Document:

Prepared and filed by St Ives Financial

SIXTH AMENDMENT TO LOAN AGREEMENT

This SIXTH AMENDMENT TO LOAN AGREEMENT (hereinafter, the “Sixth Amendment”) is dated as of October 20, 2006, by and among BANK OF AMERICA, N.A., a national banking association having an address at IL1-231-10-35, 231 South LaSalle Street, Chicago, Illinois 60697, as Administrative Agent (hereinafter, the “Administrative Agent”), BANK OF AMERICA, N.A., PB CAPITAL CORPORATION, a lending institution having an address at 230 Park Avenue, 19th Floor, New York, New York 10169, MANUFACTURERS AND TRADERS TRUST COMPANY, a lending institution having an address at One M & T Plaza, Buffalo, New York 14240, SOVEREIGN BANK, a lending institution having an address at 75 State Street, Boston, Massachusetts 02109, RAYMOND JAMES BANK, FSB, a lending institution having an address at
710 Carillon Parkway, St. Petersburg, Florida 33716, CITIZENS BANK OF PENNSYLVANIA, a lending institution having an address at 3025 Chemical Road 194-0245, Suite 245, Plymouth Meeting, Pennsylvania 19462, KEYBANK, NATIONAL ASSOCIATION, a lending institution having an address at 225 Franklin Street, 18th Floor, Boston, Massachusetts, 02110, LASALLE BANK NATIONAL ASSOCIATION, a lending institution having an address at 135 S. LaSalle Street, Chicago, Illinois, 60603, and the other lending institutions which are or may hereafter become parties to the Loan Agreement (as defined below), as the Lenders (collectively, the “Lenders”), and CEDAR SHOPPING CENTERS PARTNERSHIP, L.P., a Delaware limited partnership having an address at 44 South Bayles Avenue, Port Washington, New York 11050, as the Borrower (hereinafter, the “Borrower”). All capitalized terms not otherwise defined herein shall have the same meaning ascribed to such terms
and set forth under the Loan Agreement. 

BACKGROUND

WHEREAS, Bank of America, N.A., as Administrative Agent, Bank of America, N.A., Commerzbank AG New York Branch, PB Capital Corporation, Manufacturers and Traders Trust Company, Sovereign Bank, Raymond James Bank, FSB, Keybank, National Association, LaSalle Bank National Association and Citizens Bank of Pennsylvania, as the lenders (hereinafter, the “Original Lenders”), and Borrower entered into a certain loan arrangement (hereinafter, the “Loan Arrangement”) evidenced by, among other documents, instruments and agreements, that certain Loan Agreement dated as of January 30, 2004, as amended by that certain First Amendment to Loan Agreement dated as of June 16, 2004, that certain Second Amendment to Loan Agreement dated as of November 2, 2004, that certain Third Amendment to Loan Agreement dated as of January 28, 2005, that certain Fourth Amendment to Loan
Agreement  dated as of December 16, 2005, and that certain Fifth Amendment to Loan Agreement  dated as of June 29, 2006 (hereinafter, collectively, the “Loan Agreement”), and those certain promissory notes dated as of various dates executed by the Borrower in favor of the Original Lenders in the original aggregate principal amount of $225,000,000.00 (hereinafter, individually and collectively, the “Note”);

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WHEREAS, pursuant to the terms and conditions of Section 2.1.1(iii) of the Loan Agreement, the Borrower has the right, on any one (1) or more occasions prior to the Maturity Date, to elect to increase the Established Loan Amount; 

WHEREAS, the Borrower has elected, and the Administrative Agent and the Lenders have agreed, to increase the Established Loan Amount in accordance with Section 2.1.1(iii) of the Loan Agreement; and 

WHEREAS, the Administrative Agent, Lenders and Borrower have further agreed to amend the Loan Agreement as more particularly set forth herein. 

Accordingly, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed by and among the Administrative Agent, Lenders and Borrower as follows:

	

 
 	

1.
 	

Exhibit A to the Loan Agreement is hereby amended by inserting the following definitions in their corresponding alphabetical order:
 

“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

“Assignee Group” means two or more Eligible Assignees that are Affiliates of one another or two or more Approved Funds managed by the same investment advisor.

“Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes. For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

“Participant” as defined in Section 13.3.3.”

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2.
 	

The definition of the term “Adjusted Capitalized Value” is hereby amended by deleting the reference therein to “eight and three quarters percent (8.75%)” and replacing same with “eight percent (8.00%)”.
 

	

 
 	

3.
 	

The definition of the term “Aggregate Borrowing Base Value” is hereby deleted in its entirety and shall be replaced with the following:
 

“Aggregate Borrowing Base Value shall mean, as determined by the Administrative Agent as of the most recent Compliance Certificate or Borrowing Base Property report, as applicable, delivered to the Administrative Agent, the aggregate of the Borrowing Base Values for all Borrowing Base Properties.”

	

 
 	

4.
 	

The definition of the term “Applicable Margin” is hereby deleted in its entirety and shall be replaced with the following:
 

“Applicable Margin shall mean for LIBO Rate Loans and for Variable Rate Loans,   respectively, the following

 

  	

Level
 	

 
 	

Leverage
 Ratio
 	

 
 	

Applicable 
 Margin for 
 LIBO Rate
 Loans
 	

 
 	

Applicable
 Margin for
 Variable
 Rate Loans
 
	

 	

 
 	

 	

 
 	

 	

 
 	

 
	
        1
 	

 
 	

Leverage
 Ratio<55%
 	

 
 	

110 basis points
 	

 
 	

0 basis points
 
	
        2
 	

 
 	

Leverage
 Ratio=>55%
 to <60%
 	

 
 	

125 basis points
 	

 
 	

0 basis points
 
	
        3
 	

 
 	

Leverage
 Ratio=>60%
 to <65%
 	

 
 	

135 basis points
 	

 
 	

0 basis points
 
	
        4
 	

 
 	

Leverage
 Ratio= >65%
 	

 
 	

145 basis points
 	

 
 	

50 basis points
 

The Applicable Margin shall remain in effect until the Administrative Agent has provided the Borrower with written notice (in the manner provided in the Loan Agreement) that the Applicable Margin has been modified due to a change in the Leverage Ratio as of any Calculation Date, with any such change then being implemented retroactively to the first Business day following such Calculation Date.”

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5.
 	

The definition of “Availability” is hereby deleted in its entirety and shall be replaced with the following:
 

“Availability shall mean, from time to time, an amount determined by the Administrative Agent as of the most recent Compliance Certificate or Borrowing Base Property report, as applicable, delivered to the Administrative Agent, equal to the lesser of the following:

(a) seventy percent (70%) of the Aggregate Borrowing Base Value of the Borrowing Base Properties as of the date of the most recent Compliance Certificate or Borrowing Base Property report, as applicable, delivered to the Administrative Agent; or 

(b) the Implied Loan Amount”.

	

 
 	

6.
 	

The definition of “Borrowing Base Value” is hereby amended by deleting the following text on the first line thereof “shall mean, as of each Calculation Date” and replacing same with “shall mean, as of the most recent Compliance Certificate or Borrowing Base Property report, as applicable, delivered to the Administrative Agent,”
 

	

 
 	

7.
 	

The definition of the term “Eligible Assignee” is hereby deleted in its entirety and shall be replaced with the following:
 

“Eligible Assignee shall mean any Person that meets the requirements to be an assignee under Section 13.3.1, subject to such consents, if any, as may be required under Section 13.3.1.”

	

 
 	

8.
 	

The definition of the term “Established Loan Amount” is hereby deleted in its entirety and shall be replaced with the following:
 

“Established Loan Amount shall mean, as of October 20, 2006, Three Hundred Million Dollars ($300,000,000.00).”

	

 
 	

9.
 	

The definition of the term “Fixed Charges” is hereby amended by deleting subsection (a) thereof and replacing same with the following:
 

“(a) Interest Expenses (excluding any interest expenses required to be capitalized under GAAP),”

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10.
 	

The definition of the term “Implied Debt Service” is hereby deleted in its entirety and shall be replaced with the following:
 

“Implied Debt Service shall mean the greater of (a) the annual amount of principal and interest payable on a hypothetical loan in an amount equal to the Implied Loan Amount, based upon a twenty-five (25) year direct reduction monthly amortization schedule and a per annum  interest rate equal to the greater of (i) the actual blended interest rate for the Loan, or (ii) the 10-year Treasury Rate as of the Calculation Date plus 1.25%, or (b) an annual debt service constant of eight percent (8.00%)”.

	

 
 	

11.
 	

The definition of the term “Implied Loan Amount” is hereby deleted in its entirety and shall be replaced with the following:
 

“Implied Loan Amount shall mean a principal amount which would generate as of any Calculation Date an Implied Debt Service Coverage Ratio of 1.35 to 1.00, which Implied Loan Amount may be revised by the Administrative Agent after the Closing Date or as of the most recent Compliance Certificate or Borrowing Base Property report, as applicable, delivered to the Administrative Agent, to reflect additions, removals and other adjustments to the Borrowing Base Properties since the Closing Date or the most recent Compliance Certificate or Borrowing Base Property report, as applicable, delivered to the Administrative Agent.”

	

 
 	

12.
 	

The definition of the term “Note” is hereby deleted in its entirety and shall be replaced with the following:
 

“Note shall mean, collectively, the various amended and restated promissory notes payable to each Lender in the aggregate original principal amount of the Established Loan Amount.

	

 
 	

13.
 	

The definition of the term “Permitted Investments” is hereby amended by deleting subsection (b) thereof and replacing same with the following:
 

“(b) The Pro Rata share of Investments in Land Assets which, in the aggregate, valued at Book Value do not exceed ten percent (10%) of Total Asset Value;”

and by deleting the following text at the end thereof:

“Provided, however, that the aggregate of the Pro Rata Share of Investments described in clauses (a), (b) and (d) above shall not exceed  thirty percent (30%) of Total Asset Value.”

	

 
 	

14.
 	

The definition of the term “Register” is hereby deleted in its entirety and shall be replaced with the following 
 

“Register as defined in Section 13.3.2.”

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15.
 	

The definition of the term “Total Asset Value” is hereby amended by replacing all references to the amount of “8.75%” with references to the amount of “8.00%”.
 

	

 
 	

16.
 	

Section 1.3 of the Loan Agreement is hereby amended by deleting the reference contained therein to “THREE HUNDRED MILLION DOLLARS ($300,000,000.00)” and replacing same with “FOUR HUNDRED MILLION DOLLARS ($400,000,000.00)”.
 

	

 
 	

17.
 	

Section 2.1.1(iii) of the Loan Agreement is hereby amended by deleting the reference contained therein to “Three Hundred Million ($300,000,000.00) Dollars” and replacing same with “Four Hundred Million ($400,000,000.00) Dollars”.
 

	

 
 	

18.
 	

Section 2.2.1 is hereby deleted in its entirety and shall be replaced by the following: 
 

“The Loan shall be for a term (the “Initial Term”) commencing on the date hereof and ending on January 30, 2009 (the “Initial Maturity Date”) or such earlier date as the Loan is accelerated pursuant to the terms of this Agreement upon an Event of Default. The Initial Term may be extended for one year (“Extended Term”) until January 30, 2010 (“Extended Maturity Date”) upon satisfaction of the conditions set forth in Section 2.2.3 (hereinafter, the Initial Maturity Date and the Extended Maturity Date may be referred to herein sometimes as the “Maturity Date” as may be applicable).”

	

 
 	

19.
 	

Section 2.2.3(v) is hereby deleted in its entirety and shall be replaced by the following
 

“(v) Extension Fee. The Borrower shall have paid to the Administrative Agent an extension fee (the “Extension Fee”) for the pro rata benefit of the Lenders of two-tenths of one percent (0.20%) of the outstanding principal balance of the Loan, such Extension Fee to be payable at least five (5) days prior to the Initial Maturity Date.”

 

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20.
 	

Section 3.4.4 of the Loan Agreement is hereby deleted in its entirety and shall be replaced by the following:
 

“In addition to all other rights of the Administrative Agent with respect to the removal of the Lake Raystown Shopping Plaza as a Borrowing Base Property under this Agreement, the Administrative Agent shall be permitted to remove the Lake Raystown Shopping Plaza as a Borrowing Base Property upon the occurrence of (x) the termination of that certain Lease Agreement dated July 15, 1993, as amended and supplemented by an Amendment to Lease dated May 13, 1994, a Lease Commencement Agreement dated July 26, 1995, a Letter Agreement dated January 21, 1999, a Second Amendment to Lease dated January 19, 2000 and a Letter

Agreement dated February 19, 2002, by and between Cedar Lake Raystown, LLC (the “Landlord”), as successor in interest to Greater Huntington and Co., Inc., and Giant Food Stores, LLC (the “Tenant”), as successor in interest to Giant Food Stores, Inc., with regard to a shopping center located within the Lake Raystown Shopping Plaza containing approximately 39,244 square feet (the “Original Giant Space”), and (y) the relocation of the Tenant to a separate shopping center facility located on a parcel of land adjacent to the Lake Raystown Shopping Plaza (the “Adjacent Property”), consisting of approximately 25.553 acres and owned by Cedar Raystown Land, LLC, an affiliate of the Landlord, and a subsidiary of the Borrower (the “CR Subsidiary”); provided, however, that the Administrative Agent shall not remove the Lake Raystown
Shopping Plaza as a Borrowing Base Property solely as a result of any such termination and relocation if, simultaneous with such termination and relocation, the Borrower and the CR Subsidiary (i) enter into such agreements with the Administrative Agent, (ii) execute such documents, and (iii) perform all other acts, as are necessary to (a) cause the Adjacent Property and the Lake Raystown Shopping Plaza to be deemed to be one (1) combined property for the purpose of determining whether such combined property (the “Combined Lake Raystown Property”) shall be added as a Borrowing Base Property, and (b) add the Combined Lake Raystown Property as a Borrowing Base Property in accordance with the terms and conditions of this Agreement. The Administrative Agent and the Borrower hereby agree that the fueling station located within the Lake Raystown Shopping Plaza containing approximately 27,547 square feet, and subject to that certain Lease Agreement dated January 19, 2000, by and
between Landlord, as successor in interest to Greater Raystown Associates, and Tenant, as successor in interest to Giant Food Stores, Inc., shall not be included in the determination of whether the Combined Lake Raystown Property shall be added as a Borrowing Base Property. In addition, (A) the Borrower shall have a period of two hundred seventy (270) days in which to relet the space formerly occupied by the Tenant in the Lake Raystown Shopping Plaza, (B) the Original Giant Space shall not be included in determining the Occupancy Ratio for the Combined Lake Raystown Property during such two hundred seventy (270) day period and (C) the Combined Lake Raystown Property shall be deemed to be a Stabilized Asset during such two hundred seventy (270) day period notwithstanding the fact that the Occupancy Ratio for the Combined Lake Raystown Property during such two hundred seventy (270) day period may be less than eighty percent (80%). Upon the Borrower and the CR Subsidiary entering into
such agreements with the Administrative Agent, and completing such other actions, as are necessary to add the Combined Lake Raystown Property as a Borrowing Base Property in accordance with the terms and conditions of this Agreement, the Administrative Agent shall advise the Borrower of the Adjusted Appraised Value of the Combined Lake Raystown Property.”

