Document:

EX-10.1

 

Exhibit 10.1

 

CREDIT AGREEMENT

dated as of

September 5, 2007

among

HEARTLAND PAYMENT SYSTEMS, INC.

a Delaware corporation

The Lenders Party Hereto

and

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

 

J.P. MORGAN SECURITIES INC.,

as Sole Bookrunner and Sole Lead Arranger;

KEYBANK NATIONAL ASSOCIATION,

as a Lender and Syndication Agent

SUNTRUST BANK,

as a Lender and Documentation Agent

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	ARTICLE I. Definitions
	 	 	1	 
	 
	 	 	 	 
	SECTION 1.01. Defined Terms
	 	 	1	 
	SECTION 1.02. Classification of Loans and Borrowings
	 	 	18	 
	SECTION 1.03. Terms Generally
	 	 	18	 
	SECTION 1.04. Accounting Terms; GAAP
	 	 	18	 
	 
	 	 	 	 
	ARTICLE II. The Credits
	 	 	19	 
	 
	 	 	 	 
	SECTION 2.01. Commitments
	 	 	19	 
	SECTION 2.02. Loans and Borrowings
	 	 	19	 
	SECTION 2.03. Requests for Revolving Borrowings
	 	 	20	 
	SECTION 2.04. Swingline Loans
	 	 	20	 
	SECTION 2.05. Letters of Credit
	 	 	21	 
	SECTION 2.06. Funding of Borrowings
	 	 	25	 
	SECTION 2.07. Interest Elections
	 	 	26	 
	SECTION 2.08. Termination, Reduction, and Increase of Commitments
	 	 	27	 
	SECTION 2.09. Repayment of Loans; Evidence of Debt
	 	 	28	 
	SECTION 2.10. Prepayment of Loans
	 	 	29	 
	SECTION 2.11. Fees
	 	 	29	 
	SECTION 2.12. Interest
	 	 	30	 
	SECTION 2.13. Alternate Rate of Interest
	 	 	31	 
	SECTION 2.14. Increased Costs
	 	 	31	 
	SECTION 2.15. Break Funding Payments
	 	 	33	 
	SECTION 2.16. Taxes
	 	 	33	 
	SECTION 2.17. Payments Generally; Pro Rata Treatment; Sharing of Set-offs
	 	 	34	 
	SECTION 2.18. Mitigation Obligations; Replacement of Lenders
	 	 	36	 
	 
	 	 	 	 
	ARTICLE III. Representations and Warranties
	 	 	37	 
	 
	 	 	 	 
	SECTION 3.01. Organization; Powers
	 	 	37	 
	SECTION 3.02. Authorization; Enforceability
	 	 	37	 
	SECTION 3.03. Governmental Approvals; No Conflicts
	 	 	37	 
	SECTION 3.04. Financial Condition; No Material Adverse Change
	 	 	38	 
	SECTION 3.05. Properties
	 	 	38	 
	SECTION 3.06. Litigation and Environmental Matters
	 	 	38	 
	SECTION 3.07. Compliance with Laws and Agreements
	 	 	39	 
	SECTION 3.08. Investment Company Status
	 	 	39	 
	SECTION 3.09. Taxes
	 	 	39	 
	SECTION 3.10. ERISA
	 	 	39	 
	SECTION 3.11. Disclosure
	 	 	39	 
	 
	 	 	 	 
	ARTICLE IV. Conditions
	 	 	39	 
	 
	 	 	 	 
	SECTION 4.01. Effective Date
	 	 	39	 

- i - 

 

	 	 	 	 	 
	 	 	Page
	SECTION 4.02. Each Credit Event
	 	 	41	 
	 
	 	 	 	 
	ARTICLE V. Affirmative Covenants
	 	 	42	 
	 
	 	 	 	 
	SECTION 5.01. Financial Statements; Ratings Change and Other Information
	 	 	42	 
	SECTION 5.02. Notices of Material Events
	 	 	43	 
	SECTION 5.03. Existence; Conduct of Business
	 	 	44	 
	SECTION 5.04. Payment of Obligations
	 	 	44	 
	SECTION 5.05. Maintenance of Properties; Insurance
	 	 	44	 
	SECTION 5.06. Books and Records; Inspection Rights
	 	 	44	 
	SECTION 5.07. Compliance with Laws
	 	 	44	 
	SECTION 5.08. Use of Proceeds and Letters of Credit
	 	 	45	 
	SECTION 5.09. Additional Guarantors
	 	 	45	 
	 
	 	 	 	 
	ARTICLE VI. Negative Covenants
	 	 	45	 
	 
	 	 	 	 
	SECTION 6.01. Indebtedness
	 	 	45	 
	SECTION 6.02. Liens
	 	 	46	 
	SECTION 6.03. Fundamental Changes
	 	 	47	 
	SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions
	 	 	47	 
	SECTION 6.05. Swap Agreements
	 	 	48	 
	SECTION 6.06. Restricted Payments
	 	 	48	 
	SECTION 6.07. Transactions with Affiliates
	 	 	49	 
	SECTION 6.08. Restrictive Agreements
	 	 	49	 
	SECTION 6.09. Leverage Ratios
	 	 	50	 
	SECTION 6.10. Fixed Charge Coverage Ratio
	 	 	50	 
	SECTION 6.11. Asset Sales
	 	 	50	 
	SECTION 6.12. Sale and Leaseback Transactions
	 	 	51	 
	 
	 	 	 	 
	ARTICLE VII. Events of Default
	 	 	51	 
	 
	 	 	 	 
	ARTICLE VIII. The Administrative Agent
	 	 	53	 
	 
	 	 	 	 
	ARTICLE IX. Miscellaneous
	 	 	55	 
	 
	 	 	 	 
	SECTION 9.01. Notices
	 	 	55	 
	SECTION 9.02. Waivers; Amendments
	 	 	56	 
	SECTION 9.03. Expenses; Indemnity; Damage Waiver
	 	 	57	 
	SECTION 9.04. Successors and Assigns
	 	 	58	 
	SECTION 9.05. Survival
	 	 	61	 
	SECTION 9.06. Counterparts; Integration; Effectiveness
	 	 	62	 
	SECTION 9.07. Severability
	 	 	62	 
	SECTION 9.08. Right of Setoff
	 	 	62	 
	SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process
	 	 	62	 
	SECTION 9.10. WAIVER OF JURY TRIAL
	 	 	63	 
	SECTION 9.11. Headings
	 	 	63	 
	SECTION 9.12. Confidentiality
	 	 	63	 
	SECTION 9.13. Interest Rate Limitation
	 	 	64	 
	SECTION 9.14. USA PATRIOT ACT
	 	 	64	 

- ii - 

 

SCHEDULES:

Schedule 2.01 — Commitments

Schedule 3.06 — Disclosed Matters

Schedule 6.01 — Existing Indebtedness

Schedule 6.02 — Existing Liens

Schedule 6.08 — Existing Restrictions

EXHIBITS:

Exhibit A — Form of Assignment and Assumption (with Annex I)

Exhibit B — Form of Opinion of Borrower’s Counsel

Exhibit C — Form of Guaranty

Exhibit D — Form of Borrowing Request

Exhibit E — Form of Interest Election Request

Exhibit F — Form of Promissory Note

Exhibit G — Form of Compliance Certificate

Exhibit H — Investment Standards

- iii - 

 

          CREDIT AGREEMENT dated as of September 5, 2007, among HEARTLAND PAYMENT SYSTEMS, INC., a
Delaware corporation, the LENDERS party hereto from time to time, and JPMORGAN CHASE BANK, N.A., as
Administrative Agent.

          The parties hereto agree as follows:

ARTICLE I.

Definitions

               SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the
meanings specified below:

          “ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan,
or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to
the Alternate Base Rate.

          “Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to
(a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.

          “Administrative Agent” means JPMorgan Chase Bank, N.A., in its capacity as
administrative agent for the Lenders hereunder.

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

          “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.

          “Alternate Base Rate” means, for any day, a rate per annum equal to the greatest of
(a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and
(c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the
Alternate Base Rate due to a change in the Prime Rate, the Base CD Rate or the Federal Funds
Effective Rate shall be effective from and including the effective date of such change in the Prime
Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively.

          “Applicable Margin” means the percentage per annum set forth in the following table,
based on the Total Leverage Ratio then in effect for the Borrower; provided that on the Effective
Date the Revolving Loans shall bear interest at a rate equal to the Adjusted LIBO Rate plus 0.50%
or the Alternate Base Rate minus 0.50%.

