Document:

EX-10.1

Exhibit 10.1

SEPARATION AND RETIREMENT AGREEMENT

THIS SEPARATION AND RETIREMENT AGREEMENT (this “Agreement”) is made and entered into as of
August 22, 2007 (the “Effective Date”) by and between AVATECH SOLUTIONS, INC., a Delaware
corporation with its principal office located at 10715 Red Run Boulevard, Suite 101, Owings Mills,
MD 21117 (together with its successors and assigns, “Avatech”), and DONALD R. “SCOTTY” WALSH, who
resides at 14112 Phoenix Road, Phoenix, MD 21131 (“Walsh”) (Walsh and Avatech referred to herein
as the “Parties”). The Parties acknowledge that the terms and conditions of this Agreement have
been voluntarily agreed to and that such terms are final and binding.

W I T N E S S E T H:

WHEREAS, Walsh was employed by Avatech as Chief Executive Officer and a Director; and

WHEREAS, Walsh has expressed a desire to retire as an officer, director and employee of
Avatech as provided in this Agreement; and

WHEREAS, Avatech and Walsh intend that this Agreement supersedes and replaces all other
agreements between Avatech and Walsh; and WHEREAS, Avatech accepts Walsh’s retirement in accordance
with and as provided in this Agreement; and

WHEREAS, the Parties now desire to settle fully and finally all claims and obligations arising
out of the Employment Agreement made and entered into as of July 1, 2003, between Avatech and Walsh
(the “Employment Agreement”);

NOW, THEREFORE, in consideration of the covenants and promises made herein, the Parties hereby
agree as follows:

1. Walsh’s Employment Term under the Employment Agreement terminated as of midnight on July
31, 2007 (the “Termination Date”).

2. Walsh hereby resigns as Chief Executive Officer, officer, director and employee of Avatech
and each of its subsidiaries and affiliates.

3. On and after the Termination Date, Walsh shall not be entitled to, or receive, any
compensation, severance payment, benefit, retirement, vacation, reimbursement or other payment
under or in respect of the Employment Agreement or otherwise except as specifically set forth in
this Agreement.

4. Avatech shall pay, and Walsh shall be entitled to receive from Avatech, the following:

(a) Severance pay equal to the gross amount of Three Hundred Thousand and 00/100 ($300,000.00)
Dollars, to be paid in six (6) monthly installments of Forty Four Thousand and 00/100 ($44,000.00)
Dollars to be followed by six (6) monthly installments of Six Thousand and 00/100 ($6,000.00)
Dollars, less applicable federal, state and local withholding and taxes, commencing on August 1,
2007;

(b) A Stay Bonus in the amount of Three Hundred Forty Four and 00/100 ($344,000.00) Dollars,
to be paid in six (6) monthly installments of Thirty Eight Thousand and 00/100 ($38,000.00) Dollars
to be followed by six (6) monthly installments of Nineteen Thousand Three Hundred Thirty Three and
33/100 ($19,333.33) Dollars, less applicable federal, state and local withholding and taxes,
commencing on February 1, 2008;

(c) As specific consideration for Walsh’s restrictive covenants made in Paragraph (c) of
Section 5 hereof, the exercise of the following stock options without payment to Avatech of the
amount of Sixty Thousand One Hundred Fifty and 00/100 ($60,150.00) Dollars that would otherwise be
due from Walsh:

(i) three hundred thousand (300,000) options, dated July 30, 2003, at exercise price of $0.117
each;

(ii) one hundred fifty thousand (150,000) options, dated December 2, 2002, at
exercise price of $0.167 each.

(d) With the exception of fifty thousand (50,000) options granted on September 1, 2005, at an
exercise price of Sixty ($.60) Cents each, which shall be exercisable by Walsh in accordance with
and pursuant to the plans and agreements concerning such options, all other previous grants of
options to Walsh to purchase shares of stock of Avatech, shall be null and void.

(e) except as otherwise specifically set forth herein, the employee benefit plans set forth in
Section 2.5 of the Employment Agreement, shall be in effect until the Termination Date;

5. (a) Walsh agrees that he shall not, and shall not cause others to, use, reveal, report,
publish, transfer or otherwise disclose to any person, corporation or other entity, any
Confidential Information (as defined in Section 4 of the Employment Agreement) without the prior
written consent of the Chief Executive Officer of Avatech. Notwithstanding the foregoing, the
prohibitions of this Section shall not apply to any Confidential Information that becomes general
public knowledge other than from Walsh or is required to be divulged by law, court order or by
administrative process. Upon receipt of any subpoena or other process requiring Walsh to divulge
Confidential Information, Walsh shall immediately notify Avatech. The restrictions set forth in
this Section 5 are in addition to and not in lieu of protections afforded to trade secrets and
Confidential Information under applicable law. Nothing in this Agreement is intended to diminish
or otherwise limit the right of Avatech under applicable law to protect its trade secrets and
Confidential Information.

(b) Walsh represents that he has delivered to Avatech all plans, manuals, letters, notes,
notebooks, reports, computer programs and copies thereof and all other materials and property,
including without limitation, those of a secret or confidential nature relating to Avatech’s
business that were in his possession or control.

(c) Specifically in consideration for the amount received under Paragraph (c) of Section 4
hereof:

(i) For a period of eighteen (18) months from the Effective Date of this Agreement, Walsh
shall not (for any reason whatsoever) either individually or in conjunction with any person or
persons, association, syndicate, company, corporation or firm, directly or indirectly engage in any
business that is competitive with the business of Avatech as an executive, employee, consultant,
contractor, principal, agent, shareholder, director or in any other manner; provided, that the
foregoing shall not prohibit Walsh’s ownership of not more than three (3%) percent of the
outstanding stock of a publicly-traded company. Nothing herein precludes Walsh from engaging in
any business or endeavor that is not competitive with the business of Avatech. If this Agreement
or any portion thereof is determined by a court of competent jurisdiction to be invalid,
unreasonable or unenforceable, it is hereby agreed to by Walsh that such determination will not
invalidate the remaining portion(s) of this Agreement.

(ii) Walsh, for himself or any others, directly or indirectly, shall not hire or engage the
services of, or seek to solicit to hire, any employee of Avatech for a period of eighteen (18)
months from the Effective Date of this Agreement.

6. All payments to Walsh under this Agreement shall be subject to withholding on account of
federal, state and local taxes as required by law. With respect to the payment to be made to Walsh
as described in Section 4(c) herein, however, Walsh shall receive a Form 1099 in the amount of
Sixty Thousand One Hundred Fifty and 00/100 ($60,150.00) Dollars.

7. Walsh agrees to be responsible for the payment of any and all taxes, interest, penalties
and other liabilities or costs that may be assessed upon the payments to be made to Walsh
hereunder.

8. Except as otherwise required by law or regulation, Walsh hereby agrees that he shall not
make any statement, written or verbal, in any form or media or take any action in disparagement of
Avatech, including, but not limited to, references to Avatech’s products, services, corporate
policies, officers, directors and employees or any other action which may disparage Avatech to the
general public and Avatech’s employees, customers, suppliers, and business and financial relations.
Except as otherwise required by law or regulation, Avatech, through its officers and directors,
hereby agrees that it shall not make any statement, written or verbal, in any form or media or take
any action in disparagement of Walsh. Avatech shall consult with Walsh prior to its issuance of a
press release concerning his retirement.

9. (a) In consideration for the payments to be received by Walsh pursuant to this Agreement,
Walsh, for and on behalf of himself, his heirs, beneficiaries, executors, administrators,
attorneys, successors, and assigns, hereby voluntarily waives, remits, releases and forever
discharges Avatech and its current and former parent corporations, affiliates, subsidiaries,
divisions, predecessors, successors and assigns and their current and former officers, directors,
stockholders, employees, agents, attorneys, lenders, investors, servants, insurers and agents
thereof (the “Released Parties”) from any and all manner of action, claims, liens, demands,
liabilities, potential or actual causes of action, charges, complaints, suits (judicial,
administrative, or otherwise), damages, debts, demands, obligations of any other nature, past or
present, known or unknown, whether in law or in equity, whether founded upon contract (expressed or
implied), tort (including, but not limited to, defamation), statute or regulation (State, Federal
or local), common law and/or other theory or basis, from the beginning of the world to the date
hereof, including, but not limited to, any claim that Walsh has asserted, now asserts or could have
asserted. Listed below are examples of the statutes under which Walsh will not bring any claim.
If the law prohibits a waiver of claims under any such statute, Walsh hereby acknowledges that he
has no valid claim under those statutes or that all monies paid hereunder shall be a set-off
against any such claim, if a court permits such claim to be asserted. The claims released or
acknowledged not to exist include, but are not limited to, any violation of:

(i) Title VII of the Civil Rights Act of 1964;

(ii) The Civil Rights Act of 1991;

(iii) Sections 1981 through 1988 of Title 42 of the United States Code;

(iv) The Employee Retirement Income Security Act of 1974;

(v) The Immigration Reform and Control Act;

(vi) The Americans with Disabilities Act of 1990;

	 	(vii)	 	The Age Discrimination in Employment Act of 1967 (29
U.S.C. §621, et seq.) as amended to include the Older Workers Benefit
Protection Act of 1990;

(viii) The Workers Adjustment and Retraining Notification Act;

(ix) The Occupational Safety and Health Act;

(x) The Sarbanes-Oxley Act of 2002;

	 	(xi)	 	Statutes under the Maryland Commission on Human
Relations;

	 	(xii)	 	Any other federal, state or local, civil,
whistleblower, discrimination, wage, wage-hour, retaliation, employment,
human rights laws or any other local, state or federal law, regulation or
ordinance;

	 	(xiii)	 	Any public policy, contract, tort, or common law obligation; or

	 	(xiv)	 	Any obligation to pay for attorneys’ fees, costs,
fees, or other expenses.