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21.
 	

Section 7.19 of the Loan Agreement is hereby deleted in its entirety.
 

	

 
 	

22.
 	

Section 7.21 of the Loan Agreement is hereby deleted in its entirety and shall be replaced by the following:
 

“7.21   Fixed Charge Ratio. The Fixed Charge Ratio as determined as of each Calculation Date shall be not less than 1.35:1. The Fixed Charge Ratio covenant shall be tested by the Administrative Agent as of each Calculation Date with results based upon the results for the most recent Calculation Period, such calculation and results to be verified by the Administrative Agent.”

  	
         

      	
        23.

      	
        Section 8.4.3 is hereby deleted in its entirety and shall be replaced with the following”.
 

“8.4.3  Individual Property secured Debt of the Borrower, CSC or any Borrower Subsidiary which is recourse to the Borrower or CSC consistent with customary project finance market terms and conditions (excluding the Obligations) in an amount not to exceed twenty five percent (25%) of the Total Asset Value in the aggregate outstanding at any one time, provided that the Borrower will be in compliance with the Financial Covenants considering the consequences of the incurrence of such Debt;”

  	
         

      	
        24.

      	
        Section 13.3 of the Loan Agreement is hereby deleted and shall be replaced by the following:
 

“13.3  Assignments by Lenders.

13.3.1  Assignment. Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans (including for purposes of this Section 13.3.1, participations in L/C Obligations) at the time owing to it); provided that any such assignment shall be subject to the following conditions:

(i)  Minimum Amounts.

(A) in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, no minimum amount needs to be assigned; and 

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(B)
  in any case not described in Section 13.3.1(i)(A) above, the aggregate amount
  of the Commitment (which for this purpose includes Loans outstanding thereunder)
  or, if the Commitment is not then in effect, the principal outstanding balance
  of the Loans of the assigning Lender subject to each such assignment, determined
  as of the date the Assignment and Acceptance with respect to such assignment
  is delivered to the Administrative Agent or, if “Trade Date” is specified
  in the Assignment and Acceptance, as of the Trade Date, shall not be less than
  $5,000,000 unless each of the Administrative Agent and, so long as no Event
  of Default has occurred and is continuing, the Borrower otherwise consents (each
  such consent not to be unreasonably withheld or delayed); provided, however,
  that concurrent assignments to members of an Assignee Group and concurrent assignments
  from members of an Assignee Group to a single assignee (or to an assignee and
  members of its Assignee Group) will be treated as a single assignment for purposes
  of determining whether such minimum amount has been met;

(ii)  Proportionate Amounts. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loans or the Commitment assigned; 

(iii) Required Consents. No consent shall be required for any assignment except to the extent required by Section 13.3.1(i)(B) and, in addition: 

(A)  the consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (1) an Event of Default has occurred and is continuing at the time of such assignment or (2) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund;

(B)  the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required if such assignment is to a Person that is not a Lender, an Affiliate of a Lender or an Approved Fund; and 

(C)  the consent of the L/C Issuer (such consent not to be unreasonably withheld or delayed) shall be required for any assignment that increases the obligation of the assignee to participate in exposure under one or more Letters of Credit (whether or not then outstanding).

(iv)  Assignment and Acceptance. The parties to each assignment shall execute and deliver to the Administrative Agent for recording in the Register an Assignment and Acceptance, substantially in the form of Exhibit H hereto (the “Assignment and Acceptance”), together with a processing and recordation fee in the amount of $3,000.00; provided, however, that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. The assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.

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(v)  No Assignment to Borrower. No such assignment shall be made to the Borrower or any of the Borrower’s Affiliates or Subsidiaries.

(vi)  No Assignment to Natural Person. No such assignment shall be made to a natural person.

Subject to acceptance and recording thereof by the Administrative Agent pursuant to Section 13.3.2, from and after the effective date specified in each Assignment and Acceptance, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 2.3.11, 2.6, 7.15 and 7.17 with respect to facts and circumstances occurring prior to the effective date of such assignment. Promptly following delivery of notice of such assignment and written request, the Borrower (at its expense) shall, in exchange for each surrendered Note, execute and deliver a Note to the assignee Lender. Such new Notes shall provide that they are replacements for the surrendered Notes, shall be in an aggregate principal amount equal to the aggregate principal amount of the surrendered Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be substantially in the form of the assigned Notes. The surrendered Notes shall be cancelled and returned to the Borrower. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with
Section 13.3.3.

13.3.2. Register. The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at the Administrative Agent’s Office a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans and L/C Obligations owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in
the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender at any reasonable time and from time to time upon reasonable prior notice.

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13.3.3. Participations. Any Lender may at any time, without the consent of the Borrower or the Administrative Agent, but upon notice to the Borrower and the Administrative Agent, sell participations to any Person (other than a natural person or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans (including such Lender’s participations in L/C Obligations) owing to it); provided that (i) such Lender’s obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent, the Lenders and the L/C Issuer shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.

Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any  provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in Section 13.4.1(i) through (viii) that affects such Participant. Subject to Section 13.3.4 below, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.3.11 and 2.6 to the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to Section 13.3.1 above. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 12.2 as though it were a Lender, provided such Participant agrees to be subject to Section 12.2 as though it were a Lender.

13.3.4 Limitations upon Participant Rights. A Participant shall not be entitled to receive any greater payment under Section 2.3.11 or 2.6 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent, provided in no instance shall the Borrower’s Obligations be increased as a result thereof. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.3.11 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the
Borrower, to comply with Section 2.3.11 as though it were a Lender.

13.3.5 Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment or foreclosure with respect to any such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledge or assignee for such Lender as a party hereto.

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13.3.6 Electronic Execution of Assignments. The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Acceptance shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act,  or any other similar state laws based on the Uniform Electronic Transactions Act.”

	

 
 	

25.
 	

Exhibit B-1 to the Loan Agreement is hereby deleted in its entirety and shall be replaced with the Exhibit B-1 attached hereto as Exhibit E.
 

	

 
 	

26.
 	

Exhibit F to the Loan Agreement is hereby deleted in its entirety and shall be replaced with the Exhibit F attached hereto as Exhibit A. 
 

	

 
 	

27.
 	

Exhibit G to the Loan Agreement is hereby deleted in its entirety and shall be replaced with the Exhibit G attached hereto as Exhibit F.
 

	

 
 	

28.
 	

Exhibit H to the Loan Agreement is hereby deleted in its entirety and shall be replaced with the Exhibit H attached hereto as Exhibit G.
 

	

 
 	

29.
 	

Immediately after the execution hereof, Exhibit I to the Loan Agreement shall be deemed deleted in its entirety and shall be replaced with the Exhibit I attached hereto as Exhibit B.
 

	

 
 	

30.
 	

Immediately after the execution hereof, Exhibit J to the Loan Agreement shall be deemed deleted in its entirety and shall be replaced with the Exhibit J attached hereto as Exhibit C. The Borrower hereby certifies, warrants and represents that, to the best of Borrower’s knowledge, the Individual Properties being added as Borrowing Base Properties satisfy the Borrowing Base Property Requirements and the related Eligibility Criteria, all as set forth in the Loan Agreement. 
 

	

 
 	

31.
 	

Immediately after the execution hereof, Schedule 6.14.2(i) to the Loan Agreement shall be deemed deleted in its entirety and shall be replaced with the Schedule 6.14.2(i) attached hereto as Exhibit D.   
 

	

 
 	

32.
 	

The Borrower, the Administrative Agent and the Lenders hereby acknowledge and agree that (a) notwithstanding the terms of the Loan Agreement and the terms of Paragraph 33 below, the Applicable Margin shall be determined as set forth under the Fourth Amendment to Loan Agreement  dated as of December 16, 2005, through October 19, 2006, and (b) effective as of the execution hereof, the Applicable Margin shall be Level 1 as set forth in this Sixth Amendment.
 

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33.
 	

The Borrower, the Administrative Agent and the Lenders here by acknowledge and agree that the Borrower’s compliance with the Financial Covenants for the period ended September 30, 2006 shall be calculated as if the terms and conditions of this Sixth Amendment were in effect as of September 30, 2006.
 

	

 
 	

34.
 	

The Borrower hereby ratifies, confirms, and reaffirms all of the terms and conditions of the Loan Agreement, and all of the other documents, instruments, and agreements evidencing the Loan Arrangement including, without limitation, the Note. The Borrower further acknowledges and agrees that all of the terms and conditions of the Loan Arrangement shall remain in full force and effect except as expressly provided in this Sixth Amendment. No novation of the indebtedness evidenced by the Note, the Loan Agreement or any other Loan Document shall occur as a result of the execution of this Sixth Amendment. 
 

	

 
 	

35.
 	

Any determination that any provision of this Sixth Amendment or any application hereof is invalid, illegal or unenforceable in any respect and in any instance shall not effect the validity, legality, or enforceability of such provision in any other instance, or the validity, legality or enforceability of any other provisions of this Sixth Amendment.
 

	

 
 	

36.
 	

This Sixth Amendment may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Sixth Amendment, it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought.
 

	

 
 	

37.
 	

The Loan Agreement, as amended by this Sixth Amendment, constitutes the entire agreement of the parties regarding the matters contained herein and shall not be modified by any prior oral or written communications.
 

	

 
 	

38.
 	

The Borrower acknowledges, confirms and agrees that it has no offsets, defenses, claims or counterclaims against the Administrative Agent or the Lenders with respect to any of the Borrower’s liabilities and obligations to the Administrative Agent or the Lenders under the Loan Arrangement, and to the extent that the Borrower has any such claims under the Loan Arrangement, the Borrower affirmatively WAIVES and RENOUNCES such claims as of the date hereof.
 

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39.
 	

Conditions Precedent. This Sixth Amendment shall become effective as of the date first above written, at such time when all of the following conditions are satisfied:
 

	

 
 	

a.
 	

All Lenders shall have executed this Sixth Amendment.
 

	

 
 	

b.
 	

The Borrower shall have executed this Sixth Amendment.
 

	

 
 	

c.
 	

The Lenders shall have received such executed resolutions, secretary’s certificates and certificates of legal existence as the Administrative Agent may specify all in form and substance satisfactory to the Administrative Agent and its counsel.
 

	

 
 	

d.
 	

The Lenders shall have received such legal opinions for the Borrower and such other parties as the Administrative Agent may require, all in form and substance satisfactory to the Administrative Agent and its counsel.
 

	

 
 	

e.
 	

The Borrower shall have paid the fees, costs and expenses of the Administrative Agent’s counsel in connection with this Sixth Amendment.
 

[The balance of this page is intentionally left blank]

-14-

IN WITNESS WHEREOF, this Sixth Amendment has been executed as a sealed instrument as of the date first set forth above.

 

  	

        BORROWER:

      	
         
 	

 
 
	
        CEDAR
          SHOPPING CENTERS PARTNERSHIP, L.P.,

           a Delaware limited partnership
 	
         
 	

 
 
	
        

By: 

      	
        
 Cedar Shopping Centers, Inc.,
 its general partner
 	
         
 	

 
 	
          
 
					

            

 

  	
         
 	
        By: 
 	
         /s/ Brenda J. Walker
 	
         
 	
          
 
	
         
 	
        
      
	
        

 	
         
 	
         
 
	
         
 	
        Name: 
 	
        Brenda J. Walker
 	
         
 	
         
 
	
         
 	
        Title: 
 	
        Vice President
 	
         
 	
         
 

 

	

ADMINISTRATIVE AGENT:
 	

 
 	

 
 
	

BANK OF AMERICA, N.A.
 	

 
 	

 
 
	

By: 
 	

 /s/ Mark A. Mokelke
 	

 
 	

 
 	

  
 
	

 
 	

 	

 
 	

 
 	

 
 
	

Name: 
 	

Mark A. Mokelke
 	

 
 	

 
 	

 
 
	

Title: 
 	

Vice President
 	

 
 	

 
 	

 
 

 

	

LENDERS:
 	

 
 	

 
 
	

BANK OF AMERICA, N.A.
 	

