Document:

exv10w1

Exhibit 10.1

EXECUTION VERSION

REGISTRATION RIGHTS AGREEMENT

by and among

The GEO Group, Inc.

GEO RE Holdings LLC

GEO Care, Inc.

Correctional Services Corporation

CPT Limited Partner LLC

CPT Operating Partnership LP

Correctional Properties Prison Finance LLC

Public Properties Development and Leasing LLC

GEO Holdings I, Inc.

GEO Acquisition II, Inc.

GEO Transport, Inc.

Just Care, Inc.

Cornell Companies, Inc.

Cornell Companies Management Holdings, LLC

Cornell Companies Administration LLC

Cornell Corrections Management, Inc.

CCGI Corporation

Cornell Companies Management Services LP

Cornell Companies Management, LP

Cornell Corrections of Alaska. Inc.

Cornell Corrections of California, Inc.

Cornell Corrections of Texas, Inc.

Cornell Corrections of Rhode Island, Inc.

Cornell Interventions, Inc.

Correctional Systems, Inc.

WBP Leasing, Inc.

Cornell Abraxas Group, Inc.

WBP Leasing, LLC

BII Holding Corporation

BII Holding I Corporation

Behavioral Holding Corp.

Behavioral Acquisition Corp.

B.I. Incorporated

and

Wells Fargo Securities, LLC

Merrill Lynch, Pierce, Fenner & Smith Incorporated

Barclays Capital Inc.

J.P. Morgan Securities LLC

SunTrust Robinson Humphrey, Inc.

Dated as of February 10, 2011

 

 

Registration Rights Agreement

          This Registration Rights Agreement (this “Agreement”) is made and entered into as of
February 10, 2011, by and among The GEO Group, Inc., a Florida corporation (the “Company”),
the Guarantors set forth in Schedule B to the Purchase Agreement (collectively, the
“Guarantors”), and the Initial Purchasers set forth in Schedule A to the Purchase Agreement
(as defined below) (each an “Initial Purchaser” and, collectively, the “Initial
Purchasers”), each of whom has agreed to purchase the
Company’s 6 5⁄8% Senior Notes due 2021 (the
“Notes”), fully and unconditionally guaranteed by the Guarantors (the
“Guarantees”), pursuant to the Purchase Agreement (as defined below). The Notes and the
Guarantees attached thereto are herein collectively referred to as the “Initial
Securities.”

          This Agreement is made pursuant to the Purchase Agreement, dated as of February 1, 2011 (the
“Purchase Agreement”), by and among the Company, the Guarantors and the Initial Purchasers
(i) for the benefit of the Initial Purchasers and (ii) for the benefit of the holders from time to
time of the Initial Securities (including you and each other Initial Purchaser named in the
Purchase Agreement). In order to induce the Initial Purchasers to purchase the Initial Securities,
the Company has agreed to provide the registration rights set forth in this Agreement. The
execution and delivery of this Agreement is a condition to the obligations of the Initial
Purchasers set forth in Section 3(a) of the Purchase Agreement.

          The parties hereby agree as follows:

          Section 1. Definitions

          As used in this Agreement, the following capitalized terms shall have the following meanings:

          Advice: As defined in Section 6(c) hereof.

          Broker-Dealer: Any broker or dealer registered under the Exchange Act.

          Closing Date: The date of this Agreement.

          Commission: The Securities and Exchange Commission.

     Consummate: A registered Exchange Offer shall be deemed “Consummated” for
purposes of this Agreement upon the occurrence of all of the following (i) the filing and
effectiveness under the Securities Act of the Exchange Offer Registration Statement relating
to the Exchange Securities to be issued in the Exchange Offer, (ii) the maintenance of such
Registration Statement continuously effective and the keeping of the Exchange Offer open for
a period not less than the minimum period required pursuant to Section 3(b) hereof, and
(iii) the delivery by the Company to the Registrar under the Indenture of Exchange
Securities in the same aggregate principal amount as the aggregate principal amount of
Initial Securities that were tendered by Holders thereof pursuant to the Exchange Offer.

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          Effectiveness Target Date: As defined in Section 5 hereof.

          Exchange Act: The Securities Exchange Act of 1934, as amended.

     Exchange Offer: The registration by the Company under the Securities Act of
the Exchange Securities pursuant to a Registration Statement pursuant to which the Company
offers the Holders of all outstanding Transfer Restricted Securities the opportunity to
exchange all such outstanding Transfer Restricted Securities held by such Holders for
Exchange Securities in an aggregate principal amount equal to the aggregate principal amount
of the Transfer Restricted Securities tendered in such exchange offer by such Holders.

     Exchange Offer Registration Statement: The Registration Statement relating to
the Exchange Offer, including the related Prospectus.

     Exchange Securities: The 6 5⁄8% Senior Notes due 2021, of the same series under
the Indenture as the Initial Securities, and the Guarantees attached thereto, to be issued
to Holders in exchange for Transfer Restricted Securities pursuant to this Agreement.

          FINRA: The Financial Industry Regulatory Authority, Inc.

          Holders: As defined in Section 2(b) hereof.

          Indemnified Holder: As defined in Section 8(a) hereof.

     Indenture: The Indenture, dated as of February 10, 2011, among the Company,
the Guarantors and Wells Fargo Corporate Trust Services, as trustee (the “Trustee”),
pursuant to which the Securities are to be issued, as such Indenture is amended or
supplemented from time to time in accordance with the terms thereof.

     Initial Placement: The issuance and sale by the Company of the Initial
Securities to the Initial Purchasers pursuant to the Purchase Agreement.

          Initial Purchasers: As defined in the preamble hereto.

     Initial Securities: The 6 5⁄8% Senior Notes due 2021, of the same series under
the Indenture as the Exchange Securities, and the Guarantees attached thereto, for so long
as such securities constitute Transfer Restricted Securities.

          Interest Payment Date: As defined in the Indenture and the Securities.

          Liquidated Damages: As defined in Section 5 hereof.

     Person: An individual, partnership, corporation, trust or unincorporated
organization, or a government or agency or political subdivision thereof.

     Prospectus: The prospectus included in a Registration Statement, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,

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including post-effective amendments, and all material incorporated by reference into
such Prospectus.

          Registration Default: As defined in Section 5 hereof.

     Registration Statement: Any registration statement of the Company relating to
(a) an offering of Exchange Securities pursuant to an Exchange Offer or (b) the registration
for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement,
which is filed pursuant to the provisions of this Agreement, in each case, including the
Prospectus included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by reference therein.

          Securities: The Initial Securities and the Exchange Securities.

          Securities Act: The Securities Act of 1933, as amended.

          Shelf Filing Deadline: As defined in Section 4 hereof.

          Shelf Registration Statement: As defined in Section 4 hereof.

     Subsidiaries: A subsidiary of the Company that is material to the business,
financial condition or results of operations of the Company, taken as a whole.

     Transfer Restricted Security: Each Initial Security, until the earliest to
occur of (a) the date on which such Security is exchanged in the Exchange Offer and entitled
to be resold to the public by the Holder thereof without complying with the prospectus
delivery requirements of the Securities Act, (b) the date on which such Security has been
effectively registered under the Securities Act and disposed of in accordance with a Shelf
Registration Statement and (c) the date on which such Security is distributed to the public
pursuant to Rule 144 under the Securities Act or by a Broker-Dealer pursuant to the “Plan of
Distribution” contemplated by the Exchange Offer Registration Statement (including delivery
of the Prospectus contained therein).

     Trust Indenture Act: The Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa
to 77bbbb) as in effect on the date of the Indenture.

     Underwritten Registration or Underwritten Offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to the public.

          Section 2. Securities Subject To This Agreement

          (a) Transfer Restricted Securities. The securities entitled to the benefits of this
Agreement are the Transfer Restricted Securities.

          (b) Holders of Transfer Restricted Securities. A Person is deemed to be a holder of
Transfer Restricted Securities (each, a “Holder”) whenever such Person owns Transfer
Restricted Securities.

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          Section 3. Registered Exchange Offer

          (a) Unless the Exchange Offer shall not be permissible under applicable law or Commission
policy (after the procedures set forth in Section 6(a) below have been complied with), each of the
Company and the Guarantors shall (i) cause to be filed with the Commission as soon as practicable
after the Closing Date, but in no event later than 75 days after the Closing Date, a Registration
Statement under the Securities Act relating to the Exchange Securities and the Exchange Offer, (ii)
use its best efforts to cause such Registration Statement to become effective at the earliest
possible time, but in no event later than 180 days after the Closing Date, (iii) in connection with
the foregoing, file (A) all pre-effective amendments to such Registration Statement as may be
necessary in order to cause such Registration Statement to become effective and (B) if applicable,
a post-effective amendment to such Registration Statement pursuant to Rule 430A under the
Securities Act, (iv) cause all necessary filings in connection with the registration and
qualification of the Exchange Securities to be made under the Blue Sky laws of such jurisdictions
as are necessary to permit Consummation of the Exchange Offer, and (v) upon the effectiveness of
such Registration Statement, commence the Exchange Offer. The Exchange Offer Registration
Statement shall be on the appropriate form permitting registration of the Exchange Securities to be
offered in exchange for the Transfer Restricted Securities and to permit resales of Securities held
by Broker-Dealers as contemplated by Section 3(c) below.

          (b) The Company and the Guarantors shall cause the Exchange Offer Registration Statement to be
effective continuously and shall keep the Exchange Offer open for a period of not less than the
minimum period required under applicable federal and state securities laws to Consummate the
Exchange Offer; provided, however, that in no event shall such period be less than 20 business days
after the date notice of the Exchange Offer is mailed to the Holders. The Company and the
Guarantors shall cause the Exchange Offer to comply with all applicable federal and state
securities laws. No securities other than the Exchange Securities shall be included in the
Exchange Offer Registration Statement. Each of the Company and the Guarantors shall use its best
efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the
Exchange Offer Registration Statement has become effective, but in no event later than 30 days
after the Exchange Offer Registration Statement has become effective.

          (c) The Company shall indicate in a “Plan of Distribution” section contained in the Prospectus
forming a part of the Exchange Offer Registration Statement that any Broker-Dealer who holds
Initial Securities that are Transfer Restricted Securities and that were acquired for its own
account as a result of market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Company), may exchange such Initial Securities
pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be an “underwriter”
within the meaning of the Securities Act and must, therefore, deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of the Exchange Securities
received by such Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may be
satisfied by the delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer
Registration Statement. Such “Plan of Distribution” section shall also contain all other
information with respect to such resales by Broker-Dealers that the Commission may require in order
to permit such resales pursuant thereto, but such “Plan of Distribution” shall not name any such
Broker-Dealer or disclose the amount of Securities held by

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any such Broker-Dealer except to the extent required by the Commission as a result of a change
in policy after the date of this Agreement.

          Each of the Company and the Guarantors shall use its best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended as required by the
provisions of Section 6(c) below to the extent necessary to ensure that it is available for resales
of Securities acquired by Broker-Dealers for their own accounts as a result of market-making
activities or other trading activities, and to ensure that it conforms with the requirements of
this Agreement, the Securities Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period ending on the earlier of (i) 180 days from the date on
which the Exchange Offer Registration Statement is declared effective and (ii) the date on which a
Broker-Dealer is no longer required to deliver a prospectus in connection with market-making or
other trading activities.

          The Company shall provide sufficient copies of the latest version of such Prospectus to
Broker-Dealers promptly upon request at any time during such 180-day (or shorter as provided in the
foregoing sentence) period in order to facilitate such resales.

          Section 4. Shelf Registration

          (a) Shelf Registration. If (i) the Company and the Guarantors are not required to
file an Exchange Offer Registration Statement or to consummate the Exchange Offer because the
Exchange Offer is not permitted by applicable law or Commission policy (after the procedures set
forth in Section 6(a) below have been complied with), or (ii) any Holder of Transfer Restricted
Securities notifies the Company in writing prior to the 20th day following the
consummation of the Exchange Offer that (A) such Holder is prohibited by applicable law or
Commission policy from participating in the Exchange Offer, or (B) such Holder may not resell the
Exchange Securities acquired by it in the Exchange Offer to the public without delivering a
prospectus and that the Prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder, or (C) such Holder is a Broker-Dealer and
holds Initial Securities acquired directly from the Company or one of its affiliates, then, upon
such Holder’s request, the Company and the Guarantors shall:

     (x) cause to be filed a shelf registration statement pursuant to Rule 415 under the
Securities Act, which may be an amendment to the Exchange Offer Registration Statement (in
either event, the “Shelf Registration Statement”) as promptly as practicable (such
date being the “Shelf Filing Deadline”), which Shelf Registration Statement shall
provide for resales of all Transfer Restricted Securities the Holders of which shall have
provided the information required pursuant to Section 4(b) hereof; and

     (y) use their best efforts to cause such Shelf Registration Statement to be declared
effective by the Commission on or before the 75th day after the Shelf Filing
Deadline (or if such 75th day is not a business day, the next succeeding business
day).

     Each of the Company and the Guarantors shall use its best efforts to keep such Shelf
Registration Statement continuously effective, supplemented and amended as required by the
provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available
for resales of Securities by the Holders of Transfer Restricted Securities entitled to the benefit
of this

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Section 4(a), and to ensure that it conforms with the requirements of this Agreement, the
Securities Act and the policies, rules and regulations of the Commission as announced from time to
time, for a period of at least one year following the effective date of such Shelf Registration
Statement (or shorter period that will terminate when all the Securities covered by such Shelf
Registration Statement have been sold pursuant to such Shelf Registration Statement).

          (b) Provision by Holders of Certain Information in Connection with the Shelf Registration
Statement. No Holder of Transfer Restricted Securities may include any of its Transfer
Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and
until such Holder furnishes to the Company in writing, within 10 business days after receipt of a
request therefor, such information as the Company may reasonably request for use in connection with
any Shelf Registration Statement or Prospectus or preliminary prospectus included therein. Each
Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to
the Company all information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.

          Section 5. Liquidated Damages

          If (i) any of the Registration Statements required by this Agreement is not filed with the
Commission on or prior to the date specified for such filing in this Agreement, (ii) any of such
Registration Statements has not been declared effective by the Commission on or prior to the date
specified for such effectiveness in this Agreement (the “Effectiveness Target Date”), (iii)
the Exchange Offer has not been Consummated within 30 business days after the Effectiveness Target
Date with respect to the Exchange Offer Registration Statement or (iv) any Registration Statement
required by this Agreement is filed and declared effective but shall thereafter cease to be
effective or fail to be usable for its intended purpose without being succeeded immediately by a
post-effective amendment to such Registration Statement that cures such failure and that is itself
immediately declared effective (each such event referred to in clauses (i) through (iv), a
“Registration Default”), the Company hereby agrees to pay to each Holder of the Notes
affected thereby Liquidated Damages in an amount equal to one quarter of one percent (0.25%) per
annum on principal amounts of the Notes held by such Holder during the 90-day period immediately
following the occurrence of any Registration Default and shall increase by an additional one
quarter of one percent (0.25%) per annum on the principal amounts of such Notes at the end of each
subsequent 90-day period, but in no event shall such increase exceed 1.00% per annum (any such
interest assessed upon the occurrence of Registration Default is referred to as “Liquidated
Damages”). Following the cure of all Registration Defaults relating to any particular Notes,
the Liquidated Damages payable with respect to the Notes as a result of the provisions of this
paragraph shall cease; provided, however, that, if after any such reduction in interest rate, a
different Registration Default occurs, the interest rate borne by the relevant Notes shall again be
increased pursuant to the foregoing provision but shall initially be one quarter of one percent
(0.25%) per annum regardless of the rate in effect with respect to any prior Registration Default
at the time of cure of such Registration Default.

          All obligations of the Company and the Guarantors set forth in the preceding paragraph that
are outstanding with respect to any Notes at the time such security ceases to be a

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Transfer Restricted Security shall survive until such time as all such obligations with
respect to such Notes shall have been satisfied in full.