1

 

	 	 	 	 	 	 	 	 	 
	Total	 	Applicable	 	Applicable
	Leverage	 	Margin for ABR	 	Margin for
	Ratio	 	Loans	 	Eurodollar Loans
	Greater than or equal to 2.0 to 1.00
	 	 	0	%	 	 	1.25	%
	Less than 2.0 to 1.0 and greater than
or equal to 1.5 to 1.0
	 	 	0	%	 	 	1.00	%
	Less than 1.5 to 1.0 and greater than
or equal to 1.0 to 1.0
	 	 	0	%	 	 	0.75	%
	Less than 1.0 to 1.0
	 	 	-0.50	%	 	 	0.50	%

          The Applicable Margin shall be determined in accordance with the foregoing table based on the
Borrower’s most recent annual or quarterly financial statements delivered pursuant to this
Agreement (the “Financials”). Adjustments, if any, to the Applicable Margin shall be
effective on the date that the Administrative Agent has received the applicable Financials. If the
Borrower fails to deliver the Financials to the Administrative Agent at the time required pursuant
to this Agreement, then the Applicable Margin shall be the highest Applicable Margin set forth in
the foregoing table until the date that such Financials are so delivered.

          “Applicable Percentage” means, with respect to any Lender, the percentage of the total
Commitments represented by such Lender’s Commitment. If the Commitments have terminated or
expired, the Applicable Percentages shall be determined based upon the Commitments most recently in
effect, giving effect to any assignments.

          “Approved Fund” has the meaning assigned to such term in Section 9.04.

          “Assessment Rate” means, for any day, the annual assessment rate in effect on such day
that is payable by a member of the Bank Insurance Fund classified as “well capitalized” and within
supervisory subgroup “B” (or a comparable successor risk classification) within the meaning of 12
C.F.R. Part 327 (or any successor provision) to the Federal Deposit Insurance Corporation for
insurance by such Corporation of time deposits made in dollars at the offices of such member in the
United States; provided that if, as a result of any change in any law, rule or regulation,
it is no longer possible to determine the Assessment Rate as aforesaid, then the Assessment Rate
shall be such annual rate as shall be determined by the Administrative Agent to be representative
of the cost of such insurance to the Lenders.

          “Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required by Section
9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other
form approved by the Administrative Agent.

2

 

          “Availability Period” means the period from and including the Effective Date to but
excluding the Revolving Credit Termination Date.

          “Base CD Rate” means the sum of (a) the Three Month Secondary CD Rate multiplied by
the Statutory Reserve Rate plus (b) the Assessment Rate.

          “Board” means the Board of Governors of the Federal Reserve System of the United
States of America.

          “Borrower” means Heartland Payment Systems, Inc., a Delaware corporation.

          “Borrowing” means (a) Revolving Loans of the same Type, made, converted or continued
on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in
effect, or (b) a Swingline Loan.

          “Borrowing Request” means a request by the Borrower for a Revolving Borrowing in
accordance with Section 2.03, in the form of Exhibit D or any other form approved
by the Administrative Agent.

          “Business Day” means any day that is not a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to remain closed;
provided that, when used in connection with a Eurodollar Loan, the term “Business
Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in
the London interbank market.

          “Capital Expenditures” means, without duplication, any expenditure or commitment to
expend money for any purchase or other acquisition of any asset which would be classified as a
fixed or capital asset on a consolidated balance sheet of the Borrower and its Subsidiaries
prepared in accordance with GAAP.

          “Capital Lease Obligations” of any Person means the obligations of such Person to pay
rent or other amounts under any lease of (or other arrangement conveying the right to use) real or
personal property, or a combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of
such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

          “Change in Control” means (a) the acquisition of ownership, directly or indirectly,
beneficially or of record, by any Person or group (within the meaning of the Securities Exchange
Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the
date hereof) of Equity Interests representing more than 35% of the aggregate ordinary voting power
represented by the issued and outstanding Equity Interests of the Borrower; (b) occupation of a
majority of the seats (other than vacant seats) on the board of directors of the Borrower by
Persons who were neither (i) nominated by the board of directors of the Borrower nor (ii) appointed
by directors so nominated; or (c) the acquisition of direct or indirect Control of the Borrower by
any Person or group.

3

 

          “Change in Law” means (a) the adoption of any law, rule or regulation after the date
of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or
application thereof by any Governmental Authority after the date of this Agreement or (c)
compliance by any Lender or the Issuing Bank (or, for purposes of Section 2.14(b), by any
lending office of such Lender or by such Lender’s or the Issuing Bank’s holding company, if any)
with any request, guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.

          “Class”, when used in reference to any Loan or Borrowing, refers to whether such Loan,
or the Loans comprising such Borrowing, are Revolving Loans or Swingline Loans.

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

          “Commitment” means, with respect to each Lender, the commitment of such Lender to make
Revolving Loans and to acquire participations in Letters of Credit and Swingline Loans hereunder,
expressed as an amount representing the maximum aggregate amount of such Lender’s Revolving Credit
Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section
2.08, (b) increased from time to time pursuant to Section 2.08(d), or (c) reduced or increased
from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04.
The initial amount of each Lender’s Commitment is set forth on Schedule 2.01, or in the
Assignment and Assumption pursuant to which such Lender shall have assumed its Commitment, as
applicable. The initial aggregate amount of the Lenders’ Commitments is $50,000,000.

          “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” and “Controlled”
have meanings correlative thereto.

          “Customer Acquisition Costs” means cash customer acquisition costs paid during any
period by Borrower consisting of (i) bonus payments in the ordinary course of business made to
relationship managers and sales managers in the sales workforce of the Borrower for the
establishment of new merchant relationships; and (ii) payments made to buy out commissions of sales
employees of Borrower.

          “Default” means any event or condition which constitutes an Event of Default or which
upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

          “Disclosed Matters” means the actions, suits and proceedings and the environmental
matters disclosed in Schedule 3.06, which Schedule 3.06 shall be deemed to be
automatically amended to include any action, suit or proceeding or environmental matter as to which
notice is given pursuant to Section 5.02.

          “Dividends” means cash dividends on Equity Interests in Borrower paid by the Borrower
during the relevant period.

          “dollars” or “$” refers to lawful money of the United States of America.

4

 

          “Earn-Out Obligations” shall mean, with respect to any Person, obligations of such
Person that are recognized under GAAP as a liability of such Person, payable in cash or which may
be payable in cash at the seller’s or obligee’s option arising from the acquisition of a business
or a line of business (whether pursuant to an acquisition of Equity Interests or assets, the
consummation of a merger or consolidation or otherwise) and payable to the seller or sellers
thereof.

          “EBITDA” means, for any period, Net Income for such period plus (a) without
duplication and to the extent deducted in determining Net Income for such period, the sum of (i)
Interest Expense for such period, (ii) expense for Taxes for such period net of tax refunds, (iii)
all FAS 123R expenses for such period, and (iv) all amounts attributable to depreciation and
amortization expense of the Borrower and the Subsidiaries for such period, minus (b)
without duplication and to the extent included in Net Income, any extraordinary gains, all
calculated for the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP.

          “Effective Date” means the date on which the conditions specified in Section
4.01 are satisfied (or waived in accordance with Section 9.02).

          “Environmental Laws” means all laws, rules, regulations, codes, ordinances, orders,
decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into
by any Governmental Authority, relating in any way to the environment, preservation or reclamation
of natural resources, the management, release or threatened release of any Hazardous Material or to
health and safety matters.

          “Environmental Liability” means any liability, contingent or otherwise (including any
liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the
Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any
Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or
threatened release of any Hazardous Materials into the environment or (e) any contract, agreement
or other consensual arrangement pursuant to which liability is assumed or imposed with respect to
any of the foregoing.

          “Equity Interests” means shares of capital stock, partnership interests, membership
interests in a limited liability company, beneficial interests in a trust or other equity ownership
interests in a Person, and any warrants, options or other rights entitling the holder thereof to
purchase or acquire any such equity interest.

          “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from
time to time.

          “ERISA Affiliate” means any trade or business (whether or not incorporated) that,
together with the Borrower, 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.

5

 

          “ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or
the regulations issued thereunder with respect to a Plan (other than an event for which the 30 day
notice period is waived); (b) the existence with respect to any Plan of an “accumulated funding
deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived;
(c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application
for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the
Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to
the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC
or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to
appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA
Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or
Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the
receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is,
or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

          “Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by
reference to the Adjusted LIBO Rate.

          “Event of Default” has the meaning assigned to such term in Article VII.

          “Excluded Taxes” means, with respect to the Administrative Agent, any Lender, the
Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of
the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income
by the United States of America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any Lender, in which its
applicable lending office is located, (b) any branch profits taxes imposed by the United States of
America or any similar tax imposed by any other jurisdiction in which the Borrower is located and
(c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower
under Section 2.18(b)), any withholding tax that is imposed on amounts payable to such
Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a
new lending office) or is attributable to such Foreign Lender’s failure to comply with Section
2.16(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled,
at the time of designation of a new lending office (or assignment), to receive additional amounts
from the Borrower with respect to such withholding tax pursuant to Section 2.16(a).

          “Facility Fee Rate” means the applicable percentage rate per annum set forth in the
following table, based on the Total Leverage Ratio then in effect for the Borrower; provided that
on the Effective Date, the Facility Fee Rate shall initially be 0.125% per annum.