 
 	

 
 
	

By: 
 	

 /s/ Mark A. Mokelke
 	

 
 	

 
 	

  
 
	

 
 	

 	

 
 	

 
 	

 
 
	

Name: 
 	

Mark A. Mokelke
 	

 
 	

 
 	

 
 
	

Title: 
 	

Vice President
 	

 
 	

 
 	

 
 

 

	

PB CAPITAL CORPORATION
 	

 
 	

 
 
	

By: 
 	

 /s/ Andrew E. Woodtli
 	

 
 	

By: 
 	

 /s/ Michael J. Rodgers
 
	

 
 	

 	

 
 	

 
 	

 
	

Name: 
 	

Andrew E. Woodtli
 	

 
 	

Name: 
 	

Michael J. Rodgers
 
	

Title: 
 	

Senior Director
 	

 
 	

Title: 
 	

Vice President
 

 

  	
        MANUFACTURERS
          AND TRADERS TRUST COMPANY

      
	
        By: 

      	
        

          /s/ Peter J. Ostrowski

      	
         

      	
         

      	
        
        

      
	
         

      	
        
        

      	
         

      	
         

      	
         

      
	
        Name: 

      	
        Peter
          J. Ostrowski

      	
         

      	
         

      	
         

      
	
        Title: 

      	
        Vice
          President

      	
         

      	
         

      	
         

      

 

	

SOVEREIGN BANK
 	

 
 	

 
 
	

By: 
 	

 /s/ Erin T. Aslakson
 	

 
 	

 
 	

  
 
	

 
 	

 	

 
 	

 
 	

 
 
	

Name: 
 	

Erin T. Aslakson
 	

 
 	

 
 	

 
 
	

Title: 
 	

Assistant Vice President
 	

 
 	

 
 	

 
 

 

	

RAYMOND JAMES BANK, FSB
 	

 
 	

 
 
	

By: 
 	

 /s/ Steven Paley
 	

 
 	

 
 	

  
 
	

 
 	

 	

 
 	

 
 	

 
 
	

Name: 
 	

Steven Paley
 	

 
 	

 
 	

 
 
	

Title: 
 	

Vice President
 	

 
 	

 
 	

 
 

 

	

CITIZENS BANK OF PENNSYLVANIA
 	

 
 	

 
 
	

By: 
 	

 /s/ Robert L. Schopf
 	

 
 	

 
 	

  
 
	

 
 	

 	

 
 	

 
 	

 
 
	

Name: 
 	

Robert L. Schopf
 	

 
 	

 
 	

 
 
	

Title: 
 	

Vice President
 	

 
 	

 
 	

 
 

 

	

KEYBANK, NATIONAL ASSOCIATION
 	

 
 	

 
 
	

By: 
 	

 /s/ Gregory W. Lane
 	

 
 	

 
 	

  
 
	

 
 	

 	

 
 	

 
 	

 
 
	

Name: 
 	

Gregory W. Lane
 	

 
 	

 
 	

 
 
	

Title: 
 	

Vice President
 	

 
 	

 
 	

 
 

 

	

LASALLE BANK NATIONAL ASSOCIATION
 
	

By: 
 	

 /s/ Robert E. Goeckel
 	

 
 	

 
 	

  
 
	

 
 	

 	

 
 	

 
 	

 
 
	

Name: 
 	

Robert E. Goeckel
 	

 
 	

 
 	

 
 
	

Title: 
 	

Vice President
 	

 
 	

 
 	

 
 

EXHIBIT
  A

EXHIBIT F TO LOAN AGREEMENT

OWNERSHIP INTERESTS AND TAXPAYER IDENTIFICATION NUMBERS

 

  	
        Entity
          Name

      	
         

      	
        Partners/Members

      	
         

      	
        Tax
          Identification

          Number

      	
         

      
	
        
        

      	
         

      	
        
        

      	
         

      	
        
        

      	
         

      
	
        Cedar-South
          Philadelphia I, LLC

      	
         

      	
        Cedar-South
          Philadelphia II, LLC (100%)

      	
         

      	
        90-0082050

      	
         

      
	
        Cedar-South
          Philadelphia II, LLC

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        90-0082060

      	
         

      
	
        Cedar-Riverview
          LP

      	
         

      	
        Cedar-Riverview
          LLC (1%; general partner); CSC-Riverview LLC (99%; limited partner)

      	
         

      	
        20-0422200

      	
         

      
	
        Cedar-Riverview
          LLC 

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        20-0151534

      	
         

      
	
        CSC-Riverview
          LLC 

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        20-0151125

      	
         

      
	
        Cedar
          Lender LLC 

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        20-0447171

      	
         

      
	
        Delaware
          1851 Associates, LP 

      	
         

      	
        Cedar-Columbus
          LLC (1%; general partner); CSC-Columbus LLC (99%; limited partner)

      	
         

      	
        23-2999402

      	
         

      
	
        Cedar-Columbus
          LLC 

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        20-0151547

      	
         

      
	
        Cedar
          Sunset Crossing, LLC

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        20-0579586

      	
         

      
	
        CSC-Columbus
          LLC 

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        20-0151526

      	
         

      
	
        Cedar
          Dubois, LLC

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        20-0768567

      	
         

      
	
        Swede
          Square Associates, L.P.

      	
         

      	
        Swede
          Square, LLC (0.1%; general partner); Cedar Shopping Centers Partnership,
          L.P. (99.9%; limited partner)

      	
         

      	
        02-0673581

      	
         

      

EF-1

 

 

  	
        Swede
          Square, LLC

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        02-0673593

      	
         

      
	
        Cedar
          Lake Raystown, LLC

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        20-1158059

      	
         

      
	
        Cedar
          Huntingdon, LLC

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        20-1157929

      	
         

      
	
        Cedar
          Brickyard, LLC

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        20-2011661

      	
         

      
	
        Cedar
          St. James, LLC

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        20-2311739

      	
         

      
	
        Cedar
          Kenley Village, LLC

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        20-2311870

      	
         

      
	
        Cedar-Valley
          Plaza, LLC

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        42-1596164

      	
         

      
	
        Cedar-Glen
          Allen UK, LLC

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        20-3797757

      	
         

      
	
        Cedar-Fredericksburg
          UK, LLC

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        20-3797657

      	
         

      
	
        Cedar-Salem
          Run, LLC

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        20-3797596

      	
         

      
	
        Cedar-VA
          Commons LLC

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        20-3797692

      	
         

      
	
        Cedar-Revere
          LLC

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        20-3528504

      	
         

      
	
        Cedar-Carlisle,
          LLC

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        20-3397838

      	
         

      
	
        Cedar-Trexler
          Plaza 2, LLC

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        20-5065081

      	
         

      
	
        Cedar-Stonehedge,
          LLC

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        20-5228228

      	
         

      
	
        Cedar-Oakhurst,
          LLC

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        20-5233216

      	
         

      
	
        Cedar-Palmyra,
          LLC

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        20-3897470

      	
         

      
	
        Cedar-Stadium
          Plaza, LLC

      	
         

      	
        Cedar
          Shopping Centers Partnership, L.P. (100%)

      	
         

      	
        20-2957198

      	
         

      

EF-2

EXHIBIT B

EXHIBIT I TO LOAN AGREEMENT

LENDERS’ COMMITMENT

 

  	

Lender
 	
         
 	

Commitment Amount
 	
         
 	
        Commitment Percentage
 	
         
 
	

 	
         
 	

 	
         
 	
        

 	
         
 
	

BANK OF AMERICA, N.A.
 	
         
 	

$
 	
        44,000,000.00
 	
         
 	
        14.66666
 	
        %
 
	

PB CAPITAL CORPORATION
 	
         
 	

$
 	
        44,000,000.00
 	
         
 	
        14.66666
 	
        %
 
	

MANUFACTURERS AND TRADERS TRUST COMPANY
 	
         
 	

$
 	
        30,000,000.00

      	
         
 	
        10

      	
        %
 
	

SOVEREIGN BANK
 	
         
 	

$
 	
        30,000,000.00
 	
         
 	
        10

      	
        %
 
	

RAYMOND JAMES BANK, FSB
 	
         
 	

$
 	
        20,000,000.00
 	
         
 	
        6.66670
 	
        %
 
	

CITIZENS BANK OF PENNSYLVANIA
 	
         
 	

$
 	
        44,000,000.00
 	
         
 	
        14.66666
 	
        %
 
	

KEYBANK, NATIONAL ASSOCIATION
 	
         
 	

$
 	
        44,000,000.00
 	
         
 	
        14.66666
 	
        %
 
	

LASALLE BANK NATIONAL ASSOCIATION
 	
         
 	

$
 	
        44,000,000.00
 	
         
 	
        14.66666
 	
        %
 
	

TOTAL
 	
         
 	

$
 	
        300,000,000.00
 	
         
 	
        100
 	
        %
 

EI-1

EXHIBIT C

EXHIBIT J TO LOAN AGREEMENT

 

  	
        Borrowing Base Property
 	
         
 	
        Adjusted Appraised Value
 as of October 20, 2006
 
	
        

 	
         
 	
        

 
	
        South Philadelphia Shopping Plaza
 Philadelphia, Pennsylvania
 	
         
 	
        $36,400,000.00
 
	
        Riverview Shopping Center
 Philadelphia, Pennsylvania
 	
         
 	
        $43,200.000.00
 
	
        Sunset Crossing Shopping Center
 Dickson, Pennsylvania
 	
         
 	
        $11,250,000.00
 
	
        Columbus Crossing Shopping Center
 Philadelphia, Pennsylvania
 	
         
 	
        $23,000,000.00
 
	
        Dubois Commons Shopping Center
 Sandy, Pennsylvania 
 	
         
 	
        $17,690,000.00
 
	
        Swede Square Shopping Center
 East Norriton, Pennsylvania
 	
         
 	
        $11,500,000.00
 
	
        Lake Raystown Shopping Center
 Smithfield, Pennsylvania
 	
         
 	
        $6,700,000.00
 
	
        Brickyard Shopping Center
 Berlin, Connecticut
 	
         
 	
        $28,200,000.00
 
	
        Valley
          Plaza Shopping Center, 

          Hagerstown, Maryland

      	
         
 	
        $9,950,000.00
 
	
        St.
          James Shopping Center,

          Hagerstown, Maryland

      	
         
 	
        $4,250,000.00
 
	
        Kenley
          Village Shopping Center,

          Hagerstown, Maryland

      	
         
 	
        $3,750,000.00
 
	
        Ukrop’s Shopping Center,
 Fredericksburg, Virginia
 	
         
 	
        $16,000,000.00
 
	
        Ukrop’s Shopping Center,
 Glen Allen, Virginia
 	
         
 	
        $6,300,000.00
 
	
        Virginia Center Commons
 Glen Allen, Virginia
 	
         
 	
        $4,900,000.00
 
	
        The Shoppes at Salem Run
 Fredericksburg, Virginia
 	
         
 	
        $5,300,000.00
 
	
        Unit 2 of The Shops at Suffolk Downs Condominium
 Revere, Massachusetts
 	
         
 	
        $19,300,000.00 (As Is)

        $20,900,000.00
          (At Completion)

      
	
        Point at Carlisle Shopping Center
 Carlisle, Pennsylvania
 	
         
 	
        $12,900,000.00
 
	
        Trexlertown Plaza (Units 1, 3A and 4)
 Trexlertown, Pennsylvania
 	
         
 	
        $27,500,000.00
 
	
        Stonhedge Square Shopping Center
 Carlisle, Pennsylvania
 	
         
 	
        $13,800,000.00
 
	
        Oakhurst Plaza
 Harrisburg, Pennsylvania
 	
         
 	
        $22,500,000.00
 
	
        Palmyra Shopping Center
 Palmyra, Pennsylvania
 	
         
 	
        $7,400,000.00
 
	
        Stadium Plaza
 East Lansing, MI
 	
         
 	
        $11,500,000.00
 

EJ-1

EXHIBIT D

SCHEDULE 6.14.2(i) TO LOAN AGREEMENT

 

  	
        BORROWING
          BASE PROPERTY

      	
         

      	
        FEE
          OR LEASEHOLD
          ESTATE INTEREST

      
	
        

      	 	
        

      
	
        South
          Philadelphia Shopping Plaza Philadelphia,
          Pennsylvania

      	
         

      	
        Leasehold

      
	
        Riverview
          Shopping Center Philadelphia, Pennsylvania

      	
         

      	
        Fee
          and Leasehold

      
	
        Sunset
          Crossing Shopping Center Dickson,
          Pennsylvania

      	
         

      	
        Fee

      
	
        Columbus
          Crossing Shopping Center Philadelphia, Pennsylvania

      	
         

      	
        Fee

      
	
        Dubois
          Commons Shopping Center Sandy, Pennsylvania

      	
         

      	
        Fee

      
	
        Swede
          Square Shopping Center East Norriton, Pennsylvania

      	
         

      	
        Fee

      
	
        Lake
          Raystown Shopping Center Smithfield, Pennsylvania

      	
         

      	
        Fee

      
	
        Brickyard
          Shopping Center Berlin, Connecticut

      	
         

      	
        Fee

      
	
        Valley
          Plaza Shopping Center,  Hagerstown,
          Maryland

      	
         

      	
        Fee

      
	
        St.
          James Shopping Center,  Hagerstown,
          Maryland

      	
         

      	
        Fee

      
	
        Kenley
          Village Shopping Center,  Hagerstown,
          Maryland

      	
         

      	
        Fee

      
	
        Ukrop’s
          Shopping Center, Fredericksburg, Virginia

      	
         

      	
        Fee

      
	
        Ukrop’s
          Shopping Center, Glen Allen, Virginia

      	
         

      	
        Fee

      
	
        Virginia
          Center Commons, Glen Allen, Virginia

      	
         

      	
        Fee

      
	
        The
          Shoppes at Salem Run, Fredericksburg, Virginia

      	
         

      	
        Fee

      
	
        Unit
          2 of The Shops at Suffolk Downs Condominium, Revere,
          Massachusetts

      	
         

      	
        Fee

      
	
        Point
          at Carlisle Shopping Center Carlisle, Pennsylvania

      	
         

      	
        Fee

      
	
        Trexlertown
          Plaza (Units 1, 3A and 4) Trexlertown, Pennsylvania

      	
         

      	
        Fee

      
	
        Stonhedge
          Square Shopping Center Carlisle, Pennsylvania

      	
         

      	
        Fee

      
	
        Oakhurst
          Plaza Harrisburg, Pennsylvania

      	
         

      	
        Fee

      
	
        Palmyra
          Shopping Center Palmyra, Pennsylvania

      	
         

      	
        Fee
          and Access Easement

      
	
        Stadium
          Plaza East Lansing, MI

      	
         

      	
        Fee
          

      

RIGHTS
  OF FIRST
  REFUSAL

Right of First Refusal, executed on October 31, 2003, and effective as of November 3, 2003, granted by Cedar-Riverview LP, a Pennsylvania limited partnership, to Firehouse Realty Corp., a Pennsylvania corporation, Reed Development Associates, Inc., a Pennsylvania corporation, South River View Plaza, Inc., a Pennsylvania corporation, River View Development Corp., a Pennsylvania corporation, and Riverview Commons, Inc., a Pennsylvania corporation.