(b) Included in this General Release are any and all claims for future damages allegedly
arising from the alleged continuation of the effect of any past action, omission or event. Walsh
further agrees to waive any rights he may have to reinstatement or re-employment with Avatech.
Notwithstanding the foregoing, Walsh shall retain the right, if any, to claim unemployment
insurance with respect to the termination of Walsh’s employment with Avatech.

10. Walsh hereby affirms that he has not filed, caused to be filed, or presently is a party to
any claim, complaint, or action against any of the Released Parties herein in any forum or form, or
that Walsh has assigned any claims against any of the Released Parties to a third party. Walsh
further affirms that he has been paid and/or has received all leave (paid or unpaid), compensation,
wages, bonuses, commissions, and/or benefits to which he may be entitled and that no other leave
(paid or unpaid), vacation pay, compensation, wages, bonuses, commissions and/or benefits are due
to Walsh, except as provided in this Agreement. Walsh furthermore affirms that he has no known
workplace injury or occupational disease and has been provided with and/or has not been denied any
leave requested under the Family and Medical Leave Act.

11. Avatech covenants and agrees that it will not assert any claims against Walsh in
connection with the lawful, good faith performance by Walsh of his duties as a Director and Chief
Executive Officer of Avatech.

12. The Parties respectively represent and warrant that each is fully authorized and empowered
to enter into this Agreement and that the performance of its or his obligations, as the case may
be, under this Agreement will not violate any agreement between such Party and any other person,
firm or organization. Avatech represents and warrants that this Agreement has been duly authorized
by all necessary corporate action and is valid, binding and enforceable in accordance with its
terms.

13. (a) This Agreement is absolute and unconditional and constitutes the full, complete, and
entire understanding between the Parties with respect to the subject matter of this Agreement. No
other promises, representations, statements, warranties, covenants or undertakings or other prior
or contemporaneous agreements, oral or written, respecting such matters which are not specifically
incorporated herein shall be deemed in any way to exist or to bind any of the Parties hereto.

(b) No provision in this Agreement may be amended unless such amendment is agreed to in
writing and signed by both Walsh and an authorized officer of Avatech. No waiver by either Party
of any breach by the other Party of any condition or provision contained in this Agreement to be
performed by such other Party shall be deemed a waiver of a similar or dissimilar condition or
provision at the same or any prior or subsequent time. Any waiver must be in writing and signed by
the Party to be charged with the waiver. No delay by either Party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof.

14. In the event that any provision or portion of this Agreement shall be determined to be
invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest
extent permitted by law.

15. This Agreement shall be governed by and construed and interpreted in accordance with the
laws of the State of Maryland, without reference to principles of conflict of laws. The Parties
agree that the appropriate forum and venue of any disputes arising out of this Agreement shall be
exclusively the State or Federal Court in the county of Baltimore, State of Maryland, and each of
the Parties hereto submits to the personal jurisdiction of any such Court. The foregoing shall not
limit the right of any Party to obtain execution of judgment in any other jurisdiction.

16. Any notice given to either Party shall be in writing and shall be deemed to have been
given when delivered either personally, by fax, or by nationally recognized overnight courier
service (such as Federal Express), duly addressed to the Party concerned at the address indicated
below or to such changed address as the Party may

subsequently give notice of.

If to Avatech:

Avatech Solutions, Inc.

10715 Red Run Boulevard, Suite 101

Owings Mills, MD 21117

Attention: George Davis

Fax: (410) 581-8088

With required copy to:

Moomjian, Waite, Wactlar & Coleman, LLP

100 Jericho Quadrangle

Jericho, New York 11753

Fax: 516-937-5050

If to Walsh:

Donald R. “Scotty” Walsh

14112 Phoenix Road

Phoenix, MD 21131

17. Capitalized terms used but not defined herein shall have the respective meanings
ascribed to such terms in the Employment Agreement.

18. The Parties hereto acknowledge that they have carefully read, understood and considered
the terms and conditions set forth in this Agreement, and have consulted with their respective
counsel prior to executing this Agreement. The Parties therefore affirm that they freely,
knowingly, and voluntarily enter into this Agreement as of the date specified above.

19. This Agreement may be executed in counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts together shall constitute one and the
same instrument.

YOU HAVE TWENTY-ONE (21) CALENDAR DAYS FROM THE DATE OF YOUR RECEIPT OF THIS AGREEMENT TO
CONSIDER THIS AGREEMENT BEFORE YOU SIGN IT; YOU MAY SIGN IT EARLIER IF YOU WISH, BUT THE DECISION
IS ENTIRELY YOURS. ONCE YOU SIGN THIS AGREEMENT, YOU HAVE SEVEN (7) CALENDAR DAYS AFTER SIGNING
TO REVOKE IT AND THE AGREEMENT SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE EXPIRATION OF
THAT SEVEN (7) CALENDAR DAY PERIOD.

TO REVOKE THIS AGREEMENT, PLEASE CONTACT THE UNDERSIGNED IN WRITING. YOU ARE ADVISED TO
CONSULT WITH AN ATTORNEY OF YOUR OWN CHOOSING AND AT YOUR OWN EXPENSE PRIOR TO EXECUTING THIS
AGREEMENT. THE AGREEMENT, AMONG OTHER THINGS, WAIVES RIGHTS THAT YOU MAY HAVE UNDER THE AGE
DISCRIMINATION IN EMPLOYMENT ACT (THE “ADEA”). NOTHING IN THIS AGREEMENT WAIVES RIGHTS OR CLAIMS
UNDER THE ADEA THAT MAY ARISE AFTER THE DATE THAT THIS AGREEMENT IS EXECUTED.

IN THE EVENT THAT YOU DO NOT ACCEPT THIS OFFER, BY YOUR SIGNATURE ON AND RETURN OF THE
ENCLOSED COPY OF THIS LETTER NOT LATER THAN TWENTY-ONE (21) CALENDAR DAYS FROM THE DATE OF THIS
LETTER, OR, IN THE EVENT THAT YOU DO ACCEPT THIS OFFER, AND SUBSEQUENTLY REVOKE THIS AGREEMENT
WITHIN SEVEN (7) CALENDAR DAYS AFTER SIGNING IT, THE OFFER WILL BE WITHDRAWN AND WILL NOT BE
REINSTATED UNDER ANY CIRCUMSTANCES.

YOU AGREE THAT ANY MODIFICATION, MATERIAL OR OTHERWISE, MADE TO THIS AGREEMENT DOES NOT
RESTART OR AFFECT IN ANY MANNER THE ORIGINAL TWENTY-ONE (21) CALENDAR DAY CONSIDERATION PERIOD.

HAVING ELECTED TO EXECUTE THIS AGREEMENT, TO FUFILL THE PROMISES AND TO RECEIVE THE SUMS AND
BENEFITS STATED HEREIN, YOU FREELY AND KNOWINGLY, AND AFTER DUE CONSIDERATION, ENTER INTO THIS
AGREEMENT INTENDING TO WAIVE, SETTLE AND RELEASE ALL CLAIMS YOU HAVE OR MIGHT HAVE AGAINST THE
COMPANY AND THE RELEASED PARTIES.

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

AVATECH SOLUTIONS, INC.

By: _/s/ George Davis

Name: George Davis

Title: President and

Chief Executive Officer

 /s/ Donald R. “Scotty” Walsh

	 	 	Donald R. “Scotty” WalshEX-10.1

Exhibit 10.1

CREDIT AGREEMENT

Dated as of August 21, 2007

between

LUMINENT MORTGAGE CAPITAL, INC.

and

ARCO CAPITAL CORPORATION LTD.

