (3)                (4)
                                                                             Aggregate
                                                                             Principal          Aggregate
                                             Address and                     Amount of          Number of
           Buyer                           Facsimile Number                    Notes          Common Shares
---------------------------------------------------------------------------------------------------------------
<S>                           <C>                                             <C>                <C>
Bristol Investment Fund,                                                      $250,000           200,000
Ltd.                          c/o Bristol Investment Fund, Ltd.
                              10990 Wilshire Blvd
                              #1410
                              Los Angeles, California  90024
                              Attention:  Paul Kessler
                                          Amy Wong
                              Facsimile:  (310) 696-0334
                              Telephone:  (310) 696-0333
                              Residence:  Cayman Islands
Global Hunter Holdings, L.P                                                   $250,000           200,000
                              1808 Point de Vue
                              Suite 1000
                              Ft. Mound, Texas  75022
                              Attention:  Daniel O. Conwill
                              Facsimile:  (504) 525-5607
                              Telephone:  (504) 527-0333
                              Residence:   Delaware
Hudson Bay Fund LP                                                            $250,000           200,000
                              120 Broadway
                              40th Floor
                              New York, New York 10271
                              Attention:  Yoav Roth
                              Facsimile:  (212) 571-1279
                              Telephone:  (212) 571-1244
                              Residence:  Delaware
Ronald Hart                                                                   $50,000            40,000
                              4821 Crestwood Drive
                              Little Rock, Arkansas 72207
                              Attention: Ron Hunt
                              Telephone: (501) 265-0063
Kuekenhof Equity Fund,                                                        $100,000           80,000
L.P.                          c/o Kuekenhof Capital Management, LLC
                              22 Church St
                              Suite #5
                              Ramsey, New Jersey 07446
                              Attention:  Michael C. James
                              Facsimile:  (201) 995-1954
                              Telephone:  (201) 995-1950
                              Residence:  Delaware

<CAPTION>
            (1)                   (5)               (6)                     (7)
                                                                           Legal
                                Aggregate                             Representative's
                                Number of                               Address and
           Buyer              Warrant Shares    Purchase Price        Facsimile Number
-----------------------------------------------------------------------------------------------------
<S>                           <C>               <C>             <C>
Bristol Investment Fund,         500,000          $250,000      N/A
Ltd.

Global Hunter Holdings, L.P      500,000          $250,000      N/A

Hudson Bay Fund LP               500,000          $250,000      N/A

Ronald Hart                      100,000           $50,000      Jerry Larkaowski
                                                                308 South Louisiana, Little Rock
                                                                Arkansas, 72201.  Phone,
                                                                501-376-6277, fax, 501-376-6279.

Kuekenhof Equity Fund,           200,000          $100,000      N/A
L.P.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
            (1)                                  (2)                            (3)                (4)
                                                                             Aggregate
                                                                             Principal          Aggregate
                                             Address and                     Amount of          Number of
           Buyer                           Facsimile Number                    Notes          Common Shares
-------------------------------------------------------------------------------------------------------------
<S>                           <C>                                             <C>                <C>
Simon Halegoua                                                                $50,000            40,000
                              1 Crescent Road
                              Belle Teere, New York 11777
                              Attention: Simon Halegoua
                              Telephone: (631) 928-9225
Isaak Halegoua & Audrey                                                       $50,000            40,000
Halegoua Joint Trust          1 Crescent Road
                              Belle Teere, New York 11777
                              Attention:
                              Telephone:  (631) 928-9225
                              Residence:  New York
-------------------------------------------------------------------------------------------------------------

                                                                TOTAL   $6,000,000.00         4,800,000

<CAPTION>
            (1)                   (5)               (6)                     (7)
                                                                           Legal
                                Aggregate                             Representative's
                                Number of                               Address and
           Buyer              Warrant Shares    Purchase Price        Facsimile Number
---------------------------------------------------------------------------------------------------
<S>                             <C>               <C>             <C>
Simon Halegoua                   100,000           $50,000        N/A

Isaak Halegoua & Audrey          100,000           $50,000        N/A
Halegoua Joint Trust

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

                    TOTAL     12,000,000        $6,000,000.00
</TABLE>

<PAGE>

                              SCHEDULE OF WARRANTS

<TABLE>
<CAPTION>
             (1)                     (2)               (3)               (4)               (5)

                                  Number of         Number of         Number of         Number of
                                   Series A          Series B          Series C          Series D
            Buyer               Warrant Shares    Warrant Shares    Warrant Shares    Warrant Shares
-------------------------------------------------------------------------------------------------------
<S>                             <C>               <C>               <C>               <C>
Smithfield Fiduciary LLC           500,000           500,000           500,000           500,000
Iroquois Master Fund, Ltd.         300,000           300,000           300,000           300,000
Rockmore Investment Master         250,000           250,000           250,000           250,000
Fund, Limited
Cranshire Capital, L.P             250,000           250,000           250,000           250,000
Grace Brothers, Ltd.,              625,000           625,000           625,000           625,000
RAQ, LLC                           125,000           125,000           125,000           125,000
Paragon Capital, LP                175,000           175,000           175,000           175,000
Nite Capital L.P.                  125,000           125,000           125,000           125,000
Alpha Capital                      150,000           150,000           150,000           150,000
Aktiengesellschaft
Bristol Investment Fund, Ltd.      125,000           125,000           125,000           125,000
Global Hunter Holdings, L.P        125,000           125,000           125,000           125,000
Hudson Bay Fund LP                 125,000           125,000           125,000           125,000