Right of First Refusal, executed on November 19, 2003, and effective as of December 9, 2003, granted by Delaware 1851 Associates, LP, a Pennsylvania limited partnership, to Welsh-Square, Inc., a Pennsylvania corporation, Indenture of Trust of Bart Blatstein dated as of June 9, 1998, a Pennsylvania trust, and Irrevocable Indenture of  Trust of Barton Blatstein dated July 13, 1999, a Pennsylvania trust.

EXHIBIT E

EXHIBIT B-1 TO LOAN AGREEMENT

REQUISITION AND AVAILABILITY CERTIFICATE

	

TO:
 	

Bank of America, N.A. (“Administrative Agent”)
 

	

RE:
 	

Loan Agreement dated as of January 30, 2004 (as amended, the “Loan Agreement”) between Administrative Agent, the lenders described therein and Cedar Shopping Centers Partnership, L.P. (“Borrower”)
 

LOAN
  REQUEST NO.: ________________

AMOUNT
  OF LOAN ADVANCE REQUESTED: $__________________

DATE:________________, 200__

This Borrower’s Certificate and Request for Loan Advance is submitted by Borrower to Administrative Agent pursuant to the provisions of the Loan Agreement in order to induce Lenders to make the Loan Advance identified above. Capitalized terms used herein which are not otherwise specifically defined shall have the same meaning herein as in the Loan Agreement.

Borrower
  hereby requests Lenders to make a Loan Advance under the Notes in the following
  amount: $________________________.

The
  Loan Advance is requested for the following purposes: ___________________________________________________________

_________________________________________________________________________________________________________________

_________________________________________________________________________________________________________________.

The Loan Advance requested of $______________, when added to prior Loan Advances under the Notes of $________________, plus the L/C Exposure of $__________________, will result in aggregate Loans plus L/C Exposure of $_______________.

The types of Loans requested are as follows:

 

	

Variable Rate:
 	

$__________________
 
	

Effective LIBO Rate
 	

$___________________
 
	

 
 	

        Interest
          Period ________________

      
	

 
 	

$___________________
 
	

 
 	

        Interest
          Period ________________

      
	

 
 	

 
 

The Maximum Loan Amount shall not be exceeded upon the making of the Loan Advance requested hereunder. Calculations of the Maximum Loan Amount, current Loan balance, and amount of the Loan available to be advanced and/or L/C’s available to be issued are set forth on the Availability Certificate annexed hereto.

Borrower hereby certifies, warrants and represents to Administrative Agent and the Lenders that (except for each condition precedent to Lender’s obligation to make the requested Loan Advance) this request: (i) constitutes an affirmation by Borrower that, except as otherwise disclosed in writing to the Administrative Agent, each of the warranties and representations made in the Loan Agreement, including, without limitation, the Borrower’s continued compliance with the Financial Covenants, as satisfied by the Closing Compliance Certificate, or once delivered, the most recent Compliance Certificate delivered by the Borrower to the Agent, remains true and correct in all material respects as of the date of this request and, unless Administrative Agent is notified to the contrary prior to the disbursement of the Loan Advance, will be so on the date of such Loan Advance; and (ii)
constitutes the representation and warranty of Borrower that the information set forth in this request is true, accurate and complete in all material respects.

The Borrower hereby further certifies, warrants and represents to Administrative Agent and the Lenders that: (i) to the best of the Borrower’s knowledge, the financial information provided by the Borrower to the Agent remains true and accurate in all material respects; (ii) the Borrower is in compliance with the financial covenants contained in the Loan Agreement to the extent set forth below; (iii) to the best of the Borrower’s knowledge, an Event of Default which is continuing has not occurred under the Loan Agreement or any of the other Loan Documents.

 

	

Covenant
 	

 
 	

Requirement
 	

 
 	

Actual
 	

 
 
	

 	

 
 	

 	

 
 	

 	

 
 
	

Leverage Ratio
 	

 
 	

Less than 70%
 	

 
 	

 
 	

 
 
	

Fixed Charge Ratio
 	

 
 	

Not less than 1.35:1
 	

 
 	

 
 	

 
 
	

Borrower’s Net Worth
 	

 
 	

Not less than 85% of the Borrower’s Net Worth as of December 31, 2003, plus 85% of cumulative net cash proceeds, as set forth in the Loan Agreement
 	

 
 	

 
 	

 
 
	

Occupancy Ratio for Borrowing Base Properties
 	

 
 	

Not less than 85% for the aggregate of all Borrowing Base Properties, and not less than 80% for each individual Borrowing Base Property
 	

 
 	

 
 	

 
 
	

Aggregate Pro Rata amount of the Variable Rate Indebtedness of the Consolidated CSC Entities and the Unconsolidated CSC Entities 
 	

 
 	

Less than 30% of the Total Asset Value 
 	

 
 	

 
 	

 
 
	

Individual Property secured Debt of the Borrower, CSC or any Borrower Subsidiary which is recourse to the Borrower or CSC
 	

 
 	

In the aggregate outstanding at any time, not to exceed twenty five percent (25%) of the Total Asset Value 
 	

 
 	

 
 	

 
 
	

The Pro Rata share of Investments in Development Assets (valued at undepreciated Book Value) 
 	

 
 	

In the aggregate, not to exceed twenty five percent (25%) of Total Asset Value
 	

 
 	

 
 	

 
 
	

The Pro Rata share of Investments in Land Assets which are valued at Book Value 
 	

 
 	

In the aggregate, not to exceed ten percent (10%) of Total Asset Value
 	

 
 	

 
 	

 
 
	

        The
          Pro Rata share of Investments in Non-Retail Assets 

      	

 
 	

In the aggregate, not to exceed five percent (5%) of Total Asset Value
 	

 
 	

 
 	

 
 

Calculations of the Financial Covenants are set forth in the Closing Compliance Certificate, or once delivered, the most recent Compliance Certificate delivered by the Borrower to the Agent.

This request is submitted to Administrative Agent for the purpose of inducing Lenders to make a Loan Advance and Borrower intends that Administrative Agent and the Lenders shall rely upon the same being true, accurate and complete in all material respects.

If all conditions precedent to Lenders’ obligation to make a Loan Advance are satisfied, please disburse the Loan Advance on ______________, 200__.

 

WITNESS the execution hereof as an instrument under seal as of the _______ day of _____________, 200__.

 

  	
         

      	
         

      	
         

      	
        CEDAR
          SHOPPING CENTERS PARTNERSHIP, L.P.,

          a Delaware limited partnership

      
	
         

      	
         

      	
         

      	
        

          By:

      	
        

          Cedar Shopping Centers, Inc.,

          its general partner

      
	
         

      	
         

      	
         

      	
        

          

      	 

By: 
      
	
         

      	
         

      	
         

      	
         
        

      	
        
      
	
        

      
	
         

      	
         

      	
         

      	
         

      	
        Name: 

      
	
         

      	
         

      	
         

      	
         

      	
        
      
	
        

      
	
         

      	
         

      	
         

      	
         

      	
        Title:

      
	
         

      	
         

      	
         

      	
         

      	
        
      
	
        

      

Availability Certificate

	

1.
 	

Maximum Loan Amount
 

 

  	
        a.
 	

 
 	

  Established Loan Amount
 	

 
 	

 
 	

 
 	

$
 	

300,000,000.00
 	

 
 	

 
 	

 
 
	
        b.
 	

 
 	

  Total Commitment
 	

 
 	

 
 	

 
 	

$
 	

300,000,000.00
 	

 
 	

 
 	

 
 
	
        c.
 	

 
 	

  Availability (calculated below) lesser of (a), (b) and (c)
 	

 
 	

 
 	

 
 	

$
 	

 
 	

 
 	

$
 	

 
 
	
         
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 	

 
 	

 
 	

 

	

2.
 	

Loan Balance
 

 

  	
        a.
 	

 
 	

  Outstanding Balance of Loan plus
 	

 
 	

 
 	

 
 	

$
 	

 
 	

 
 	

 
 	

 
 
	
         
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 	

 
 	

 
 	

 
 
	
        b.
 	

 
 	

  L/C Exposure (a) plus (b)
 	

 
 	

 
 	

 
 	

$
 	

 
 	

 
 	

$
 	

 
 
	
         
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 	

 
 	

 
 	

 

	

3.
 	

Amount of Loan available to be advanced and/or L/C’s available to be issued
 

 

	

 
 	

 
 	

  1 minus 2
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

$
 	

 
 
	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 

 

Availability Calculation

 

	

a.
 	

 
 	

  Aggregate Borrowing Base Value* (calculated below)
 	

$
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 
	

 
 	

 
 	

 
 	

 
 	

 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 
	

 
 	

 
 	

  Multiplied by 70%
 	

 
 	

 
 	

 
 	

$
 	

 
 	

 
 	

 
 	

 
 
	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 	

 
 	

 
 	

 
 
	

b.
 	

 
 	

  Implied Loan Amount (calculated below) lesser of (a) or (b)
 	

 
 	

 
 	

 
 	

$
 	

 
 	

 
 	

$
 	

 
 
	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 	

 
 	

 
 	

 
	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 

*Borrowing Base Value Calculation

(prepare for each Borrowing Base Property)

	

(a)
 	

If Stabilized Asset
 

 

	

(i)
 	

 
 	

Adjusted Appraised Value (as determined by the most recent Appraisal of such Borrowing Base Property)
 	

 
 	

 
 	

 
 	

$
 	

 
 	

 
 	

 
 	

 
 
	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 	

 
 	

 
 	

 
 
	

(ii)
 	

 
 	

Adjusted Capitalized Value** (calculated below)
 	

 
 	

 
 	

 
 	

$
 	

 
 	

 
 	

 
 	

 
 
	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 	

 
 	

 
 	

 
 

	

**
 	

Adjusted Capitalized Value Calculation (For Stabilized Asset)
 

 

	

Adjusted Net Operating Income for most recent fiscal quarter, annualized capitalized at 8.00%
 	

$
 	

 
 	

 
 	

$
 	

 
 	

 
 	

 
 	

 
 
	

 
 	

 
 	

 	

 
 	

 
 	

 	

 
 	

 
 	

 
 

	

(b)
 	

If Non-Stabilized Asset
 

 

	

(i)
 	

 
 	

Adjusted Appraised Value (as determined by the most recent Appraisal of such Borrowing Base Property)
 	

 
 	

 
 	

 
 	

$
 	

 
 	

 
 	

 
 	

 
 
	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 	

 
 	

 
 	

 
 
	

(ii)
 	

 
 	

Adjusted Capitalized Value (Undepreciated Book Value)
 	

 
 	

 
 	

 
 	

$
 	

 
 	

 
 	

 
 	

 
 
	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 	

 
 	

 
 	

 
 

Calculation of Borrowing Base Value if Event of Loss Has Occurred

 

	

(i)
 	

 
 	

Adjusted Capitalized Value (calculated in the manner set forth above for Stabilized Asset, subject to the limits of Borrowing Base Value, or Non Stabilized Asset, as applicable)
 	

$
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 
	

 
 	

 
 	

 
 	

 
 	

 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 
	

 
 	

 
 	

Multiplied by 70%
 	

 
 	

 
 	

 
 	

$
 	

 
 	

 
 	

 
 	

 
 
	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 
 	

 	

 
 	

 
 	

 
 

Implied Loan Amount Calculation

Principal amount which generates Implied Debt Service Coverage Ratio of 1.35 to 1.00, calculated in accordance with the worksheet which is to be annexed hereto.

EXHIBIT F

EXHIBIT G TO LOAN AGREEMENT

COMPLIANCE CERTIFICATE

  	
        TO:
          The Administrative Agent and Lenders party to the Loan Agreement Described
          Below

      

This Compliance Certificate is furnished pursuant to that certain Loan Agreement dated as of January 30, 2004 (as amended, the “Loan Agreement”), among Cedar Shopping Centers Partnership, L.P. (“Borrower”), Bank of America, N.A., as Administrative Agent and the Lenders identified therein. Unless otherwise defined herein, capitalized terms used in this Compliance Certificate have the meanings ascribed thereto in the Loan Agreement.

THE UNDERSIGNED HEREBY CERTIFIES THAT:

1. I am the duly elected/authorized ______________________ of Cedar Shopping Centers, Inc., general partner of the Borrower.

2. I have reviewed the terms of the Loan Agreement and I have made, or have caused to be made under my supervision, a review of the transactions and conditions of the Borrower during the accounting period covered by the attached financial statements.

3. The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or event which constitutes an Event of Default or an event which, with notice or the passage of time or both, would constitute an Event of Default during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth below.

4. Schedule 1 attached hereto sets forth financial data and computations at and for the period ending __________ evidencing the Borrower’s compliance with certain covenants of the Loan Agreement, except as set forth below, all of which data and computations are true, complete and correct in all material respects to my knowledge.

Described below are the exceptions, if any, to paragraphs 3 and 4, listing the nature of the condition or event, the period during which it has existed and the action which the Borrower has taken, is taking, or proposes to take with respect to each such condition or event:

 

	

 
 
	

 
	

 
 
	

 

IN WITNESS WHEREOF, the undersigned has executed this Certificate as of this ____ day of ____________, 200____.