6

 

	 	 	 	 	 
	Total	 	 
	Leverage	 	Facility Fee
	Ratio	 	Rate
	Greater than or equal to 2.0 to 1.00

	 	 	0.25	%
	Less than 2.0 to 1.0 and greater than or equal to 1.5 to 1.0

	 	 	0.20	%
	Less than 1.5 to 1.0 and greater than or equal to 1.0 to 1.0

	 	 	0.15	%
	Less than 1.0 to 1.0

	 	 	0.125	%

          The Facility Fee Rate shall be determined in accordance with the foregoing table based on the
Borrower’s most recent annual or quarterly financial statements delivered pursuant to this
Agreement (the “Financials”). Adjustments, if any, to the related fees shall be effective
on the date that the Administrative Agent has received the applicable Financials. If the Borrower
fails to deliver the Financials to the Administrative Agent at the time required pursuant to this
Agreement, then the Facility Fee Rate shall be the greatest Facility Fee Rate set forth in the
foregoing table until the date that such Financials are so delivered.

          “Federal Funds Effective Rate” means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received
by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

          “Financial Officer” means, as to any Person, the chief financial officer, principal
accounting officer, treasurer or controller of such Person.

          “Fixed Charges” means, for any period as to the Borrower and the Subsidiaries, and
without duplication, an amount equal to the sum of (a) cash Interest Expense, (b) scheduled
principal payments in respect of any Indebtedness (excluding any amounts owed by the Borrower or
its Subsidiaries to sponsoring banks for advances of Interchange Fees to merchants in the ordinary
course of business), and (c) payments made in respect of Taxes.

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

7

 

          “Funded Debt” means, at any time as to the Borrower and the Subsidiaries, and without
duplication, an amount equal to the sum of (a) the aggregate principal amount of all Loans
outstanding on such date, plus (b) the aggregate principal amount of drawings under Letters
of Credit issued hereunder which have not been reimbursed pursuant to Section 2.05 hereof,
plus (c) the aggregate principal amount of all Indebtedness of the Borrower and the
Subsidiaries of the following types (without duplication): (i) all obligations for borrowed money
and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar
instruments; (ii) any direct or contingent obligations arising under standby letters of credit;
(iii) Earn-Out Obligations; (iv) Capital Lease Obligations; (v) all obligations to pay the deferred
purchase price of property or services (but excluding current accounts payable arising in the
ordinary course of business which are not more than 90 days past due the original due date); and
(vi) obligations secured by (or for which the holder of such obligations has an existing right,
contingent or otherwise, to be secured by) a Lien on property owned or being purchased by Borrower
or any of the Subsidiaries (including obligations arising under conditional sales or other title
retention agreements), whether or not such obligations shall have been assumed by Borrower or any
of its Subsidiaries or is limited in recourse; provided, that for the purposes of (vi)
hereunder, the amount of such Funded Debt shall be limited to the greater of (x) the amount of such
Funded Debt as to which there is recourse to such Person and (y) the fair market value of the
property which is subject to such Lien. Notwithstanding anything to the contrary above, any
amounts owed by the Borrower or its Subsidiaries to sponsoring banks for advances of Interchange
Fees to merchants in the ordinary course of business shall not constitute “Funded Debt”.

          “GAAP” means generally accepted accounting principles in the United States of America.

          “Governmental Authority” means the government of the United States of America, any
other nation or any political subdivision thereof, whether state or local, and any agency,
authority, instrumentality, regulatory body, court, central bank or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.

          “Guarantee” of or by any Person (as used in this definition, 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.

8

 

          “Guaranties” means collectively, the Guaranties executed by the Guarantors as of the
Effective Date hereof in the form of Exhibit C attached hereto, together with any other
Guaranties executed by the Guarantors hereafter Guaranteeing the Obligations. “Guaranty”
shall mean any of the Guaranties.

          “Guarantors” shall mean The Heartland Payroll Company, L.L.C., an Ohio limited
liability company and Debitek, Inc., a Delaware corporation, and any other direct or indirect
present or future domestic subsidiary of the Borrower. “Guarantor” shall mean any of the
Guarantors.

          “Hazardous Materials” means all explosive or radioactive substances or wastes and all
hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas,
infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to
any Environmental Law.

          “Indebtedness” of any Person means, without duplication, (a) all obligations of such
Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations
of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of
such Person upon which interest charges are customarily paid, (d) all obligations of such Person
under conditional sale or other title retention agreements relating to property acquired by such
Person, (e) all obligations of such Person in respect of the deferred purchase price of property or
services (excluding current accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the Indebtedness secured thereby has been assumed provided, that for
the purposes of (f) hereunder, the amount of such Indebtedness shall be limited to the greater of
(i) the amount of such Indebtedness as to which there is recourse to such Person and (ii) the fair
market value of the property which is subject to such Lien (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations,
contingent or otherwise, of such Person as an account party in respect of letters of credit and
letters of guaranty, (j) all obligations, contingent or otherwise, of such Person in respect of
bankers’ acceptances, (k) all payment or reimbursement obligations of the Borrower or its
Subsidiaries with respect to Payroll Deposits which are not paid or reimbursed by Borrower or its
Subsidiaries in the ordinary course of their business and consistent with past practices or in
accordance with any applicable contract terms governing such obligations, (l) all obligations under
any Swap Agreement and (m) all payment or reimbursement obligations with respect to amounts
withheld from merchants which are not paid or reimbursed by Borrower or its Subsidiaries in the
ordinary course of their business and consistent with past practices or in accordance with any
applicable contract terms governing such obligations. The Indebtedness of any Person shall include
the Indebtedness of any other entity (including any partnership in which such Person is a general
partner) to the extent such Person is liable therefor as a result of such Person’s ownership
interest in or other relationship with such entity, except to the extent the terms of such
Indebtedness provide that such Person is not liable therefor.

          “Indemnified Taxes” means Taxes other than Excluded Taxes.

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          “Intangible Assets” means those assets of the Borrower and its Subsidiaries which are
(a) deferred assets, other than prepaid insurance and prepaid taxes; (b) patents, copyrights,
trademarks, trade names, franchises, goodwill, experimental expenses; (c) unamortized debt discount
and expense; (d) write-ups of assets after the Effective Date, but specifically excluding any cash
deposited into a sinking fund for payment of debentures and similar instruments; and (e) other
similar assets which would be classified as intangible assets on a balance sheet of the Borrower
and its Subsidiaries, prepared in accordance with GAAP.

          “Interchange Fees” means fees payable by a merchant to a credit card issuer with
respect to Processing Transactions.

          “Interest Election Request” means a request by the Borrower to convert or continue a
Revolving Borrowing in accordance with Section 2.07, in the form of Exhibit E or
any other form approved by the Administrative Agent.

          “Interest Expense” means, with reference to any period, total interest expense
(including the interest component of Capital Lease Obligations) of the Borrower and its
Subsidiaries for such period with respect to all outstanding Indebtedness of the Borrower and its
Subsidiaries (including all commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers’ acceptance financing and net costs under Swap Agreements in respect
of interest rates to the extent such net costs are allocable to such period in accordance with
GAAP), calculated on a consolidated basis for the Borrower and its Subsidiaries for such period in
accordance with GAAP.

          “Interest Payment Date” means (a) with respect to any ABR Loan (other than a Swingline
Loan), the last day of each November, February, May, and August, (b) with respect to any Eurodollar
Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part
and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months’
duration, each day prior to the last day of such Interest Period that occurs at intervals of three
months’ duration after the first day of such Interest Period, and (c) with respect to any
Swingline Loan, the day that such Loan is required to be repaid.

          “Interest Period” means with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically corresponding day in the
calendar month that is one, two, three or six months thereafter, as the Borrower may elect;
provided, that (i) 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 and (ii) 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. For purposes hereof, the date of a Eurodollar
Borrowing initially shall be the date on which such Eurodollar Borrowing is made and, thereafter,
shall be the effective date of the most recent conversion or continuation of such Eurodollar
Borrowing.

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          “Investment Standards” means the investment standards of the Borrower attached hereto
as Exhibit H; as such Exhibit H shall automatically be updated to include any
amendments, restatements or other modifications to the Investment Standards which could not
reasonably be expected to have a Material Adverse Effect.

          “Issuing Bank” means JPMorgan Chase Bank, N.A., in its capacity as the issuer of
Letters of Credit hereunder, and its successors in such capacity as provided in Section
2.05(i). The Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to
be issued by Affiliates of the Issuing Bank, in which case the term “Issuing Bank” shall include
any such Affiliate with respect to Letters of Credit issued by such Affiliate.

          “LC Disbursement” means a payment made by the Issuing Bank pursuant to a Letter of
Credit.

          “LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all
outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements
that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of
any Lender at any time shall be its Applicable Percentage of the total LC Exposure at such time.

          “Lenders” means the Persons listed on Schedule 2.01 and any other Person that
shall have become a party hereto pursuant to an Assignment and Assumption, other than any such
Person that ceases to be a party hereto pursuant to an Assignment and Assumption. Unless the
context otherwise requires, the term “Lenders” includes the Swingline Lender.