1

	 	 	 	 	 	 	 	 	 
	ARTICLE IDEFINED TERMS1
	 	 	 	 
	Section 1.01.
	 	Definitions	 	 	1	 
	Section 1.02.
	 	Interpretation	 	 	4	 
	ARTICLE IITERM LOAN
	 	 	 	 	 	 	4	 
	Section 2.01.
	 	The Loan	 	 	4	 
	Section 2.02.
	 	Manner of Borrowing	 	 	5	 
	Section 2.03.
	 	Notification of Interest Rate	 	 	5	 
	Section 2.04.
	 	Repayment of Principal	 	 	5	 
	Section 2.05.
	 	Payment of Interest	 	 	5	 
	Section 2.06.
	 	Voluntary Prepayment	 	 	5	 
	Section 2.07.
	 	Mandatory Prepayment	 	 	5	 
	Section 2.08.
	 	Reduction of Commitment	 	 	5	 
	Section 2.09.
	 	Funding Losses	 	 	5	 
	Section 2.10.
	 	Notes	 	 	6	 
	ARTICLE IIICHANGE IN CIRCUMSTANCES
	 	 	6	 
	Section 3.01.
	 	Increased Costs	 	 	6	 
	Section 3.02.
	 	Illegality	 	 	7	 
	Section 3.03.
	 	Taxes	 	 	7	 
	ARTICLE IVPAYMENTS
	 	 	 	 	 	 	8	 
	Section 4.01.
	 	Manner of Payments	 	 	8	 
	Section 4.02.
	 	Extension of Payments	 	 	8	 
	Section 4.03.
	 	Computation of Interest	 	 	8	 
	Section 4.04.
	 	Application of Payments	 	 	8	 
	ARTICLE VCONDITIONS PRECEDENT
	 	 	8	 
	Section 5.01.
	 	Initial Conditions	 	 	8	 
	Section 5.02.
	 	Continuing Conditions	 	 	9	 
	Section 5.03.
	 	Conditions to Each Loan after the Initial Loan	 	 	9	 
	ARTICLE VIREPRESENTATIONS AND WARRANTIES
	 	 	9	 
	Section 6.01.
	 	Status	 	 	9	 
	Section 6.02.
	 	Financial Condition	 	 	9	 
	Section 6.03.
	 	Litigation	 	 	10	 
	Section 6.04.
	 	Compliance with Other Instruments	 	 	10	 
	Section 6.05.
	 	Binding Agreement	 	 	10	 
	Section 6.06.
	 	Authorizations	 	 	10	 
	Section 6.07.
	 	Investment Company Act	 	 	10	 
	Section 6.08.
	 	Compliance with Laws	 	 	10	 
	Section 6.09.
	 	Compliance with ERISA	 	 	10	 
	Section 6.10.
	 	Taxes	 	 	10	 
	Section 6.11.
	 	Regulation U	 	 	11	 
	Section 6.12.
	 	Full Disclosure	 	 	11	 
	ARTICLE VIIAFFIRMATIVE COVENANTS
	 	 	11	 
	Section 7.01.
	 	Payment of Taxes	 	 	11	 
	Section 7.02.
	 	Preservation of Existence	 	 	11	 
	Section 7.03.
	 	Compliance with Laws	 	 	11	 
	Section 7.04.
	 	Keeping of Books and Records; Inspection	 	 	11	 
	Section 7.05.
	 	Notice of Certain Events	 	 	11	 
	Section 7.06.
	 	Priority; Negative Pledge	 	 	11	 
	Section 7.07.
	 	Financial Statements and Other Information	 	 	12	 
	Section 7.08.
	 	Use of Proceeds	 	 	12	 
	ARTICLE VIIINEGATIVE COVENANTS
	 	 	12	 
	Section 8.01.
	 	Investments	 	 	12	 
	Section 8.02.
	 	Liens	 	 	12	 
	Section 8.03.
	 	Other Indebtedness	 	 	12	 
	Section 8.04.
	 	Consolidations, Mergers, etc	 	 	12	 
	Section 8.05.
	 	Pensions Plans	 	 	12	 
	Section 8.06.
	 	Location of Borrower	 	 	12	 
	Section 8.07.
	 	Amendment of Organizational Documents	 	 	12	 
	ARTICLE IXEVENTS OF DEFAULT
	 	 	13	 
	Section 9.01.
	 	Events of Default	 	 	13	 
	Section 9.02.
	 	Default Remedies	 	 	14	 
	Section 9.03.
	 	Setoff	 	 	14	 
	Section 9.04.
	 	Default Interest	 	 	14	 
	Section 9.05.
	 	Funding Indemnities	 	 	14	 
	ARTICLE XGENERAL PROVISIONS
	 	 	14	 
	Section 10.01.
	 	Assignment, Amendments and Waivers	 	 	14	 
	Section 10.02.
	 	Notices	 	 	15	 
	Section 10.03.
	 	Expenses; Indemnification	 	 	16	 
	Section 10.04.
	 	Cumulative Rights; No Waiver	 	 	16	 
	Section 10.05.
	 	Counterparts	 	 	16	 
	Section 10.06.
	 	Severability	 	 	16	 
	Section 10.07.
	 	Headings	 	 	16	 
	Section 10.08.
	 	Governing Law; Jurisdiction; Consent to Service of Process	 	 	16	 
	Section 10.09.
	 	Waiver of Jury Trial	 	 	17	 
	Section 10.10.
	 	Successors	 	 	17	 
	Section 10.11.
	 	Confidentiality	 	 	17	 
	Section 10.12.
	 	USA Patriot Act	 	 	18	 
	Section 10.13.
	 	Further Assurances	 	 	18	 

SCHEDULES

Schedule I Corporate Information Book

EXHIBITS

	 	 	 
	Exhibit A

Exhibit B

	 	Form of Note

Form of Notice of Borrowing

2

CREDIT AGREEMENT

CREDIT AGREEMENT dated as of August 21, 2007 between LUMINENT MORTGAGE CAPITAL, INC., a
corporation organized under the laws of the State of Maryland (the “Borrower”) and ARCO
CAPITAL CORPORATION LTD., a corporation organized under the laws of the Cayman Islands (the
“Lender”).

W I T N E S S E T H:

WHEREAS, the Borrower has requested the Lender to make short-term bridge loans to the Borrower
to be used by the Borrower to meet current or impending financing calls or maturities; and

WHEREAS, the Lender is willing to make such short-term bridge loans on the terms and subject
to the conditions contained herein;

NOW, THEREFORE, the parties hereto hereby agree as follows:

ARTICLE I

DEFINED TERMS

Section 1.01. Definitions. For all purposes of the Related Documents, unless the
context otherwise requires, the following terms shall have the following meanings:

“Affiliate” means, with respect to a specified Person, another Person that directly,
or indirectly through one or more intermediaries, Controls or is Controlled by or is under common
Control with the Person specified.

“Agreement” means this Credit Agreement, as amended, modified or supplemented from
time to time.

“Applicable Margin” means 4.0% per annum.

“Availability Period” means the period from and including the Closing Date to but
excluding the Final Maturity Date.

“Business Day” means a day on which banks are not required or authorized by law or
executive order to close in New York City.

“Closing Date” means August 21, 2007 or such later date as shall be mutually agreed
between the parties hereto.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Commitment” means the obligation of the Lender to make Loans pursuant to Section 2.01
hereof, in an aggregate principal amount at any one time outstanding up to $18,500,000. The
Commitment is subject to reduction pursuant to Sections 2.08 and 9.02 hereof.

“Control” means the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person, whether through the ability to
exercise voting power, by contract or otherwise. “Controlling”, “Controls” and
“Controlled” have meanings correlative thereto.

“Corporate Information Book” means the presentation entitled “Luminent Corporate
Structure” attached as Schedule I hereto.

“Default” means any Event of Default or any event which, with the giving of notice or
lapse of time, or both, would become an Event of Default.

“Disclosure Letter” means, collectively, the Form 8-K dated August 13, 2007 filed by
the Borrower with the U.S. Securities and Exchange Commission, the Corporate Information Book and
the disclosure letter dated as of the date hereof from the Borrower to the Lender.

“Dollars” or “$” means the lawful currency of the United States of America
and, in relation to any amount to be advanced or paid hereunder, funds having same day or immediate
value.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, or any
successor statute.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that,
together with the Borrower or any Guarantor, is treated as a single employer under Section 414(b)
or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is
treated as a single employer under Section 414 of the Code

“Event of Default” means each of the events set forth in Section 9.01 hereof.

“Final Maturity Date” means the earlier of (i) September 21, 2007; provided,
that the Final Maturity Date may be extended to August 21, 2008 in the sole and absolute discretion
of the Lender, (ii) the Replacement Financing Date, or (iii) such date on which the Commitment may
terminate in accordance with the terms hereof.

“Governmental Authority” means any national, federal, state or local government
(whether foreign or domestic), any political subdivision thereof or any governmental,
quasi-governmental, judicial, public or statutory instrumentality, authority, body or entity, or
any other regulatory bureau, authority, body or entity, including the Federal Deposit Insurance
Corporation, the Comptroller of the Currency or the Board of Governors of the Federal Reserve
System, any central bank or any comparable authority or entity.

“Guarantee Agreement” means that certain Subsidiary Guarantee Agreement dated as of
the date hereof made by the Guarantors in favor of the Lender, as it hereafter may be amended,
amended and restated, supplemented or otherwise modified from time to time.

“Guarantee” of or by any Person (the “guarantor”) means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation of any other Person (the “primary
obligor”) in any manner, whether directly or indirectly, and including any obligation of the
guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or lease property,
securities or services for the purpose of assuring the owner of such Indebtedness or other
obligation of the payment thereof, (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or obligation,
provided that the term “Guarantee” shall not include endorsements for collection or deposit
in the ordinary course of business.

“Guarantors” means each and all of the subsidiaries of Borrower that are not prevented
by law or contract to provide a Guarantee, each in its capacity as a guarantor under its respective
Guarantee.

“Indebtedness” means for any Person, without duplication, (i) all indebtedness or
other obligations of such Person for borrowed money and all obligations of such Person under leases
which would, in accordance with United States generally accepted accounting principles, be
capitalized on the balance sheet of such Person, (ii) all obligations of such Person to pay the
deferred purchase price of property or services (including indebtedness created under or arising
out of any conditional sale or other title retention agreement), (iii) all obligations of such
Person (contingent or otherwise) under reimbursement or similar agreements with respect to the
issuance of letters of credit, (iv) all indebtedness or other obligations of such Person under or
with respect to any swap, cap, collar or other financial or commodity hedging arrangement, (v) all
indebtedness or other obligations of any other Person of the type specified in clause (i), (ii),
(iii) or (iv) above, the payment or collection of which such Person has guaranteed (except by
reason of endorsement for collection in the ordinary course of business) or in respect of which
such Person is liable, contingently or otherwise, including, without limitation, liable by way of
agreement to purchase products or securities, to provide funds for payment, to maintain working
capital or other balance sheet conditions or otherwise to assure a creditor against loss, and (vi)
all indebtedness or other obligations of any other Person of the type specified in clause (i),
(ii), (iii), (iv) or (v) above secured by (or for which the holder of such indebtedness has an
existing right contingent or otherwise, to be secured by) any Lien, upon or in property (including,
without limitation, accounts and contract rights) owned by such Person, whether or not such Person
has assumed or becomes liable for the payment of such indebtedness or obligations.

“Interest Period” means with respect to any Loan, the period commencing on the date of
such Loan and ending on the numerically corresponding day in the calendar month that is one month
thereafter; provided, that (a) if any Interest Period would end on a day other than a
Business Day, such Interest Period shall be extended to the next succeeding Business Day unless
such next succeeding Business Day would fall in the next calendar month, in which case such
Interest Period shall end on the next preceding Business Day, (b) any Interest Period that
commences on the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the last calendar month of such Interest Period) shall end on the
last Business Day of the last calendar month of such Interest Period and (c) no Interest Period may
end after the Final Maturity Date. For purposes hereof, the date of a Loan initially shall be the
date on which such Loan is made and thereafter shall be the effective date of the most recent
continuation of such Loan.