          Section 6. Registration Procedures

          (a) Exchange Offer Registration Statement. In connection with the Exchange Offer, the
Company and the Guarantors shall comply with all of the provisions of Section 6(c) below, shall use
their best efforts to effect such exchange to permit the sale of Transfer Restricted Securities
being sold in accordance with the intended method or methods of distribution thereof, and shall
comply with all of the following provisions:

     (i) If in the reasonable opinion of counsel to the Company there is a question as to
whether the Exchange Offer is permitted by applicable law, each of the Company and the
Guarantors hereby agrees to seek a no-action letter or other favorable decision from the
Commission allowing the Company and the Guarantors to Consummate an Exchange Offer for such
Initial Securities. Each of the Company and the Guarantors hereby agrees to pursue the
issuance of such a decision to the Commission staff level but shall not be required to take
commercially unreasonable action to effect a change of Commission policy. Each of the
Company and the Guarantors hereby agrees, however, to (A) participate in telephonic
conferences with the Commission, (B) deliver to the Commission staff an analysis prepared by
counsel to the Company setting forth the legal bases, if any, upon which such counsel has
concluded that such an Exchange Offer should be permitted and (C) diligently pursue a
favorable resolution by the Commission staff of such submission.

     (ii) As a condition to its participation in the Exchange Offer pursuant to the terms of
this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the
request of the Company, prior to the Consummation thereof, a written representation to the
Company (which may be contained in the letter of transmittal contemplated by the Exchange
Offer Registration Statement) to the effect that (A) it is not an affiliate of the Company,
(B) it is not engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the Exchange Securities
to be issued in the Exchange Offer and (C) it is acquiring the Exchange Securities in its
ordinary course of business. In addition, all such Holders of Transfer Restricted
Securities shall otherwise cooperate in the Company’s preparations for the Exchange Offer.
Each Holder hereby acknowledges and agrees that any Broker-Dealer and any such Holder using
the Exchange Offer to participate in a distribution of the securities to be acquired in the
Exchange Offer (1) could not under Commission policy as in effect on the date of this
Agreement rely on the position of the Commission enunciated in Morgan Stanley and Co.,
Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available
May 13, 1988), as interpreted in the Commission’s letter to Shearman & Sterling dated July
2, 1993, and similar no-action letters (which may include any no-action letter obtained
pursuant to clause (i) above), and (2) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary resale
transaction and that such a secondary resale transaction should be covered by an effective
registration statement containing the selling security holder information required by Item
507 or 508, as

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applicable, of Regulation S-K if the resales are of Exchange Securities obtained by
such Holder in exchange for Initial Securities acquired by such Holder directly from the
Company.

          (b) Shelf Registration Statement. In connection with the Shelf Registration
Statement, each of the Company and the Guarantors shall comply with all the provisions of Section
6(c) below and shall use their best efforts to effect such registration to permit the sale of the
Transfer Restricted Securities being sold in accordance with the intended method or methods of
distribution thereof, and pursuant thereto each of the Company and the Guarantors will as
expeditiously as possible prepare and file with the Commission a Registration Statement relating to
the registration on any appropriate form under the Securities Act, which form shall be available
for the sale of the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof.

          (c) General Provisions. In connection with any Registration Statement and any
Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted
Securities (including, without limitation, any Registration Statement and the related Prospectus
required to permit resales of Transfer Restricted Securities by Broker-Dealers), each of the
Company and the Guarantors shall:

     (i) use its best efforts to keep such Registration Statement continuously effective and
provide all requisite financial statements (including, if required by the Securities Act or
any regulations thereunder, financial statements of the Guarantors) for the period specified
in Section 3 or 4 of this Agreement, as applicable; upon the occurrence of any event that
would cause any such Registration Statement or the Prospectus contained therein (A) to
contain a material misstatement or omission or (B) not to be effective and usable for resale
of Transfer Restricted Securities during the period required by this Agreement, the Company
shall file promptly an appropriate amendment to such Registration Statement, in the case of
clause (A), correcting any such misstatement or omission, and, in the case of either clause
(A) or (B), use its best efforts to cause such amendment to be declared effective and such
Registration Statement and the related Prospectus to become usable for their intended
purpose(s) as soon as practicable thereafter;

     (ii) prepare and file with the Commission such amendments and post-effective amendments
to the Registration Statement as may be necessary to keep the Registration Statement
effective for the applicable period set forth in Section 3 or 4 hereof, as applicable, or
such shorter period as will terminate when all Transfer Restricted Securities covered by
such Registration Statement have been sold; cause the Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
under the Securities Act, and to comply fully with the applicable provisions of Rules 424
and 430A under the Securities Act in a timely manner; and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with the intended method
or methods of distribution by the sellers thereof set forth in such Registration Statement
or supplement to the Prospectus;

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     (iii) advise the underwriter(s), if any, and selling Holders promptly and, if requested
by such Persons, to confirm such advice in writing, (A) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when the same has become
effective, (B) of any request by the Commission for amendments to the Registration Statement
or amendments or supplements to the Prospectus or for additional information relating
thereto, (C) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Securities Act or of the suspension by
any state securities commission of the qualification of the Transfer Restricted Securities
for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the
preceding purposes, and (D) of the existence of any fact or the happening of any event that
makes any statement of a material fact made in the Registration Statement, the Prospectus,
any amendment or supplement thereto, or any document incorporated by reference therein
untrue, or that requires the making of any additions to or changes in the Registration
Statement or the Prospectus in order to make the statements therein not misleading. If at
any time the Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other regulatory authority
shall issue an order suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws, each of the Company
and the Guarantors shall use its best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time;

     (iv) furnish without charge to each of the Initial Purchasers, each selling Holder
named in any Registration Statement, and each of the underwriter(s), if any, before filing
with the Commission, copies of any Registration Statement or any Prospectus included therein
or any amendments or supplements to any such Registration Statement or Prospectus (including
all documents incorporated by reference after the initial filing of such Registration
Statement), which documents will be subject to the review of such Holders and underwriter(s)
in connection with such sale, if any, for a period of at least five business days, and the
Company will not file any such Registration Statement or Prospectus or any amendment or
supplement to any such Registration Statement or Prospectus (including all such documents
incorporated by reference) to which an Initial Purchaser of Transfer Restricted Securities
covered by such Registration Statement or the underwriter(s), if any, shall reasonably
object in writing within five business days after the receipt thereof (such objection to be
deemed timely made upon confirmation of telecopy transmission within such period). The
objection of an Initial Purchaser or underwriter, if any, shall be deemed to be reasonable
if such Registration Statement, amendment, Prospectus or supplement, as applicable, as
proposed to be filed, contains a material misstatement or omission;

     (v) promptly prior to the filing of any document that is to be incorporated by
reference into a Registration Statement or Prospectus, provide copies of such document to
the Initial Purchasers, each selling Holder named in any Registration Statement, and to the
underwriter(s), if any, make the Company’s and the Guarantors’ representatives available for
discussion of such document and other customary due diligence matters, and include such
information in such document prior to the filing thereof as such selling Holders or
underwriter(s), if any, reasonably may request;

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     (vi) make available at reasonable times for inspection by the Initial Purchasers, any
managing underwriter participating in any disposition pursuant to such Registration
Statement and any attorney or accountant retained by such Initial Purchasers or any of the
underwriter(s), all financial and other records, pertinent corporate documents and
properties of the Company and each of the Guarantors and cause the officers, directors and
employees of the Company and each of the Guarantors to supply all information reasonably
requested by any such Holder, underwriter, attorney or accountant in connection with such
Registration Statement subsequent to the filing thereof and prior to its effectiveness;

     (vii) if requested by any selling Holders or the underwriter(s), if any, promptly
incorporate in any Registration Statement or Prospectus, pursuant to a supplement or
post-effective amendment if necessary, such information as such selling Holders and
underwriter(s), if any, may reasonably request to have included therein, including, without
limitation, information relating to the “Plan of Distribution” of the Transfer Restricted
Securities, information with respect to the principal amount of Transfer Restricted
Securities being sold to such underwriter(s), the purchase price being paid therefor and any
other terms of the offering of the Transfer Restricted Securities to be sold in such
offering; and make all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after the Company is notified of the matters to be
incorporated in such Prospectus supplement or post-effective amendment;

     (viii) cause the Transfer Restricted Securities covered by the Registration Statement
to be rated with the appropriate rating agencies, if so requested by the Holders of a
majority in aggregate principal amount of Securities covered thereby or the underwriter(s),
if any;

     (ix) furnish to each selling Holder and each of the underwriter(s), if any, without
charge, at least one copy of the Registration Statement, as first filed with the Commission,
and of each amendment thereto, including financial statements and schedules, all documents
incorporated by reference therein and all exhibits (including exhibits incorporated therein
by reference);

     (x) deliver to each selling Holder and each of the underwriter(s), if any, without
charge, as many copies of the Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such Persons reasonably may request; each of the Company
and the Guarantors hereby consents to the use of the Prospectus and any amendment or
supplement thereto by each of the selling Holders and each of the underwriter(s), if any, in
connection with the offering and the sale of the Transfer Restricted Securities covered by
the Prospectus or any amendment or supplement thereto;

     (xi) enter into such agreements (including an underwriting agreement), and make such
representations and warranties, and take all such other actions in connection therewith in
order to expedite or facilitate the disposition of the Transfer Restricted Securities
pursuant to any Registration Statement contemplated by this Agreement, all to such extent as
may be requested by any Initial Purchaser or by any Holder of Transfer Restricted Securities
or underwriter in connection with any sale or resale pursuant to any

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Registration Statement contemplated by this Agreement; and whether or not an
underwriting agreement is entered into and whether or not the registration is an
Underwritten Registration, each of the Company and the Guarantors shall:

     (1) furnish to each Initial Purchaser, each selling Holder and each
underwriter, if any, in such substance and scope as they may request and as are
customarily made by issuers to underwriters in primary underwritten offerings, upon
the date of the Consummation of the Exchange Offer and, if applicable, the
effectiveness of the Shelf Registration Statement:

     (A) a certificate, dated the date of Consummation of the Exchange Offer
or the date of effectiveness of the Shelf Registration Statement, as the
case may be, signed by the Chief Financial Officer of the Company and the
Guarantors, confirming, as of the date thereof, the matters set forth in
Section 7(i) of the Purchase Agreement, and such other matters as such
parties may reasonably request;

     (B) opinions, dated the date of Consummation of the Exchange Offer or
the date of effectiveness of the Shelf Registration Statement, as the case
may be, of counsel for the Company and the Guarantors, covering the matters
set forth in Sections 5(f) and 5(g) of the Purchase Agreement and such other
matters as such parties may reasonably request, and in any event including a
statement to the effect that such counsel has participated in conferences
with officers and other representatives of the Company and the Guarantors,
representatives of the independent public accountants for the Company and
the Guarantors, the Initial Purchasers’ representatives and the Initial
Purchasers’ counsel in connection with the preparation of such Registration
Statement and the related Prospectus and has considered the matters required
to be stated therein and the statements contained therein, although such
counsel has not independently verified the accuracy, completeness or
fairness of such statements; and that such counsel advises that, on the
basis of the foregoing, no facts came to such counsel’s attention that
caused such counsel to believe that the applicable Registration Statement,
at the time such Registration Statement or any post-effective amendment
thereto became effective, and, in the case of the Exchange Offer
Registration Statement, as of the date of Consummation, contained an untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such Registration Statement
as of its date and, in the case of the opinion dated the date of
Consummation of the Exchange Offer, as of the date of Consummation,
contained an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Without
limiting the foregoing, such counsel may state further that such counsel
assumes no responsibility for, and has not independently verified, the
accuracy, completeness or fairness of the

11

 

financial statements, notes and schedules and other financial data
included in any Registration Statement contemplated by this Agreement or the
related Prospectus; and

     (C) a customary comfort letter or letters, dated as of the date of
Consummation of the Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, from the Company’s independent
accountants or any other independent accountants that have reviewed any
financial statements included or incorporated by reference in any
Registration Statement, in the customary form and covering matters of the
type customarily covered in comfort letters by underwriters in connection
with primary underwritten offerings, and affirming the matters set forth in
the comfort letters delivered pursuant to Sections 5(a), (b) and (c) of the
Purchase Agreement, without exception;

     (2) set forth in full or incorporate by reference in the underwriting
agreement, if any, the indemnification provisions and procedures of Section 8 hereof
with respect to all parties to be indemnified pursuant to said Section; and

     (3) deliver such other documents and certificates as may be reasonably
requested by such parties to evidence compliance with clause (A) above and with any
customary conditions contained in the underwriting agreement or other agreement
entered into by the Company or the Guarantors pursuant to this clause (xi), if any.

          If at any time the representations and warranties of the Company or the Guarantors
contemplated in this clause (xi) cease to be true and correct, the Company or the Guarantors shall
so advise the Initial Purchasers and the underwriter(s), if any, and each selling Holder promptly
and, if requested by such Persons, shall confirm such advice in writing;

     (xii) prior to any public offering of Transfer Restricted Securities, cooperate with
the selling Holders, the underwriter(s), if any, and their respective counsel in connection
with the registration and qualification of the Transfer Restricted Securities under the
securities or Blue Sky laws of such jurisdictions as the selling Holders or underwriter(s)
may request and do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted Securities covered by the Shelf
Registration Statement; provided, however, that neither the Company nor any of the
Guarantors shall be required to register or qualify as a foreign corporation where it is not
then so qualified or to take any action that would subject it to the service of process in
suits or to taxation, other than as to matters and transactions relating to the Registration
Statement, in any jurisdiction where it is not then so subject;

     (xiii) shall issue, upon the request of any Holder of Initial Securities covered by the
Shelf Registration Statement, Exchange Securities, having an aggregate principal amount
equal to the aggregate principal amount of Initial Securities surrendered to the Company by
such Holder in exchange therefor or being sold by such Holder; such Exchange Securities to
be registered in the name of such Holder or in the name of the

12

 

purchaser(s) of such Securities, as the case may be; in return, the Initial Securities
held by such Holder shall be surrendered to the Company for cancellation;

     (xiv) cooperate with the selling Holders and the underwriter(s), if any, to facilitate
the timely preparation and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends; and enable such Transfer
Restricted Securities to be in such denominations and registered in such names as the
Holders or the underwriter(s), if any, may request at least two business days prior to any
sale of Transfer Restricted Securities made by such Holders or underwriter(s);

     (xv) use its best efforts to cause the Transfer Restricted Securities covered by the
Registration Statement to be registered with or approved by such other governmental agencies
or authorities as may be necessary to enable the seller or sellers thereof or the
underwriter(s), if any, to consummate the disposition of such Transfer Restricted
Securities, subject to the proviso contained in clause (xii) above;

     (xvi) if any fact or event contemplated by Section 6(c)(iii)(D) above shall exist or
have occurred, prepare a supplement or post-effective amendment to the Registration
Statement or related Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue statement of a material
fact or omit to state any material fact necessary to make the statements therein not
misleading;

     (xvii) provide a CUSIP number for all Notes comprising Exchange Securities not later
than the effective date of the Registration Statement and provide the Trustee under the
Indenture with printed certificates for the Exchange Securities which are in a form eligible
for deposit with the Depositary Trust Company;

     (xviii) cooperate and assist in any filings required to be made with FINRA and in the
performance of any due diligence investigation by any underwriter (including any “qualified
independent underwriter”) that is required to be retained in accordance with the rules and
regulations of FINRA, and use its reasonable best efforts to cause such Registration
Statement to become effective and approved by such governmental agencies or authorities as
may be necessary to enable the Holders selling Transfer Restricted Securities to consummate
the disposition of such Transfer Restricted Securities;

     (xix) otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission, and make generally available to its security holders, as soon
as practicable, a consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) for the twelve-month period (A) commencing at the end of any
fiscal quarter in which Transfer Restricted Securities are sold to underwriters in a firm or
best efforts Underwritten Offering or (B) if not sold to underwriters in such an offering,
beginning with the first month of the Company’s first fiscal quarter commencing after the
effective date of the Registration Statement;

13

 

     (xx) cause the Indenture to be qualified under the Trust Indenture Act not later than
the effective date of the first Registration Statement required by this Agreement, and, in
connection therewith, cooperate with the Trustee and the Holders of Securities to effect
such changes to the Indenture as may be required for such Indenture to be so qualified in
accordance with the terms of the Trust Indenture Act; and to execute and use its best
efforts to cause the Trustee to execute, all documents that may be required to effect such
changes and all other forms and documents required to be filed with the Commission to enable
such Indenture to be so qualified in a timely manner;

     (xxi) cause all Transfer Restricted Securities covered by the Registration Statement to
be listed on each securities exchange on which similar securities issued by the Company are
then listed if requested by the Holders of a majority in aggregate principal amount of
Initial Securities or the managing underwriter(s), if any; and

     (xxii) provide promptly to each Holder upon request each document filed with the
Commission pursuant to the requirements of Section 13 and Section 15 of the Exchange Act.

          Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of any
notice from the Company of the existence of any fact of the kind described in Section 6(c)(iii)(D)
hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities
pursuant to the applicable Registration Statement until such Holder’s receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof, or until it is advised
in writing (the “Advice”) by the Company that the use of the Prospectus may be resumed, and
has received copies of any additional or supplemental filings that are incorporated by reference in
the Prospectus. If so directed by the Company, each Holder will deliver to the Company (at the
Company’s expense) all copies, other than permanent file copies then in such Holder’s possession,
of the Prospectus covering such Transfer Restricted Securities that was current at the time of
receipt of such notice. In the event the Company shall give any such notice, the time period
regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as
applicable, shall be extended by the number of days during the period from and including the date
of the giving of such notice pursuant to Section 6(c)(iii)(D) hereof to and including the date when
each selling Holder covered by such Registration Statement shall have received the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or shall have received
the Advice; however, no such extension shall be taken into account in determining whether
Liquidated Damages are due pursuant to Section 5 hereof or the amount of such Liquidated Damages,
it being agreed that the Company’s option to suspend use of a Registration Statement pursuant to
this paragraph shall be treated as a Registration Default for purposes of Section 5.

          Section 7. Registration Expenses

          (a) All expenses incident to the Company’s and the Guarantors’ performance of or compliance
with this Agreement will be borne by the Company and the Guarantors, jointly and severally,
regardless of whether a Registration Statement becomes effective, including without limitation:
(i) all registration and filing fees and expenses (including filings made by any Initial Purchaser
or Holder with FINRA (and, if applicable, the fees and expenses of any

14

 

“qualified independent underwriter” and its counsel that may be required by the rules and
regulations of FINRA)), up to $10,000; (ii) all fees and expenses of compliance with federal
securities and state Blue Sky or securities laws; (iii) all expenses of printing (including
printing certificates for the Exchange Securities to be issued in the Exchange Offer and printing
of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of
counsel for the Company and the Guarantors, and, subject to Section 7(b) below, the Holders of
Transfer Restricted Securities; (v) all application and filing fees in connection with listing the
Exchange Securities on a national securities exchange or automated quotation system pursuant to the
requirements thereof; (vi) all fees and disbursements of independent certified public accountants
of the Company and each of the Guarantors (including the expenses of any special audit and comfort
letters required by or incident to such performance); and (vii) all fees and expenses relating to
the qualification of the Indenture under the applicable securities laws.

          Each of the Company and the Guarantors will, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expenses of any annual audit and the fees and expenses of any
Person, including special experts, retained by the Company or the Guarantors.

          (b) In connection with any Registration Statement required by this Agreement (including,
without limitation, the Exchange Offer Registration Statement and the Shelf Registration
Statement), the Company and the Guarantors, jointly and severally, will reimburse the Initial
Purchasers and the Holders of Transfer Restricted Securities being tendered in the Exchange Offer
and/or resold pursuant to the “Plan of Distribution” contained in the Exchange Offer Registration
Statement or registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be Shearman & Sterling or
such other counsel as may be chosen by the Holders of a majority in principal amount of the
Transfer Restricted Securities for whose benefit such Registration Statement is being prepared.

          Section 8. Indemnification

          (a) The Company and the Guarantors, jointly and severally, agree to indemnify and hold
harmless (i) each Holder and (ii) each person, if any, who controls (within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act) any Holder (any of the persons referred
to in this clause (ii) being hereinafter referred to as a “controlling person”) and (iii) the
respective officers, directors, partners, employees, representatives and agents of any Holder or
any controlling person (any person referred to in clause (i), (ii) or (iii) may hereinafter be
referred to as an “Indemnified Holder”), to the fullest extent lawful, from and against any
and all losses, claims, damages, liabilities, judgments, actions and expenses (including without
limitation and as incurred, reimbursement of all reasonable costs of investigating, preparing,
pursuing, settling, compromising, paying or defending any claim or action, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, including the reasonable
fees and expenses of counsel to any Indemnified Holder), joint or several, directly or indirectly
caused by, related to, based upon, arising out of or in connection with any untrue statement or
alleged untrue statement of a material fact contained in any Registration Statement or Prospectus
(or any amendment or supplement thereto), or any omission or alleged omission to state therein a
material fact required to be stated therein or

15

 

necessary to make the statements therein not misleading, except insofar as such losses,
claims, damages, liabilities or expenses are caused by an untrue statement or omission or alleged
untrue statement or omission that is made in reliance upon and in conformity with information
relating to any of the Holders furnished in writing to the Company by any of the Holders expressly
for use therein. This indemnity agreement shall be in addition to any liability which the Company
or any of the Guarantors may otherwise have.

          (b) Each Holder of Transfer Restricted Securities agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Guarantors and their respective directors and officers
of the Company and the Guarantors who sign a Registration Statement, and any person controlling
(within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) the
Company or any of the Guarantors, and the respective offices, directors, partners, employees,
representatives and agents of each such person, to the same extent as the foregoing indemnity from
the Company and the Guarantors to each of the Indemnified Holders, but only with respect to claims
and actions based on information relating to such Holder furnished in writing by such Holder
expressly for use in any Registration Statement. In case any action or proceeding shall be brought
against the Company, the Guarantors or their respective directors or officers or any such
controlling person in respect of which indemnity may be sought against a Holder of Transfer
Restricted Securities, such Holder shall have the rights and duties given the Company and the
Guarantors and the Company, the Guarantors or their respective directors or officers or such
controlling person shall have the rights and duties given to each Holder by the preceding
paragraph. In no event shall the liability of any selling Holder hereunder be greater in amount
than the dollar amount of the proceeds received by such Holder upon the sale of the Securities
giving rise to such indemnification obligation.

          (c) Promptly after receipt by an indemnified party under this Section 8 of notice of any claim
or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to
be made against the indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that the failure to
notify the indemnifying party shall not relieve it from any liability that it may have under this
Section 8 except to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses and; provided
further that the failure to notify the indemnifying party shall not relieve it from any liability
that it may have to an indemnified party otherwise than under this Section 8. If any such claim or
action shall be brought against an indemnified party, and it shall notify the indemnifying party
thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying
party to the indemnified party of its election to assume the defense of such claim or action, the
indemnifying party shall not be liable to the indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that the Indemnified
Holders shall have the right to employ counsel to represent jointly the Indemnified Holders and
those Indemnified Holders and their respective directors, officers, employees and controlling
persons who may be subject to liability arising out of any claim in respect of which indemnity may
be sought by the Indemnified Holders against the Company or any of the Guarantors under this
Section 8 if, in the reasonable judgment of the Indemnified

16

 

Holders, it is advisable for the Indemnified Holders and those directors, officers, employees
and controlling persons to be jointly represented by separate counsel, and in that event the fees
and expenses of such separate counsel shall be paid by the Company and the Guarantors. No
indemnifying party shall (i) without the prior written consent of the indemnified parties (which
consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of
which indemnification or contribution may be sought hereunder (whether or not the indemnified
parties are actual or potential parties to such claim or action) unless such settlement, compromise
or consent includes an unconditional release of each indemnified party from all liability arising
out of such claim, action, suit or proceeding, or (ii) be liable for any settlement of any such
action effected without its written consent (which consent shall not be unreasonably withheld), but
if settled with the consent of the indemnifying party or if there be a final judgment of the
plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any
indemnified party from and against any loss or liability by reason of such settlement or judgment.

          (d) If the indemnification provided for in this Section 8 is unavailable to an indemnified
party under Section 8(a) or Section 8(b) hereof (other than by reason of exceptions provided in
those Sections) in respect of any losses, claims, damages, liabilities, judgments, actions or
expenses referred to therein, then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in such proportion as is
appropriate to reflect the relative benefits received by the Company and the Guarantors, on the one
hand, and the Holders, on the other hand, from the Initial Placement (which in the case of the
Company and the Guarantors shall be deemed to be equal to the total gross proceeds from the Initial
Placement as set forth on the cover page of the Offering Memorandum), the amount of Liquidated
Damages which did not become payable as a result of the filing of the Registration Statement
resulting in such losses, claims, damages, liabilities, judgments actions or expenses, and such
Registration Statement, or if such allocation is not permitted by applicable law, the relative
fault of the Company and the Guarantors, on the one hand, and of the Indemnified Holder, on the
other hand, in connection with the statements or omissions which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant equitable considerations. The
relative fault of the Company and the Guarantors, on the one hand, and of the Indemnified Holder,
on the other, shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission to state a material
fact relates to information supplied by the Company or any of the Guarantors or by the Indemnified
Holder and the parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or payable by a party as a result
of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 8(c), any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending any action or
claim.

          The Company, the Guarantors and each Holder of Transfer Restricted Securities agree that it
would not be just and equitable if contribution pursuant to this Section 8(d) were determined by
pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable

17

 

considerations referred to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages, liabilities or expenses
referred to in the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8, none of the Holders (and its related Indemnified Holders) shall be
required to contribute, in the aggregate, any amount in excess of the amount by which the total
discount received by such Holder with respect to the Initial Securities exceeds the amount of any
damages which such Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The Holders’ obligations to
contribute pursuant to this Section 8(d) are several in proportion to the respective principal
amount of Initial Securities held by each of the Holders hereunder and not joint.

          Section 9. Rule 144A

          Unless the Company is subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, each of the Company and the Guarantors shall, for so long as any Transfer Restricted
Securities remain outstanding, make available to any Holder or beneficial owner of Transfer
Restricted Securities in connection with any sale thereof and any prospective purchaser of such
Transfer Restricted Securities from such Holder or beneficial owner, the information required by
Rule 144A(d)(4) under the Securities Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A.

          Section 10. Participation In Underwritten Registrations

          No Holder may participate in any Underwritten Registration hereunder unless such Holder (a)
agrees to sell such Holder’s Transfer Restricted Securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements
and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the terms of such
underwriting arrangements.

          Section 11. Selection Of Underwriters

          The Holders of Transfer Restricted Securities covered by the Shelf Registration Statement who
desire to do so may sell such Transfer Restricted Securities in an Underwritten Offering. In any
such Underwritten Offering, the investment banker or investment bankers and manager or managers
that will administer the offering will be selected by the Holders of a majority in aggregate
principal amount of the Transfer Restricted Securities included in such offering; provided, that
such investment bankers and managers must be reasonably satisfactory to the Company.

18

 

          Section 12. Miscellaneous

          (a) Remedies. Each of the Company and the Guarantors hereby agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.

          (b) No Inconsistent Agreements. Each of the Company and the Guarantors will not, on
or after the date of this Agreement, enter into any agreement with respect to its securities that
is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts
with the provisions hereof. Neither the Company nor any of the Guarantors has entered into any
agreement granting any registration rights with respect to its securities to any Person. The rights
granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of the Company’s or any of the Guarantors’ securities under any
agreement in effect on the date hereof.

          (c) Adjustments Affecting the Securities. The Company will not take any action, or
permit any change to occur, with respect to the Securities that would materially and adversely
affect the ability of the Holders to Consummate any Exchange Offer, unless such action or change is
required by applicable law.

          (d) Amendments and Waivers. The provisions of this Agreement may not be amended,
modified or supplemented, and waivers or consents to or departures from the provisions hereof may
not be given unless the Company has obtained the written consent of Holders of a majority of the
outstanding principal amount of Transfer Restricted Securities (excluding any Transfer Restricted
Securities held by the Company or its affiliates). Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the rights of Holders
whose securities are being tendered pursuant to the Exchange Offer and that does not affect
directly or indirectly the rights of other Holders whose securities are not being tendered pursuant
to such Exchange Offer may be given by the Holders of a majority of the outstanding principal
amount of Transfer Restricted Securities being tendered or registered; provided that, with respect
to any matter that directly or indirectly affects the rights of any Initial Purchaser hereunder,
the Company shall obtain the written consent of each such Initial Purchaser with respect to which
such amendment, qualification, supplement, waiver, consent or departure is to be effective.

          (e) Notices. All notices and other communications provided for or permitted hereunder
shall be made in writing by hand-delivery, first-class mail (registered or certified, return
receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery:

     (i) if to a Holder, at the address set forth on the records of the Registrar under the
Indenture, with a copy to the Registrar under the Indenture; and

     (ii) if to the Company or any Guarantor:

The GEO Group, Inc.

One Park Place

621 NW 53rd Street

19

 

Suite 700

Boca Raton, FL 33487

Facsimile: (561) 999-7744

Attention: John J. Bulfin, Esq.

with a copy to:

Akerman Senterfitt

One Southeast Third Avenue

25th Floor

Miami, FL 33131-1714

Facsimile: (305) 374-5095

Attention: Jose Gordo

     (iii) if to the Initial Purchasers:

c/o Wells Fargo Securities, LLC

301 S. College St.

Charlotte, NC 28202

Facsimile: (704) 383-9165

Attention: Transaction Management Department

with a copy to:

Shearman & Sterling LLP

599 Lexington Avenue

New York, NY 10022-6069

Facsimile: (646) 848-7293

Attention: Andrew Schleider

          All such notices and communications shall be deemed to have been duly given: at the time
delivered by hand, if personally delivered; five business days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if faxed;
and on the next business day, if timely delivered to an air courier guaranteeing overnight
delivery.

          Copies of all such notices, demands or other communications shall be concurrently delivered by
the Person giving the same to the Trustee at the address specified in the Indenture.

          (f) Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties, including without limitation and
without the need for an express assignment, subsequent Holders of Transfer Restricted Securities;
provided, however, that this Agreement shall not inure to the benefit of or be binding upon a
successor or assign of a Holder unless and to the extent such successor or assign acquired Transfer
Restricted Securities from such Holder.

20

 

          (g) Counterparts. This Agreement may be executed in any number of counterparts and by
the 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.

          (h) Headings. The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.

          (i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAW RULES THEREOF.

          (j) Severability. In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable,
the validity, legality and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired thereby.

          (k) Entire Agreement. This Agreement together with the Purchase Agreement, the
Securities, and the Indenture is intended by the parties as a final expression of their agreement
and intended to be a complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to herein with respect
to the registration rights granted by the Company with respect to the Transfer Restricted
Securities. This Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter.

[Remainder of this Page Intentionally Left Blank]

21

 

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

	 	 	 	 	 
	 	The Geo Group, Inc.

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	Sr. VP & CFO 	 
	 

	 	 	 	 	 
	 	GEO RE Holdings LLC

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	Sr. VP & Treasurer 	 
	 

	 	 	 	 	 
	 	GEO Care, Inc.

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	Treasurer 	 
	 

	 	 	 	 	 
	 	Correctional Services Corporation

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP & Treasurer 	 
	 

	 	 	 	 	 
	 	CPT Limited Partner LLC

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP, Finance 	 
	 

	 	 	 	 	 
	 	CPT Operating Partnership LP

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP, Finance 	 

Registration Rights Agreement

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	Correctional Properties Prison Finance LLC

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP, Finance 	 
	 

	 	 	 	 	 
	 	Public Properties Development and Leasing LLC

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP, Finance 	 
	 

	 	 	 	 	 
	 	GEO Holdings I, Inc.

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP, Finance 	 
	 

	 	 	 	 	 
	 	GEO Acquisition II, Inc.

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP, Finance 	 
	 

	 	 	 	 	 
	 	GEO Transport, Inc.

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP & Treasurer 	 
	 

	 	 	 	 	 
	 	Just Care, Inc.