          “Letter of Credit” means any letter of credit issued pursuant to this Agreement.

          “Letter of Credit Fee” means the letter of credit fee defined in Section
2.11(b) of this Agreement.

          “LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period,
the rate appearing on Page 3750 of the Dow Jones Market Service (the Telerate screen) (or on any
successor or substitute page of such Service, or any successor to or substitute for such Service,
providing rate quotations comparable to those currently provided on such page of such Service, as
determined by the Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00
a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate
for dollar deposits with a maturity comparable to such Interest Period. In the event that such
rate is not available at such time for any reason, then the “LIBO Rate” with respect to such
Eurodollar Borrowing for such Interest Period shall be the rate (rounded upwards, if necessary, to
the next 1/16 of 1%) at which dollar deposits of $5,000,000 and for a maturity comparable to such
Interest Period are offered by the principal London office of the Administrative Agent in
immediately available funds in the London interbank market at approximately 11:00 a.m., London
time, two Business Days prior to the commencement of such Interest Period.

          “Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien,
pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the

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interest of a vendor or a lessor under any conditional sale agreement, capital lease or title
retention agreement (or any financing lease having substantially the same economic effect as any of
the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call
or similar right of a third party with respect to such securities.

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

          “Loan Documents” means this Agreement, the Guaranties, and any other document executed
in connection herewith now or hereafter, including without limitation any Promissory Notes and
security agreements, as any of the foregoing may hereafter be amended, supplemented, modified,
renewed, or extended.

          “Material Adverse Change” means any event, development or circumstance that has had or
would reasonably be expected to have a Material Adverse Effect.

          “Material Adverse Effect” means a material adverse effect on (i) the business, assets,
property or condition (financial or otherwise) of the Borrower and the Subsidiaries taken as a
whole, or (ii) the validity or enforceability of any of the Loan Documents or the rights or
remedies of the Administrative Agent and the Lenders thereunder.

          “Material Indebtedness” means Indebtedness (other than the Loans and Letters of
Credit), or obligations in respect of one or more Swap Agreements, of any one or more of the
Borrower and its Subsidiaries in an aggregate principal amount exceeding $5,000,000. For purposes
of determining Material Indebtedness, the “principal amount” of the obligations of the Borrower or
any Subsidiary in respect of any Swap Agreement at any time shall be the maximum aggregate amount
(giving effect to any netting agreements) that the Borrower or such Subsidiary would be required to
pay if such Swap Agreement were terminated at such time.

          “Maturity Date” means September 5, 2012.

          “Moody’s” means Moody’s Investors Service, Inc.

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

          “Net Income” means, for any period, the consolidated net income (or loss) of the
Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP;
provided that there shall be excluded (a) the income (or deficit) of any Person accrued
prior to the date it becomes a Subsidiary of the Borrower or is merged into or consolidated with
the Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person (other than a
Subsidiary of the Borrower) in which the Borrower or any of its Subsidiaries has an ownership
interest, except to the extent that any such income is actually received by the Borrower or such
Subsidiary in the form of dividends or similar distributions and (c) the undistributed earnings of
any Subsidiary of the Borrower to the extent that the declaration or payment of dividends or
similar distributions by such Subsidiary is not at the time permitted by the terms of any
contractual obligation (other than under any Loan Document) or Requirement of Law applicable to
such Subsidiary.

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          “Obligations” means all obligations, liabilities and indebtedness of the Borrower and
its Subsidiaries to the Lenders, their Affiliates and the Administrative Agent arising under or in
connection with this Agreement or any other document or instrument executed in connection herewith
(including without limitation the other Loan Documents and any Swap Agreement entered into by the
Borrower or any of its Subsidiaries with any Lender or any Affiliate of any Lender), whether now
existing or hereafter created, direct or indirect, matured or unmatured, liquidated or
unliquidated, primary or secondary, due or not yet due, including without limitation all of their
respective obligations, liabilities and indebtedness with respect to the principal of and interest
on the Loans (including but not limited to interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization, or like proceeding relating to
the Borrower or any of its Subsidiaries, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding), drawings under any Letter of Credit, and the payment or
performance of all other obligations, liabilities, and indebtedness owed by any of them to the
Lenders, their Affiliates and the Administrative Agent hereunder or under any one or more documents
or instruments executed and delivered in connection herewith (including without limitation the
other Loan Documents and any Swap Agreement entered into by the Borrower or any of its Subsidiaries
with any Lender or any Affiliate of any Lender) or with any Letter of Credit entered into by
Borrower or any of such Subsidiaries with any Lender or any Affiliate of any Lender, including
without limitation all fees, costs, expenses and indemnity obligations hereunder and thereunder.

          “Other

           Taxes” means any and all present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies arising from any payment made hereunder or from
the execution, delivery or enforcement of, or otherwise with respect to, this Agreement.

          “Participant” has the meaning set forth in Section 9.04.

          “Payroll Deposits” means funds collected and held or invested by the Borrower or its
Subsidiaries in connection with their payroll processing business pursuant to contracts with
customers.

          “PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA
and any successor entity performing similar functions.

          “Permitted Encumbrances” means:

     (a) Liens imposed by law for taxes that are not yet due or are being contested in
compliance with Section 5.04;

     (b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like
Liens imposed by law, arising in the ordinary course of business and securing obligations
that are not overdue by more than 30 days or are being contested in compliance with
Section 5.04;

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     (c) pledges and deposits made in the ordinary course of business in compliance with
workers’ compensation, unemployment insurance and other social security laws or regulations;

     (d) deposits to secure the performance of bids, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of a like
nature, in each case in the ordinary course of business;

     (e) judgment liens in respect of judgments that do not constitute an Event of Default
under clause (k) of Article VII;

     (f) easements, zoning restrictions, rights-of-way and similar encumbrances on real
property imposed by law or arising in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value of the affected property
or interfere with the ordinary conduct of business of the Borrower or any Subsidiary; and

     (g) any Lien granted in favor of the Administrative Agent and/or the Lenders to secure
payment of the Obligations and other Indebtedness of the Borrower.

          “Permitted Investments” means investments made by the Borrower pursuant to the
Investment Standards.

          “Permitted Repurchases” means, for any twelve-month period, the sum of (a) proceeds
from the exercise of stock options and (b) upon prior written request by Borrower (which request
shall not be given more than twice per any twelve-month period), the net amount paid by Borrower
with respect to any repurchases of its Equity Interests consummated during such twelve-month period
that Lenders agree shall be excluded from the calculation of the Fixed Charge Coverage Ratio for
such twelve-month period.

          “Person” means any natural person, corporation, limited liability company, trust,
joint venture, association, company, partnership, Governmental Authority or other entity.

          “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 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.

          “Prime Rate” means the rate of interest per annum publicly announced from time to time
by JPMorgan Chase Bank, N.A. as its prime rate in effect at its principal office in New York City;
each change in the Prime Rate shall be effective from and including the date such change is
publicly announced as being effective. THE PRIME RATE IS A REFERENCE RATE AND MAY NOT BE SUCH
BANK’S LOWEST RATE.

          “Promissory Note” has the meaning set forth in Section 2.09(e).

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          “Processing Transactions” means bank card payment processing services provided by the
Borrower and its Subsidiaries to merchants pursuant to service contracts between the Borrower
and/or a Subsidiary and such merchants.

          “Register” has the meaning set forth in Section 9.04.

          “Requirement of Law” means, as to any Person, the certificate of incorporation and
by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental Authority, in each
case applicable to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.

          “Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and advisors of such Person
and such Person’s Affiliates.

          “Required Lenders” means, at any time, Lenders having Revolving Credit Exposures and
unused Commitments representing at least 51% of the sum of the total Revolving Credit Exposures and
unused Commitments at such time.

          “Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other property) with respect to any Equity Interests in the Borrower or any
Subsidiary, or any payment (whether in cash, securities or other property), including any sinking
fund or similar deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any such Equity Interests in the Borrower or any Subsidiary or any
option, warrant or other right to acquire any such Equity Interests in the Borrower or any
Subsidiary.

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

          “Revolving Credit Termination Date” means the first (1st) Business Day immediately
prior to the fifth (5th) anniversary of the Effective Date.

          “Revolving Loan” means a Loan made pursuant to Section 2.03.

          “Sale and Leaseback Transaction” means, with respect to any Person, any direct or
indirect arrangement pursuant to which properties are sold or transferred by such Person or a
subsidiary of such Person and are thereafter leased back from the purchaser or transferee thereof
by such Person or one of its subsidiaries.

          “Senior Leverage Ratio” means, at any date of determination, the ratio of (a) Funded
Debt less the aggregate amount of Subordinated Indebtedness of the Borrower and its
Subsidiaries on such date to (b) EBITDA.