“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended, or any
successor statute.

“Laws” means all laws, rules, regulations, orders and decrees of any Governmental
Authority applicable to the Borrower.

“Lending Office” shall mean (i) the office specified below the Lender’s name in
Section 10.02 hereof or (ii) such other office or offices as the Lender shall designate to be its
lending office for purposes of this Agreement.

“Letter of Intent” means that certain letter of intent dated as of August 16, 2007,
signed by the Borrower and the Lender.

“LIBO Rate” means a one-month LIBO Rate reasonably determined by Lender using
customary market sources.

“Lien” means any security interest, mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), or preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement or any financing lease having
substantially the same economic effect as any of the foregoing.

“Loan” means each loan made by the Lender to the Borrower pursuant to Article II
hereof.

“Material Adverse Effect” means a material adverse effect on (a) the business, assets,
property or condition (financial or otherwise) of the Borrower, (b) the ability of the Borrower to
perform any of its obligations under this Agreement or (c) the rights of or benefits available to
the Lender under this Agreement.

“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of
ERISA.

“Note” means each promissory note of the Borrower payable to the order of the Lender
as provided for herein, substantially in the form of Exhibit A hereto, and any promissory
note or notes of the Borrower issued in substitution thereof.

“Notice of Borrowing” means an irrevocable notice, substantially in the form of
Exhibit B hereto, given to the Lender by the Borrower pursuant to Section 2.02 hereof.

“Person” means any corporation, limited liability company, natural person, joint
venture, partnership, trust, unincorporated organization, government or any department or agency of
any government.

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA,
and in respect of which the Borrower or any Guarantor or any ERISA Affiliate is (or, if such plan
were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in
Section 3(5) of ERISA.

“Related Documents” means this Agreement, each Note, the Guarantee Agreement, the
Security Pledge Agreement and each other document required to be executed and delivered pursuant to
any of the foregoing agreements, documents or instruments.

“Replacement Financing Date” means the date upon which the Borrower shall have entered
into a loan agreement with the Lender which provides refinancing for the Loan hereunder and a
disbursement is made thereunder.

“Security Pledge Agreement” means that certain Security and Pledge Agreement dated the
date hereof and entered into among the Security Providers and the Lender.

“Security Providers” means the Borrower and the Guarantors.

“Taxes” means any and all taxes, levies, imposts, duties or other charges of a similar
nature.

Section 1.02. Interpretation. All references in this Agreement to any other agreement
or instrument shall include such other agreement or instrument as the same may be amended, modified
or supplemented from time to time. All defined terms herein shall retain their defined meanings in
both their singular and their plural forms. In the computation of interest payable from a
specified date to a later specified date, unless otherwise indicated the word “from” means “from
and including” and the words “to” and “until” both mean “to but not including”.

ARTICLE II

TERM LOANS

Section 2.01. The Loans. On the terms and subject to the conditions of this
Agreement, the Lender agrees to make Loans from time to time during the Availability Period in an
aggregate amount not to exceed the Commitment.

Section 2.02. Manner of Borrowing. The Borrower shall give the Lender a duly
completed Notice of Borrowing not later than 10:00 a.m. (New York City time) three Business Days
prior to the date of each Loan (or such later date and time as the Lender may agree). Each such
Notice of Borrowing shall specify (i) the amount of such Loan, (ii) the date of such Loan, which
date shall be a Business Day, and (iii) the account to which the proceeds of such Loan should be
transferred together with all necessary wire information. The Lender shall give the Borrower
telephonic notice, confirmed by facsimile or other written notice, of the LIBO Rate applicable to
the initial Interest Period for the relevant Loan before 12:00 noon (New York City time) on the
relevant borrowing date, which determination shall be conclusive, absent manifest error. Subject
to the conditions of this Agreement, the Lender shall make such Loan by transferring the proceeds
thereof in Dollars to the account designated by the Borrower for such purpose not later than 2:00
p.m. (New York City time) on the relevant borrowing date.

Section 2.03. Notification of Interest Rate. The Lender shall give the Borrower
telephonic notice, confirmed by facsimile or other written notice, of the LIBO Rate applicable to
each Interest Period after the initial Interest Period for each Loan before 12:00 noon (New York
City time) on the first day of such Interest Period, which determination shall be conclusive,
absent manifest error.

Section 2.04. Repayment of Principal. The Borrower shall repay the full principal
amount of each Loan on the Final Maturity Date. Amounts repaid hereunder may not be reborrowed
hereunder.

Section 2.05. Payment of Interest. The Borrower shall pay interest on the unpaid
principal amount of each Loan from the date of such Loan to the date on which such Loan is paid in
full in respect of each Interest Period applicable thereto at a rate equal to the sum of the LIBO
Rate plus the Applicable Margin. Accrued interest for each Interest Period shall be payable on the
last day of such Interest Period.

Section 2.06. Voluntary Prepayment. The Borrower may prepay any Loan in whole but not
in part at any time, provided that (a) the Borrower shall give the Lender not less than seven
Business Days’ prior written notice of each prepayment and (b) each prepayment shall be accompanied
by the payment of accrued interest on the amount prepaid to the date of prepayment and any
additional amount owing under Section 2.09 hereof. Amounts so prepaid may not be reborrowed.

Section 2.07. Mandatory Prepayment. The Borrower shall prepay each Loan on the
Replacement Financing Date. Amounts so prepaid may not be reborrowed.

Section 2.08. Reduction of Commitment. The Commitment shall be automatically and
permanently reduced at the close of business on each of the dates that the Lender makes a Loan to
the Borrower by an amount equal to the amount of such Loan.

Section 2.09. Funding Losses. The Borrower will indemnify the Lender against, and on
demand reimburse the Lender for, any loss, premium, penalty or expense which the Lender may pay or
incur (including, without limitation, any loss or expense incurred by reason of the relending,
depositing or other employment of funds acquired by the Lender to fund any Loan) as a result of (a)
any prepayment or repayment of a Loan on a date prior to the last day of the Interest Period
applicable thereto, (b) any failure by the Borrower to borrow any Loan on a date specified therefor
in a Notice of Borrowing pursuant to Section 2.02 hereof, except to the extent such failure results
from a default by the Lender in making the requisite funds available to the Borrower hereunder or
(c) any failure by the Borrower to prepay any Loan on the date specified therefor in a notice of
prepayment delivered by the Borrower pursuant to Section 2.06 hereof. The Lender shall furnish the
Borrower with a certificate setting forth the basis for determining any additional amount to be
paid to it hereunder, and such certificate shall be conclusive, absent manifest error, as to the
contents thereof.

Section 2.10. Notes. Each Loan shall be evidenced by a single Note payable to the
order of the Lender. The amount of each Loan, the Interest Period applicable thereto and each
repayment or prepayment of principal shall be endorsed by the Lender on the schedule annexed to and
constituting a part of each Note, provided that the failure to make or any error in making
any such endorsement on such schedule shall not limit, extinguish or in any way modify the
obligation of the Borrower to repay such Loan. Such endorsements shall be prima
facie evidence of the aggregate unpaid principal amount of all the Loans made by the
Lender.

ARTICLE III

CHANGE IN CIRCUMSTANCES

Section 3.01. Increased Costs.

(a) If, after the date of this Agreement, (i) the introduction of, or any change in, any
applicable law, rule or regulation or in the interpretation or administration thereof by any
Governmental Authority or (ii) compliance by the Lender with any request, guideline, policy or
directive of any Governmental Authority issued after the date of this Agreement (whether or not
having the force of law) shall:

(A) subject the Lender to any tax, duty or other charge or shall change the basis of taxation
of payments to the Lender of any amount due under this Agreement or any Note (except for changes in
the tax on the overall net income of the Lender imposed by the jurisdiction of its incorporation or
the jurisdiction in which its Lending Office is located);

(B) impose, modify or deem applicable any reserve, special deposit or similar requirement
against assets or liabilities of, deposits with or for the account of, or commitments issued by,
the Lender (including, without limitation, any such requirement imposed by the Board of Governors
of the Federal Reserve System); or

(C) impose on the Lender or the money markets any other condition affecting the Commitment,
any Loan or the Note;

and the result of any of the foregoing is to increase the cost to the Lender of making or
maintaining the Commitment or any Loan, or to reduce the amount of any sum received or
receivable by the Lender under this Agreement or under any Note, then the Borrower shall from
time to time pay to the Lender within 10 Business Days of its demand therefor such additional
amount or amounts as will compensate it for such increased cost or reduction.

(b) If the Lender shall have determined that, after the date of this Agreement, the adoption
of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any
change in the interpretation or administration thereof by any Governmental Authority, or compliance
by the Lender (or, without duplication, the bank holding company of which the Lender is a
subsidiary) with any request, guideline, policy or directive regarding capital adequacy (whether or
not having the force of law) of any such authority, has or would have the effect of reducing the
rate of return on the Lender’s or bank holding company’s capital as a consequence of any Loans or
its obligations hereunder to a level below that which the Lender or its bank holding company could
have achieved but for such adoption, change or compliance (taking into consideration the Lender’s
or such bank holding company’s policies with respect to capital adequacy), then the Borrower shall
from time to time pay to the Lender within 10 Business Days of its demand therefor such additional
amount or amounts as will compensate the Lender or its bank holding company for such reduction.