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP & Treasurer 	 

Registration Rights Agreement

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	Cornell Companies, Inc.

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP and CFO 	 
	 

	 	 	 	 	 
	 	Cornell Companies Management Holdings, LLC

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP and CFO 	 
	 

	 	 	 	 	 
	 	Cornell Companies Administration LLC

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP and CFO 	 
	 

	 	 	 	 	 
	 	Cornell Corrections Management, Inc.

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP and CFO 	 
	 

	 	 	 	 	 
	 	CCGI Corporation

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP and CFO 	 
	 

	 	 	 	 	 
	 	Cornell Companies Management Services LP

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP and CFO 	 

Registration Rights Agreement

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	Cornell Companies Management, LP

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP and CFO 	 
	 

	 	 	 	 	 
	 	Cornell Corrections of Alaska. Inc.

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP and CFO 	 
	 

	 	 	 	 	 
	 	Cornell Corrections of California, Inc.

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP and CFO 	 
	 

	 	 	 	 	 
	 	Cornell Corrections of Texas, Inc.

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP and CFO 	 
	 

	 	 	 	 	 
	 	Cornell Corrections of Rhode Island, Inc.

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP and CFO 	 
	 

	 	 	 	 	 
	 	Cornell Interventions, Inc.

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP and CFO 	 

Registration Rights Agreement

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	Correctional Systems, Inc. 

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP and CFO 	 
	 

	 	 	 	 	 
	 	WBP Leasing, Inc.

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP and CFO 	 
	 

	 	 	 	 	 
	 	Cornell Abraxas Group, Inc.

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP and CFO 	 
	 

	 	 	 	 	 
	 	WBP Leasing, LLC

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP and CFO 	 
	 

	 	 	 	 	 
	 	Bii Holding Corporation

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP Finance 	 
	 

	 	 	 	 	 
	 	BII Holding I Corporation

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP – Finance 	 

Registration Rights Agreement

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	Behavioral Holding Corp.

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP – Finance 	 
	 

	 	 	 	 	 
	 	Behavioral Acquisition Corp.

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP – Finance 	 
	 

	 	 	 	 	 
	 	B.I. Incorporated

 	 
	 	By:  	/s/ Brian R. Evans 	 
	 	 	Name:  	Brian R. Evans 	 
	 	 	Title:  	VP – Finance 	 
	 

Registration Rights Agreement

 

 

	 	 	 	 	 
	 	The foregoing Registration Rights Agreement is

hereby confirmed and accepted as of the date first

above written.

Wells Fargo Securities, LLC

Merrill Lynch, Pierce, Fenner & Smith

                              Incorporated

Barclays Capital Inc.

J.P. Morgan Securities LLC

SunTrust Robinson Humphrey, Inc.

Acting on behalf of themselves and the several

Initial Purchasers

 	 
	 	By:  	Wells Fargo Securities, LLC
 	 
	 	 	 	 
	 	By:  	/s/ Jake Petkovich 	 
	 	 	Name:  	Jake Petkovich 	 
	 	 	Title:  	Director 	 
	 	 	 
	 	By:  	Merrill Lynch, Pierce, Fenner & Smith
 	 
	 	 	                              Incorporated 	 
	 	 	 	 
	 	By:  	/s/ William H. Pegler 	 
	 	 	Name:  	William H. Pegler 	 
	 	 	Title:  	Managing Director 	 
	 	 	 
	 	By:  	Barclays Capital Inc.
 	 
	 	 	 
	 	By:  	/s/ Benjamin J. Burton 	 
	 	 	Name:  	Benjamin J. Burton 	 
	 	 	Title:  	Managing Director 	 

Registration Rights Agreement

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	 	 
	 	By:  	J.P. Morgan Securities LLC
 	 
	 	 	 
	 	By:  	/s/ Matthew C. Bittner 	 
	 	 	Name:  	Matthew C. Bittner 	 
	 	 	Title:  	Executive Director 	 
	 	 	 
	 	By:  	SunTrust Robinson Humphrey, Inc.
 	 
	 	 	 
	 	By:  	/s/ Christopher L. Wood 	 
	 	 	Name:  	Christopher L. Wood 	 
	 	 	Title:  	Managing Director 	 
	 

Registration Rights AgreementExhibit 10.1

Exhibit 10.1

FORM OF SALE OF ACCOUNTS AND SECURITY AGREEMENT

Date: February 14, 2011

Clean Diesel Technologies, Inc., a Delaware corporation, having a principal place of business
of 4567 Telephone Road, Suite 206, Ventura, California 93003 (“Seller”) and Faunus Group
International, Inc., a Delaware corporation (“FGI”), hereby agree, intending to be legally bound,
to the terms and conditions set forth in this Sale of Accounts and Security Agreement.

Section 1.1 Definitions. For the purposes of this Agreement and unless defined otherwise
herein, all terms used shall have the meanings assigned to them in this Section 1.1:

“Account” has the definition contained in the UCC and which shall include a right to payment
of a monetary obligation, whether or not earned by performance, (i) for property that has been or
is to be sold, leased, licensed, assigned, or otherwise disposed of or (ii) for services rendered
or to be rendered.

“Account Debtor” has the definition contained in the UCC and which includes any Person who is
obligated on an Account.

“Advance” means an amount advanced by FGI to the Seller pursuant to Section 3(d).

“Affiliate” of any Person shall mean (a) any Person which, directly or indirectly, is in
control of, is controlled by, or is under common control with such Person, or (b) any Person who is
a director or officer (i) of such Person, (ii) of any subsidiary of such Person or (iii) of any
Person described in clause (a) above. For purposes of this definition, control of a Person shall
mean the power, direct or indirect, (x) to vote 5% or more of the securities having ordinary voting
power for the election of directors of such Person, or (y) to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise.

“Agreement” means this Agreement, including the Exhibits and any Schedules hereto, and all
amendments, modifications and supplements hereto and thereto and restatements hereof and thereof.

“Applicable Interest Rate” means the greater of (i) 7.50% per annum and (ii) 2.50% per annum
above the prime rate which shall be an annual rate equal to (x) the prime rate for U.S. banks as
published in the “Money Rates” section of The Wall Street Journal or (y) if The Wall Street Journal
ceases to publish a prime rate, the average of the prime rates announced by the three largest U.S.
money center commercial banks as determined by FGI (the “Prime Rate”).

“Application” means each application made by Seller in connection with this Agreement.

“Avoidance Claim” means any claim that any payment received by FGI from or for the account of
an Account Debtor is avoidable or subject to challenge under the Bankruptcy Code or any other
debtor relief statute.

“Bankruptcy Code” means the Bankruptcy Reform Act of 1978, as amended, and codified as 11
U.S.C. § 101 et seq.

“Chattel Paper” has the definition contained in the UCC and which includes a record or records
that evidence both a monetary obligation and a security interest in specific goods, a security
interest in specific goods and software used in the goods, a security interest in specific goods
and license of software used in the goods, a lease of specific goods, or a lease of specific goods
and license of software used in the goods.

“Collateral” means and includes all of the Seller’s right, title and interest in and to all of
the Seller’s personal property, wherever located and whether now or hereafter existing or now owned
or hereafter acquired or arising, including the following: (a) all Accounts, (b) all Chattel Paper,
(c) all Commercial Tort Claims, (d) all Deposit Accounts, (e) all Documents, (f) all Equipment, (g)
all General Intangibles, (h) all Goods (including all files, correspondence, computer programs,
tapes, disks and related data processing software which contain
information identifying or pertaining to any of the Collateral or any Account Debtor or
showing the amounts thereof or payments thereon or otherwise necessary or helpful in the
realization thereon or the collection thereof), (i) all Instruments, (j) all Inventory, (k) all
Investment Property, (l) all letters of credit and Letter-of-Credit Rights, (m) all Supporting
Obligations and (n) all cash and non-cash proceeds of the foregoing, including insurance proceeds.

 

 

 

“Commercial Tort Claim” has the definition contained in the UCC.

“Covered Affiliate Agreements” means all Sale and Security Agreements and similar agreements
between FGI and any of the following Affiliates of Seller: Catalytic Solutions, Inc., Engine
Control Systems Ltd, Engine Control Systems Limited, Engine Control Systems Europe AB, Clean Diesel
Technologies, Limited, and Clean Diesel International, LLC.

“Date of Collection” means the date a check, draft or other item representing payment on an
invoice is posted by FGI plus two (2) business days.

“Deficiency Assessment” means charges as set forth in Section 3(j) of this Agreement applied
to the difference between the minimum monthly net funds employed and the net funds employed for the
month and shall be chargeable to the Reserve Account, or at FGI’s option, payable by Seller on
FGI’s demand.

“Default” means any of the events or circumstances specified in Section 10 of this Agreement
that, with the passage of time or giving of notice or both, would constitute an Event of Default.

“Deposit Account” has the definition contained in the UCC and which includes any demand, time,
savings, passbook or like account maintained with a bank, trust company, savings and loan
association, credit union, other financial institution or like organization, other than an account
evidenced by a certificate of deposit that is an instrument under the UCC.

“Dispute” means any claim, whether or not provable or bona fide, and whether with or without
support, made by an Account Debtor as a basis for refusing to pay a Purchased Account, either in
whole or in part, including, but not limited to, any contract dispute, charge back, credit, right
to return Goods, or other matter which diminishes or may diminish the dollar amount or timely
collection of such Account.

“Document” means a document of title or a receipt of the type described in UCC 7-201(2).

“Eligible Inventory” shall mean the aggregate gross amount of Seller’s Inventory (other than
work-in-process), valued at the lower of cost (determined on a first-in, first out basis) or
market, which (i) is owned solely by Seller and with respect to which Seller has good, valid and
marketable title, (ii) is stored at 1620 Emerson Avenue, Oxnard, California 93033 and Seller shall
have delivered in favor of the FGI an Acknowledgment and Waiver Agreement from the landlord of such
leased location; (iii) is subject to a valid, enforceable and first priority Lien in favor of FGI
and is otherwise free and clear of any other Liens; (iv) is located in the continental United
States of America; (v) is not obsolete or slow moving and for which a markdown reserve has not been
made, and which otherwise conforms to the warranties contained herein; (vi) is subject to insurance
for the benefit of FGI and Seller; (vii) meets all standards imposed by any Governmental Authority;
(viii) is not Inventory consisting of manufacturing supplies (other than raw materials), expense
supplies or shipping supplies, (ix) is not goods returned or rejected by Seller’s customers for
which a credit has not yet been issued, (x) is not goods in transit to third parties, (xi) is not
damaged Inventory, (xii) is not Inventory that FGI determines in its sole discretion to be
packaging, a no charge or sample item; (xiii) is not Inventory which is held by Seller pursuant to
consignment, sale or return, sale on approval or similar arrangement; (xiii) is not Inventory
subject to a license agreement unless the licensor with respect thereto has executed a licensor
consent acceptable to FGI in its sole discretion and (xiv) is not Inventory that FGI determines in
its sole discretion to be ineligible.

“Equipment” has the definition contained in the UCC.

“Event of Default” means any of the events or circumstances specified as Events of Defaults in
Section 10 of this Agreement.

 

 

 

“Extended Term” means a three year extension of the term of this Agreement effected in
accordance with Section 13.

“Facility Amount” means the amount determined by FGI from time to time to be the Facility
Amount and, until so determined, means $7,500,000, less (i) outstanding amounts advanced against
Inventory hereunder and under (and as defined in) all Covered Affiliate Agreements, and (ii) other
outstanding amounts under all Covered Affiliate Agreements.

“FGI’s Security” has the meaning assigned thereto in Section 6(a).

“Financing Statement” means each Uniform Commercial Code financing statement, including any
continuations thereof or amendments thereto, naming FGI as purchaser/secured party and the Seller
as seller/debtor, in connection with this Agreement.

“Foreign Currency” has the meaning assigned thereto in Section 25(a).

“Foreign Exchange Loss” has the meaning assigned thereto in Section 25(b).

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

“General Intangible” has the definition contained in the UCC.

“Goods” has the definition contained in the UCC.

“Instrument” has the definition contained in the UCC and which includes a negotiable
instrument or any other writing that evidences a right to the payment of a monetary obligation, is
not itself a security agreement or lease, and is of a type that in ordinary course of business is
transferred by delivery with any necessary endorsement or assignment.

“Inventory” has the definition contained in the UCC.

“Inventory Advance Rate” means the rate identified in Section 3(e).

“Inventory Sublimit” means the amount determined by FGI from time to time to be the Inventory
Sublimit and, until so determined, means $1,000,000, less outstanding advances against Inventory
under (and as defined in) all Covered Affiliate Agreements.

“Investment Property” has the definition contained in the UCC.

“Letter-of-Credit Right” has the definition contained in the UCC.

“Misdirected Payment Fee” means 15% of the amount of any payment on account of a Purchased
Account or, after the occurrence and during the continuance of a Default any other Account, which
has been received by Seller and not delivered in kind to FGI on the second business day following
the date of receipt by Seller.

“Net Invoice Amount” means the invoice amount of a Purchased Account, less returns (whenever
made), all selling discounts (at FGI’s sole option, calculated on shortest terms), and credit or
deductions of any kind allowed or granted to or taken by the Account Debtor at any time.

“Obligations” means all present and future obligations owing by Seller to FGI whether or not
for the payment of money, whether or not evidenced by any note or other instrument, whether direct
or indirect, absolute or contingent, due or to become due, joint or several, primary or secondary,
liquidated or unliquidated, secured or unsecured, original or renewed or extended, whether arising
before, during or after the commencement of any
bankruptcy case in which Seller is a debtor, specifically including interest accruing after
the commencement of any bankruptcy, insolvency or similar proceeding with respect to Seller
(whether or not a claim for such post-commencement interest is allowed), including but not limited
to any obligations arising pursuant to letters of credit or acceptance transactions or any other
financial accommodations.

 

 

 

“Original Term” means the initial two year term of this Agreement as reflected in Section 13.

“Person” means an individual, corporation, partnership, limited liability company, unlimited
liability company, association, trust, joint venture, unincorporated organization, government or
any agency or political subdivision thereof, or any other entity.

“Prime Rate” has the meaning assigned thereto in the definition herein of “Applicable Interest
Rate”

“Purchased Account” means an Account which FGI purchases pursuant to this Agreement.

“Purchase Date” has the meaning assigned thereto in Section 25(b).

“Purchase Price” has the meaning assigned thereto in Section 3(a).

“Rate of Exchange” has the meaning assigned thereto in Section 25(b).

“Related Rights” means, with respect to an Account, all rights (but not obligations) of Seller
with respect thereto, including all right, title and interest of Seller in, to, under and with
respect to (i) all contract rights, guarantees, letters of credit, liens, security interests,
instruments, chattel paper and other documents, rights or interests arising out of or evidencing
such Account, (ii) all insurance and other agreements and arrangements of whatever character from
time to time supporting or securing payment of such Account, (iii) all Goods the sale of which gave
rise to such Account, including Seller’s rights and remedies with respect thereto under any present
or future personal property security legislation, or under any other applicable law, and all rights
of stoppage in transit, replevin and reclamation and (iv) all cash and non-cash proceeds of any of
the foregoing, including insurance proceeds.

“Required Reserve Amount” means the amount determined by FGI from time to time in accordance
with Section 3(c) to be the Required Reserve Amount and, until so determined, means an amount equal
to the Reserve Percentage multiplied by the unpaid balance of all Purchased Accounts.

“Reserve Account” means (a) a bookkeeping account on the books of FGI and/or (b) an account of
FGI in which FGI deposits funds from time to time as contemplated by this Agreement.

“Reserve Percentage” means the percentage determined by FGI from time to time in accordance
with Section 3(c) to be the Reserve Percentage and, until so determined, means 20%.

“Reserve Shortfall” means the amount by which the balance in the Reserve Account is less than
the Required Reserve Amount, provided that, if the Reserve Account has a negative balance, the
Reserve Shortfall shall be the sum of such balance and the Required Reserve Amount.