 

	

 
 	

 
 	

CEDAR SHOPPING CENTERS PARTNERSHIP, L.P., 
 a Delaware limited partnership
 
	

 
 	

 
 	
         
 	
        By:
 	

Cedar Shopping Centers, Inc.,
 its general partner
 
	

 
 	

 
 	
         
 	
         
 	
        By: 
 	 

           

  
 
	
         
 	
         
 	
         
 	
         
 	
         
 	
        

 
	
         
 	
         
 	
         
 	
         
 	
        Name: 
 	
         
 
	
         
 	
         
 	
         
 	
         
 	
         
 	
        

 
	
         
 	
         
 	
         
 	
         
 	
        Title: 
 	
         
 
	
         
 	
         
 	
         
 	
         
 	
         
 	
        

 

Schedule 1 to Compliance Certificate

 

	

Covenant
 	

 
 	

Requirement
 	

 
 	

Actual
 
	

 	

 
 	

 	

 
 	

 
	

Leverage Ratio
 	

 
 	

Less than 70%
 	

 
 	

 
 
	

Fixed Charge Ratio
 	

 
 	

Not less than 1.35:1
 	

 
 	

 
 
	

Borrower’s Net Worth
 	

 
 	

Not less than 85% of the Borrower’s Net Worth as of December 31, 2003, plus 85% of cumulative net cash proceeds, as set forth in the Loan Agreement
 	

 
 	

 
 
	

Occupancy Ratio for Borrowing Base Properties
 	

 
 	

Not less than 85% for the aggregate of all Borrowing Base Properties, and not less than 80% for each individual Borrowing Base Property
 	

 
 	

 
 
	

Aggregate Pro Rata amount of the Variable Rate Indebtedness of the Consolidated CSC Entities and the Unconsolidated CSC Entities 
 	

 
 	

Less than 30% of the Total Asset Value 
 	

 
 	

 
 
	

Individual Property secured Debt of the Borrower, CSC or any Borrower Subsidiary which is recourse to the Borrower or CSC
 	

 
 	

In the aggregate outstanding at any time, not to exceed twenty five percent (25%) of the Total Asset Value (excluding the Obligations)
 	

 
 	

 
 
	

The Pro Rata share of Investments in Development Assets (valued at undepreciated Book Value) 
 	

 
 	

In the aggregate, not to exceed twenty five percent (25%) of Total Asset Value
 	

 
 	

 
 
	

The Pro Rata share of Investments in Land Assets which are valued at Book Value 
 	

 
 	

In the aggregate, not to exceed ten percent (10%) of Total Asset Value
 	

 
 	

 
 
	

The Pro Rata share of Investments in Non-Retail Assets 
 	

 
 	

In the aggregate, not to exceed five percent (5%) of Total Asset Value
 	

 
 	

 
 

EXHIBIT G

EXHIBIT H TO LOAN AGREEMENT

ASSIGNMENT AND ACCEPTANCE

This Assignment and Acceptance (this “Assignment and Acceptance”) is dated as of the Effective Date set forth below and is entered into by and between [the][each Assignor] identified in item 1 below [the][each, an] “Assignor”) and [the][each] Assignee identified in item 2 below ([the][each, an] “Assignee”). [It is understood and agreed that the rights and obligations of [the Assignors][the Assignees] hereunder are several and not joint.]  Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (the “Credit
 Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto (the “Standard Terms and Conditions”) are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Acceptance as if set forth herein in full.

For an agreed consideration, [the][each] Assignor hereby irrevocably sells and assigns to [the Assignee][the respective Assignees], and [the][each] Assignee hereby irrevocably purchases and assumes from [the Assignor][the respective Assignors], subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of [the Assignor’s][the respective Assignors’] rights and obligations in [its capacity as a Lender][their respective capacities as Lenders] under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of [the Assignor][the respective Assignors] under the respective facilities identified
below (including, without limitation, the Letters of Credit included in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of [the Assignor (in its capacity as a Lender)][the respective Assignors (in their respective capacities as Lenders)] against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned by [the][any] Assignor to [the][any] Assignee pursuant to clauses (i) and (ii) above being referred to herein collectively as
[the][an] “Assigned Interest”). Each such sale and assignment is without recourse to [the][any] Assignor and, except as expressly provided in this Assignment and Acceptance, without representation or warranty by [the][any] Assignor.

 

  	
        1.        Assignor[s]:   
 	
        _________________________
 
	
         
 	
        _________________________
 
	
        2.        Assignee[s]:  
 	
        _________________________
 
	
         
 	
        _________________________
 

[for each Assignee, indicate [Affiliate][Approved Fund] of [identify Lender]]

	

 
 	

3.
 	

Borrower:  Cedar Shopping Centers Partnership, L.P.
 

	

 
 	

4.
 	

Administrative Agent:  Bank of America, N.A., as the administrative agent under the Credit Agreement
 

	

 
 	

5.
 	

Credit Agreement:  Loan Agreement, dated as of January 30, 2004, as amended, among Cedar Shopping Centers Partnership, L.P., the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent and L/C Issuer.
 

	

 
 	

6.
 	

Assigned Interest[s]:
 

 

  	
        Assignor[s]

      	
         

      	
        Assignee[s]

      	
         

      	
        Facility

          Assigned

      	
         

      	
        Aggregate
          

          Amount of the

          Commitment/

          Loans for all

          Lenders

      	
         

      	
        Amount
          of

          Commitment/

          Loans Assigned

      	
         

      	
        Percentage

          Assigned of

          Commitment/

          Loans

      	
         

      	
        CUSIP

          Number

      	
         

      
	
        

      	
         

      	
        

      	
         

      	
        

      	
         

      	
        

      	
         

      	
        

      	
         

      	
        

      	
         

      	
        

      	
         

      
	
         

      	
         

      	
         

      	
         

      	
         

      	
         

      	
         

      	
         

      	
         

      	
         

      	
         

      	
         

      	
         

      	
         

      
	
         

      	
         

      	
         

      	
         

      	
         

      	
         

      	
         

      	
         

      	
         

      	
         

      	
         

      	
         

      	
         

      	
         

      
	 	 	 	 	 	 	 	 	 	 	 	 	 	 

  	
         

      	
        7.

      	
        Trade
          Date: ____________________, 200_.

        

Effective Date: _______________, 20___ TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.

The terms set forth in this Assignment and Acceptance are hereby agreed to:

 

	

 
 	

 
 	

ASSIGNOR:
 
	

 
 	

 
 	

[NAME OF ASSIGNOR]
 
	

  
 	

 
 	
        

           By: 

      	

  
 
	

 
 	

 
 	
         

      	

 
	

 
 	

 
 	

 
 	

 
 
	

 
 	

 
 	

ASSIGNEE:
 
	

 
 	

 
 	

[NAME OF ASSIGNEE]
 
	

  
 	

 
 	
          

          By:

      	

  
 
	

 
 	

 
 	
         

      	

 
	

 
 	

 
 	

 
 	

 
 

ANNEX 1 TO ASSIGNMENT AND ACCEPTANCE

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ACCEPTANCE

1.
  Representations and Warranties.

1.1 Assignor. [The] [Each] Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of [the][the relevant] Assigned Interest, (ii) [the][such] Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Acceptance and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or
any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.

1.2 Assignee. [The][Each] Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Acceptance and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all the requirements to be an assignee under Section 13.3.1 of the Credit Agreement (subject to such consents, if any, as may be required under Section 13.3.1 of the Credit Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of [the][the relevant] Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of
the type represented by [the][such] Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire [the][such] Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section 7.2 thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance and to purchase [the][such] Assigned Interest, (iv) it has independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made it own credit analysis and decision to enter into this Assignment and Acceptance and to purchase [the][such] Assigned Interest, and (vii) if it is a Foreign Lender, attached hereto
is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by [the][such] Assignee; and (b) agrees that (i) it will, independently and without reliance upon the Administrative Agent, [the][any] Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

2. Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of [the][each] Assigned Interest (including payments of principal, interest, fees and other amounts) to [the][the relevant] Assignor for amounts which have accrued to but excluding the Effective Date and to [the][the relevant] Assignee for amounts which have accrued from and after the Effective Date.

3. General Provisions. This Assignment and Acceptance shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Acceptance may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Acceptance by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance. This Assignment and Acceptance shall be governed by, and construed in accordance with, the law of the Commonwealth of Massachusetts.Exhibit 4.5B

    
      

    

     

    
      
        	
                 Exhibit
                  4.5B 

              	
                Cornell
                  Third Convertible Debenture

              

      

    

    

    Dated:
      August 16, 2006

     

    NEITHER
      THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS CONVERTIBLE
      HAVE
      BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
      COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
      THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”),
      AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
      REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
      EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
      SECURITIES LAWS.

     

    
      
        	
                No.
                  CCP-3

              	
                $2,000,000

              

      

    

     

    HYPERDYNAMICS
      CORPORATION

     

    Secured
      Convertible Debenture

     

     

    Due:
      August 14, 2009

     

    This
      Secured Convertible Debenture (the “Debenture”)
      is
      issued by HYPERDYNAMICS
      CORPORATION, a
      Delaware corporation (the “Obligor”),
      to
CORNELL
      CAPITAL PARTNERS, LP
      (the
“Holder”),
      pursuant to that certain Securities Purchase Agreement (the “Securities
      Purchase Agreement”)
      dated
      June 19, 2006. 

     

    FOR
      VALUE RECEIVED,
      the
      Obligor hereby promises to pay to the Holder or its successors and assigns
      the
      principal sum of Two Million Dollars ($2,000,000) together with accrued but
      unpaid interest on or before August 16, 2009 (the “Maturity
      Date”)
      in
      accordance with the following terms:

     

    Interest.
      Interest shall accrue on the outstanding principal balance hereof at an annual
      rate equal to ten percent (10%). Interest shall be calculated on the basis
      of a
      365-day year and the actual number of days elapsed, to the extent permitted
      by
      applicable law. Interest hereunder will be paid to the Holder or its assignee
      (as defined in Section
      5)
      in
      whose name this Debenture is registered on the records of the Obligor regarding
      registration and transfers of Debentures (the “Debenture
      Register”).

     

    Monthly
      Payments.
      The
      Obligor shall make monthly scheduled payments (“Scheduled
      Payments”)
      on
      this Debenture and all other debentures issued in connection with the Securities
      Purchase Agreement consisting of a total of $175,000 of principal plus accrued
      and unpaid interest, commencing with the first Scheduled Payment which shall
      be
      due and payable on the earlier of (a) September 1, 2006 or (b) three days after
      the date that the Underlying Shares Registration Statement (as defined in
Section
      5)
      is
      declared effective and continuing on the first business day of each calendar
      month thereafter until paid in full. Nothing contained in this paragraph shall
      limit the Holder’s conversion rights set forth in Section
      3.
      

    
      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

    

     

    All
      payments in respect of the indebtedness evidenced hereby shall be made in
      collected funds, and shall be applied to principal, accrued interest and charges
      and expenses owing under or in connection with this Debenture in such order
      as
      the Holder elects, except that payments shall be applied to accrued interest
      before principal. Notwithstanding the foregoing, this Debenture shall become
      due
      and immediately payable, including all accrued but unpaid interest, upon an
      Event of Default (as defined in Section
      2
      hereof).

     

    However,
      If the Holder converts a portion of the principal amount outstanding under
      this
      Debenture or any other debenture issued in connection with the Securities
      Purchase Agreement prior to a Scheduled Payment due date, the Obligor shall
      be
      entitled to an off-set of the amount due pursuant to such Schedule Payment
      equal
      to the amount converted (the “Off-Set Amount”). In such event the Obligor shall
      still be obligated to make a Scheduled Payment reduced by the Off-Set Amount
      as
      contemplated hereunder, if applicable

     

    Right
      of Redemption.
      The
      Obligor at its option shall have the right to redeem a portion or all amounts
      outstanding under this Debenture prior to the Maturity Date, which are not
      otherwise due pursuant to a Scheduled Payment, provided that the Closing Bid
      Price of the of the Obligor’s Common Stock, as reported by Bloomberg, LP, is
      less than the Fixed Conversion Price at the time of the Redemption Notice.
      The
      Obligor shall pay an amount equal to the principal amount being redeemed plus
      a
      redemption premium (“Redemption
      Premium”)
      equal
      to twenty percent (20%) of the principal amount being redeemed, and accrued
      interest, (collectively referred to as the “Redemption
      Amount”).
      In
      order to make a redemption, the Obligor shall first provide written notice
      to
      the Holder of its intention to make a redemption (the “Redemption
      Notice”)
      setting forth the amount of principal it desires to redeem. After receipt of
      the
      Redemption Notice the Holder shall have three (3) business days to elect to
      convert all or any portion of this Debenture, subject to the limitations set
      forth in Section
      3(b)(i).
      Upon
      the expiration of this three (3) business day period, the Obligor shall deliver
      to the Holder the Redemption Amount with respect to the principal amount
      redeemed after giving effect to conversions effected during the three (3)
      business day period. 

     

    Security
      Agreements.
      This
      Debenture is secured by a Security Agreement dated June 19, 2006 between the
      Holder and Trendsetters Production Company (the “Security
      Agreement”)
      and a
      Subsidiary Security Agreement dated June 19, 2006 among the Holder and certain
      subsidiaries of the Company (the “Subsidiary
      Security Agreement”).

     

    This
      Debenture is subject to the following additional provisions:

     

    Section 1.   This
      Debenture is exchangeable for an equal aggregate principal amount of Debentures
      of different authorized denominations, as requested by the Holder surrendering
      the same. No service charge will be made for such registration of transfer
      or
      exchange.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    Section
      2.   Events
      of Default.