(c) The Lender will promptly give the Borrower notice of the occurrence of any event of which
it has knowledge which will entitle it to compensation pursuant to this Section 3.01, and will use
reasonable efforts to mitigate the effect of any such event if, in the sole opinion of the Lender,
such efforts will avoid the need for, or reduce the amount of, such compensation and will not be
otherwise disadvantageous to it or contrary to its internal policies, provided that the
failure of the Lender so to notify the Borrower will not discharge the Borrower of its obligations
under this Section 3.01. The Lender shall furnish the Borrower with a certificate setting forth
the basis for determining any additional amount or amounts to be paid to it hereunder, and such
certificate shall be conclusive, absent manifest error, as to the contents thereof.

Section 3.02. Illegality. If, after the date of this Agreement, the introduction of,
or any change in, any applicable law, rule or regulation or in the interpretation or administration
thereof by any Governmental Authority shall make it unlawful for the Lender to make or maintain any
Loan or the Commitment, then, provided no Default shall have occurred and be continuing, the Lender
shall give notice thereof to the Borrower and commence good faith negotiations with the Borrower to
determine a substitute basis for determining a rate of interest payable to the Lender which would
cure such illegality hereunder. If within 30 days of such notice to the Borrower, the Borrower and
the Lender shall not have agreed in writing to such a substitute basis, the Lender may declare such
Loan to be due and payable and/or cancel the Commitment and the Borrower shall prepay such Loan in
full on the last day of the Interest Period applicable thereto unless such Loan is required by law
to be repaid sooner, in which case the Borrower shall repay such Loan on such earlier date,
together with accrued interest thereon and any additional amount owing under Section 2.09 hereof.
The Lender will promptly notify the Borrower of any event of which the Lender has knowledge which
will entitle it to the provisions of this Section 3.02 and will designate a different Lending
Office if, in the sole opinion of the Lender, such designation will avoid the need for such
prepayment and will not be otherwise disadvantageous to it or contrary to its internal policies.

Section 3.03. Taxes.

(a) Each payment by the Borrower to the Lender under this Agreement or any of the other
Related Documents shall be made free and clear of and without deduction for any Taxes, other than
any Taxes imposed on the overall net income of the Lender by the jurisdiction of its incorporation
or by the jurisdiction in which its Lending Office is located (all such non-excluded Taxes being
hereinafter referred to as “Covered Taxes”). If the Borrower shall be required by law to
deduct any Covered Taxes from or in respect of any such payment, then (i) the sum payable shall be
increased as may be necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section) the Lender receives an amount equal to
the sum it would have received had no such deductions been made, (ii) the Borrower shall make such
deductions and (iii) the Borrower shall pay on a timely basis the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable law.

(b) The Borrower will indemnify the Lender for the full amount of Covered Taxes required to be
paid by, or imposed, levied or assessed against the Lender. In addition, the Borrower shall pay to
the Lender such amounts as may be necessary to hold the Lender harmless on an after-tax basis from
any Taxes (including without limitation, income or franchise taxes) imposed by any jurisdiction as
a result of the receipt or accrual by the Lender of any payment under this Section 3.03 (including
any payment under this sentence). Any indemnification pursuant to this Section 3.03(b) shall be
made within 30 days from the date the Lender makes written demand therefor. A certificate setting
forth any amount payable to the Lender under this Section 3.03 and the basis therefor submitted by
the Lender to the Borrower shall, absent manifest error, be conclusive and binding.

(c) Within 60 days after the date of any payment of Covered Taxes made under this Section 3.03
or the withholding of any Taxes excluded from indemnification under subsection (a), the Borrower
will furnish to the Lender the original or a certified copy of a receipt, accompanied by a
certified English translation if the receipt is not in English, evidencing payment thereof, a
statement signed by an officer responsible for the Borrower’s financial or accounting records
setting forth the amount and identity of such Taxes (specifying the particular provisions of law
requiring such withholding), and all additional information and documents that the Lender shall
reasonably and in writing request to establish that full and timely payment of such Covered Taxes
or other Taxes has been made. The Borrower will promptly notify the Lender of any reports or
returns that the Lender is required to file with respect to Covered Taxes.

(d) Without prejudice to the survival of any other agreement of the Borrower hereunder, the
agreements and obligations of the Borrower contained in this Section 3.03 shall survive the
prepayment or payment in full or in part of the Loans and the interest thereon and the termination
of this Agreement or any other Related Document.

ARTICLE IV

PAYMENTS

Section 4.01. Manner of Payments. Each payment required to be made by the Borrower
under this Agreement or the other Related Documents shall be made by transferring the amount
thereof in Dollars to the Lender not later than 2:00 p.m. (New York City time) on the date on which
such payment shall become due to JPMorgan Chase; ABA#: 021-000-021; A/C: Citigroup Global Markets
Inc; A/C#: 5541336; FFC: Arco Capital Corporation Ltd.; A/C#: 22024335 (or such other account as
the Lender shall notify the Borrower from time to time). Each such payment shall be made without
defense, set-off or counterclaim. Any payment received after 2:00 p.m. (New York City time) on any
Business Day shall be deemed to have been received on the next following Business Day.

Section 4.02. Extension of Payments. If any payment under this Agreement or the other
Related Documents shall become due on a day which is not a Business Day, then the due date thereof
shall be extended to the next following day which is a Business Day, and such extension shall be
taken into account in computing the amount of any interest then due and payable hereunder.

Section 4.03. Computation of Interest. All interest on each Loan payable under this
Agreement and the other Related Documents shall be computed on the basis of a year of 360 days and
the actual number of days elapsed.

Section 4.04. Application of Payments. All amounts received by the Lender hereunder
shall be applied by the Lender, first to the payment of any interest then due and payable on the
Loans, second to the prepayment of any outstanding principal of the Loans, and third to the payment
of any other amounts due and payable hereunder.

ARTICLE V

CONDITIONS PRECEDENT

Section 5.01. Initial Conditions. As a condition precedent to the Lender’s obligation
to make the initial Loan hereunder, the Lender shall have received the following items in form and
substance satisfactory to it, unless otherwise waived by the Lender:

(a) Related Documents. A counterpart hereof, of the Note to be issued on the date
hereof and of each of the other Related Documents, each duly executed by the Borrower and each
Guarantor, as applicable.

(b) Borrower and Guarantor Documents. (i) a Certificate from the Secretary of State
of the State of Maryland and of each jurisdiction of incorporation of each Guarantor certifying
that the Borrower and each Guarantor, respectively is in good standing under the laws of such
state; (ii) a certificate from the Secretary, an Assistant Secretary or another officer of the
Borrower and each Guarantor, certifying (A) as to the incumbency and signature of an officer of the
Borrower and of each Guarantor, authorized to execute and deliver this Agreement and the other
Related Documents to which the Borrower and each Guarantor is a party and any certificate to be
furnished pursuant thereto, (B) that attached thereto are true and complete copies of the charter
and any other governing documents of the Borrower and of each Guarantor and (C) that attached
thereto is a true and complete copy of the resolutions of the board of directors of the Borrower
and of each Guarantor authorizing the execution, delivery and performance of this Agreement and the
other Related Documents to which the Borrower and each Guarantor is a party and the transactions
contemplated thereby, together with a certification by another officer of the Borrower and each
Guarantor as to the incumbency and signature of such Secretary or Assistant Secretary; and (iii) a
certificate from an appropriate officer of the Borrower and each Guarantor certifying that, to the
best knowledge of such officer, the representations and warranties contained in Article VI hereof
and in Section 9 of the Guarantee Agreement are true and complete and no Default has occurred and
is continuing.

(c) Additional Documents. Such other documents, certificates, financial or other
information, or opinions as the Lender may reasonably request.

Section 5.02. Continuing Conditions. As a condition precedent to the Lender’s
obligation to make any Loan hereunder, including the initial Loan, the following conditions shall
be satisfied on the date of such Loan:

(a) Representations True. The representations and warranties contained in Article VI
hereof shall be true and correct with the same force and effect as though made on and as of such
date;

(b) No Default. No Default shall have occurred and be continuing; and

(c) Notice of Borrowing. The Borrower must furnish the Lender with, as appropriate, a
Notice of Borrowing.

Each Notice of Borrowing shall be deemed a representation and warranty by the Borrower that
the conditions referred to in clauses (a) and (b) above have been met.

Section 5.03. Conditions to Each Loan after the Initial Loan. As a condition
precedent to the Lender’s obligation to make each Loan (other than the initial Loan) hereunder, the
Lender shall have received the following items in form and substance satisfactory to it:

(a) Note. A duly executed Note dated the date of such loan;

(b) Additional Documents. Such other documents, certificates, financial or other
information, or opinions as the Lender may reasonably request; and

(c) Consent. The written consent of the Lender which consent may be given or withheld
in the sole and absolute discretion of the Lender.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Lender that:

Section 6.01. Status. The Borrower (a) is a duly organized and validly existing
corporation in good standing under the laws of the State of Maryland, (b) is duly licensed or
qualified to do business and in good standing in each jurisdiction where the failure to be so
licensed or qualified would reasonably be expected to have a Material Adverse Effect, and (c) has
all requisite power and authority to own its properties and conduct its business as presently
conducted and to execute and deliver, and to perform its obligations under, this Agreement and the
other Related Documents.

Section 6.02. Financial Condition. Other than as specifically disclosed in the
Disclosure Letter, there has been no further material adverse change in the financial condition or
business of the Borrower and no further change which would materially further impair the ability of
the Borrower to perform its obligations hereunder or under the other Related Documents. The
Borrower has no current intention to file for bankruptcy and the Borrower, acting reasonably, and
after due analysis and deliberation, is confident that, with the transactions described in the
Letter of Intent, it can continue as a going concern.