          “Service Center” means the real property and improvements to be acquired and/or
constructed by the Borrower located at 1 Heartland Way, Jeffersonville, Indiana.

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          “Service Center Indebtedness” means Indebtedness of the Borrower incurred to finance
the acquisition and construction of the Service Center on terms and conditions and pursuant to
documentation that would not reasonably be expected to have a Material Adverse Effect;
provided that (a) such Indebtedness is incurred prior to or within 90 days after such
acquisition or the completion of such construction or acquisition and (ii) the aggregate principal
amount of Indebtedness with respect thereto shall not exceed $45,000,000 at any time outstanding.

          “S&P” means Standard & Poor’s.

          “Stated Amount” means, as to each Letter of Credit, the face amount of the Letter of
Credit without regard to any drawings made thereunder and whether any conditions to drawing could
then be met.

          “Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of
which is the number one and the denominator of which is the number one minus the aggregate of the
maximum reserve percentages (including any marginal, special, emergency or supplemental reserves)
expressed as a decimal established by the Board to which the Administrative Agent is subject (a)
with respect to the Base CD Rate, for new negotiable nonpersonal time deposits in dollars of over
$100,000 with maturities approximately equal to three months and (b) with respect to the Adjusted
LIBO Rate, for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in
Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such
Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration, exemptions or
offsets that may be available from time to time to any Lender under such Regulation D or any
comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the
effective date of any change in any reserve percentage.

          “Subordinated Indebtedness” of a Person means any Indebtedness of such Person the
payment of which is subordinated to the Obligations to the written satisfaction of the
Administrative Agent.

          “subsidiary” means, with respect to any Person (the “parent”) at any date, any
corporation, limited liability company, partnership, association or other entity the accounts of
which would be consolidated with those of the parent in the parent’s consolidated financial
statements if such financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests representing more than 50% of the equity or
more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the
general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as
of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by
the parent and one or more subsidiaries of the parent.

          “Subsidiary” means any subsidiary of the Borrower.

16

 

          “Swap Agreement” means any agreement with respect to any swap, forward, future or
derivative transaction or option or similar agreement involving, or settled by reference to, one or
more rates, currencies, commodities, equity or debt instruments or securities, or economic,
financial or pricing indices or measures of economic, financial or pricing risk or value or any
similar transaction or any combination of these transactions; provided that no phantom
stock or similar plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of the Borrower or the Subsidiaries shall be a
Swap Agreement.

          “Swingline Exposure” means, at any time, the aggregate principal amount of all
Swingline Loans outstanding at such time. The Swingline Exposure of any Lender at any time shall
be its Applicable Percentage of the total Swingline Exposure at such time.

          “Swingline Lender” means JPMorgan Chase Bank, N.A., in its capacity as lender of
Swingline Loans hereunder.

          “Swingline Loan” means a Loan made pursuant to Section 2.04.

          “Swingline Limit” is defined in Section 2.04.

          “Tangible Assets” means, as of any date, the sum of the aggregate book value of the
assets which appear on a balance sheet of the Borrower and its Subsidiaries minus the
aggregate book value of Intangible Assets, on a combined and consolidated basis prepared as of such
date in accordance with GAAP.

          “Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.

          “Three Month Secondary CD Rate” means, for any day, the secondary market rate for
three month certificates of deposit reported as being in effect on such day (or, if such day is not
a Business Day, the next preceding Business Day) by the Board through the public information
telephone line of the Federal Reserve Bank of New York (which rate will, under the current
practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the
week following such day) or, if such rate is not so reported on such day or such next preceding
Business Day, the average of the secondary market quotations for three month certificates of
deposit of major money center banks in New York City received at approximately 10:00 a.m., New York
City time, on such day (or, if such day is not a Business Day, on the next preceding Business Day)
by the Administrative Agent from three negotiable certificate of deposit dealers of recognized
standing selected by it.

          “Total Leverage Ratio” shall have the meaning set forth in Section 6.09(a).

          “Transactions” means the execution, delivery and performance by the Borrower of this
Agreement, the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of
Credit hereunder.

17

 

          “Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of
interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the
Adjusted LIBO Rate or the Alternate Base Rate.

          “Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of
Subtitle E of Title IV of ERISA.

               SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g.,
a “Revolving Loan”) or by Type (e.g., a “Eurodollar Loan”) or by Class and Type
(e.g., a “Eurodollar Revolving Loan”). Borrowings also may be classified and referred to
by Class (e.g., a “Revolving Borrowing”) or by Type (e.g., a “Eurodollar Borrowing”) or by
Class and Type (e.g., a “Eurodollar Revolving Borrowing”).

               SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the
terms defined. Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be
deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to
have the same meaning and effect as the word “shall”. Unless the context requires otherwise (a)
any definition of or reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from time to time
amended, supplemented or otherwise modified (subject to any restrictions on such amendments,
supplements or modifications set forth herein), (b) any reference herein to any Person shall be
construed to include such Person’s successors and assigns, (c) the words “herein”, “hereof” and
“hereunder”, and words of similar import, shall be construed to refer to this Agreement in its
entirety and not to any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and
Exhibits and Schedules to, this Agreement and (e) the words “asset” and “property” shall be
construed to have the same meaning and effect and to refer to any and all tangible and intangible
assets and properties, including cash, securities, accounts and contract rights.

               SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature
shall be construed in accordance with GAAP, as in effect from time to time; provided that,
if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any
provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or
in the application thereof on the operation of such provision (or if the Administrative Agent
notifies the Borrower that the Required Lenders request an amendment to any provision hereof for
such purpose), regardless of whether any such notice is given before or after such change in GAAP
or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in
effect and applied immediately before such change shall have become effective until such notice
shall have been withdrawn or such provision amended in accordance herewith.

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ARTICLE II.

The Credits

               SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein, each Lender agrees to make Revolving Loans
to the Borrower from time to time during the Availability Period in an aggregate principal amount
that will not result in (a) such Lender’s Revolving Credit Exposure exceeding such Lender’s
Commitment or (b) the sum of the total Revolving Credit Exposures exceeding the total Commitments.
Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower
may borrow, prepay and reborrow Revolving Loans.

               SECTION 2.02. Loans and Borrowings (a) Each Revolving Loan shall be made as part of a Borrowing consisting of Revolving Loans
made by the Lenders ratably in accordance with their respective Commitments. The failure of any
Lender to make any Loan required to be made by it shall not relieve any other Lender of its
obligations hereunder; provided that the Commitments of the Lenders are several and no
Lender shall be responsible for any other Lender’s failure to make Loans as required.

          (b) Subject to Section 2.13, each Revolving Borrowing shall be comprised entirely of
ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith. Each Swingline
Loan shall be an ABR Loan. Each Lender at its option may make any Eurodollar Loan by causing any
domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any
exercise of such option shall not affect the obligation of the Borrower to repay such Loan in
accordance with the terms of this Agreement or impose withholding or other obligations on the
Borrower of any amount or nature which it would not have incurred if such option had not been
exercised.

          (c) At the commencement of each Interest Period for any Eurodollar Revolving Borrowing, such
Borrowing shall be in an aggregate amount that is an integral multiple of $500,000 and not less
than $1,000,000. At the time that each ABR Revolving Borrowing is made, such Borrowing shall be in
an aggregate amount that is an integral multiple of $500,000 and not less than $1,000,000;
provided that an ABR Revolving Borrowing may be in an aggregate amount that is equal to the
entire unused balance of the total Commitments or the amount that is required to finance the
reimbursement of an LC Disbursement as contemplated by Section 2.05(e). Each Swingline
Loan shall be in an amount that is an integral multiple of $500,000 and not less than $1,000,000,
provided that a Swingline Loan may be in an aggregate principal amount that is equal to the
entire unused balance of the Swingline Limit. Borrowings of more than one Type and Class may be
outstanding at the same time; provided that there shall not at any time be more than a
total of ten (10) Eurodollar Revolving Borrowings outstanding.

          (d) Notwithstanding any other provision of this Agreement, the (i) Borrower shall not be
entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period
requested with respect thereto would end after the Maturity Date; and (ii) Borrower shall not be
entitled to request a Eurodollar Borrowing, upon the occurrence and during the continuance of
a payment Default.

19

 

               SECTION 2.03. Requests for Revolving Borrowings. To request a Revolving Borrowing, the Borrower shall notify the Administrative Agent of such
request by telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York
City time, three Business Days before the date of the proposed Borrowing or (b) in the case of an
ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of
the proposed Borrowing; provided that in the case of an ABR Revolving Borrowing to finance
the reimbursement of an LC Disbursement as contemplated by Section 2.05(e), any such notice
may be given not later than noon, New York City time, on the date of the proposed Borrowing. Each
such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved
by the Administrative Agent and signed by the Borrower. Each such telephonic and written Borrowing
Request shall specify the following information in compliance with Section 2.02:

	 	(i)	 	the aggregate amount of the requested Borrowing;
	 
	 	(ii)	 	the date of such Borrowing, which shall be a Business Day;
	 
	 	(iii)	 	whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;
	 
	 	(iv)	 	in the case of a Eurodollar Borrowing, the initial Interest Period to be
applicable thereto, which shall be a period contemplated by the definition of the term
“Interest Period”; and
	 
	 	(v)	 	the location and number of the Borrower’s account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.06.