     

    (a)   An
      “Event
      of Default”,
      wherever used herein, means any one of the following events (whatever the reason
      and whether it shall be voluntary or involuntary or effected by operation of
      law
      or pursuant to any judgment, decree or order of any court, or any order, rule
      or
      regulation of any administrative or governmental body):

     

    (i)   Any
      default in the payment of the principal of, interest on or other charges in
      respect of this Debenture, free of any claim of subordination (whether on a
      Scheduled Payment due date, a Conversion Date or the Maturity Date or by
      acceleration or otherwise), which is not cured within three (3) business days
      of
      notice of such breach;

     

    (ii)   The
      Obligor or any material subsidiary of the Obligor shall commence, or there
      shall
      be commenced against the Obligor or any material subsidiary of the Obligor
      under
      any applicable bankruptcy or insolvency laws as now or hereafter in effect
      or
      any successor thereto, or the Obligor or any material subsidiary of the Obligor
      commences any other proceeding under any reorganization, arrangement, adjustment
      of debt, relief of debtors, dissolution, insolvency or liquidation or similar
      law of any jurisdiction whether now or hereafter in effect relating to the
      Obligor or any material subsidiary of the Obligor or there is commenced against
      the Obligor or any material subsidiary of the Obligor any such bankruptcy,
      insolvency or other proceeding which remains undismissed for a period of 61
      days; or the Obligor or any material subsidiary of the Obligor is adjudicated
      insolvent or bankrupt; or any order of relief or other order approving any
      such
      case or proceeding is entered; or the Obligor or any material subsidiary of
      the
      Obligor suffers any appointment of any custodian, private or court appointed
      receiver or the like for it or any substantial part of its property which
      continues undischarged or unstayed for a period of sixty one (61) days; or
      the
      Obligor or any material subsidiary of the Obligor makes a general assignment
      for
      the benefit of creditors; or the Obligor or any material subsidiary of the
      Obligor shall fail to pay, or shall state that it is unable to pay, or shall
      be
      unable to pay, its debts generally as they become due; or the Obligor or any
      material subsidiary of the Obligor shall call a meeting of its creditors with
      a
      view to arranging a composition, adjustment or restructuring of its debts;
      or
      the Obligor or any material subsidiary of the Obligor shall by any act or
      failure to act expressly indicate its consent to, approval of or acquiescence
      in
      any of the foregoing; or any corporate or other action is taken by the Obligor
      or any material subsidiary of the Obligor for the purpose of effecting any
      of
      the foregoing. For the purposes of this Section
      2(a)(ii)
      the term
“material subsidiary” shall mean any subsidiary with total assets in excess of
      $100,000; 

     

    (iii)   The
      Obligor shall default in any of its obligations under any other debenture or
      any
      mortgage, credit agreement or other facility, indenture agreement, factoring
      agreement or other instrument under which there may be issued, or by which
      there
      may be secured or evidenced any indebtedness for borrowed money or money due
      under any long term leasing or factoring arrangement of the Obligor in an amount
      exceeding $500,000, whether such indebtedness now exists or shall hereafter
      be
      created and such default shall result in such indebtedness becoming or being
      declared due and payable prior to the date on which it would otherwise become
      due and payable, except those being contested in good faith;

     

    (iv)   The
      Common Stock shall cease to be quoted for trading or listing for trading on
      any
      of (a) the American Stock Exchange, (b) New York Stock Exchange, (c) the Nasdaq
      National Market, (d) the Nasdaq Capital Market, or (e) the Nasdaq OTC Bulletin
      Board (“OTC”)
      (each,
      a “Subsequent
      Market”)
      and
      shall not again be quoted or listed for trading on any Subsequent Market within
      five (5) Trading Days of such delisting;

     

    
      
        
        

      

      
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    (v)   The
      Obligor shall fail to file the Underlying Shares Registration Statement (as
      defined in Section
      5)
      with
      the Commission (as defined in Section
      5)
      within
      the time periods set forth in the Investor Registration Rights Agreement
      (“Registration
      Rights Agreement”)
      dated
      June 19, 2006 between the Obligor and the Holder, or the Underlying Shares
      Registration Statement shall not have been declared effective by the Commission
      within forty five (45) days of the Scheduled Effective Deadline as set forth
      in
      the Registration Rights Agreement, provided however, that a default shall not
      occur if a delay in the effectiveness is the result of the SEC commenting that
      a
      specific part of the Transaction Document is adverse to the SEC ordering
      effectiveness and the Obligor has used its best efforts to respond to, and
      resolve such comment, which shall be determined in the reasonable discretion
      of
      the Holder;

     

    (vi)   If
      the
      effectiveness of the Underlying Shares Registration Statement lapses for any
      reason or the Holder shall not be permitted to resell the shares of Common
      Stock
      underlying this Debenture under the Underlying Shares Registration Statement,
      in
      either case, for more than ten (10) consecutive Trading Days or an aggregate
      of
      thirty (30) Trading Days (which need not be consecutive Trading
      Days);

     

    (vii)   The
      Obligor shall fail for any reason to deliver Common Stock certificates to a
      Holder prior to the fifth (5th)
      Trading
      Day after a Conversion Date or the Obligor shall provide notice to the Holder,
      including by way of public announcement, at any time, of its intention not
      to
      comply with requests for conversions of this Debenture in accordance with the
      terms hereof and such breach is not cured within three (3) days of notice of
      such breach; 

     

    (viii)   The
      Obligor shall fail for any reason to deliver the payment in cash pursuant to
      a
      Buy-In (as defined herein) within five (5) days after notice is claimed
      delivered hereunder; 

     

    (x)   The
      Obligor shall fail to observe or perform in any material respect any other
      covenant, agreement or warranty contained in, or otherwise commit any breach
      or
      default of any provision of this Debenture (except as may be covered by
Section
      2(a)(i)
      through
2(a)(ix)
      hereof)
      or any Transaction Document (as defined in Section
      5)
      which
      is not cured within twenty (20) business days after the Obligor is provided
      with
      written notice thereof from the Holder. This Section2 (x) shall be the notice
      and cure period in relation to references made to such in other Transaction
      Document or related transactions. 

     

    (b)   During
      the time that any portion of this Debenture is outstanding, if any Event of
      Default has occurred, the full principal amount of this Debenture, together
      with
      interest and other amounts owing in respect thereof, to the date of acceleration
      shall become at the Holder's election, immediately due and payable in cash,
      provided
      however,
      the
      Holder may request (but shall have no obligation to request) payment of such
      amounts in Common Stock of the Obligor. Furthermore, if an Event of Default
      occurs and remains uncured, the Holder shall have the rights set forth in
Section
      3(c)(xii) hereof.
      In addition to any other remedies, the Holder shall have the right (but not
      the
      obligation) to convert this Debenture at any time after (x) an Event of Default
      or (y) the Maturity Date at the Conversion Price then in-effect (including,
      without limitation, the Default Conversion Price). The Holder need not provide
      and the Obligor hereby waives any presentment, demand, protest or other notice
      of any kind, and the Holder may immediately and without expiration of any grace
      period enforce any and all of its rights and remedies hereunder and all other
      remedies available to it under applicable law. Such declaration may be rescinded
      and annulled by Holder at any time prior to payment hereunder. No such
      rescission or annulment shall affect any subsequent Event of Default or impair
      any right consequent thereon. Upon an Event of Default, notwithstanding any
      other provision of this Debenture or any Transaction Document, the Holder shall
      have no obligation to comply with or adhere to any limitations, if any, on
      the
      conversion of this Debenture or the sale of the Underlying Shares. 

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    Section
      3.   Conversion.

     

    (a)   Conversion
      at Option of Holder.

     

    (i)   This
      Debenture shall be convertible into shares of Common Stock at the option of
      the
      Holder, in whole or in part at any time and from time to time, after the
      Original Issue Date (as defined in Section
      5)
      (subject to the limitations on conversion set forth in Section
      3(b)
      hereof).
      The number of shares of Common Stock issuable upon a conversion hereunder equals
      the quotient obtained by dividing (x) the outstanding amount of this Debenture
      to be converted by (y) the Conversion Price (as defined in Section
      3(c)(i)).
      The
      Obligor shall deliver Common Stock certificates to the Holder prior to the
      Fifth
      (5th)
      Trading
      Day after a Conversion Date.

     

    (ii)   Notwithstanding
      anything to the contrary contained herein, if on any Conversion Date and subject
      to notice and cure: (1) the number of shares of Common Stock at the time
      authorized, unissued and unreserved for all purposes, or held as treasury stock,
      is insufficient to pay principal and interest hereunder in shares of Common
      Stock; (2) the Common Stock is not listed or quoted for trading on the OTC
      or on
      a Subsequent Market; or (3) the Obligor has failed to timely satisfy its
      conversion, then, at the option of the Holder, the Obligor, in lieu of
      delivering shares of Common Stock pursuant to Section
      3(a)(i),
      shall
      deliver, within three (3) Trading Days of each applicable Conversion Date,
      an
      amount in cash equal to the product of the outstanding principal amount to
      be
      converted plus any interest due therein divided by the Conversion Price, and
      multiplied by the highest closing price of the stock from date of the conversion
      notice till the date that such cash payment is made.

     

    Further,
      if the Obligor shall not have delivered any cash due in respect of conversion
      of
      this Debenture or as payment of interest thereon by the fifth (5th)
      Trading
      Day after the Conversion Date, the Holder may, by notice to the Obligor, require
      the Obligor to issue shares of Common Stock pursuant to Section
      3(c),
      except
      that for such purpose the Conversion Price applicable thereto shall be the
      lesser of the Conversion Price on the Conversion Date and the Conversion Price
      on the date of such Holder demand. Any such shares will be subject to the
      provisions of this Section.

     

    (iii)   The
      Holder shall effect conversions by delivering to the Obligor a completed notice
      in the form attached hereto as Exhibit A (a “Conversion
      Notice”).
      The
      date on which a Conversion Notice is delivered is the “Conversion
      Date.”
Unless
      the Holder is converting the entire principal amount outstanding under this
      Debenture, the Holder is not required to physically surrender this Debenture
      to
      the Obligor in order to effect conversions. Conversions hereunder shall have
      the
      effect of lowering the outstanding principal amount of this Debenture plus
      all
      accrued and unpaid interest thereon in an amount equal to the applicable
      conversion. The Holder and the Obligor shall maintain records showing the
      principal amount converted and the date of such conversions. In the event of
      any
      dispute or discrepancy, the records of the Holder shall be controlling and
      determinative in the absence of manifest error.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (b)   Certain
      Conversion Restrictions.

     

    (i)   A
      Holder
      may not convert this Debenture or receive shares of Common Stock as payment
      of
      interest hereunder to the extent such conversion or receipt of such interest
      payment would result in the Holder, together with any affiliate thereof,
      beneficially owning (as determined in accordance with Section 13(d) of the
      Exchange Act and the rules promulgated thereunder) in excess of 4.99% of the
      then issued and outstanding shares of Common Stock, including shares issuable
      upon conversion of, and payment of interest on, this Debenture held by such
      Holder after application of this Section. Since the Holder will not be obligated
      to report to the Obligor the number of shares of Common Stock it may hold at
      the
      time of a conversion hereunder, unless the conversion at issue would result
      in
      the issuance of shares of Common Stock in excess of 4.99% of the then
      outstanding shares of Common Stock without regard to any other shares which
      may
      be beneficially owned by the Holder or an affiliate thereof, the Holder shall
      have the authority and obligation to determine whether the restriction contained
      in this Section will limit any particular conversion hereunder and to the extent
      that the Holder determines that the limitation contained in this Section
      applies, the determination of which portion of the principal amount of this
      Debenture is convertible shall be the responsibility and obligation of the
      Holder. If the Holder has delivered a Conversion Notice for a principal amount
      of this Debenture that, without regard to any other shares that the Holder
      or
      its affiliates may beneficially own, would result in the issuance in excess
      of
      the permitted amount hereunder, the Obligor shall notify the Holder of this
      fact
      and shall honor the conversion for the maximum principal amount permitted to
      be
      converted on such Conversion Date in accordance with the periods described
      in
Section
      3(a)(i)
      and, at
      the option of the Holder, either retain any principal amount tendered for
      conversion in excess of the permitted amount hereunder for future conversions
      or
      return such excess principal amount to the Holder. The provisions of this
      Section may be waived by a Holder (but only as to itself and not to any other
      Holder) upon not less than 65 days prior notice to the Obligor. Other Holders
      shall be unaffected by any such waiver.

     

    (ii)   The
      Total
      Transaction Shares shall not be greater than 9,215,406 shares (which does not
      exceed 19.99% of the 46,308,573 outstanding shares of Common Stock as of the
      date of the Securities Purchase Agreement), until the Obligor’s shareholders
      approve (without the vote of any shares acquired in this transaction and related
      transactions) the issuance of the Total Transaction Shares. “Total
      Transaction Shares”
shall
      mean, in the aggregate, any shares of Common Stock issued under (a) this
      Debenture to the Holder, or its affiliates, and transferees, subsequent
      transferees, or any other debenture issued pursuant to the Securities Purchase
      Agreement (b) the Warrant Shares (as defined in the Securities Purchase
      Agreement), and (c) any shares of Common Stock issued as Liquidated Damages
      (as
      defined in the Registration Rights Agreement). 

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (c)   Conversion
      Price and Adjustments to Conversion Price.

     

    (i)   The
      conversion price (the “Fixed
      Conversion Price”
or
      “Conversion
      Price”)
      in
      effect on any Conversion Date shall be equal to $2.00, subject to adjustment
      as
      provided herein. 

     

    (ii)   If
      the
      Obligor, at any time while this Debenture is outstanding, shall (a) pay a
      stock dividend or otherwise make a distribution or distributions on shares
      of
      its Common Stock or any other equity or equity equivalent securities payable
      in
      shares of Common Stock, (b) subdivide outstanding shares of Common Stock into
      a
      larger number of shares, (c) combine (including by way of reverse stock split)
      outstanding shares of Common Stock into a smaller number of shares, or (d)
      issue
      by reclassification of shares of the Common Stock any shares of capital stock
      of
      the Obligor, then the Fixed Conversion Price shall be multiplied by a fraction
      of which the numerator shall be the number of shares of Common Stock (excluding
      treasury shares, if any) outstanding before such event and of which the
      denominator shall be the number of shares of Common Stock outstanding after
      such
      event. Any adjustment made pursuant to this Section shall become effective
      immediately after the record date for the determination of stockholders entitled
      to receive such dividend or distribution and shall become effective immediately
      after the effective date in the case of a subdivision, combination or
      re-classification. However, dividends paid for Preferred Stock currently
      outstanding shall be excluded from any and all adjustments in this Section
      3(c).

     

    (iii)   If
      the
      Obligor, at any time while this Debenture is outstanding, shall issue rights,
      options or warrants to all holders of Common Stock (and not to the Holder)
      entitling them to subscribe for or purchase shares of Common Stock at a price
      per share less than the Fixed Conversion Price, then the Fixed Conversion Price
      shall be multiplied by a fraction, of which the denominator shall be the number
      of shares of the Common Stock (excluding treasury shares, if any) outstanding
      on
      the date of issuance of such rights or warrants (plus the number of additional
      shares of Common Stock offered for subscription or purchase), and of which
      the
      numerator shall be the number of shares of the Common Stock (excluding treasury
      shares, if any) outstanding on the date of issuance of such rights or warrants,
      plus the number of shares which the aggregate offering price of the total number
      of shares so offered would purchase at the Fixed Conversion Price. Such
      adjustment shall be made whenever such rights or warrants are issued, and shall
      become effective immediately after the record date for the determination of
      stockholders entitled to receive such rights, options or warrants. However,
      upon
      the expiration of any such right, option or warrant to purchase shares of the
      Common Stock the issuance of which resulted in an adjustment in the Fixed
      Conversion Price pursuant to this Section, if any such right, option or warrant
      shall expire and shall not have been exercised, the Fixed Conversion Price
      shall
      immediately upon such expiration be recomputed and effective immediately upon
      such expiration be increased to the price which it would have been (but
      reflecting any other adjustments in the Fixed Conversion Price made pursuant
      to
      the provisions of this Section after the issuance of such rights or warrants)
      had the adjustment of the Fixed Conversion Price made upon the issuance of
      such
      rights, options or warrants been made on the basis of offering for subscription
      or purchase only that number of shares of the Common Stock actually purchased
      upon the exercise of such rights, options or warrants actually
      exercised.