Section 6.03. Litigation. Other than as specifically disclosed in the Disclosure
Letter, there is no action, suit, proceeding or investigation at law or in equity by or before any
court, governmental body, agency, commission or other tribunal now pending or, to the best
knowledge of the Borrower after due inquiry, threatened against or affecting the Borrower or any
property or rights of the Borrower (a) as to which there is a significant possibility of an adverse
determination, and (b) which if adversely determined would reasonably be expected to have a
Material Adverse Effect, and there is no action, suit, proceeding or investigation at law or in
equity by or before any court, governmental body, agency, commission or other tribunal now pending
or, to the best knowledge of the Borrower after due inquiry, threatened which questions or would
question the validity of this Agreement or any of the Related Documents.

Section 6.04. Compliance with Other Instruments. The execution, delivery and
performance of this Agreement and the Related Documents will not (a) conflict with, result in a
breach of, or constitute a default under, any terms or provisions of any indenture, mortgage or
other agreement or instrument to which the Borrower is a party or by which it or any of its assets
is bound, or any existing applicable law, rule, regulation, license, judgment, order or decree of
any government, governmental body or court having jurisdiction over the Borrower or any of its
activities or properties, or the certificate of formation or limited liability company agreement of
the Borrower or (b) result in, or require the creation or imposition of, any Lien upon or with
respect to any properties now or hereafter owned by the Borrower, except as may be contemplated
hereby or thereby.

Section 6.05. Binding Agreement. The execution, delivery and performance of this
Agreement and the Related Documents have been duly authorized by all necessary action of the
Borrower. This Agreement and such Related Documents have been duly executed and delivered by the
Borrower and each constitutes a legal, valid and binding obligation of the Borrower, enforceable
according to its terms, subject, as to enforceability, to applicable bankruptcy, insolvency and
similar laws affecting creditors’ rights generally and to general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity or at law).

Section 6.06. Authorizations. All authorizations, consents, approvals, registrations,
filings, exemptions and licenses with or from governmental or regulatory authorities which are
necessary for the borrowing hereunder, for the execution and delivery of this Agreement or any
Related Document, or for the performance by the Borrower of its obligations hereunder or thereunder
have been effected and obtained and are in full force and effect.

Section 6.07. Investment Company Act. The Borrower is not an “investment company”, as
defined in the Investment Company Act of 1940, as amended.

Section 6.08. Compliance with Laws. The Borrower is in compliance with the
requirements of all applicable Laws, except those the non-compliance with which would not, singly
or in the aggregate, reasonably be expected to have a Material Adverse Effect.

Section 6.09. Compliance with ERISA. The Borrower has not established and does not
maintain or contribute to any employee benefit plan that is covered by Title IV of the Employee
Retirement Income Security Act of 1974, as amended.

Section 6.10. Taxes. The Borrower has filed all tax returns required to be filed by
it. The Borrower has paid all taxes and other governmental charges due pursuant to such returns or
pursuant to any assessment received by the Borrower, except for any taxes or other governmental
charges being contested in good faith by appropriate proceedings and for which adequate reserves
have been established by the Borrower. The charges, accruals and reserves on the books of the
Borrower in respect of any taxes or other governmental charges are, in the Borrower’s good faith
judgment, adequate in the aggregate to provide for the liabilities in respect thereof.

Section 6.11. Regulation U. The Borrower is not principally engaged in, nor does it
have as one of its important activities, the business of extending credit for the purpose of
purchasing or carrying any “margin stock” (as defined in Regulation U of the Board of Governors of
the Federal Reserve System).

Section 6.12. Full Disclosure. All written information heretofore furnished by the
Borrower to the Lender for purposes of or in connection with this Agreement or the Related
Documents or any transaction contemplated hereby or thereby is, and all written information
hereafter furnished by the Borrower to the Lender will be, true and accurate in all material
respects on the date as of which such information is stated or certified or, in the case of
projections, is or will be based on reasonable assumptions (although the Lender acknowledges that
the Borrower cannot assure the outcomes stated in such projections).

ARTICLE VII

AFFIRMATIVE COVENANTS

The Borrower hereby covenants and agrees that until the Loans and all other amounts owing
hereunder have been paid in full and this Agreement shall have terminated:

Section 7.01. Payment of Taxes. The Borrower will pay and discharge all material
taxes, assessments and governmental charges or levies imposed upon it or upon its income or
properties, prior to the date on which penalties attach thereto, except to the extent that any such
tax, assessment, charge or levy is being contested in good faith by appropriate proceedings and for
which adequate reserves have been established by the Borrower.

Section 7.02. Preservation of Existence. The Borrower will preserve and maintain its
existence, rights, franchises and privileges, except where the failure to do so would not
reasonably be expected to have a Material Adverse Effect.

Section 7.03. Compliance with Laws. The Borrower will comply with the requirements of
all applicable Laws, non compliance with which would, singly or in the aggregate, have a Material
Adverse Effect.

Section 7.04. Keeping of Books and Records; Inspection. The Borrower will maintain a
system of accounting in accordance with United States generally accepted accounting principles on a
basis consistently applied. Upon reasonable prior notice from the Lender (except during the
occurrence of an Event of Default), the Borrower will permit the Lender or its representatives to
have access to and examine and inspect the books and records and properties of the Borrower and
confer with the Borrower’s officers, agents, employees and accountants at any reasonable time
during the Borrower’s normal business hours and from time to time.

Section 7.05. Notice of Certain Events. The Borrower will promptly and in any event
not more than three Business Days after obtaining knowledge thereof notify the Lender of (a) the
occurrence of any Default or (b) the commencement of any litigation or governmental or NYSE
proceeding affecting the Borrower.

Section 7.06. Priority; Negative Pledge. The Borrower shall ensure at all times that
its obligations under this Agreement and the Note are either pari passu or senior
in priority to all senior unsecured indebtedness of the Borrower and that no new Liens on any
assets of Borrower or any Guarantor are established without Lender’s consent.

Section 7.07. Financial Statements and Other Information. The Borrower will deliver
to the Lender such financial and other information concerning its affairs as the Lender may from
time to time reasonably require in connection with the transactions contemplated by this Agreement
and the other Related Documents.

Section 7.08. Use of Proceeds. The Borrower will only use the proceeds of the Loans
to meet current or impending financing calls or maturities.

ARTICLE VIII

NEGATIVE COVENANTS

The Borrower hereby covenants and agrees that, until the Loan and all other amounts owing
hereunder have been paid in full and this Agreement shall have terminated:

Section 8.01. Investments. The Borrower will not make any loans to or investments in,
or purchase any securities of, any other Person.

Section 8.02. Liens. The Borrower will not create, incur, assume or permit to exist
any Lien upon any of its assets (including, without limitation, any mortgaged-backed securities),
other than (a) Liens for taxes, assessments, charges or other governmental levies not delinquent or
which are being contested in good faith by appropriate proceedings and for which adequate reserves
have been established by the Borrower to the extent required by generally accepted accounting
principles; (b) Liens in connection with worker’s compensation, unemployment insurance or social
security obligations; (c) mechanics’, workers’, materialmen’s, operators’, carriers’, or other like
Liens arising in the ordinary and normal course of business with respect to obligations which are
not due or which are being contested in good faith by appropriate proceedings; and (d) Liens
pursuant to the Related Documents.

Section 8.03. Other Indebtedness. The Borrower will not create, assume, incur, suffer
to exist or otherwise become or remain liable in respect of any Indebtedness other than (a) any
Indebtedness owing under this Agreement or any of the other Related Documents and (b) any
Indebtedness existing as of the date hereof and previously disclosed to the Lender in writing;

Section 8.04. Consolidations, Mergers, etc. The Borrower will not merge with or into,
or consolidate with, any other Person.

Section 8.05. Pensions Plans. The Borrower will not establish or become party to any
employee benefit plan of the type referred to in Section 6.09 hereof.

Section 8.06. Location of Borrower. The Borrower will not change its state of
organization unless it shall have given the Lender not less than 30 days’ prior written notice of
such change.

Section 8.07. Amendment of Organizational Documents. The Borrower will not, without
the prior written consent of the Lender, cause or permit any amendment, modification or waiver of
the charter or any governing document of the Borrower or any Guarantor.

ARTICLE IX

EVENTS OF DEFAULT

Section 9.01. Events of Default. If any one or more of the following events (an
“Event of Default”) shall occur and be continuing, the Lender shall be entitled to exercise the
remedies set forth in Section 9.02 hereof.

(a) Any representation or warranty made or deemed made by the Borrower or any Guarantor in
this Agreement, any other Related Document or any certificate, financial statement or other
document delivered pursuant hereto or thereto shall be false in any material respect on any date as
of which made or deemed made; or

(b) Failure of the Borrower to pay when due (whether at the scheduled due date therefor, on
prepayment or otherwise) (i) the principal of each Loan, (ii) interest on each Loan or (iii) any
other amount payable hereunder receipt of notice thereof; or

(c) Default in the performance or observance of any covenant or obligation of the Borrower or
any Guarantor, as the case may be, contained in Section 7.02, 7.03 or 7.07 or in Article VIII
hereof or in the Security Pledge Agreement; or

(d) Default in the performance or observance of any other covenant or obligation of the
Borrower pursuant to this Agreement or any other Related Document, and the continuance of such
default for thirty (30) days after written notice from the Lender to the Borrower; or

(e) The entry of a decree or order for relief in respect of the Borrower or any Guarantor by a
court having jurisdiction in the premises, or the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Borrower or any Guarantor or of
any substantial part of its property, or ordering the winding up or liquidation of its affairs, in
an involuntary case under the Federal bankruptcy laws, as now or hereafter constituted, or any
other applicable Federal or state bankruptcy, insolvency or other similar law; or the commencement
against the Borrower or any Guarantor of an involuntary case under the Federal bankruptcy laws, as
now or hereafter constituted, or any other applicable Federal or state bankruptcy, insolvency or
other similar law, and the continuance of any such case unstayed and in effect for a period of 30
consecutive days; or