If no election as to the Type of Revolving Borrowing is specified, then the requested Revolving
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any
requested Eurodollar Revolving Borrowing, then the Borrower shall be deemed to have selected an
Interest Period of one month’s duration. Promptly following receipt of a Borrowing Request in
accordance with this Section, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.

               SECTION 2.04. Swingline Loans. (a) Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make
Swingline Loans to the Borrower from time to time during the Availability Period, in an aggregate
principal amount (the “Swingline Limit”) at any time outstanding that will not result in
(i) the aggregate principal amount of outstanding Swingline Loans exceeding $5,000,000 or (ii) the
sum of the total Revolving Credit Exposures exceeding the total Commitments; provided that
the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding
Swingline Loan. Within the foregoing limits and subject to the terms and conditions set forth
herein, the Borrower may borrow, prepay and reborrow Swingline Loans.

          (b) To request a Swingline Loan, the Borrower shall notify the Administrative Agent of such
request by telephone (confirmed by telecopy), not later than 12:00 noon, New York City time, on the
day of a proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the
requested date (which shall be a Business Day) and amount of the requested

20

 

Swingline Loan. The
Administrative Agent will promptly advise the Swingline Lender of any such notice received from the
Borrower. The Swingline Lender shall make each Swingline Loan available to the Borrower by means
of a credit to the general deposit account of the Borrower with the Swingline Lender (or, in the
case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in
Section 2.05(e), by remittance to the Issuing Bank) by 3:00 p.m., New York City time, on
the requested date of such Swingline Loan. Any Swingline Loan will reduce the availability under
the Swingline Lender’s Commitment (or participant Lender’s Commitment as to any participation under
the following subsection (c) as applicable) on a dollar-for-dollar basis.

          (c) The Swingline Lender may by written notice given to the Administrative Agent not later
than 10:00 a.m., New York City time, on any Business Day require the Lenders to acquire
participations on such Business Day in all or a portion of the Swingline Loans outstanding. Such
notice shall specify the aggregate amount of Swingline Loans in which Lenders will participate.
Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each
Lender, specifying in such notice such Lender’s Applicable Percentage of such Swingline Loan or
Loans. Each Lender hereby absolutely and unconditionally agrees, upon receipt of notice as
provided above, to pay to the Administrative Agent, for the account of the Swingline Lender, such
Lender’s Applicable Percentage of such Swingline Loan or Loans. Each Lender acknowledges and
agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph
is absolute and unconditional and shall not be affected by any circumstance whatsoever, including
the occurrence and continuance of a Default or reduction or termination of the Commitments, and
that each such payment shall be made without any offset, abatement, withholding or reduction
whatsoever. Each Lender shall comply with its obligation under this paragraph by wire transfer of
immediately available funds, in the same manner as provided in Section 2.06 with respect to
Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment
obligations of the Lenders), and the Administrative Agent shall promptly pay to the Swingline
Lender the amounts so received by it from the Lenders. The Administrative Agent shall notify the
Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph, and
thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and
not to the Swingline Lender. Any amounts received by the Swingline Lender from the Borrower (or
other party on behalf of the Borrower) in respect of a Swingline Loan after receipt by the
Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to
the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly
remitted by the Administrative Agent to the Lenders that shall have made their payments pursuant to
this paragraph and to the Swingline Lender, as their interests may appear; provided that
any such payment so remitted shall be repaid to the Swingline Lender or to the Administrative
Agent, as applicable, if and to the extent such payment is required to be refunded to the Borrower
for any reason. The purchase of participations in a Swingline Loan pursuant to this paragraph
shall not relieve the Borrower of any default in the payment thereof.

               SECTION 2.05. Letters of Credit. (a) General. Subject to the terms and conditions set forth herein, the Borrower may
request the issuance of Letters of Credit for its own account, in a form reasonably acceptable to
the Administrative Agent and the Issuing Bank, at any time and from time to time during the
Availability Period. In the event of any inconsistency between the terms and conditions

21

 

of this
Agreement and the terms and conditions of any form of letter of credit application or other
agreement submitted by the Borrower to, or entered into by the Borrower with, the Issuing Bank
relating to any Letter of Credit, the terms and conditions of this Agreement shall control.

          (b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To
request the issuance of a Letter of Credit (or the amendment, renewal or extension of an
outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or transmit by
electronic communication, if arrangements for doing so have been approved by the Issuing Bank) to
the Issuing Bank and the Administrative Agent (reasonably in advance of the requested date of
issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit,
or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of
issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such
Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount
of such Letter of Credit, the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If
requested by the Issuing Bank, the Borrower also shall submit a letter of credit application on the
Issuing Bank’s standard form in connection with any request for a Letter of Credit. A Letter of
Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal
or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that),
after giving effect to such issuance, amendment, renewal or extension (i) the LC Exposure shall not
exceed $5,000,000 and (ii) the sum of the total Revolving Credit Exposures shall not exceed the
total Commitments.

          (c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of
business on the earlier of (i) the date one year after the date of the issuance of such Letter of
Credit (or, in the case of any renewal or extension thereof, one year after such renewal or
extension) and (ii) the date that is five Business Days prior to the Revolving Credit Termination
Date.

          (d) Participations. By the issuance of a Letter of Credit (or an amendment to a
Letter of Credit increasing the amount thereof) and without any further action on the part of the
Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Lender, and each Lender hereby
acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Lender’s
Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit.
In consideration and in furtherance of the foregoing, each Lender hereby absolutely and
unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank,
such Lender’s Applicable Percentage of each LC Disbursement made by the Issuing Bank and not
reimbursed by the Borrower on the date due as provided in paragraph (e) of this Section, or of any
reimbursement payment required to be refunded to the Borrower for any reason. Each Lender
acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in
respect of Letters of Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or
the occurrence and continuance of a Default or reduction or termination of the
Commitments, and that each such payment shall be made without any offset, abatement,
withholding or reduction whatsoever.

22

 

          (e) Reimbursement. If the Issuing Bank shall make any LC Disbursement in respect of
a Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to the
Administrative Agent an amount equal to such LC Disbursement not later than 3:00 p.m., New York
City time, on the date that such LC Disbursement is made, if the Borrower shall have received
notice of such LC Disbursement prior to 10:00 a.m., New York City time on such date, or, if such
notice has not been received by the Borrower prior to 10:00 a.m., New York City time on such date,
on (i) the Business Day that the Borrower receives such notice, if such notice is received prior to
10:00 a.m., New York City time, or (ii) the Business Day immediately following the day that the
Borrower receives such notice, if such notice is not received prior to 10:00 a.m. New York City
time; provided that, if such LC Disbursement is not less than $500,000, the Borrower may,
subject to the conditions to borrowing set forth herein, request in accordance with Section
2.03 or 2.04 that such payment be financed with an ABR Revolving Borrowing or Swingline Loan in
an equivalent amount and, to the extent so financed, the Borrower’s obligation to make such payment
shall be discharged and replaced by the resulting ABR Revolving Borrowing or Swingline Loan. If
the Borrower fails to make such payment when due, the Administrative Agent shall notify each Lender
of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and
such Lender’s Applicable Percentage thereof. Promptly following receipt of such notice, each
Lender shall pay to the Administrative Agent its Applicable Percentage of the payment then due from
the Borrower, in the same manner as provided in Section 2.06 with respect to Loans made by
such Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of
the Lenders), and the Administrative Agent shall promptly pay to the Issuing Bank the amounts so
received by it from the Lenders. Promptly following receipt by the Administrative Agent of any
payment from the Borrower pursuant to this paragraph, the Administrative Agent shall distribute
such payment to the Issuing Bank or, to the extent that Lenders have made payments pursuant to this
paragraph to reimburse the Issuing Bank, then to such Lenders and the Issuing Bank as their
interests may appear. Any payment made by a Lender pursuant to this paragraph to reimburse the
Issuing Bank for any LC Disbursement (other than the funding of ABR Revolving Loans or a Swingline
Loan as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its
obligation to reimburse such LC Disbursement.