     

    (iv)   If
      the
      Obligor or any subsidiary thereof, as applicable, at any time while this
      Debenture is outstanding, shall issue shares of Common Stock or rights,
      warrants, options or other securities or debt that are convertible into or
      exchangeable for shares of Common Stock (“Common
      Stock Equivalents”)
      entitling any Person to acquire shares of Common Stock, at a price per share
      less than the Fixed Conversion Price (if the holder of the Common Stock or
      Common Stock Equivalent so issued shall at any time, whether by operation of
      purchase price adjustments, reset provisions, floating conversion, exercise
      or
      exchange prices or otherwise, or due to warrants, options or rights per share
      which is issued in connection with such issuance, be entitled to receive shares
      of Common Stock at a price per share which is less than the Fixed Conversion
      Price, such issuance shall be deemed to have occurred for less than the Fixed
      Conversion Price), then, at the sole option of the Holder, the Fixed Conversion
      Price shall be adjusted to mirror the conversion, exchange or purchase price
      for
      such Common Stock or Common Stock Equivalents (including any reset provisions
      thereof) at issue. Such adjustment shall be made whenever such Common Stock
      or
      Common Stock Equivalents are issued. The Obligor shall notify the Holder in
      writing, no later than one (1) business day following the issuance of any Common
      Stock or Common Stock Equivalent subject to this Section, indicating therein
      the
      applicable issuance price, or of applicable reset price, exchange price,
      conversion price and other pricing terms. No adjustment under this Section
      shall
      be made as a result of issuances and exercises of options to purchase shares
      of
      Common Stock issued for compensatory purposes pursuant to any of the Obligor's
      stock option or stock purchase plans. However, equity line puts in connection
      with the Dutchess Private Equities Fund II ,LP equity line of credit are
      excluded from this Section 3(c). (v) If
      the
      Obligor, at any time while this Debenture is outstanding, shall distribute
      to
      all holders of Common Stock (and not to the Holder) evidences of its
      indebtedness or assets or rights or warrants to subscribe for or purchase any
      security, then in each such case the Fixed Conversion Price at which this
      Debenture shall thereafter be convertible shall be determined by multiplying
      the
      Fixed Conversion Price in effect immediately prior to the record date fixed
      for
      determination of stockholders entitled to receive such distribution by a
      fraction of which the denominator shall be the Closing Bid Price determined
      as
      of the record date mentioned above, and of which the numerator shall be such
      Closing Bid Price on such record date less the then fair market value at such
      record date of the portion of such assets or evidence of indebtedness so
      distributed applicable to one outstanding share of the Common Stock as
      determined by the Board of Directors in good faith. In either case the
      adjustments shall be described in a statement provided to the Holder of the
      portion of assets or evidences of indebtedness so distributed or such
      subscription rights applicable to one share of Common Stock. Such adjustment
      shall be made whenever any such distribution is made and shall become effective
      immediately after the record date mentioned above.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (vi)   In
      case
      of any reclassification of the Common Stock or any compulsory share exchange
      pursuant to which the Common Stock is converted into other securities, cash
      or
      property, the Holder shall have the right thereafter to, at its option, (A)
      convert the then outstanding principal amount, together with all accrued but
      unpaid interest and any other amounts then owing hereunder in respect of this
      Debenture into the shares of stock and other securities, cash and property
      receivable upon or deemed to be held by holders of the Common Stock following
      such reclassification or share exchange, and the Holder of this Debenture shall
      be entitled upon such event to receive such amount of securities, cash or
      property as the shares of the Common Stock of the Obligor into which the then
      outstanding principal amount, together with all accrued but unpaid interest
      and
      any other amounts then owing hereunder in respect of this Debenture could have
      been converted immediately prior to such reclassification or share exchange
      would have been entitled, or (B) require the Obligor to prepay the outstanding
      principal amount of this Debenture, plus all interest and other amounts due
      and
      payable thereon. The entire prepayment price shall be paid in cash. This
      provision shall similarly apply to successive reclassifications or share
      exchanges.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (vii)   The
      Obligor shall at all times reserve and keep available out of its authorized
      Common Stock the full number of shares of Common Stock issuable upon conversion
      of all outstanding amounts under this Debenture; and within three (3) Business
      Days following the receipt by the Obligor of a Holder's notice that such minimum
      number of Underlying Shares is not so reserved, the Obligor shall promptly
      reserve a sufficient number of shares of Common Stock to comply with such
      requirement.

     

    (viii)   All
      calculations under this Section
      3
      shall be
      rounded up to the nearest $0.001 or whole share.

     

    (ix)   Whenever
      the Conversion Price is adjusted pursuant to Section
      3
      hereof,
      the Obligor shall promptly mail to the Holder a notice setting forth the
      Conversion Price after such adjustment and setting forth a brief statement
      of
      the facts requiring such adjustment.

     

    (x)   If
      (A)
      the Obligor shall declare a dividend (or any other distribution) on the Common
      Stock; (B) the Obligor shall declare a special nonrecurring cash dividend on
      or
      a redemption of the Common Stock; (C) the Obligor shall authorize the granting
      to all holders of the Common Stock rights or warrants to subscribe for or
      purchase any shares of capital stock of any class or of any rights; (D) the
      approval of any stockholders of the Obligor shall be required in connection
      with
      any reclassification of the Common Stock, any consolidation or merger to which
      the Obligor is a party, any sale or transfer of all or substantially all of
      the
      assets of the Obligor, of any compulsory share exchange whereby the Common
      Stock
      is converted into other securities, cash or property; or (E) the Obligor shall
      authorize the voluntary or involuntary dissolution, liquidation or winding
      up of
      the affairs of the Obligor; then, in each case, the Obligor shall cause to
      be
      filed at each office or agency maintained for the purpose of conversion of
      this
      Debenture, and shall cause to be mailed to the Holder at its last address as
      it
      shall appear upon the stock books of the Obligor, at least twenty (20) calendar
      days prior to the applicable record or effective date hereinafter specified,
      a
      notice stating (x) the date on which a record is to be taken for the purpose
      of
      such dividend, distribution, redemption, rights or warrants, or if a record
      is
      not to be taken, the date as of which the holders of the Common Stock of record
      to be entitled to such dividend, distributions, redemption, rights or warrants
      are to be determined or (y) the date on which such reclassification,
      consolidation, merger, sale, transfer or share exchange is expected to become
      effective or close, and the date as of which it is expected that holders of
      the
      Common Stock of record shall be entitled to exchange their shares of the Common
      Stock for securities, cash or other property deliverable upon such
      reclassification, consolidation, merger, sale, transfer or share exchange,
      provided, that the failure to mail such notice or any defect therein or in
      the
      mailing thereof shall not affect the validity of the corporate action required
      to be specified in such notice. The Holder is entitled to convert this Debenture
      during the 20-day calendar period commencing the date of such notice to the
      effective date of the event triggering such notice.

     

    (xi)   In
      case
      of any (1) merger or consolidation of the Obligor or any subsidiary of the
      Obligor with or into another Person, or (2) sale by the Obligor or any
      subsidiary of the Obligor of more than one-half of the assets of the Obligor
      in
      one or a series of related transactions, a Holder shall have the right to (A)
      exercise any rights under Section
      2(b),
      (B)
      convert the aggregate amount of this Debenture then outstanding into the shares
      of stock and other securities, cash and property receivable upon or deemed
      to be
      held by holders of Common Stock following such merger, consolidation or sale,
      and such Holder shall be entitled upon such event or series of related events
      to
      receive such amount of securities, cash and property as the shares of Common
      Stock into which such aggregate principal amount of this Debenture could have
      been converted immediately prior to such merger, consolidation or sales would
      have been entitled, or (C) in the case of a merger or consolidation, require
      the
      surviving entity to issue to the Holder a convertible Debenture with a principal
      amount equal to the aggregate principal amount of this Debenture then held
      by
      such Holder, plus all accrued and unpaid interest and other amounts owing
      thereon, which such newly issued convertible Debenture shall have terms
      identical (including with respect to conversion) to the terms of this Debenture,
      and shall be entitled to all of the rights and privileges of the Holder of
      this
      Debenture set forth herein and the agreements pursuant to which this Debentures
      were issued. In the case of clause (C), the conversion price applicable for
      the
      newly issued shares of convertible preferred stock or convertible Debentures
      shall be based upon the amount of securities, cash and property that each share
      of Common Stock would receive in such transaction and the Conversion Price
      in
      effect immediately prior to the effectiveness or closing date for such
      transaction. The terms of any such merger, sale or consolidation shall include
      such terms so as to continue to give the Holder the right to receive the
      securities, cash and property set forth in this Section upon any conversion
      or
      redemption following such event. This provision shall similarly apply to
      successive such events.

     

    
      
        
        

      

      
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    (xii)   If
      an
      Event of Default occurs (after the expiration of any applicable cure period
      as
      set forth in Section
      2(a)hereof)
      and remains uncured for ten (10) days after the Holder sends notice of such
      Event of Default to the Obligor, the Holder may elect to switch the Fixed
      Conversion Price to the Default Conversion Price. The “Default
      Conversion Price”
shall
      mean the lesser of (a) the Fixed Conversion Price, or (b) seventy percent (70%)
      of the lowest Closing Bid Price of the Common Stock as quoted by Bloomberg,
      LP
      during the fifteen (15) trading days immediately preceding the Conversion Date.
      Upon the Obligor’s receipt of written notice by the Holder of such an Event of
      Default and the Holder’s election to exercise the remedy to switch the
      conversion price to the Default Conversion Price, the Company shall file a
      registration statement within forty five (45) days of notice of such Event
      of
      Default to register an amount of stock equal to two times the remaining amount
      outstanding under this Debenture and all other debentures issued pursuant to
      the
      Securities Purchase Agreement and use its best efforts to ensure that such
      registration statement is declared effective within ninety days of filing
      thereof. Further, the Obligor agrees that the date that full consideration
      was
      paid for this Debenture shall remain the Original Issue Date. The Company shall
      provide an opinion letter from counsel within two (2) days of written request
      by
      the Holder stating that the date full consideration was paid for this Debenture
      is the Original Issue Date. In the event that counsel to the Company fails
      or
      refuses to render an opinion as required to issue the conversion shares in
      accordance with this paragraph (either with or without restrictive legends,
      as
      applicable), then the Company irrevocably and expressly authorizes counsel
      to
      the Holder to render such opinion and shall authorize the Obligor’s transfer
      agent to accept and be entitled to rely on such opinion for the purposes of
      issuing the conversion shares. 

     

    
      
        
        

      

      
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    (d)   Other
      Provisions.

     

    (i)   The
      Obligor covenants that it will at all times reserve and keep available out
      of
      its authorized and unissued shares of Common Stock solely for the purpose of
      issuance upon conversion of this Debenture and payment of interest on this
      Debenture, each as herein provided, free from preemptive rights or any other
      actual contingent purchase rights of persons other than the Holder, not less
      than such number of shares of the Common Stock as shall (subject to any
      additional requirements of the Obligor as to reservation of such shares set
      forth in this Debenture) be issuable (taking into account the adjustments and
      restrictions of Sections
      2(b) and 3(c))
      upon
      the conversion of the outstanding principal amount of this Debenture and payment
      of interest hereunder. The Obligor covenants that all shares of Common Stock
      that shall be so issuable shall, upon issue, be duly and validly authorized,
      issued and fully paid, nonassessable and, if the Underlying Shares Registration
      Statement has been declared effective under the Securities Act, registered
      for
      public sale in accordance with such Underlying Shares Registration
      Statement.

     

    (ii)   Upon
      a
      conversion hereunder the Obligor shall not be required to issue stock
      certificates representing fractions of shares of the Common Stock, but may
      if
      otherwise permitted, make a cash payment in respect of any final fraction of
      a
      share based on the Closing Bid Price at such time. If the Obligor elects not,
      or
      is unable, to make such a cash payment, the Holder shall be entitled to receive,
      in lieu of the final fraction of a share, one whole share of Common
      Stock.

     

    (iii)   The
      issuance of certificates for shares of the Common Stock on conversion of this
      Debenture shall be made without charge to the Holder thereof for any documentary
      stamp or similar taxes that may be payable in respect of the issue or delivery
      of such certificate, provided that the Obligor shall not be required to pay
      any
      tax that may be payable in respect of any transfer involved in the issuance
      and
      delivery of any such certificate upon conversion in a name other than that
      of
      the Holder of such Debenture so converted and the Obligor shall not be required
      to issue or deliver such certificates unless or until the person or persons
      requesting the issuance thereof shall have paid to the Obligor the amount of
      such tax or shall have established to the satisfaction of the Obligor that
      such
      tax has been paid.

     

    (iv)   Nothing
      herein shall limit a Holder's right to pursue actual damages or declare an
      Event
      of Default pursuant to Section
      2
      herein
      for the Obligor 's failure to deliver certificates representing shares of Common
      Stock upon conversion within the period specified herein and such Holder shall
      have the right to pursue all remedies available to it at law or in equity
      including, without limitation, a decree of specific performance and/or
      injunctive relief, in each case without the need to post a bond or provide
      other
      security. The exercise of any such rights shall not prohibit the Holder from
      seeking to enforce damages pursuant to any other Section hereof or under
      applicable law. 