“Schedule of Accounts” means a schedule of Accounts in the form attached hereto as Schedule 1
or in such other form as required by FGI or otherwise acceptable to FGI (including in an excel
spreadsheet format acceptable to FGI) wherein Seller lists Accounts that Seller offers to sell to
FGI.

“Supporting Obligation” has the definition contained in the UCC.

“Term” means the term of this Agreement, as determined in accordance Section 13.

“Termination Fee” means a fee payable to FGI pursuant to Section 13 in the event Seller
terminates this Agreement prior to maturity of the Original Term or of an Extended Term.

 

 

 

“UCC” means the Uniform Commercial Code as in effect from time to time in the State of New York.

“U.S. Dollars” means the lawful currency of the United States of America.

Section 1.2 Other Referential Provisions.

(a) Except as otherwise expressly provided herein, all accounting terms not specifically
defined or specified herein shall have the meanings generally attributed to such terms under GAAP.

(b) All personal pronouns used in this Agreement, whether used in the masculine, feminine or
neuter gender, shall include all other genders; the singular shall include the plural, and the
plural shall include the singular.

(c) The words “hereof”, “herein” and “hereunder” and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular provisions of this
Agreement.

(d) Titles of Articles and Sections in this Agreement are for convenience only, do not
constitute part of this Agreement and neither limit nor amplify the provisions of this Agreement,
and all references in this Agreement to Articles, Sections, Subsections, paragraphs, clauses, sub
clauses, Schedules or Exhibits shall refer to the corresponding Article, Section, Subsection,
paragraph, clause or sub clause of, or Schedule or Exhibit attached to, this Agreement, unless
specific reference is made to the articles, sections or other divisions or subdivisions of, or to
schedules or exhibits to, another document or instrument.

(e) Unless the context requires otherwise (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such agreement, instrument
or other document as from time to time amended, supplemented, restated or otherwise modified
(subject to any restrictions on such amendments, supplements, restatements or modifications set out
herein), (b) any reference herein to any statute or any section thereof shall, unless otherwise
expressly stated, be deemed to be a reference to such statute or section as amended, replaced or
re-enacted from time to time and (c) any reference herein to any Person shall be construed to
include such Person’s successors and permitted assigns.

(f) When used in this Agreement, the words “include”, “includes” and “including” shall be
deemed to be followed by the phrase “without limitation”.

(g) Except as otherwise expressly provided in this Agreement, all dollar amounts referred to
herein are stated in the lawful currency of the United States of America. In addition, all
calculations hereunder in respect of any amount that is denominated in a Foreign Currency (such as
the amount of an Account) shall for all purposes hereof be made in respect of the U.S. Dollar
equivalent of such amount determined by converting such amount that is denominated in a Foreign
Currency to U.S. Dollars using the rate of exchange at which FGI is able, on the date of
determination, to purchase U.S. Dollars with such Foreign Currency in accordance with its normal
practice at its office in New York, New York.

Section 1.3 Exhibits and Schedules. All Exhibits and Schedules attached hereto are by
reference made a part hereof.

Section 2. Purchase & Sale of Accounts.

(a) Seller hereby offers to sell, assign, transfer, convey and deliver to FGI, as absolute
owner, in accordance with the procedure detailed herein, all of Seller’s right, title and interest
in and to Seller’s Accounts and their Related Rights; provided that the parties acknowledge their
intention that, without affecting the validity of any sale, assignment, transfer, conveyance or
delivery of any Purchased Account, the aggregate outstanding amount of Purchased Accounts Advanced
on FGI’s books will not at any time exceed the Facility Amount.

(b) All Accounts shall be submitted to FGI on a Schedule of Accounts listing each Account
separately. The Schedule of Accounts shall, at the request of FGI, be signed by a person acting or
purporting to act on behalf of Seller. At the time a Schedule of Accounts is presented, Seller
shall also deliver to FGI one copy of the
sales contract, purchase order and invoice for each Account listed on the schedule together
with evidence of shipment, furnishing and/or delivery of the applicable Goods or rendition of the
applicable service(s).

 

 

 

(c) Any and all Purchased Accounts shall be purchased by FGI with full recourse to Seller, and
Seller agrees to pay to FGI on demand the unpaid amount of each Purchased Account specified by FGI.
Seller agrees that any payments or credits applying to any Account owing by an Account Debtor will
be applied: first, to any Purchased Account of such Account Debtor; and, second, to
any other Accounts of such Account Debtor. This order of payment applies regardless of the
respective dates the sales occurred and regardless of any notations on payment items.

(d) In the event that FGI determines to purchase an Account submitted by Seller to it and such
Account’s Related Rights, FGI shall post such Account on its receivables processing system and
shall mark such Account as having been purchased and/or accepted. Such posting and marking shall
constitute FGI’s acceptance of Seller’s offer to sell, assign, transfer, convey and deliver such
Account and its Related Rights to FGI and shall effect a purchase of such Account and its Related
Rights by FGI and the sale, assignment, transfer, conveyance and delivery thereof to FGI whether or
not Seller has complied with any notice or other requirements set forth in this Agreement in
respect thereof. Seller may, and at FGI’s request from time to time with respect to any Purchased
Account specified by FGI will, deliver to FGI a specific assignment of an Account submitted by
Seller to it (including a Purchased Account) in a form specified by FGI. The delivery by or of
behalf of Seller to FGI of any assignment of an Account shall effect (or confirm) the sale,
assignment, transfer, conveyance and delivery of such Account and its Related Rights to FGI,
provided the delivery of any such assignment shall not be necessary to effect a sale, assignment,
transfer, conveyance and delivery of any Account and its Related Rights if FGI shall post and mark
such Account on its factoring processing system as contemplated by this Section 2(d).

Section 3. Purchase Price and Fees.

(a) The purchase price for each Purchased Account and its Related Rights shall equal the Net
Invoice Amount of such Purchased Account less (i) any portion thereof that represents an obligation
to pay PST and (ii) FGI’s fees, as determined in accordance with Section 3(h). No discount,
credit, allowance or deduction with respect to any Purchased Account, unless shown on the face of
the invoice delivered to FGI prior to FGI’s purchase of such Account, shall be granted or approved
by Seller to any Account Debtor without FGI’s prior written consent.

(b) The Purchase Price for a Purchased Account and its Related Rights less (i) any Required
Reserve Amount or credit balance that FGI, in FGI’s sole and absolute discretion, determines to
hold, (ii) the outstanding balance of all Advances in respect of such Account and of any other
moneys remitted, paid, or otherwise advanced by FGI to or on behalf of Seller (including any
amounts which FGI reasonably determines that FGI may be obligated to pay in the future), and (iii)
any charge, fee, and other amount that Seller is required to pay to FGI pursuant to this Agreement,
shall be payable by FGI to Seller on the Date of Collection of such Account.

(c) FGI shall be entitled, in its sole and absolute discretion, to withhold the Required
Reserve Amount, and may increase or decrease the Required Reserve Amount or Reserve Percentage at
any time and from time to time if FGI deems it necessary to do so in order to protect FGI’s
interests. In no event shall Seller permit a Reserve Shortfall to occur, and shall pay to FGI the
amount thereof on demand. FGI may charge against the Reserve Account any amount for which Seller
may be obligated to FGI at any time, whether under the terms of this Agreement, or otherwise,
including but not limited to the repayment of any Advance, the amount of any Purchased Account aged
ninety (90) days or more past invoice date, any damages suffered by FGI as a result of Seller’s
breach of any representation or warranty herein or of any other provision hereof (whether
intentional or unintentional), any adjustments due and any attorneys’ fees, costs and disbursements
due. Seller recognizes that the Reserve Account may, in FGI’s sole discretion, represent
bookkeeping entries only and not cash funds. It is further agreed that, with respect to the
balance in the Reserve Account, FGI is authorized to withhold, without giving prior notice to
Seller, any payments and credits otherwise due to Seller under the terms of this Agreement to
protect FGI for reasonably anticipated claims or to adequately satisfy reasonably anticipated
obligations Seller may owe FGI. Upon the occurrence of an Event of Default, or in the event Seller
shall cease selling Accounts to FGI, FGI shall be under no obligation to pay the amount maintained
in the Reserve Account until all Purchased Accounts have been collected or
FGI has determined, in its sole and absolute discretion, that it will make no further efforts
to collect any Purchased Accounts and all sums due FGI hereunder have been paid. Notwithstanding
anything set forth herein to the contrary, upon an Event of Default, Seller understands and agrees
that the Termination Fee described Section 13 hereof shall be due and payable by Seller in the
event that FGI terminates this Agreement following an Event of Default.

 

 

 

(d) Advances. In FGI’s sole and absolute discretion, FGI may from time to time advance to
Seller against the Purchase Price of a Purchased Account, sums up to 80% of the aggregate Purchase
Price thereof outstanding at the time any such Advance is made, less: (i) the amount of any such
Purchased Account that is in Dispute; (ii) the amount of any Purchased Account aged ninety (90)
days or more past invoice date; and (iii) any fees, actual or estimated, that are payable to FGI
hereunder. Each Advance shall be payable by Seller to FGI on demand until the Date of Collection
of the related Purchased Account and shall bear interest at the Applicable Interest Rate, before
and after default and judgement, with interest on overdue interest at the same rate, from the date
such Advance is made until the earlier of (i) the date the Advance is repaid in full or (ii) the
date FGI would otherwise be obligated hereunder to pay the Purchase Price of the Purchased Account
against which such Advance was made.

(e) Inventory Sublimit. If requested by Seller, in accordance with the terms of this
Agreement, FGI may in its sole and absolute discretion advance to Seller against Eligible
Inventory, submitted to FGI on an Inventory Borrowing Base Certificate, sums not to exceed 75% of
the net orderly liquidation value of up to 30% of the Eligible Inventory outstanding at the time
any such advance is made. Notwithstanding the foregoing, the outstanding advances against Eligible
Inventory may not at any time exceed the lesser of (i) the Inventory Sublimit and (ii) an amount
equal to 30% of the aggregate Purchase Price of all outstanding Purchased Accounts hereunder and
under all other such Sale and Security Agreements and all similar agreements between FGI and any
Affiliate of the Seller. Any resulting overadvance shall be immediately repaid to FGI. The
Inventory Borrowing Base Certificate shall be in the form attached hereto as Schedule 3(e)
or in such other form as required by FGI, and shall be signed by a duly authorized
representative of Seller. At the time the Inventory Borrowing Base Certificate is presented, Seller
shall also deliver to FGI its inventory report. Any advance made pursuant to this subsection shall
be payable on demand and shall bear interest at the Applicable Interest Rate from the date such
advance is made until the date such advance is paid in full.

(f) Interest at the Applicable Interest Rate upon the daily total outstanding balance of each
Advance shall be payable by Seller to FGI on the last day of each month and may be charged by FGI
to the Reserve Account. Any adjustment in the Applicable Interest Rate, whether downward or
upward, will become effective on the day on which the Applicable Interest Rate decreases or
increases, as the case may be. If, on any day in a month, the balance in the Reserve Account
exceeds the unpaid balance of all Purchased Accounts, then Seller agrees to credit the Reserve
Account as of the last day of such month with interest on such excess at an annual rate equal to
4.25% above the Prime Rate. All interest and fees payable hereunder shall be computed for the
actual number of days elapsed on the basis of a year consisting of three hundred sixty (360) days.
The rates of interest under this Agreement are nominal rates, and not effective rates or yields.
The principle of deemed reinvestment of interest does not apply to any interest calculation under
this Agreement.

(g) Seller shall pay to FGI a onetime non-refundable facility fee of $75,000, less any
payments made to FGI constituting “facility fees” under any Covered Affiliate Agreements.

(h) Seller shall, both before and after the termination of this Agreement, pay a
non-refundable collateral management fee of 0.44% per month of the original face amount of each
Purchased Account upon which an Advance has been made for the period such Purchased Account is open
on FGI’s books. For the purpose of this section 3(h), a Purchased Account shall be considered to
be open on FGI’s books for the number of days, or any part thereof, elapsed (including the first
day but excluding the last day) in the period that commences on the day that the Account became a
Purchased Account and that ends on the first to occur of (x) the day on which such Purchased
Account has been collected in full and (y) the day on which FGI has determined, in its sole and
absolute discretion, that it will make no further efforts to collect such Purchased Account. FGI
will charge each collateral management fee to the Reserve Account; provided that, if the Reserve
Account would, following any such charge, not have a credit balance, or would have a credit balance
that is less than the Required Reserve Amount, Seller will pay the fee in question to FGI on
demand.

 

 

 

(i) Seller shall unconditionally pay and FGI shall be entitled to receive a non-refundable
monthly inventory management service fee equal to 0.55% on the net daily balance of all outstanding
advances in subsection (e) charged monthly to Seller’s Reserve Account or if funds are not
available therein, payable by Seller on demand.

(j) All collateral management fees shall be computed on the basis of a year of 365 or 366
days, as the case may be, and shall be payable for the actual number of days elapsed (including the
first day but excluding the last day).

(k) Seller shall pay to FGI a non-refundable standby fee in respect of (x) each month during
the Term and (y) the period that commences on the day following the last full month of the Term and
that ends on the last day of the Term. Each standby fee shall be equal to the sum of (i) a fee
calculated at the Applicable Interest Rate on the difference, during the period for which the
calculation is made, between $2,400,000 and the average unpaid principal amount of the aggregate
Advances that are outstanding hereunder and under all Covered Affiliate Agreements during such
period (such difference, the “Unadvanced Amount” for such period) plus (ii) a fee equal to 0.44%
per month of the amount determined by dividing the Unadvanced Amount during the period for which
the calculation is made by 80%. FGI shall charge the standby fee for a particular period to the
Reserve Account and/or to any Reserve Accounts under (and as defined in) any Covered Affiliate
Agreements on the last day of such period; provided that, if the Reserve Account and all Reserve
Accounts under (and as defined in) all Covered Affiliate Agreements would, following any such
charge, not have a credit balance, or would have a credit balance that is less than the Required
Reserve Amount (as defined hereunder and under the respective Covered Affiliate Agreements), Seller
shall pay the fee in question to FGI on demand. All standby fees shall be computed on the basis of
a year of 365 or 366 days, as the case may be, and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).