          (f) Obligations Absolute. The Borrower’s obligation to reimburse LC Disbursements as
provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable, and
shall be performed strictly in accordance with the terms of this Agreement under any and all
circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any
Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other
document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any
respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the
Issuing Bank under a Letter of Credit against presentation of a draft or other document that does
not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of
this Section, constitute a legal or equitable discharge of, or provide a right of setoff against,
the Obligations. Neither the Administrative Agent, the Lenders nor the Issuing Bank, nor any of
their Related Parties, shall have any liability or responsibility by reason of or in connection
with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment
thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any
error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or

23

 

other communication under or relating to any Letter of Credit (including any document required to
make a drawing thereunder), any error in interpretation of technical terms or any consequence
arising from causes beyond the control of the Issuing Bank; provided that the foregoing
shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of
any direct damages (as opposed to consequential damages, claims in respect of which are hereby
waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are
caused by the Issuing Bank’s failure to exercise care when determining whether drafts and other
documents presented under a Letter of Credit comply with the terms thereof. The parties hereto
expressly agree that, in the absence of gross negligence or willful misconduct on the part of the
Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall
be deemed to have exercised care in each such determination. In furtherance of the foregoing and
without limiting the generality thereof, the parties agree that, with respect to documents
presented which appear on their face to be in substantial compliance with the terms of a Letter of
Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such
documents without responsibility for further investigation, regardless of any notice or information
to the contrary, or refuse to accept and make payment upon such documents if such documents are not
in strict compliance with the terms of such Letter of Credit.

          (g) Disbursement Procedures. The Issuing Bank shall, promptly following its receipt
thereof, examine all documents purporting to represent a demand for payment under a Letter of
Credit. The Issuing Bank shall promptly notify the Administrative Agent and the Borrower by
telephone (confirmed by telecopy) of such demand for payment and whether the Issuing Bank has made
or will make an LC Disbursement thereunder; provided that any failure to give or delay in
giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank
and the Lenders with respect to any such LC Disbursement.

          (h) Interim Interest. If the Issuing Bank shall make any LC Disbursement, then,
unless the Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement
is made, the unpaid amount thereof shall bear interest, for each day from and including the date
such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC
Disbursement, at the rate per annum then applicable to ABR Revolving Loans; provided that,
if the Borrower fails to reimburse such LC Disbursement when due pursuant to paragraph (e) of this
Section, then Section 2.12(c) shall apply. Interest accrued pursuant to this paragraph
shall be for the account of the Issuing Bank, except that interest accrued on and after the date of
payment by any Lender pursuant to paragraph (e) of this Section to reimburse the Issuing Bank shall
be for the account of such Lender to the extent of such payment.

          (i) Replacement of the Issuing Bank. The Issuing Bank may be replaced at any time by
written agreement among the Borrower, the Administrative Agent, the replaced Issuing Bank and the
successor Issuing Bank. The Administrative Agent shall notify the Lenders of any such replacement
of the Issuing Bank. At the time any such replacement shall become effective, the Borrower shall
pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section
2.11(b). From and after the effective date of any such replacement, (i) the
successor Issuing Bank shall have all the rights and obligations of the Issuing Bank under
this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein
to the term “Issuing Bank” shall be deemed to refer to such successor or to any previous Issuing

24

 

Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the
replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and
shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with
respect to Letters of Credit issued by it prior to such replacement, but shall not be required to
issue additional Letters of Credit.

          (j) Cash Collateralization. If any Event of Default shall occur and be continuing,
on the Business Day that the Borrower receives notice from the Administrative Agent or the Required
Lenders (or, if the maturity of the Loans has been accelerated, Lenders with LC Exposure
representing greater than 50% of the total LC Exposure) demanding the deposit of cash collateral
pursuant to this paragraph, the Borrower shall deposit in an account with the Administrative Agent,
in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash equal
to the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided
that the obligation to deposit such cash collateral shall become effective immediately, and such
deposit shall become immediately due and payable, without demand or other notice of any kind, upon
the occurrence of any Event of Default with respect to the Borrower described in clause (h) or (i)
of Article VII. Such deposit shall be held by the Administrative Agent as collateral for
the payment and performance of the Obligations. The Administrative Agent shall have exclusive
dominion and control, including the exclusive right of withdrawal, over such account. Other than
any interest earned on the investment of such deposits, which investments shall be made at the
option and sole discretion of the Administrative Agent and at the Borrower’s risk and expense, such
deposits shall not bear interest. Interest or profits, if any, on such investments shall
accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to
reimburse the Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the
extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the
Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated
(but subject to the consent of Lenders with LC Exposure representing greater than 50% of the total
LC Exposure), be applied to satisfy other Obligations of the Borrower. If the Borrower is required
to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of
Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower
within three Business Days after all Events of Default have been cured or waived.

               SECTION 2.06. Funding of Borrowings . (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by
wire transfer of immediately available funds by 12:00 noon, New York City time, to the account of
the Administrative Agent most recently designated by it for such purpose by notice to the Lenders;
provided that Swingline Loans shall be made as provided in Section 2.04. The
Administrative Agent will make such Loans available to the Borrower by promptly crediting the
amounts so received, in like funds, to an account of the Borrower maintained with the
Administrative Agent in New York City and designated by the Borrower in the applicable Borrowing
Request; provided that ABR Revolving Loans made to finance the reimbursement of
an LC Disbursement as provided in Section 2.05(e) shall be remitted by the Administrative
Agent to the Issuing Bank.

          (b) Unless the Administrative Agent shall have received notice from a Lender prior to the
proposed date of any Borrowing that such Lender will not make available to the Administrative Agent
such Lender’s share of such Borrowing, the Administrative Agent may

25

 

assume that such Lender has
made such share available on such date in accordance with paragraph (a) of this Section and may, in
reliance upon such assumption, make available to the Borrower a corresponding amount. In such
event, if a Lender has not in fact made its share of the applicable Borrowing available to the
Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each
day from and including the date such amount is made available to the Borrower to but excluding the
date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the
Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with
banking industry rules on interbank compensation or (ii) in the case of the Borrower, the interest
rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then
such amount shall constitute such Lender’s Loan included in such Borrowing. If the Borrower pays
such amounts, any such payment shall be without prejudice to the Borrower’s rights under
Section 2.18(b).

               SECTION 2.07. Interest Elections. (a) Each Revolving Borrowing initially shall be of the Type specified in the applicable
Borrowing Request and, in the case of a Eurodollar Revolving Borrowing, shall have an initial
Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to
convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a
Eurodollar Revolving Borrowing, may elect Interest Periods therefor, all as provided in this
Section. The Borrower may elect different options with respect to different portions of the
affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders
holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be
considered a separate Borrowing. This Section shall not apply to Swingline Borrowings, which may
not be converted or continued.

          (b) To make an election pursuant to this Section, the Borrower shall notify the
Administrative Agent of such election by telephone by the time that a Borrowing Request would be
required under Section 2.03 if the Borrower were requesting a Revolving Borrowing of the
Type resulting from such election to be made on the effective date of such election. Each such
telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form
approved by the Administrative Agent and signed by the Borrower.

          (c) Each telephonic and written Interest Election Request shall specify the following
information in compliance with Section 2.02:

	 	(i)	 	the Borrowing to which such Interest Election Request applies and, if different
options are being elected with respect to different portions thereof, the portions
thereof to be allocated to each resulting Borrowing (in which case the information
to be specified pursuant to clauses (iii) and (iv) below shall be specified for each
resulting Borrowing);
	 
	 	(ii)	 	the effective date of the election made pursuant to such Interest Election
Request, which shall be a Business Day;

26

 

	 	(iii)	 	whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing; and
	 
	 	(iv)	 	if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be
applicable thereto after giving effect to such election, which shall be a period
contemplated by the definition of the term “Interest Period”.

If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an
Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one
month’s duration.

          (d) Promptly following receipt of an Interest Election Request, the Administrative Agent
shall advise each Lender of the details thereof and of such Lender’s portion of each resulting
Borrowing.

          (e) If the Borrower fails to deliver a timely Interest Election Request with respect to a
Eurodollar Revolving Borrowing prior to the end of the Interest Period applicable thereto, then,
unless such Borrowing is repaid as provided herein, at the end of such Interest Period such
Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof,
if an Event of Default has occurred and is continuing and the Administrative Agent, at the request
of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is
continuing (i) no outstanding Revolving Borrowing may be converted to or continued as a Eurodollar
Borrowing and (ii) unless repaid, each Eurodollar Revolving Borrowing shall be converted to an ABR
Borrowing at the end of the Interest Period applicable thereto.

               SECTION 2.08. Termination, Reduction, and Increase of Commitments
(a) Unless previously terminated, the Commitments shall terminate on the Maturity Date.

          (b) The Borrower may at any time terminate, or from time to time reduce, the Commitments;
provided that (i) each reduction of the Commitments shall be in an amount that is an
integral multiple of $1,000,000 and not less than $5,000,000 and (ii) the Borrower shall not
terminate or reduce the Commitments if, after giving effect to any concurrent prepayment of the
Loans in accordance with Section 2.10, the sum of the Revolving Credit Exposures would
exceed the total Commitments.

          (c) The Borrower shall notify the Administrative Agent of any election to terminate or reduce
the Commitments under paragraph (b) of this Section at least three Business Days prior to the
effective date of such termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent shall
advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to
this Section shall be irrevocable; provided that a notice of termination of the Commitments
delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other
credit facilities, in which case such notice may be revoked by the Borrower (by notice to the
Administrative Agent on or prior to the specified effective date) if such condition is not
satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction

27

 

of
the Commitments shall be made ratably among the Lenders in accordance with their respective
Commitments.