     

    (v)   In
      addition to any other rights available to the Holder, if the Obligor fails
      to
      deliver to the Holder such certificate or certificates pursuant to Section
      3(a)(i) by
      the
      fifth (5th)
      Trading
      Day after the Conversion Date, and if after such fifth (5th)
      Trading
      Day the Holder purchases (in an open market transaction or otherwise) Common
      Stock to deliver in satisfaction of a sale by such Holder of the Underlying
      Shares which the Holder anticipated receiving upon such conversion (a
“Buy-In”),
      then
      the Obligor shall (A) pay in cash to the Holder (in addition to any remedies
      available to or elected by the Holder) the amount by which (x) the Holder's
      total purchase price (including brokerage commissions, if any) for the Common
      Stock so purchased exceeds (y) the product of (1) the aggregate number of shares
      of Common Stock that such Holder anticipated receiving from the conversion
      at
      issue multiplied by (2) the market price of the Common Stock at the time of
      the
      sale giving rise to such purchase obligation and (B) at the option of the
      Holder, either reissue a Debenture in the principal amount equal to the
      principal amount of the attempted conversion or deliver to the Holder the number
      of shares of Common Stock that would have been issued had the Obligor timely
      complied with its delivery requirements under Section
      3(a)(i).
      For
      example, if the Holder purchases Common Stock having a total purchase price
      of
      $11,000 to cover a Buy-In with respect to an attempted conversion of Debentures
      with respect to which the market price of the Underlying Shares on the date
      of
      conversion was a total of $10,000 under clause (A) of the immediately preceding
      sentence, the Obligor shall be required to pay the Holder $1,000. The Holder
      shall provide the Obligor written notice indicating the amounts payable to
      the
      Holder in respect of the Buy-In.

     

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

    

     

    
      
        	
                If
                  to the Company, to:

              	
                Hyperdynamics
                  Corporation

              
	 	
                One
                  Sugar Creek Center Boulevard, Suite 125

              
	 	
                Sugar
                  Land, Texas 77478

              
	 	
                Attention:

              	
                Kent
                  P. Watts

              
	 	
                Telephone:

              	
                (713)
                  353-9400

              
	 	
                Facsimile:

              	
                (713)
                  353-9421

              
	 	 	 
	
                With
                  a copy to: 

              	
                Joel
                  Seidner, Esq.

              
	 	
                880
                  Tully Road #50

              
	 	
                Houston,
                  TX 77079

              
	 	
                Telephone:

              	
                (281)
                  493-1311

              
	 	
                Facsimile:

              	
                (281)
                  667-3292

              
	 	 	 
	
                If
                  to the Holder:

              	
                Cornell
                  Capital Partners, LP

              
	 	
                101
                  Hudson Street, Suite 3700

              
	 	
                Jersey
                  City, NJ 07303

              
	 	
                Attention:

              	
                Mark
                  Angelo

              
	 	
                Telephone:

              	
                (201)
                  985-8300

              
	 	 	 
	
                With
                  a copy to:

              	
                David
                  Gonzalez, Esq. 

              
	 	
                101
                  Hudson Street - Suite 3700

              
	 	
                Jersey
                  City, NJ 07302

              
	 	
                Telephone:

              	
                (201)
                  985-8300

              
	 	
                Facsimile:

              	
                (201)
                  985-8266

              

      

    

    

    or
      at
      such other address and/or facsimile number and/or to the attention of such
      other
      person as the recipient party has specified by written notice given to each
      other party three (3) business days prior to the effectiveness of such change.
      Written confirmation of receipt (i) given by the recipient of such notice,
      consent, waiver or other communication, (ii) mechanically or electronically
      generated by the sender's facsimile machine containing the time, date, recipient
      facsimile number and an image of the first page of such transmission or (iii)
      provided by a nationally recognized overnight delivery service, shall be
      rebuttable evidence of personal service, receipt by facsimile or receipt from
      a
      nationally recognized overnight delivery service in accordance with clause
      (i),
      (ii) or (iii) above, respectively.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    Section
      5.   Definitions.
      For the
      purposes hereof, the following terms shall have the following
      meanings:

     

    “Business
      Day”
means
      any day except Saturday, Sunday and any day which shall be a federal legal
      holiday in the United States or a day on which banking institutions are
      authorized or required by law or other government action to close.

     

    “Change
      of Control Transaction”
means
      the occurrence of (a) an acquisition after the date hereof by an individual
      or
      legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the
      Exchange Act) of effective control (whether through legal or beneficial
      ownership of capital stock of the Obligor, by contract or otherwise) of in
      excess of fifty percent (50%) of the voting securities of the Obligor (except
      that the acquisition of voting securities by the Holder shall not constitute
      a
      Change of Control Transaction for purposes hereof), (b) a replacement at one
      time or over time of more than one-half of the members of the board of directors
      of the Obligor which is not approved by a majority of those individuals who
      are
      members of the board of directors on the date hereof (or by those individuals
      who are serving as members of the board of directors on any date whose
      nomination to the board of directors was approved by a majority of the members
      of the board of directors who are members on the date hereof), (c) the merger,
      consolidation or sale of fifty percent (50%) or more of the assets of the
      Obligor or any subsidiary (other than any subsidiary with less than $100,000
      in
      assets) of the Obligor in one or a series of related transactions with or into
      another entity, or (d) the execution by the Obligor of an agreement to which
      the
      Obligor is a party or by which it is bound, providing for any of the events
      set
      forth above in (a), (b) or (c).

     

    “Closing
      Bid Price”
means
      the price per share in the last reported trade of the Common Stock on the OTC
      or
      on the exchange which the Common Stock is then listed as quoted by Bloomberg,
      LP.

     

    “Commission”
means
      the Securities and Exchange Commission.

     

    “Common
      Stock”
means
      the common stock, par value $.001, of the Obligor and stock of any other class
      into which such shares may hereafter be changed or reclassified.

     

    “Conversion
      Date”
shall
      mean the date upon which the Holder gives the Obligor notice of their intention
      to effectuate a conversion of this Debenture into shares of the Company’s Common
      Stock as outlined herein.

     

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

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    “Original
      Issue Date”
shall
      mean the date of the first issuance of this Debenture regardless of the number
      of transfers and regardless of the number of instruments, which may be issued
      to
      evidence such Debenture.

     

    “Person”
means
      a
      corporation, an association, a partnership, organization, a business, an
      individual, a government or political subdivision thereof or a governmental
      agency.

     

    “Securities
      Act”
means
      the Securities Act of 1933, as amended, and the rules and regulations
      promulgated thereunder.

     

    “Trading
      Day”
means
      a
      day on which the shares of Common Stock are quoted on the OTC or quoted or
      traded on such Subsequent Market on which the shares of Common Stock are then
      quoted or listed; provided, that in the event that the shares of Common Stock
      are not listed or quoted, then Trading Day shall mean a Business
      Day.

     

    “Transaction
      Documents”
means
      the Securities Purchase Agreement or any other agreement delivered in connection
      with the Securities Purchase Agreement, including, without limitation, the
      Security Agreement, the Subsidiary Security Agreement, the Irrevocable Transfer
      Agent Instructions, and the Registration Rights Agreement and any related
      transactions.

     

    “Underlying
      Shares”
means
      the shares of Common Stock issuable upon conversion of this Debenture or as
      payment of interest in accordance with the terms hereof.

     

    “Underlying
      Shares Registration Statement”
means
      a
      registration statement meeting the requirements set forth in the Registration
      Rights Agreement, covering among other things the resale of the Underlying
      Shares and naming the Holder as a “selling stockholder” thereunder.

     

    Section
      6.   Except
      as
      expressly provided herein, no provision of this Debenture shall alter or impair
      the obligations of the Obligor, which are absolute and unconditional, to pay
      the
      principal of, interest and other charges (if any) on, this Debenture at the
      time, place, and rate, and in the coin or currency, herein prescribed. This
      Debenture is a direct obligation of the Obligor. This Debenture ranks pari
      passu
      with all other Debentures now or hereafter issued under the terms set forth
      herein. As long as this Debenture is outstanding, the Obligor shall not and
      shall cause their subsidiaries not to, without the consent of the Holder, (i)
      amend its certificate of incorporation, bylaws or other charter documents so
      as
      to adversely affect any rights of the Holder; (ii) repay, repurchase or offer
      to
      repay, repurchase or otherwise acquire shares of its Common Stock or other
      equity securities other than as to the Underlying Shares to the extent permitted
      or required under the Transaction Documents; or (iii) enter into any agreement
      with respect to any of the foregoing. 

     

    Section
      7.   This
      Debenture shall not entitle the Holder to any of the rights of a stockholder
      of
      the Obligor, including without limitation, the right to vote, to receive
      dividends and other distributions, or to receive any notice of, or to attend,
      meetings of stockholders or any other proceedings of the Obligor, unless and
      to
      the extent converted into shares of Common Stock in accordance with the terms
      hereof.

     

    Section
      8.   If
      this
      Debenture is mutilated, lost, stolen or destroyed, the Obligor shall execute
      and
      deliver, in exchange and substitution for and upon cancellation of the mutilated
      Debenture, or in lieu of or in substitution for a lost, stolen or destroyed
      Debenture, a new Debenture for the principal amount of this Debenture so
      mutilated, lost, stolen or destroyed but only upon receipt of evidence of such
      loss, theft or destruction of such Debenture, and of the ownership hereof,
      and
      indemnity, if requested, all reasonably satisfactory to the
      Obligor.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    Section
      9.   No
      indebtedness of the Obligor is senior to this Debenture in right of payment,
      whether with respect to interest, damages or upon liquidation or dissolution
      or
      otherwise. 

     

    Section
      10.       
      This
      Debenture shall be governed by and construed in accordance with the laws of
      the
      State of New Jersey, without giving effect to conflicts of laws thereof. Each
      of
      the parties consents to the jurisdiction of the Superior Courts of the State
      of
      New Jersey sitting in Hudson County, New Jersey and the U.S. District Court
      for the District of New Jersey sitting in Newark, New Jersey in connection
      with
      any dispute arising under this Debenture and hereby waives, to the maximum
      extent permitted by law, any objection, including any objection based on
forum non conveniens
      to the
      bringing of any such proceeding in such jurisdictions. 

     

    Section
      11.        
      If
      the
      Obligor fails to strictly comply with the terms of this Debenture, then the
      Obligor shall reimburse the Holder promptly for all fees, costs and expenses,
      including, without limitation, attorneys’ fees and expenses incurred by the
      Holder in any action in connection with this Debenture, including, without
      limitation, those incurred: (i) during any workout, attempted workout, and/or
      in
      connection with the rendering of legal advice as to the Holder’s rights,
      remedies and obligations, (ii) collecting any sums which become due to the
      Holder, (iii) defending or prosecuting any proceeding or any counterclaim to
      any
      proceeding or appeal; or (iv) the protection, preservation or enforcement of
      any
      rights or remedies of the Holder.

     

    Section
      12.       
      Any
      waiver by the Holder of a breach of any provision of this Debenture shall not
      operate as or be construed to be a waiver of any other breach of such provision
      or of any breach of any other provision of this Debenture. The failure of the
      Holder to insist upon strict adherence to any term of this Debenture on one
      or
      more occasions shall not be considered a waiver or deprive that party of the
      right thereafter to insist upon strict adherence to that term or any other
      term
      of this Debenture. Any waiver must be in writing.

     

    Section
      13.       
      If
      any
      provision of this Debenture is invalid, illegal or unenforceable, the balance
      of
      this Debenture shall remain in effect, and if any provision is inapplicable
      to
      any person or circumstance, it shall nevertheless remain applicable to all
      other
      persons and circumstances. If it shall be found that any interest or other
      amount deemed interest due hereunder shall violate applicable laws governing
      usury, the applicable rate of interest due hereunder shall automatically be
      lowered to equal the maximum permitted rate of interest. The Obligor covenants
      (to the extent that it may lawfully do so) that it shall not at any time insist
      upon, plead, or in any manner whatsoever claim or take the benefit or advantage
      of, any stay, extension or usury law or other law which would prohibit or
      forgive the Obligor from paying all or any portion of the principal of or
      interest on this Debenture as contemplated herein, wherever enacted, now or
      at
      any time hereafter in force, or which may affect the covenants or the
      performance of this indenture, and the Obligor (to the extent it may lawfully
      do
      so) hereby expressly waives all benefits or advantage of any such law, and
      covenants that it will not, by resort to any such law, hinder, delay or impeded
      the execution of any power herein granted to the Holder, but will suffer and
      permit the execution of every such as though no such law has been
      enacted.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    Section
      14.       
      Whenever
      any payment or other obligation, notice or cure hereunder shall be due on a
      day
      other than a Business Day, such payment shall be made on the next succeeding
      Business Day.

     

    Section
      15.       
      THE
      PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY
      OF
      THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON
      OR
      ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
      DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL
      OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT
      FOR
      THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.

     

    [REMAINDER
      OF PAGE INTENTIONLLY LEFT BLANK]

     

    
      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

    

     

    IN
      WITNESS WHEREOF,
      the
      Obligor has caused this Secured Convertible Debenture to be duly executed by
      a
      duly authorized officer as of the date set forth above.

     

    
      	 	
              HYPERDYNAMICS
                CORPORATION 

            
	 	 
	 	
              By:/s
                Kent P. Watts

            
	 	
              Name: Kent
                P. Watts

            
	 	
              Title: President
                and Chief Executive Officer

            

    

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      “A”

     

     

    NOTICE
      OF CONVERSION

     

     

    (To
      be executed by the Holder in order to convert the
      Debenture)

     

     

    TO:

    
      The
        undersigned hereby irrevocably elects to convert $____________________________of
        the
        principal amount of the above Debenture into Shares of Common Stock of
        Hyperdynamics Corporation, according to the conditions stated therein, as
        of the
        Conversion Date written below.

       

    

    
      	
              Conversion
                Date:

            	 	 	 
	
              Applicable
                Conversion Price:

            	 	 	 
	
              Signature:

            	 	 	 
	
              Name:

            	 	 	 
	
              Address:

            	 	 	 
	
              Amount
                to be converted:

            	 	
              $          

            	 
	
              Amount
                of  Debenture unconverted:

            	 	
              $          

            	 
	
              Conversion
                Price  per share: 

            	 	
              $          

            	 
	
              Number
                of  shares of  Common Stock to be
                issued:

            	 	 	 
	
              Please
                issue the shares of Common Stock in the following name and to the
                following address:

            	 	 	 
	
              Issue
                to:

            	 	 	 
	
              Authorized
                Signature:

            	 	 	 
	
              Name:

            	 	 	 
	
              Title:

            	 	 	 
	
              Phone
                Number:

            	 	 	 
	
              Broker
                DTC Participant Code:

            	 	 	 
	
              Account
                Number:

            	 	 	 

    

     

     

    17

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