(l) IT IS THE INTENTION OF THE PARTIES HERETO THAT, AS TO ALL PURCHASED ACCOUNTS, THE
TRANSACTIONS CONTEMPLATED HEREBY SHALL CONSTITUTE A TRUE PURCHASE AND SALE OF SUCH ACCOUNTS
INCLUDING, WITHOUT LIMITATION, UNDER § 9-318 OF THE UCC, AND AS SUCH THE SELLER SHALL THEREFORE
HAVE NO LEGAL OR EQUITABLE INTEREST IN ANY PURCHASED ACCOUNTS. NEVERTHELESS, THE PARTIES HERETO
INTEND TO CONTRACT IN STRICT COMPLIANCE WITH APPLICABLE USURY LAW FROM TIME TO TIME IN EFFECT. IN
FURTHERANCE THEREOF SUCH PARTIES STIPULATE AND AGREE THAT NONE OF THE TERMS AND PROVISIONS
CONTAINED IN THIS AGREEMENT SHALL EVER BE CONSTRUED TO CREATE A CONTRACT TO PAY, FOR THE USE,
FORBEARANCE OR DETENTION OF MONEY, INTEREST IN EXCESS OF THE MAXIMUM RATE (AS HEREINAFTER DEFINED)
FROM TIME TO TIME IN EFFECT. NEITHER SELLER, ANY PRESENT OR FUTURE GUARANTOR NOR ANY OTHER PERSON
HEREAFTER BECOMING LIABLE FOR THE PAYMENT OF THE ADVANCES, OR ANY OTHER AMOUNTS PAYABLE HEREUNDER,
SHALL EVER BE LIABLE FOR ANY OBLIGATION THAT MAY BE CHARACTERIZED AS UNEARNED INTEREST THEREON, OR
SHALL EVER BE REQUIRED TO PAY ANY OBLIGATION THAT MAY BE CHARACTERIZED AS INTEREST THEREON, IN
EITHER CASE THAT IS IN EXCESS OF THE MAXIMUM AMOUNT THAT MAY BE LAWFULLY CHARGED UNDER APPLICABLE
LAW FROM TIME TO TIME IN EFFECT, AND THE PROVISIONS OF THIS SECTION SHALL CONTROL OVER ALL OTHER
PROVISIONS OF THIS AGREEMENT WHICH MAY BE IN CONFLICT THEREWITH. IF ANY INDEBTEDNESS OR OBLIGATION
OWED BY SELLER HEREUNDER IS DETERMINED TO BE IN EXCESS OF THE LEGAL MAXIMUM, OR FGI SHALL OTHERWISE
COLLECT MONEYS WHICH ARE DETERMINED TO CONSTITUTE INTEREST WHICH WOULD OTHERWISE INCREASE THE
INTEREST ON ALL OR ANY PART OF ANY INDEBTEDNESS OR OBLIGATIONS HEREUNDER TO AN AMOUNT IN EXCESS OF
THAT PERMITTED TO BE CHARGED BY APPLICABLE LAW THEN IN EFFECT, THEN ALL SUCH SUMS DETERMINED TO
CONSTITUTE INTEREST IN EXCESS OF SUCH LEGAL LIMIT SHALL, WITHOUT PENALTY, BE PROMPTLY APPLIED TO
REDUCE THE THEN OUTSTANDING INDEBTEDNESS OR OBLIGATIONS OF SELLER HEREUNDER OR, AT FGI’S OPTION,
RETURNED TO SELLER OR THE OTHER PAYOR THEREOF UPON SUCH DETERMINATION. IF AT ANY TIME THE RATE AT
WHICH INTEREST IS PAYABLE HEREUNDER EXCEEDS THE MAXIMUM RATE, THE AMOUNT OUTSTANDING HEREUNDER
SHALL CEASE BEARING INTEREST UNTIL SUCH TIME AS THE TOTAL AMOUNT OF INTEREST ACCRUED HEREUNDER
EQUALS (BUT DOES NOT EXCEED) INTEREST CALCULATED AT THE MAXIMUM RATE. AS USED IN THIS
SECTION, THE TERM “APPLICABLE LAW” MEANS THE LAWS OF THE STATE OF NEW YORK OR, IF DIFFERENT,
THE LAWS OF THE STATE, TERRITORY OR OTHER JURISDICTION IN WHICH SELLER RESIDES, WHICHEVER LAW
ALLOWS THE GREATER RATE OF INTEREST, AS SUCH LAWS NOW EXIST OR MAY BE CHANGED OR AMENDED OR COME
INTO EFFECT IN THE FUTURE AND THE TERM “MAXIMUM RATE” MEANS THE MAXIMUM NONUSURIOUS RATE OF
INTEREST THAT FGI IS PERMITTED UNDER APPLICABLE LAW TO CONTRACT FOR, TAKE, CHARGE OR RECEIVE WITH
RESPECT TO THE ADVANCES OR ANY OTHER INDEBTEDNESS OR OBLIGATIONS HEREUNDER.

 

 

 

(m) FGI shall provide Seller online access via a secured website to information on the
Purchased Accounts and a reconciliation of the relationship relating to billing, collection and
account maintenance such as aging, posting, error resolution, interest and fees payable hereunder,
and mailing of statements in the ordinary course of FGI’s business. All of the foregoing shall be
in a format, and in such detail, as FGI, in its sole and absolute discretion, deems appropriate.
Furthermore, FGI’s books and records shall be admissible in evidence without objection as prima
facie evidence of the status of the Purchased and non-purchased Accounts and the Reserve Account.
Each statement, report, or accounting rendered or issued by FGI to Seller, if any, and all online
information shall be deemed conclusively accurate and binding on Seller unless within twenty-one
(21) days after the date of issuance or posting Seller notifies FGI to the contrary by registered
or certified mail, setting forth with specificity the reasons why Seller believes such statement,
report, or accounting is inaccurate, as well as what Seller believes to be correct amount(s)
therefor. FGI’s failure to provide or Seller’s failure to receive such online access shall not
relieve Seller of Seller’s obligations under this Agreement or the responsibility of Seller to
request such statement and Seller’s failure to do so shall nonetheless bind Seller to whatever
FGI’s records would have reported.

Section 4. Seller’s Representations, Warranties and Covenants. Seller, as well as each of Seller’s
principals, represent, warrant and covenant, jointly and severally, to FGI that:

(a) Seller is a corporation, is duly organized, validly existing and in good standing under
the laws of Delaware and is qualified and authorized to do business and is in good standing in all
states in which such qualification and good standing are necessary or desirable.

(b) The execution, delivery and performance by Seller of this Agreement does not and will not
constitute a violation of any applicable law, or a violation of Seller’s [articles of
incorporation/articles of organization], [bylaws/operating agreement], or other organizational
documents and does not and will not constitute any material breach of any other material document,
agreement or instrument to which Seller is a party or by which Seller is bound.

(c) Seller has all requisite power and authority to enter into and perform this Agreement, and
has taken all necessary action to authorize the execution, delivery and performance of this
Agreement and all other documents, instruments and agreements executed in connection herewith.
This Agreement is a legal, valid and binding obligation of Seller enforceable against it in
accordance with its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’
rights generally and by general equitable principles.

(d) Immediately prior to the execution and at the time of delivery of each Schedule of
Accounts, Seller will be the sole owner and holder of each of the Accounts described thereon and
its Related Rights. Upon FGI’s purchase of an Account and its Related Rights in accordance with
Section 2(d) hereof, FGI shall become the sole owner and holder of such Purchased Account and
Related Rights.

(e) At the time of sale to FGI hereunder, no Purchased Account or Related Rights shall have
been previously sold or transferred or be subject to any lien, encumbrance, security interest or
other claim of any kind of nature. Seller will not factor, sell, transfer, pledge or give a
security interest in any of its Accounts or Related Rights to anyone other than FGI. There are and
will be no Financing Statements on file in any public office covering any Collateral, any Purchased
Accounts or their Related Rights except in favor of FGI or those statements now on file
specifically listed on Schedule 4(e) attached hereto. Seller will not execute any security
agreement or authorize the filing of any Financing Statement in respect of any Collateral, any
Purchased Accounts or their Related Rights in favor of any Person, except FGI, during the Term of
this Agreement.

 

 

 

(f) The amount of each Purchased Account will, immediately prior to its sale to FGI pursuant
hereto, be due and owing to Seller and represent a bona fide sale, delivery and acceptance of Goods
or performance of services by Seller to or for an Account Debtor. The information regarding an
Account on each Schedule of Accounts will be accurate. The terms for payment of each Purchased
Account will be no greater than sixty (60) days from date of invoice and the payment of such
Purchased Account will not be contingent upon the fulfillment by Seller of any further performance
of any nature whatsoever. Each Account Debtor which is the obligor in respect of an Account that
is listed on a Schedule of Accounts will, to the best of Seller’s knowledge, be solvent at the time
Seller provides such Schedule to FGI.

(g) There are and shall be no set-offs, allowances, discounts, deductions, counterclaims, or
disputes with respect to any Purchased Account, without notice and prior written consent of FGI.
Seller shall inform FGI, in writing, immediately upon learning that there exists any Purchased
Account which is subject to a Dispute. Seller shall accept no returns and shall grant no allowance
or credit to any Account Debtor with respect to a Purchased Account without the prior written
consent of FGI. On the second business day of each calendar week, Seller shall provide to FGI, for
each Account Debtor who is indebted on a Purchased Account, a weekly report in a form and substance
satisfactory to FGI itemizing all such returns and allowances made during the previous week with
respect such Purchased Account and at FGI’s option a check (or wire transfer) payable to FGI for
the amount thereof or, in FGI’s sole and exclusive discretion, FGI may accept the issuance of a
credit memo and charge same to the Reserve Account.

(h) Seller’s address, as set forth in any Application submitted to FGI, is and will be
Seller’s mailing address, chief executive office, principal place of business and the office where
all of the books and records concerning the Purchased Accounts are and will be maintained, and
which shall not be changed without giving thirty (30) days prior written notice to FGI. Seller
will not change its name without giving thirty (30) days prior written notice to FGI.

(i) Seller shall maintain its books and records in accordance with GAAP and shall reflect on
its books the absolute sale of the Purchased Accounts and their Related Rights to FGI. Seller
shall furnish FGI, upon request, such information and statements as FGI shall request from time to
time and at any time regarding Seller’s business affairs, financial condition and results of its
operations. Without limiting the generality of the foregoing, Seller shall provide FGI, on or
prior to the thirtieth (30th) day of each month, unaudited financial statements with
respect to the prior month and, within one hundred and twenty (120) days after the end of each of
Seller’s fiscal years, annual consolidated financial statements for it and its Affiliates that are
consolidated with it, and such certificates relating to the foregoing as FGI may request including,
a monthly certificate from the president and chief financial officer of Seller stating that no
Event of Default exists or if any Event of Default exists stating in detail the nature of each
Event of Default. Seller will furnish to FGI upon request a current listing of all open and unpaid
accounts payable and Accounts, and such other items of information that FGI may deem necessary or
appropriate from time to time. Unless otherwise expressly provided herein or unless FGI otherwise
consents, all financial statements and reports furnished to FGI hereunder shall be prepared and all
financial computations and determinations pursuant hereto shall be made in accordance with GAAP,
consistently applied.

(j) Seller has filed and will file all tax returns required to be filed in any jurisdiction
where Seller conducts business and Seller has paid and will pay all taxes and governmental charges
(including taxes and charges imposed with respect to any sale of Goods or provision of services)
and furnish to FGI upon request satisfactory proof of payment and compliance with all federal,
state and local tax requirements.

(k) There are, and at any time that Seller provides a Schedule of Accounts to FGI pursuant
hereto there will be, no lawsuits against Seller involving amounts greater than $50,000 (or the
equivalent thereof in any currency) except as disclosed in writing to FGI before the date hereof or
the date of providing such Schedule, and Seller will promptly notify FGI of (i) the filing of any
lawsuit against Seller involving amounts greater than $50,000 (or the equivalent thereof in any
currency), and (ii) any attachment or any other legal process levied against Seller.

(l) The Application made or delivered by or on behalf of Seller in connection with this
Agreement, and the statements made therein, are true and correct at the time that this Agreement is
executed. There is no fact which Seller has not disclosed to FGI in writing which could reasonably
be expected to materially adversely affect
the properties, business, financial condition or prospects of Seller, or any of the Accounts
or other Collateral, or which is necessary to disclose in order to keep the foregoing
representations and warranties from being misleading.

 

 

 

(m) In no event shall the funds paid to Seller hereunder be used directly or indirectly for
personal, family, household or agricultural purposes.

(n) Seller does, and will do, business under no trade or assumed names other than specifically
listed on Schedule 4(n) attached hereto.

(o) Any invoice or written communication that Seller will send to FGI by facsimile
transmission or email will be a duplicate of the original.

(p) Any electronic communication of data, whether by e-mail, tape, disk, or otherwise, that
Seller remits or causes to be remitted to FGI shall be authentic and genuine.

(q) Seller has obtained and will obtain all licenses, permits, franchises or other
governmental authorizations necessary for the ownership of its property and for the conduct of its
business.

(r) After giving effect to the transactions contemplated under this Agreement, Seller is and
will be solvent, is and will be able to pay its debts as they become due, and has and will have
capital sufficient to carry on its business and all businesses in which it is or will be about to
engage, and now owns and will own property having a value both at fair valuation and at fair
salable value greater than the amount required to pay Seller’s debts. Seller will not be rendered
insolvent by the execution and delivery of this Agreement or by the transactions contemplated
hereunder.

(s) Seller shall continue in the business presently operated by it using its best efforts to
maintain its customers and goodwill.

(t) Seller shall deliver written notice to FGI promptly upon becoming aware of the existence
of (i) any condition or event which constitutes a Default or Event of Default, specifying the
nature and period of existence thereof and what action Seller is taking (and proposes to take) with
respect thereto or (ii) any notice of default, oral or written, given to Seller by any creditor for
indebtedness for borrowed money in excess of $50,000 (or the equivalent thereof in any currency).

(u) Seller shall permit any of FGI’s officers or other representatives to visit and inspect
upon reasonable notice during business hours any of the locations of Seller, to examine and audit
all of Seller’s books of account, records, reports and other papers, to make copies and extracts
therefrom and to discuss its affairs, finances and accounts with its officers, employees and
independent accountants all at Seller’s expense at the standard rates charged by FGI for such
activities, plus FGI’s reasonable out-of-pocket expenses. Such expenses incurred shall be limited
to $30,000 in the course of a year (unless an Event of Default then exists and is continuing in
which case Seller shall reimburse FGI for reasonable out-of-pocket expenses for all visits).

(v) Seller agrees that, immediately upon becoming aware of any development or other
information outside the ordinary course of business, excluding matters of a general economic,
financial or political nature, which would reasonably be expected to have a material adverse effect
on the properties, business, financial condition or prospects of Seller, it shall give to FGI
telephonic notice specifying the nature of such development or information and such anticipated
effect. In addition, such verbal communication shall be confirmed by written notice thereof to FGI
on the same day such verbal communication is made or the next business day thereafter.

(w) Seller will immediately notify FGI in writing in the event that Seller becomes a party to
or obtains any rights with respect to any Commercial Tort Claim. Such notification shall include
information sufficient to describe such Commercial Tort Claim, including, but not limited to, the
parties to the claim, the court in which the claim was commenced, the docket number assigned to
such claim, if any, and a detailed explanation of the events that gave rise to the claim. All
Commercial Tort Claims to which Seller has any rights as of the date hereof are listed on
Schedule 4(w) attached hereto. Seller shall execute and deliver to FGI all documents
and/or agreements
necessary to grant FGI a security interest in such Commercial Tort Claim to secure the
Obligations. Seller authorizes FGI to file (without Seller’s signature) Financing Statements as
FGI deems necessary to perfect its security interest in any Commercial Tort Claim.

 

 

 

(x) Seller shall provide FGI with written notice of any letters of credit for which Seller is
the beneficiary. Seller shall execute and deliver (or cause to be executed or delivered) to FGI
all documents and agreements as FGI may require in order to obtain and perfect its security
interest in the related Letter-of-Credit Rights.

(y) Seller shall not engage in any transaction or series of related transactions pursuant to
which (A) a Person or group of Persons acquires (i) voting securities of Seller constituting
greater than 50% of the issued and outstanding voting securities of Seller and/or entitling such
Person or group to elect a majority of Seller’s board of directors (whether by merger,
amalgamation, consolidation, recapitalization, division, conversion or otherwise) without the
consent of FGI and which consent shall not be unreasonably withheld or delayed or (ii) all or
substantially all of Seller’s assets determined on a consolidated basis, or (B) Seller is wound
up, dissolved or liquidated or otherwise ceases to be in existence in the form as of the date
hereof.

(z) Excepting the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection, Seller shall not become or be liable, directly or indirectly, primary or
secondary, matured or contingent, in any manner, whether as guarantor, surety, accommodation maker,
or otherwise, for the existing or future indebtedness of any kind of any Person without the consent
of FGI and which consent shall not be unreasonably withheld or delayed.

(aa) Seller shall not without FGI’s prior written consent: (i) declare or pay or make any
forms of distribution or dividend to holders of Seller’s capital stock, membership interest or
other equity interest; (ii) declare or pay any bonus compensation to its officers if a Default or
Event of Default exists or would result from the payment thereof; or (iii) hereafter incur or
become liable for any indebtedness.

(bb) Seller shall not make or have outstanding loans, advances, extensions of credit or
capital contributions to, or investments in, any Person other than with Affiliates with which it is
consolidated for accounting purposes and other than those in existence as of the date hereof.

(cc) Seller shall not use FGI’s name in connection with any of its business operations other
than in connection with references to this agreement. Nothing herein contained is intended to
permit or authorize Seller to make any contract on behalf of FGI.

(dd) Seller shall not become or be a party to any contract or agreement which at the time of
becoming a party to such contract or agreement materially impairs Seller’s ability to perform under
this Agreement, or under any other instrument, agreement or document to which Seller is a party or
by which it is or may be bound.