<CAPTION>
             (1)                     (6)               (7)
                                  Aggregate         Aggregate
                                  Number of         Number of         Aggregate
                                   Initial          Additional        Number of
            Buyer               Warrant Shares    Warrant Shares    Warrant Shares
-------------------------------------------------------------------------------------
<S>                             <C>               <C>               <C>
Smithfield Fiduciary LLC          1,000,000         1,000,000         2,000,000
Iroquois Master Fund, Ltd.         600,000           600,000          1,200,000
Rockmore Investment Master         500,000           500,000          1,000,000
Fund, Limited
Cranshire Capital, L.P             500,000           500,000          1,000,000
Grace Brothers, Ltd.,             1,250,000         1,250,000         2,500,000
RAQ, LLC                           250,000           250,000           500,000
Paragon Capital, LP                350,000           350,000           700,000
Nite Capital L.P.                  250,000           250,000           500,000
Alpha Capital                      300,000           300,000           600,000
Aktiengesellschaft
Bristol Investment Fund, Ltd.      250,000           250,000           500,000
Global Hunter Holdings, L.P        250,000           250,000           500,000
Hudson Bay Fund LP                 250,000           250,000           500,000
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
             (1)                     (2)               (3)               (4)               (5)

                                  Number of         Number of         Number of         Number of
                                   Series A          Series B          Series C          Series D
            Buyer               Warrant Shares    Warrant Shares    Warrant Shares    Warrant Shares
--------------------------------------------------------------------------------------------------------
<S>                             <C>               <C>               <C>               <C>
Ronald Hart                         25,000            25,000            25,000            25,000
Kuekenhof Equity Fund, L.P.         50,000            50,000            50,000            50,000
Simon Halegoua                      25,000            25,000            25,000            25,000
Isaak Halegoua & Audrey             25,000            25,000            25,000            25,000
Halegoua Joint Trust
--------------------------------------------------------------------------------------------------------
                      TOTAL       3,000,000         3,000,000         3,000,000         3,000,000

<CAPTION>
             (1)                     (6)               (7)
                                  Aggregate         Aggregate
                                  Number of         Number of         Aggregate
                                   Initial          Additional        Number of
            Buyer               Warrant Shares    Warrant Shares    Warrant Shares
-------------------------------------------------------------------------------------
<S>                             <C>               <C>               <C>
Ronald Hart                         50,000            50,000           100,000
Kuekenhof Equity Fund, L.P.        100,000           100,000           200,000
Simon Halegoua                      50,000            50,000           100,000
Isaak Halegoua & Audrey             50,000            50,000           100,000
Halegoua Joint Trust
-------------------------------------------------------------------------------------
                      TOTAL       6,000,000         6,000,000         12,000,000
</TABLE>

<PAGE>

                                    EXHIBITS

Exhibit A         Form of Notes
Exhibit B-1       Form of Series A Additional Investment Rights Warrants
Exhibit B-2       Form of Series B Warrants
Exhibit B-3       Form of Series C Additional Investment Rights Warrants
Exhibit B-4       Form of Series D Warrants
Exhibit C         Registration Rights Agreement
Exhibit D-1       Form of US Security Agreement
Exhibit D-2       Form of Hungarian General Security Agreement
Exhibit D-3       Form of Hungarian Other Security Agreement
Exhibit E         Form of Pledge Agreement
Exhibit F         Form of Guarantee
Exhibit G         Irrevocable Transfer Agent Instructions
Exhibit H-1       Form of Outside Company Counsel Opinion
Exhibit H-2       Form of Outside Hungarian Company Counsel Opinion
Exhibit I         Form of Secretary's Certificate
Exhibit J         Form of Officer's Certificate
Exhibit K         Form of Voting Agreement
Exhibit L         Form of Resolutions
Exhibit M         Form of Amendment to Certificate of Incorporation

                                    SCHEDULES

Schedule 3(a)              Subsidiaries
Schedule 3(j)              Rights Plan
Schedule 3(k)              SEC Documents; Financial Statements
Schedule 3(l)              Absence of Certain Changes
Schedule 3(q)              Transactions with Affiliates
Schedule 3(r)              Capitalization
Schedule 3(s)              Indebtedness and Other Contracts
Schedule 3(t)              Litigation
Schedule 3(x)              Intellectual Property
Schedule 3(z)              Subsidiary Rights
Schedule 3(cc)             Ranking of Notes

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