(f) The commencement by the Borrower or any Guarantor of a voluntary case under the Federal
bankruptcy laws, as now or hereafter constituted, or any other applicable Federal or state
bankruptcy, insolvency or other similar law, or the consent by it to the entry of an order for
relief in an involuntary case under any such law or the consent by it to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Borrower or any Guarantor or of any substantial part of its property, or
the making by it of a general assignment for the benefit of creditors, or the failure of the
Borrower or any Guarantor generally to pay its debts as such debts become due or the taking of any
partnership action in furtherance of any of the foregoing; or

(g) A final judgment or order for the payment of money not covered by insurance shall be
rendered against the Borrower or any Guarantor in an aggregate amount in excess of $1,000,000 (or
the equivalent thereof in any other currency) and the same shall remain undischarged for a period
of 45 days during which execution of such judgment or order shall not be effectively stayed; or

(h) Default shall be made with respect to any payment, when due, of any Indebtedness in excess
of $5,000,000 (other than the Obligations or Indebtedness in default as of the date hereof of which
the Lender has been advised in writing prior to the making of the initial Loan) of the Borrower, or
any other default shall occur with respect to the Borrower’s Indebtedness, if the effect of such
default is to accelerate the maturity of such Indebtedness or to permit (with or without the giving
of notice, the lapse of time or both) the holder or holders thereof (or any trustee or agent of
their behalf) to cause such Indebtedness to become due prior to its stated maturity or to terminate
any commitment with respect to such Indebtedness and such default shall not be remedied, cured,
waived or consented to within the period of grace with respect thereto, or any other circumstance
arises (other than the mere passage of time) by reason of which the Borrower is required to prepay,
repurchase, redeem or otherwise defease or offer to holders of Indebtedness of any such Person, the
opportunity to have prepaid, repurchased, redeemed or defeased, any such Indebtedness; or any such
Indebtedness shall become, or be declared to be, due and payable prior to its stated maturity; or

(i) Either the Guarantee Agreement or the Security Pledge Agreement shall cease to be in full
force and effect or any Security Provider shall so assert.

Section 9.02. Default Remedies. If any Event of Default shall occur and be
continuing, then and in every such event, and at any time thereafter during the continuance of such
Event of Default, the Lender may, by notice to the Borrower, take one or more of the following
actions: (a) reduce the Commitment to zero and (b) declare the Loans to be forthwith due and
payable, whereupon the Loans shall become forthwith due and payable both as to principal and
interest together with all other amounts payable by the Borrower to the Lender under this Agreement
or any other Related Document to which it is a party, without presentment, demand, protest or any
other notice of any kind, all of which are expressly waived; provided that if the Event of Default
set forth in paragraph (e) or (f) of Section 9.01 hereof shall occur with respect to the Borrower,
then without any notice to the Borrower or any other act by any other Person, the Commitment shall
be automatically reduced to zero and the Loans, interest thereon and all such other amounts shall
become forthwith due and payable, all without presentment, demand, protest or notice of any kind,
all of which are expressly waived.

Section 9.03. Setoff. The Lender is hereby authorized at any time and from time to
time, upon the occurrence and during the continuance of any Event of Default, without prior notice
to the Borrower, to the fullest extent permitted by law, to set off and apply any and all balances,
credits, deposits (general or special, time or demand, provisional or final), accounts or monies at
any time held and other indebtedness at any time owing by the Lender at any of its branches or
affiliates to or for the account of the Borrower against any and all of the amounts owing by the
Borrower under this Agreement or the other Related Documents to which it is a party, whether or not
the Lender shall have made any demand hereunder or thereunder. The rights of the Lender under this
Section 9.03 are in addition to, and do not derogate from or impair, other rights and remedies
(including, without limitation, other rights of setoff) which the Lender may have.

Section 9.04. Default Interest. Notwithstanding any other provision of this Agreement
to the contrary, if the Borrower shall fail to pay any amount owing to the Lender under this
Agreement or any other Related Document to which the Borrower is a party when due (whether at
stated due date, on acceleration or otherwise), then the Borrower will pay interest to the Lender
payable on demand, on the amount in default from the date such payment became due until payment in
full at a rate equal to the rate which is 2% per annum over the rate then payable pursuant to
Section 2.05 hereof.

Section 9.05. Funding Indemnities. The Borrower will indemnify the Lender against,
and on demand reimburse the Lender for, any loss, penalty or expense which the Lender may pay or
incur (including, without limitation, any loss or expense incurred by reason of the relending,
depositing or other employment of funds acquired by the Lender to fund any Loan) as a result of any
acceleration of any Loan pursuant to Section 9.02 hereof. The Lender shall furnish the Borrower
with a certificate setting forth the basis for determining any additional amount to be paid to it
hereunder, and such certificate shall be conclusive, absent manifest error, as to the contents
thereof. Notwithstanding anything in this Agreement to the contrary, the provisions of this
Section 9.05 shall survive termination of this Agreement.

ARTICLE X

GENERAL PROVISIONS

Section 10.01. Assignment, Amendments and Waivers.

(a) The Borrower may not assign its rights or obligations under this Agreement without the
prior written consent of the Lender which consent may be given or withheld in the sole and absolute
discretion of the Lender. The Lender may at any time assign all or a part of its rights and
obligations under this Agreement to a bank or financial institution (an “Assignee”). Any
such assignment shall be made pursuant to an assignment agreement between such Assignee and the
Lender. Such assignment agreement shall be executed by such Assignee and the Lender and shall be
delivered to the Borrower for acceptance before the proposed effective date of such assignment.
Upon such execution and delivery and acceptance, from and after the effective date specified in
such assignment agreement, (x) the Assignee thereunder shall be a party hereto and have the rights
and obligations of the Lender hereunder and (y) the transferor Lender thereunder shall be released
from its obligations under this Agreement from and after such time. On or prior to the effective
date specified in such assignment agreement, the Borrower, at its own expense, shall execute and
deliver to such transferor Lender in exchange for the Note previously delivered to the transferor
Lender a new Note to the order of such Assignee in an amount equal to the principal amount of the
original Note (subject to any reduction thereof pursuant to Section 2.08 hereof). Each such new
Note shall be dated the effective date of such assignment and shall otherwise be in the form of the
Note replaced thereby. Subject to the foregoing, all provisions contained in this Agreement or any
document or agreement referred to herein or relating hereto shall inure to the benefit of, and
shall be binding upon, the Borrower, the Lender and their respective successors and permitted
assigns.

(b) The Lender may from time to time upon prior written notice to the Borrower change the
Lending Office of the Lender at which any Loan is made or carried; provided that if at the time of
any change from one Lending Office to another the effect thereof would be to increase any amount
payable by the Borrower under this Agreement then such change shall not be made without the prior
written consent of the Borrower.

(c) The Lender may grant one or more financial institutions (each, a “Participant”) a
participation or participations in all or any part of the Lender’s rights and benefits under this
Agreement or any other Related Document (a “Participation”). In the event of any such
grant by the Lender of a Participation to a Participant, the Lender shall remain responsible for
the performance of its obligations hereunder, and the Borrower shall continue to deal solely and
directly with the Lender in connection with the Lender’s rights and obligations under this
Agreement. Any agreement pursuant to which the Lender may grant such a participating interest
shall provide that the Lender shall retain the sole right and responsibility to enforce the
obligations of the Borrower hereunder. The Borrower agrees that each Participant shall, to the
extent of its Participation, be entitled to the benefits of Sections 3.01 and 9.02 hereof as if
such Participant were the Lender; provided, however, that the amount of such
benefit shall be limited to the amount in respect of the interest sold to which the Lender would
have been entitled had it not sold such interest.

(d) Notwithstanding anything to the contrary contained in this Agreement, the Lender may
pledge, hypothecate or otherwise grant a security interest in all or any part of its rights
hereunder or under its Note to any Federal Reserve Bank; provided that no such pledge,
hypothecation or grant shall relieve the Lender of any of its obligations under this Agreement.

Section 10.02. Notices. All notices, requests, demands and other communications to
any party hereunder shall be in writing (including telex, telecopier or similar writing) and shall
be given to such party at its address, telex or telecopier number set forth below or such other
address or telex or telecopier number as such party may hereafter specify by notice to the other
parties listed below.

If to the Lender:

Arco Capital Corporation Ltd.

City View Plaza, Suite 800 Road 165 Km 1.2

Guaynabo, PR 00968

Attention: Juan Carlos Bou, General Counsel

Telecopier: (787) 993-9651

Telephone: (787) 993-9650

If to the Borrower:

Luminent Mortgage Capital, Inc.

2005 Market Street, 21st Floor

Philadelphia, PA 19103-2337

Attention: Trez Moore, Chief Executive Officer

Telecopier: (215) 564-5990

Telephone: (215) 564-5904

Each such notice, request or other communication shall be effective when actually received.

Section 10.03. Expenses; Indemnification. The Borrower agrees to pay all reasonable
out-of-pocket costs and expenses, including the reasonable fees and disbursements of counsel,
incurred by the Lender in connection with the preparation, execution and delivery of this Agreement
and the other Related Documents and any amendments and waivers hereof or thereof. The Borrower
also agrees to pay all reasonable out-of-pocket costs and expenses, including the reasonable fees
and disbursements of counsel, incurred by the Lender in connection with the administration and
enforcement of this Agreement or any of the other Related Documents and the collection of any
amounts owing hereunder or thereunder. In addition, the Borrower will indemnify the Lender
against, and on demand reimburse the Lender for, any and all liabilities, obligations, losses,
damages, penalties, stamp and other similar taxes, actions, judgments, costs expenses or
disbursements of any kind or nature whatsoever which may at any time be imposed on, incurred by or
asserted against the Lender in any way relating to or arising out of this Agreement;
provided that the Borrower shall not be liable for any of the foregoing to the extent they
arise from the gross negligence or willful misconduct of the Lender. Notwithstanding anything in
this Agreement to the contrary, the provisions of this Section 10.03 shall survive the termination
of this Agreement.