(ee) Seller shall not amend any license agreements with respect to Inventory without the prior
written consent of FGI and which consent shall not be unreasonably withheld or delayed.

Section 5. Notice of Purchase. Seller authorizes FGI to file, and Seller shall execute and deliver
to FGI and/or file at such times and places as FGI may designate, such Financing Statements as are
necessary or desirable to give notice of, and to perfect and maintain the perfection of, FGI’s
purchase of the Purchased Accounts and their Related Rights and FGI’s security interest in the
Collateral as provided herein.

 

 

 

Section 6. Collateral.

(a) In order to secure the payment of all indebtedness and obligations of Seller to FGI
(including the Obligations), Seller hereby grants to FGI a mortgage, charge, assignment, pledge,
security interest and lien (collectively, “FGI’s Security”) in and upon all of Seller’s right,
title and interest in and to all of the Collateral. Seller agrees to comply with all appropriate
laws in order to perfect FGI’s security interest in and to the Collateral
and to execute such documents as FGI may, from time to time, require and to deliver to FGI a list
of all locations of its Inventory, Equipment and Goods. Seller shall provide written notice to FGI
of any change in the locations at which it keeps its material Inventory, Equipment and Goods at
least thirty (30) days prior to any such change. The occurrence of any Event of Default shall
entitle FGI to all of the default rights and remedies (without limiting the other rights and
remedies exercisable by FGI either prior or subsequent to an Event of Default) as are available to
a secured party under the UCC in effect in any applicable jurisdiction. FGI shall consider, in its
reasonable discretion, the subordination of its security interest in certain collateral to other
financial institutions upon terms and conditions reasonably acceptable to FGI.

Section 7. Collection.

(a) Seller shall notify all its Account Debtors, in the form of Schedule 7(a) attached hereto
or in such other form as FGI shall require, and take other necessary or appropriate means to insure
that all of Seller’s Accounts, whether or not purchased by FGI, shall be paid directly to FGI at
the remittance address or by the wire instructions set forth below. FGI shall have the right at
any time, either before or after the occurrence of an Event of Default and without notice to
Seller, to direct any or all Account Debtors of Seller to make payment of all amounts due or to
become due to Seller directly to FGI. As to any Account proceeds that do not represent Purchased
Accounts, and so long as no Event of Default has occurred, FGI shall be deemed to have received any
such proceeds of Accounts as a pure pass-through for and on account of Seller; provided, however,
that FGI may retain, in its sole and absolute discretion, any such amounts as additional reserves
in the Reserve Account.

	 	 	 
	Wire Instructions (USD):

	 	Mailing Address:
	Bank Name: 

	 	
	ABA/Routing #: 

	 	
	Swift:

	 	
	Beneficiary: 
	 	 
	Account #: 
	 	 

(b) FGI, as the sole and absolute owner of the Purchased Accounts and their Related Rights,
shall have the sole and exclusive power and authority to collect such Purchased Accounts and
Related Rights, through legal action or otherwise, and FGI may, in its sole discretion, settle,
compromise, or assign (in whole or in part) any of such Purchased Accounts and Related Rights, or
otherwise exercise, to the maximum extent permitted by applicable law, any other right now existing
or hereafter arising with respect to any of such Purchased Accounts and Related Rights.

Section 8. Payments Received by Seller. Should Seller receive payment of all or any portion of any
Purchased Account or, after the occurrence and during the continuation of a Default, of any other
Account, Seller shall immediately notify FGI in writing of the receipt of the payment, hold said
payment in trust for FGI separate and apart from Seller’s own property and funds, and shall deliver
said payment to FGI without delay in the identical form in which received with all necessary
endorsements. Should Seller receive any check or other payment instrument with respect to a
Purchased Account or, after the occurrence and during the continuation of a Default, with respect
to any other Account, and fail to surrender and deliver to FGI said check or payment instrument on
the second business day following the date of receipt by Seller, FGI shall be entitled to charge
Seller a Misdirected Payment Fee to compensate FGI for the additional administrative expenses that
the parties acknowledge is likely to be incurred as a result of such breach. In the event any
Goods, the sale of which gave rise to a Purchased Account, are returned to or repossessed by
Seller, such Goods shall be held by Seller in trust for FGI, separate and apart from Seller’s own
property and subject to FGI’s sole direction and control.

 

 

 

Section 9. Power of Attorney. Seller grants to FGI an irrevocable power of attorney authorizing
and permitting FGI, at its option, with or without notice to Seller to do any or all of the
following: (a) endorse the name of Seller on any checks or other evidences of payment whatsoever
that may come into the possession of FGI regarding Purchased Accounts, their Related Rights or
Collateral, including checks or other payment instruments received by FGI pursuant to Section 8
hereof; (b) upon the occurrence and during the continuance of an Event of
Default, receive, open and dispose of any mail addressed to Seller and put FGI’s address on any
statements mailed to Account Debtors; (c) upon providing prior written notice to Seller, pay,
settle, compromise, prosecute or defend any action, claim, conditional waiver and release, or
proceeding relating to Purchased Accounts, their Related Rights or Collateral; (d) upon the
occurrence of an Event of Default, notify in the name of the Seller, the U.S. Post Office to change
the address for delivery of mail addressed to Seller to such address as FGI may designate;
provided, however, that FGI shall turn over to Seller all such mail not relating to Purchased
Accounts, their Related Rights or Collateral; (e) file any Financing Statements deemed necessary or
appropriate by FGI to protect FGI’s interest in and to the Purchased Accounts, their Related Rights
or Collateral, or under any provision of this Agreement; (f) upon the occurrence and during the
continuance of an Event of Default, effect debits to any demand deposit or other deposit account
that Seller maintains at any bank, trust company, savings and loan association, credit union, other
financial institution or like organization for any sums due to or from the Seller under this
Agreement; and (g) and upon the occurrence and during the continuance of an Event of Default, to do
all other things necessary and proper in order to carry out this Agreement. The powers and
authority granted to FGI herein are coupled with an interest and are irrevocable until this
Agreement is terminated and all Obligations are fully satisfied.

Section 10. Default and Remedies. An Event of Default shall be deemed to have occurred hereunder
and FGI may immediately exercise its rights and remedies with respect to the Collateral under this
Agreement, at law, in equity, under statute and otherwise, upon the happening of one or more of the
following: (a) Seller shall fail to pay as and when due any amount owed to FGI; (b) (i) the
commencement of any action for the dissolution, winding up or liquidation of Seller, or the
commencement of any proceeding to avoid any transaction entered into by Seller, or the commencement
of any case or proceeding for reorganization or liquidation of Seller or Seller’s debts under the
Bankruptcy Code or any other state or federal law now or hereafter enacted, for the relief of
debtors, whether instituted by or against Seller; provided, however, that Seller shall have thirty
(30) days to obtain the dismissal or discharge of involuntary proceedings filed against it,
provided further that such grace period will cease to apply if (x) an order, decree or judgment is
granted or entered thereunder (whether or not entered or subject to appeal) against or with respect
to Seller in the interim or (y) Seller files an answer admitting the material allegations of a
petition or other material filed against it in any such proceeding, (ii) Seller makes or proposes
in writing an assignment for the benefit of creditors generally, offers a composition or extension
to creditors, or makes or sends notice of an intended bulk sale of any business or assets now or
hereafter owned or conducted by Seller or (iii) the appointment of a receiver, receiver and
manager, liquidator, custodian, trustee or similar official or fiduciary for Seller or for Seller’s
property; provided, however, that Seller shall have thirty (30) days to obtain the dismissal or
discharge of involuntary proceedings filed against it, provided further that such grace period will
cease to apply if (x) an order, decree or judgment is granted or entered thereunder (whether or not
entered or subject to appeal) against or with respect to Seller in the interim or (y) Seller files
an answer admitting the material allegations of a petition or other material filed against it in
any such proceeding; (c) Seller shall become insolvent in that its debts are greater than the fair
value of its assets, or Seller is generally not paying its debts as they become due; (d) any lien,
garnishment, attachment or the like shall be issued against or shall attach to the Purchased
Accounts, their Related Rights, the Collateral or any portion thereof and the same is not released
within ten (10) days; (e) Seller suffers the entry against it for a final judgment for the payment
of money in excess of $50,000 (or the equivalent thereof in any currency), unless the same is
discharged within thirty (30) days after the date of entry thereof or an appeal or appropriate
proceeding for review thereof is taken within such period and a stay of execution pending such
appeal is obtained; (f) Seller shall breach any covenant, warranty or representation set forth
herein and such breach continues for ten (10) days or the same shall be untrue when made; (g) any
report, certificate, schedule, financial statement, profit and loss statement or other statement
furnished by Seller, or by any other Person on behalf of Seller, to FGI is not true and correct in
any material respect when so furnished; (h) Seller shall have a federal or state tax lien filed
against any of its properties, or shall fail to pay any federal or state tax when due, or shall
fail to file any federal or state tax form as and when due; or (i) a material adverse change shall
have occurred in Seller’s financial condition, business, operations or prospects. Upon the
occurrence of an Event of Default, all obligations owing to FGI (including the Obligations) shall
become immediately due and payable at the option of FGI (provided, that, upon the occurrence of an
Event of Default under clause (b) above, all such amounts shall become immediately due and payable
without further notice or demand) and FGI shall be entitled to all rights it has by law as a
secured creditor, including as to any form of equitable relief that may be appropriately obtained
through legal process without having to establish any inadequate remedy at law or other grounds
other than to establish that its Collateral is subject to being improperly used, moved dissipated
or withheld from FGI. All post-judgment interest shall bear interest at the greater of the
contract rate and 18% per annum.

 

 

 

Section 11. Cumulative Rights; Waivers. All rights, remedies and powers granted to FGI in this
Agreement, or in any other instrument or agreement given by Seller to FGI or otherwise available to
FGI in equity, at law, by statute or otherwise, are cumulative and may be exercised singularly or
concurrently with such other rights as FGI may have. These rights may be exercised from time to
time as to all or any part of the Purchased Accounts and their Related Rights or the Collateral as
FGI in its sole and absolute discretion may determine. In the event that any part of this
transaction between Seller and FGI is construed to be a loan from FGI to Seller, Seller’s
obligation to repay any Advances or other Obligations shall be secured by any interest Seller may
have in such Account and its Related Rights as well as by the other Collateral and FGI shall have
all rights and remedies available to FGI with respect thereto in addition to its rights and
remedies referred to herein. FGI will not be held to have waived its rights and remedies unless
the waiver is in writing and signed by FGI. A waiver by FGI of a right, remedy or default under
this Agreement on one occasion is not a waiver of any right, remedy or default on any subsequent
occasion. Any failure by FGI to exercise, or any delay by FGI in exercising, any right shall not
in any manner impair the subsequent exercise by FGI of any of its rights.

Section 12. Notices. Any notice or communication with respect to this Agreement shall be given in
writing, sent by (i) personal delivery, or (ii) expedited delivery service with proof of delivery,
or (iii) United States mail, postage prepaid, registered or certified mail, or (iv) facsimile or
email, addressed to each party hereto at its address set forth below or to such other address or to
the attention of such other person as hereafter shall be designated in writing by the applicable
party sent in accordance herewith. Any such notice or communication shall be deemed to have been
given either at the time of personal delivery or, in the case of delivery service or mail, as of
the date of first attempted delivery at the address and in the manner provided herein, or in the
case of facsimile, upon receipt.

	 	 	 
	FGI Finance

	 	Clean Diesel Technologies Inc.
	80 Broad Street

	 	4567 Telephone Road, Suite 206
	22nd Floor

	 	Ventura, CA. 93003
	New York, NY 10004

	 	Fax:
	Fax:
	 	 
	Email:

	 	Email:

Section 13. Term. Subject to the last sentence of this Section 13, the Original Term of this
Agreement shall be twenty four (24) months from the date of this Agreement, which shall thereafter
be extended automatically for additional one (1) year term after the termination of the Original
Term and each automatic extension unless written notice of termination is given by one party hereto
to the other party hereto at least forty-five (45) days, but not more than ninety (90) days, prior
to the end of the Original Term or any extension thereof. Any such notice of termination, however,
and notwithstanding payment in full of all Obligations by Seller, is conditioned on Seller’s
delivery, to FGI, of a general release in a form reasonably satisfactory to FGI. Seller understands
that this provision constitutes a waiver of its rights under § 9-513 of the UCC. FGI shall not be
required to record any terminations or satisfactions of any of FGI’s liens on the Collateral unless
and until Seller has executed and delivered to FGI said general release and Seller shall have no
authority to do so without FGI’s express written consent. Upon (i) the termination of this
Agreement, (ii) the payment in full of all Obligations by Seller and (iii) Seller’s delivery to FGI
of said general release, FGI shall cause any Purchased Accounts to be assigned back to Seller
without representation or warranty pursuant to documentation acceptable to FGI within a
commercially reasonable period after a written request for reassignment of such Purchased Accounts
has been delivered to FGI. In the event Seller terminates this Agreement within the first 360
days following the commencement of this Agreement, Seller shall also pay to FGI an early
Termination Fee in the amount of one hundred and fifty thousand dollars ($150,000.00), less any
early Termination Fees paid to FGI under (and as defined in) any Covered Affiliate Agreements. In
the event that Seller terminates this Agreement after the first 360 days, but prior to the end of
the Original Term of this Agreement, Seller shall pay to FGI an early Termination Fee in the amount
of seventy six thousand dollars ($76,000.00), less any early Termination Fees paid to FGI under
(and as defined in) any Covered Affiliate Agreements. Any termination of this Agreement shall not
affect FGI’s security interest in the Collateral and FGI’s ownership of the Purchased Accounts, and
this Agreement shall continue to be effective, until all transactions entered into and obligations
incurred hereunder have been completed and satisfied in full. Notwithstanding anything to the
contrary, and assuming no default by Seller in which event FGI may terminate without notice, FGI
may terminate this
Agreement at any time by giving not less than sixty (60) days notice in which event, Seller shall
not be obligated to pay any Termination Fee.

 

 

 

No Termination Fee will be due if FGI, within its rights under this Agreement, increases the
Reserve Percentage to an amount greater than forty percent (40%) for a period of more than 30
consecutive days and Seller notifies FGI of its intent to terminate this Agreement no later than 10
days after the end of such 30 day period.

Section 14. Expenses. Upon execution of this Agreement, and from time to time thereafter, Seller
will pay upon demand of FGI all costs, fees and expenses of FGI in connection with (i) the
analysis, negotiation, preparation, execution, administration, delivery and termination of this
Agreement and the documents and instruments referred to herein, and any amendment, amendment and
restatement, supplement, waiver or consent relating hereto or thereto, whether or not any such
amendment, amendment and restatement, supplement, waiver or consent is executed or becomes
effective, including search and registration costs, the reasonable fees, expenses and disbursements
of counsel for FGI, reasonable charges of any expert or consultant to FGI and reimbursement for
premiums incurred by FGI to insure against nonpayment of the Accounts or other insurable losses to
the Collateral, (ii) the enforcement of FGI’s rights hereunder, or the collection of any payments
owing from Seller under this Agreement or the protection, preservation or defense of the rights of
FGI hereunder or with respect to the Collateral, (iii) the enforcement of FGI’s rights with respect
to any of the Collateral, any Purchased Accounts or any of their Related Rights, including the
collection of any payments owing from any Account Debtors with respect to any Accounts (including
the reasonable fees, expenses and disbursements of counsel for FGI), and (iv) any refinancing or
restructuring of the arrangements provided under this Agreement in the nature of a “work-out” or of
any insolvency or bankruptcy proceedings, or otherwise (including the reasonable fees and
disbursements of counsel for FGI). Seller hereby authorizes FGI, at FGI’s sole discretion, to
charge such fees, costs and expenses, and all other Obligations, to the Reserve Account or Seller
may make demand therefor.

Section 15. Indemnity. Seller releases and shall indemnify, defend and hold harmless FGI and its
respective officers, shareholders, employees and agents, of and from any claims, demands,
liabilities, obligations, judgments, injuries, losses, damages and costs and expenses (including,
without limitation, reasonable legal fees) resulting from (i) acts or conduct of Seller under,
pursuant to or related to this Agreement, (ii) Seller’s breach or violation of any representation,
warranty, covenant or undertaking contained in this Agreement, (iii) Seller’s failure to comply
with any or all laws, statutes, ordinances, governmental rules, regulations or standards, whether
federal, state or local, or court or administrative orders or decrees, (iv) any claim by any third
party, including any other creditor of Seller, against FGI arising out of any transaction whether
hereunder or in any way related to this Agreement and (v) all costs, expenses, fines, penalties or
other damages resulting from any of the foregoing, except to the extent resulting solely from acts
or conduct of FGI constituting willful misconduct or gross negligence.

Section 16. Severability. Each and every provision, condition, covenant and representation
contained in this Agreement is, and shall be construed to be, a separate and independent covenant
and agreement. If any term or provision of this Agreement shall to any extent be invalid or
unenforceable, the remainder of the Agreement shall not be affected thereby.

Section 17. Parties in Interest. All grants, covenants and agreements contained in this Agreement
shall bind and inure to the benefit of the parties hereto and their respective successors and
permitted assigns; provided, however, that Seller may not delegate or assign any of its rights,
duties or obligations under this Agreement without the prior written consent of FGI. FGI reserves
the right to assign its rights and obligations under this Agreement in whole or in part to any
Person.

Section 18. Governing Law: Submission to Process and Venue. This agreement shall be deemed a
contract made under the laws of the State of New York and shall be construed and enforced, along
with all matters arising hereunder or related hereto, in accordance with and governed by the
internal laws of the State of New York, without reference to the rules thereof relating to
conflicts of law. Seller hereby irrevocably submits itself to the non-exclusive jurisdiction of
the state and federal courts located in New York, and agrees and consents that service of process
may be made upon it in any legal proceeding relating to this Agreement, the purchase of Accounts or
any other relationship between FGI and Seller by any means allowed under state or federal law. Any
legal proceeding arising out of or in any way related to this agreement, the purchase of Accounts
or any other relationship between
FGI and Seller may be brought and litigated in any of the state or federal courts located in the
State of New York in any county in which FGI has a business location, the selection of which shall
be in the exclusive discretion of FGI. Seller hereby waives and agrees not to assert, by way of
motion, as a defense or otherwise, that any such proceeding is brought in any inconvenient forum or
that the venue thereof is improper.

 

 

 

Section 19. Complete Agreement. This Agreement, the written documents executed pursuant to this
Agreement, if any, and any acknowledgment delivered in connection herewith set forth the entire
understanding and agreement of the parties hereto with respect to the transactions contemplated
herein and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of the parties. No modification or amendment of or supplement to this Agreement shall
be valid or effective unless the same is in writing and signed by the party against whom it is
sought to be enforced.

Section 20. Miscellaneous.

(a) Seller acknowledges that there is no fiduciary relationship between FGI and Seller created
by this Agreement, and Seller waives any right to assert, now or in the future, the existence or
creation of any fiduciary relationship between FGI and Seller with respect to this Agreement in any
action or proceeding (whether by way of claim, counterclaim, crossclaim or otherwise) for damages.

(b) This Agreement shall be deemed to be one of financial accommodation and not assumable by
any debtor, trustee or debtor-in-possession in any bankruptcy proceeding without FGI’s express
written consent and may be suspended in the event a petition in bankruptcy is filed by or against
Seller.

(c) In the event Seller’s principals, officers or directors form a new entity, whether a
corporation, partnership, limited liability company or otherwise, similar to that of Seller during
the Term of this Agreement and in connection with such action transfer assets constituting
Collateral from Seller to such entity, such entity shall be deemed to have expressly assumed the
obligations due FGI by Seller under this Agreement. Upon the formation of any such entity and the
transfer of such assets constituting Collateral, FGI shall be deemed to have been granted an
irrevocable power of attorney with authority to execute, on behalf of the newly formed successor
business, a new Financing Statement and have it filed with the appropriate governmental office.
FGI shall be held harmless and be relieved of any liability as a result of the resulting perfection
of a lien or security interest in any of the successor entity’s assets. In addition, FGI shall
have the right to notify the successor entity’s Account Debtors of FGI’s lien and other rights, to
collect all Accounts, and to notify any lender or other secured party who has sought to procure a
competing lien or security interest of FGI’s rights in such successor entity’s assets.

(d) Seller expressly authorizes FGI to access the systems of and/or communicate with any third
party with respect to the status of any Goods relating to a Purchased Account, including
warehousemen, bailees, and shipping or trucking companies, in order to obtain or verify tracking,
shipment or delivery status of any Goods relating to a Purchased Account.

(e) Seller acknowledges that the duty to accurately complete each Schedule of Accounts is
critical to this Agreement and as such all obligations with respect thereto must be fulfilled by an
authorized representative of Seller.

(f) Seller shall indemnify and save FGI harmless from any loss arising out of the assertion of
any Avoidance Claim. Seller shall notify FGI within two business days of it becoming aware of the
assertion of an Avoidance Claim.

(g) Seller agrees to execute any and all forms (including, without limitation, Forms 8821
and/or 2848) that FGI may require in order to enable FGI to obtain and receive tax information
issued by the Department of the Treasury, Internal Revenue Service, or receive refund checks.

(h) Seller will cooperate with FGI in obtaining a control agreement in form and substance
satisfactory to FGI with respect to Collateral consisting of Deposit Accounts, Investment Property,
Letter-of-Credit Rights and /or electronic Chattel Paper.

 

 

 

(i) Whenever Seller shall be required to make any payment, or perform any act, on a day which
is not a business day, such payment may be made, or such act may be performed, on the next
succeeding business day. Time is of the essence as to Seller’s performance under all provisions of
this Agreement and all related agreements and documents.

(j) All warranties, representations, and covenants made by Seller herein, or in any agreement
referred to herein or on any certificate, document or other instrument delivered by it or on its
behalf under this Agreement, shall be considered to have been relied upon by FGI regardless of any
investigation made by FGI or on its behalf. All statements in any such certificate or other
instrument prepared and/or delivered for the benefit of FGI shall constitute warranties and
representations by Seller hereunder. Except as otherwise expressly provided herein, all covenants
made by Seller hereunder or under any other agreement or instrument shall be deemed continuing
until all Obligations are satisfied in full. All indemnification obligations under this Agreement
shall survive the termination of this Agreement and payment of the Obligations.

(k) FGI, in its sole discretion, shall have the right to announce and publicize the
arrangement established hereunder, as it deems appropriate, by means and media selected by FGI.
Such publication may include all pertinent information relating to such arrangement. The form and
content of the published information shall be in the sole discretion of FGI and shall be considered
the sole and exclusive property of FGI. All expenses related to publicizing such arrangement shall
be the sole responsibility of FGI.

Section 21. Waiver of Jury Trial, Punitive and Consequential Damages, Etc. Seller and FGI hereby
irrevocably waive any right either may have to a trial by jury in respect of any litigation
directly or indirectly at any time arising out of, under or in connection with this Agreement or
any transaction contemplated hereby or associated herewith. Seller and FGI each irrevocably waives,
to the maximum extent not prohibited by law, any right it may have to claim or recover in any such
litigation any special, exemplary, punitive or consequential damages, or damages other than, or in
addition to, actual damages and Seller hereby releases and exculpates FGI, its officers, employees
and designees, from any liability arising from any acts under this Agreement or in furtherance
thereof whether of omission or commission, and whether based upon any error of judgment or mistake
of law or fact, except for gross negligence or willful misconduct. Seller certifies that no party
hereto nor any representative or agent or counsel for any party hereto has represented, expressly
or otherwise, or implied that such party would not, in the event of litigation, seek to enforce the
foregoing waivers. Seller acknowledges that FGI has been induced to enter into this Agreement and
the transactions contemplated hereby, in part, as a result of the waivers and certifications
contained in this Section.

Section 22. Successors and Assigns. This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns. Seller may not
transfer, assign or delegate any of its rights, duties or obligations hereunder. Seller
acknowledges and agrees that FGI may at any time, and from time to time, (a) sell participating
interests in FGI’s rights hereunder, and (b) otherwise sell, transfer, or assign FGI’s rights and
obligations hereunder. No rights are intended to be created hereunder, or under any related
agreements or documents, for the benefit of any third party donee, creditor or incidental
beneficiary of Seller. Nothing contained in this Agreement shall be construed as a delegation to
FGI of Seller’s duty of performance, including, without limitation, Seller’s duties under any
Account or contract with any other Person.

Section 23. Delivery by Electronic Means. This Agreement, the agreements referred to herein, and
each other agreement or instrument entered into in connection herewith or therewith or contemplated
hereby or thereby, and any amendments hereto or thereto, to the extent signed and delivered by
electronic means, including by means of unalterable files attached to e-mail communications or by
facsimile, shall be treated in all manner and respects as an original agreement or instrument and
shall be considered to have the same binding legal effect as if it were the original signed version
thereof delivered in person. At the request of any party hereto or to any such agreement or
instrument, each other party hereto or thereto shall reexecute original forms thereof and deliver
them to all other parties. No party hereto or to any such agreement or instrument shall raise the
use of electronic means to deliver a signature or the fact that any signature or agreement or
instrument was transmitted or communicated through the use of electronic means as a defense to the
formation or enforceability of a contract and each such party forever waives any such defence.

 

 

 

Section 24. Taxes and Set-off. All payments to be made by Seller hereunder shall be made without
set-off, compensation, deduction or counterclaim and without deduction for any taxes, levies,
duties, fees, deductions, withholdings, restrictions or conditions of any nature whatsoever. If at
any time any applicable law requires Seller to make any such deduction or withholding from any such
payment, the sum due from Seller with respect to such payment shall be increased to the extent
necessary to ensure that, after the making of such deduction or withholding, FGI receives a net sum
equal to the sum which FGI would have received had no deduction or withholding been required.

Section 25. Foreign Currency. If, for the purposes of obtaining judgment in any court in any
jurisdiction with respect to this Agreement or any other agreement between Seller and FGI, it
becomes necessary to convert into a particular currency (the “Judgment Currency”) any amount due
under this Agreement or such other agreement in any currency other than the Judgment Currency (the
“Currency Due”), then conversion shall be made at the rate of exchange prevailing on the business
day (in New York, New York) before the day on which judgment is given. In this Section 24, “rate
of exchange” means the rate at which FGI is able, on the relevant date, to purchase the Currency
Due with the Judgment Currency in accordance with its normal practice at its office in New York,
New York. In the event that there is a change in the rate of exchange prevailing between such
business day and the date of receipt by FGI of the amount due, Seller will, on the date of receipt
by FGI, pay FGI such additional amount, if any, or be entitled to receive reimbursement of such
amount, if any, as may be necessary to ensure that the amount received by FGI on such date is the
amount in the Judgment Currency which when converted at the rate of exchange prevailing on the date
of receipt by it is the amount then due under this Agreement or such other agreement in the
Currency Due. If the amount of the Currency Due which FGI is so able to purchase is less than the
amount of the Currency Due originally due to it, Seller shall indemnify and save FGI harmless from
and against all loss or damage arising as a result of such deficiency. This indemnity shall
constitute an obligation separate and independent from the other obligations contained in this
Agreement and any such other agreement, shall give rise to a separate and independent cause of
action, shall apply irrespective of any indulgence granted by FGI from time to time and shall
continue in full force and effect notwithstanding any judgment or order for a liquidated sum in
respect of an amount due under this Agreement or any such other agreement or under any judgment or
order.

Section 26. Currency Risk

(a) Seller acknowledges that, at Seller’s request, FGI may make Advances and other payments to
Seller hereunder or in connection herewith in one or more currencies other than U.S. Dollars (each
such other currency, a “Foreign Currency”). If Seller requests such Foreign Currency Advances,
Seller hereby agrees to reimburse FGI, on demand, for all reasonable fees, charges and other
expenses, including currency exchange fees and charges, that FGI may pay or otherwise incur in
connection with (i) the purchase of any such Foreign Currency with U.S. Dollars or (ii) the
purchase of U.S. Dollars with any amount FGI receives in a Foreign Currency from Seller or any
other Person under, pursuant to or in respect of this Agreement, any related agreement, any
Purchased Account, any Related Rights or any Collateral.

(b) Seller agrees that it will, on demand, indemnify and save FGI harmless in respect of any
loss (a “Foreign Exchange Loss”) that FGI may incur or suffer as a result of (i) FGI purchasing any
amount in a Foreign Currency with U.S. Dollars in connection with enabling FGI to advance or pay
such amount to or for the credit of Seller as contemplated by this Agreement, (ii) FGI purchasing
any amount in U.S. Dollars with any Foreign Currency that FGI may receive in connection with this
Agreement and (iii) there having occurred any change in applicable rates of exchange in relation to
U.S. Dollars and any Foreign Currency on or after the date hereof (and whether before or after the
end of the Term). In particular, but without in any way limiting the generality of the preceding
sentence, Seller agrees that, if (x) on any day (the “Purchase Date”) FGI purchases with U.S.
Dollars an amount in a Foreign Currency for the purpose of paying such amount in such Foreign
Currency to or for the benefit of Seller pursuant hereto, (y) FGI thereafter receives an amount in
any Foreign Currency from Seller or any other Person under, pursuant to or in respect of this
Agreement, any related agreement, any Purchased Account, any Related Rights or any Collateral, and
(z) there has occurred a change in any applicable rate of exchange following the Purchase Date,
Seller will, on demand, pay FGI such additional amount (whether in U.S. Dollars or a Foreign
Currency) as FGI, in its discretion, believes is desirable to help ensure that the amounts so
received by and paid to FGI, assuming that any such amount received or paid in a Foreign Currency
is converted into U.S. Dollars at the rate of exchange prevailing on the date so received by or
paid to FGI, will be sufficient to ensure that FGI will not suffer
a Foreign Exchange Loss as a result of such matters or transactions. For the purpose of this
Section 25, “rate of exchange” means the rate at which FGI is able, on any particular relevant
date, to purchase U.S. Dollars with a particular Foreign Currency in accordance with its normal
practice at its office in New York, New York.

 

 

 

(c) A certificate of FGI setting forth the amount or amounts to be paid to or by FGI pursuant
to this Section 25, together with a brief calculation thereof, shall be sent to Seller and shall be
conclusive absent manifest error. In preparing any such certificate, FGI shall be entitled to use
averages and make reasonable estimates, and shall not be required to match or isolate particular
transactions or payments. Seller shall pay FGI, or FGI shall pay Seller (or credit to the Reserve
Account), the amount shown as due by Seller or FGI, respectively, on any such certificate within 10
days after receipt thereof by Seller.

Section 27. Interpretation of Agreement. The parties hereto acknowledge and agree that this
Agreement and the agreements or instruments entered into in connection herewith have been
negotiated at arm’s-length and among parties equally sophisticated and knowledgeable in the matters
dealt with in this Agreement or in such agreements or instruments. Accordingly, any rule of law or
legal decision that would require interpretation of any ambiguities in this Agreement or the
agreements or instruments entered into in connection herewith against the party that has drafted it
is not applicable and is waived. The provisions of this Agreement and the agreements and
instruments entered into in connection herewith shall be interpreted in a reasonable manner to
effect the intent of the parties as set forth herein or therein.

SIGNATURES ON FOLLOWING PAGE

 

 

 

IN WITNESS WHEREOF, the parties have set their hands and seals on the day and year first
hereinabove written.

	 	 	 	 	 	 	 	 	 	 	 
	FGI:
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Witness:	 	/s/ Ben Brachot	 	 	 	FAUNUS GROUP INTERNATIONAL, INC.	 	 
	 

	 	 

Name: Ben Brachot
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ David M. DiPiero
 

	 	 
	 

	 	 	 	 	 	 	 	Name: David M. DiPiero	 	 
	 

	 	 	 	 	 	 	 	Title:   President	 	 
	SELLER:
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Witness:	 	/s/ Casey Owen	 	 	 	CLEAN DIESEL TECHNOLOGIES, INC.	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	Name: Casey Owen	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Nikhil A. Mehta	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Name: Nikhil A. Mehta	 	 
	 

	 	 	 	 	 	 	 	Title:   CFO

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