Section 10.04. Cumulative Rights; No Waiver. The rights, powers and remedies of the
Lender hereunder are cumulative and in addition to all rights, powers and remedies provided under
any and all agreements between the Borrower and the Lender relating hereto, at law, in equity or
otherwise. Neither any delay nor any omission by the Lender to exercise any right, power or remedy
shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any
other or further exercise thereof or any exercise of any other right, power or remedy.

Section 10.05. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of which counterparts,
when executed and delivered, shall be deemed an original and all of which counterparts, taken
together, shall constitute one and the same Agreement.

Section 10.06. Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other jurisdiction.

Section 10.07. Headings. The Article and Section headings in this Agreement are for
convenience of reference only and shall not affect the interpretation hereof.

Section 10.08. Governing Law; Jurisdiction; Consent to Service of Process.

(a) This Agreement shall be construed in accordance with and governed by the law of the State
of New York, United States of America, without reference to principles of conflicts of law other
than Section 5-1401 and Section 5-1402 of the General Obligations Law of the State of New York.

(b) The Borrower hereby irrevocably and unconditionally submits, for itself and its property,
to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding
may be heard and determined in such New York State or, to the extent permitted by law, in such
Federal court. Each of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law. Nothing in this Agreement shall affect any right that the
Lender may otherwise have to bring any action or proceeding relating to this Agreement against the
Borrower or its properties in the courts of any jurisdiction.

(c) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may
legally and effectively do so, any objection which it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this Agreement in any court
referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.

(d) Each party to this Agreement irrevocably consents to service of process in the manner
provided for notices in Section 10.02. Nothing in this Agreement will affect the right of any
party to this Agreement to serve process in any other manner permitted by law.

Section 10.09. Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.

Section 10.10. Successors. This Agreement shall be binding on and inure to the
benefit of each of the Borrower and the Lender and their respective successors and permitted
assigns. Notwithstanding anything herein to the contrary, the Borrower hereby acknowledges and
agrees that the Lender may merge with or into one or more financial institutions or otherwise
combine with one or more financial institutions to form a new entity (the “Merger”) and
that, immediately upon the consummation of the Merger and without any further action or consent
from any Person, (i) such new entity shall be entitled to and vested with all the rights and
obligations of the Lender hereunder and under each other Related Document to which the Lender is a
party, (ii) upon request of the Lender, the Borrower will issue a new Note made to the order of
such entity and (iii) all references herein and in each other Related Document to the term “Lender”
and any other term intending to refer to Arco Capital Corporation Ltd. shall be deemed to refer to
such new entity.

Section 10.11. Confidentiality. The Lender agrees to maintain the confidentiality of
the Information (as defined below), except that Information may be disclosed (a) to its and its
Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and
other advisors (it being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required
by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other
party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit,
action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject
to an agreement containing provisions substantially the same as those of this Section, to any
Participant in, or any prospective Participant in, any of its rights or obligations under this
Agreement, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes
publicly available other than as a result of a breach of this Section by it or (ii) becomes
available to the Lender on a nonconfidential basis from a source other than the Borrower. For the
purposes of this Section, “Information” means all information received from the Borrower
relating to the Borrower or its business, other than any such information that is available to the
Lender on a nonconfidential basis prior to disclosure by the Borrower; provided that, in
the case of information received from the Borrower after the date hereof, such information is
clearly identified at the time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section shall be considered to have complied
with its obligation to do so if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own confidential
information.

Section 10.12. USA Patriot Act. The Lender hereby notifies the Borrower that pursuant
to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October
26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the
Borrower, which information includes the name and address of the Borrower and other information
that will allow the Lender to identify the Borrower in accordance with the Act.

Section 10.13. Further Assurances. The Borrower expressly acknowledges and agrees to
enter into such other or further documents, and to take such other or further actions that may be
reasonably necessary or, in the reasonable opinion of the Lender, desirable in order to further and
more fully vest in the Lender all rights, interests, powers, benefits, privileges and advantages
conferred or intended to be conferred by this Agreement and the other Related Documents, including
to perfect, preserve or protect the liens and security interests created under any Related
Document.

[Remainder of page intentionally left blank; signature pages follow]

3

IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be duly
executed as of the date first above written.

LUMINENT MORTGAGE CAPITAL, INC.

By: /s/ S. TREZEVANT MOORE, JR. 

Name: S. Trezevant Moore, Jr.

Title: President and Chief Executive Officer

ARCO CAPITAL CORPORATION LTD.

By: /s/ JAY JOHNSTON 

Name: Jay Johnston

Title: Chief Executive Officer

4

Exhibit A

Form of Note

LUMINENT MORTGAGE CAPITAL, INC.

NOTE

New York, New York

$     , 200_

FOR VALUE RECEIVED, LUMINENT MORTGAGE CAPITAL, INC., a Maryland corporation (the “Borrower”),
promises to pay to the order of Arco Capital Corporation Ltd. (the “Lender”), at the time or times
which shall be determined by the provisions of the Credit Agreement referred to below,      
DOLLARS ($     ) or, if less, the unpaid principal amount of the Loan evidenced by this Note
and made by the Lender to the Borrower under the Credit Agreement referred to below.

The Borrower also promises to pay interest on the unpaid principal amount hereof from time to
time outstanding, from the date such amount is advanced by the Lender to the Borrower until paid in
full at the rates and at the times which shall be determined in accordance with the provisions of
the Credit Agreement (as amended or otherwise modified from time to time, the “Credit Agreement”)
dated as of August      , 2007 between the Borrower and the Lender.

The date and amount of the Loan evidenced by this Note and, each repayment and prepayment of
principal thereof, shall be endorsed by the Lender on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof; provided that the failure to make
or any error in making any such endorsement on such schedule shall not limit, extinguish or in any
way modify the obligation of the Borrower to repay the Loan evidenced by this Note strictly in
accordance with the Credit Agreement.

This Note is issued pursuant to and entitled to the benefits of the Credit Agreement, to which
reference is hereby made for a more complete statement of the terms and conditions under which the
Loans evidenced hereby and thereby are made and are to be repaid. Capitalized terms used herein
without definition shall have the meanings set forth in the Credit Agreement.

All payments of principal and interest in respect of this Note shall be made in lawful
currency of the United States of America without defense, set-off or counterclaim, in immediately
available or same day funds, delivered to the Lender not later than 2:00 p.m. (New York City time)
on the date due, at its address referred to in the Credit Agreement or to such other location as
the Lender may designate from time to time.

This Note may be transferred by the Lender without the prior written consent of the Borrower.
Until notified in writing of the transfer of this Note, the Borrower shall be entitled to deem the
Lender as the holder of this Note. The Lender and any subsequent holder of this Note agrees that
before disposing of this Note or any part hereof it will make a notation hereon of all principal
payments previously made hereunder and of the date to which interest hereon has been paid;
provided, however, that the failure to make a notation of any payment made on this Note shall not
limit or otherwise affect the obligation of the Borrower hereunder with respect to payments of
principal and interest on this Note.

This Note is subject to prepayment at the option of the Borrower as provided in the Credit
Agreement. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount
of this Note may become, or may be declared to be, due and payable in the manner, upon the
conditions and with the effect provided in the Credit Agreement.

No reference herein to the Credit Agreement and no provision of this Note or the Credit
Agreement shall alter or impair the obligation of the Borrower, which is absolute and
unconditional, to pay the principal of and interest on this Note at the place, at the respective
times, and in the currency herein prescribed.

The Borrower hereby waives diligence, presentment, protest, demand and notice of every kind
and, to the full extent permitted by law, the right to plead any statute of limitations as a
defense to any demand hereunder.

THIS NOTE SHALL BE GOVERNED BY AND INTERPRETED IN ALL RESPECTS IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, UNITED STATES OF AMERICA, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF
LAW OTHER THAN SECTION 5-1401 AND SECTION 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK.

IN WITNESS WHEREOF, the Borrower has caused this Note to be executed and delivered by its duly
authorized officer, as of the day and year first above written.

LUMINENT MORTGAGE CAPITAL, INC.

By:     

Name:

Title:

5

	 	 	 	 	 	 	 	 	 	 	 
	Schedule of Loans
	Date of Loan

	 	Principal Amount of

Loan
	 	Duration of

Interest Period
	 	Payments or

Prepayments of

Principal
	 	

Balance Outstanding
	 	

Notation Made By

6

Exhibit B

Form of Notice of Borrowing

LUMINENT MORTGAGE CAPITAL, INC.

NOTICE OF BORROWING

Date:      

Telecopier: [?]

Arco Capital Corporation Ltd.

Attention: [?]

Gentlemen:

Pursuant to Section 2.02 of the Credit Agreement (the “Credit Agreement”), dated as of August
21, 2007, between LUMINENT MORTGAGE CAPITAL, INC. and you, we hereby give you irrevocable notice
that we request a Loan as follows:

1. Amount of Loan: $     .

2. Date of Loan:      .

3. Purpose of proposed Loan:      .

4. Account to which proceeds of Loan should be transferred, with all necessary wire
information:      .

The undersigned hereby certifies that the following statements are true and correct on the
date hereof and will be true and correct on the date the Loan is made:

A. the representations and warranties contained in Article VI of the Credit Agreement are true
and correct in all respects as of the date hereof; and

B. no Default has occurred and is continuing.

Capitalized terms used herein but not defined shall have the meanings given to them in the
Credit Agreement.

LUMINENT MORTGAGE CAPITAL, INC.

By:     

Name:

Title:

7

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