          (d) The Borrower shall have the right, without the consent of the Lenders but with the prior
consent of the Administrative Agent (not to be unreasonably withheld), to cause from time to time
an increase in the aggregate Commitments of the Lenders by adding one or more additional Lenders
each with its own additional Commitment or by allowing one or more Lenders to increase their
respective Commitments; provided that (a) no Event of Default shall have occurred and be
continuing, (b) no such increase shall result in the aggregate Commitments exceeding $75,000,000,
(c) each such increase shall be in a minimum amount of $5,000,000 and integral multiples of
$1,000,000, (d) no Lender’s Commitment shall be increased without such Lender’s consent, and (e)
if, on the effective date of any such increase, any Revolving Loans have been funded, the Borrower
shall be responsible for paying any breakage fees or costs in connection with the reallocation of
such outstanding Revolving Loans.

               SECTION 2.09. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the
account of each Lender the then unpaid principal amount of each Revolving Loan on the Maturity Date
and (ii) to the Swingline Lender the then unpaid principal amount of each Swingline Loan on the
earlier of the Maturity Date and the first date after such Swingline Loan is made that is the 15th
or last day of a calendar month and is at least five Business Days after such Swingline Loan is
made; provided that on each date that a Revolving Borrowing is made, the Borrower shall
repay all Swingline Loans then outstanding.

          (b) Each Lender shall maintain in accordance with its usual practice an account or accounts
evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such
Lender, including the amounts of principal and interest payable and paid to such Lender from time
to time hereunder.

          (c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount
of each Loan made hereunder, the Class and Type thereof and the Interest Period applicable thereto,
(ii) the amount of any principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative
Agent hereunder for the account of the Lenders and each Lender’s share thereof.

          (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this
Section shall be prima facie evidence of the existence and amounts of the Obligations;
provided that the failure of any Lender or the Administrative Agent to maintain such
accounts or
any error therein shall not in any manner affect the obligation of the Borrower to repay the
Loans in accordance with the terms of this Agreement.

          (e) Any Lender may request that Loans made by it be evidenced by a promissory note. In such
event, the Borrower shall prepare, execute and deliver to such Lender a promissory note in
substantially the form of Exhibit F (each, a “Promissory Note”) payable to the order of
such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a
form approved by the Administrative Agent. Thereafter, the Loans evidenced by such

28

 

Promissory Note
and interest thereon shall at all times (including after assignment pursuant to Section
9.04) be represented by one or more Promissory Notes in such form payable to the order of the
payee named therein (or, if such Promissory Note is a registered note, to such payee and its
registered assigns).

               SECTION 2.10. Prepayment of Loans. (a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing
in whole or in part, subject to prior notice in accordance with paragraph (b) of this Section.

          (b) The Borrower shall notify the Administrative Agent (and, in the case of prepayment of a
Swingline Loan, the Swingline Lender) by telephone (confirmed by telecopy) of any prepayment
hereunder (i) in the case of prepayment of a Eurodollar Revolving Borrowing, not later than 11:00
a.m., New York City time, three Business Days before the date of prepayment, (ii) in the case of
prepayment of an ABR Revolving Borrowing, not later than 11:00 a.m., New York City time, one
Business Day before the date of prepayment or (iii) in the case of prepayment of a Swingline Loan,
not later than 12:00 noon, New York City time, on the date of prepayment. Each such notice shall
be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or
portion thereof to be prepaid; provided that, if a notice of prepayment is given in
connection with a conditional notice of termination of the Commitments as contemplated by
Section 2.08, then such notice of prepayment may be revoked if such notice of termination
is revoked in accordance with Section 2.08. Promptly following receipt of any such notice
relating to a Revolving Borrowing, the Administrative Agent shall advise the Lenders of the
contents thereof. Each partial prepayment of any Revolving Borrowing shall be in an amount that
would be permitted in the case of an advance of a Revolving Borrowing of the same Type as provided
in Section 2.02. Each prepayment of a Revolving Borrowing shall be applied ratably to the
Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to
the extent required by Section 2.12.

               SECTION 2.11. Fees. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a
facility fee, which shall accrue at the Facility Fee Rate on the average daily unused portion of
the Commitment of such Lender during the period from and including the Effective Date to but
excluding the Revolving Credit Termination Date; provided that, if such Lender continues to
have any Revolving Credit Exposure after its Commitment terminates, then such facility fee shall
continue to accrue on the daily amount of such Lender’s Revolving Credit Exposure from and
including the date on which its Commitment terminates to but excluding the date on which such
Lender ceases to have any Revolving Credit Exposure. Accrued facility fees shall be payable in
arrears on the last day of November, February, May, and August of each year and on the Revolving
Credit Termination Date (and on any later date upon which Revolving Credit Exposure ceases to
exist, if any), commencing on the first such date to occur after the date hereof; provided
that any facility fees accruing after the date on which the Commitments terminate shall be payable
on demand. All facility fees shall be computed on the basis of a year of 360 days and shall be
payable for the actual number of days elapsed (including the first day but excluding the last day).
Upon a Default that with the passage of time or the giving of notice or both would constitute an
Event of Default under subsections (a) and (b) of Article VII, all fees and other amounts
(except for the Letter of Credit Fee) will bear interest at two percent per annum above the rate
applicable to ABR Loans, until such Default is cured or waived.

29

 

          (b) The Borrower agrees to pay (i) to the Administrative Agent for the account of each
Lender, based on such Lender’s Applicable Percentage, a letter of credit fee (the “Letter
of Credit Fee”) with respect to each Letter of Credit issued hereunder, which shall be
payable monthly in arrears on the last day of each month commencing with the month after the
Effective Date and which shall accrue at a rate per annum equal to the Applicable Margin used to
determine the interest rate applicable to Eurodollar Revolving Loans on the Stated Amount of the
Letters of Credit, during the period from and including the Effective Date to but excluding the
later of the date on which such Lender’s Commitment terminates and the date on which such Lender
ceases to have any LC Exposure; and (ii) to the Issuing Bank a fronting fee, which shall accrue at
the rate of 0.125% per annum on the average daily amount of the LC Exposure (excluding any portion
thereof attributable to unreimbursed LC Disbursements) during the period from and including the
Effective Date to but excluding the later of the date of Revolving Credit Termination Date and the
date on which there ceases to be any LC Exposure, as well as the Bank’s standard fees with respect
to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings
thereunder. Fronting fees accrued through and including the last day of November, February, May,
and August of each year shall be payable on the third Business Day following such last day,
commencing on the first such date to occur after the Effective Date; provided that all such
fees shall be payable on the Revolving Credit Termination Date and any such fees accruing after the
Revolving Credit Termination Date shall be payable on demand. Any other fees payable to the
Issuing Bank pursuant to this paragraph shall be payable within ten (10) days after demand. All
fronting fees and all Letter of Credit Fees shall be computed on the basis of a year of 360 days
and shall be payable for the actual number of days elapsed (including the first day but excluding
the last day). Upon a Default that with the passage of time or the giving of notice or both would
constitute an Event of Default under subsections (a) and (b) of Article VII, the Letter of
Credit Fee will be increased by two percent per annum, until such Default is cured or waived.

          (c) The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable
in the amounts and at the times separately agreed upon between the Borrower and the Administrative
Agent.

          (d) All fees payable hereunder shall be paid on the dates due, in immediately available
funds, to the Administrative Agent (or to the Issuing Bank, in the case of fees payable to it) for
distribution, in the case of facility fees and Letter of Credit Fees, to the Lenders. Fees paid
shall not be refundable under any circumstances.

               SECTION 2.12. Interest.  (a) The Loans comprising each ABR Borrowing (including each Swingline Loan) shall bear interest
at the Alternate Base Rate plus the Applicable Margin.

          (b) The Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO
Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin.

          (c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or
other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity,
upon acceleration or otherwise (until such payment is made or the Default is

30

 

waived or cured), such
overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to
(i) in the case of overdue principal of any Loan, two percent (2%) per annum plus the rate
otherwise applicable to such Loan as provided in the preceding paragraphs of this Section (until
such Default is cured or waived) or (ii) in the case of any other amount, two percent (2%) per
annum, plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section.

          (d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date
for such Loan and, in the case of Revolving Loans, upon termination of the Commitments;
provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be
payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a
prepayment of an ABR Revolving Loan prior to the end of the Availability Period), accrued interest
on the principal amount repaid or prepaid shall be payable on the date of such repayment or
prepayment and (iii) in the event of any conversion of any Eurodollar Revolving Loan prior to the
end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the
effective date of such conversion.

          (e) All interest hereunder shall be computed on the basis of a year of 360 days, except that
interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is
based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap
year), and in each case shall be payable for the actual number of days elapsed (including the first
day but excluding the last day). The applicable Alternate Base Rate or Adjusted LIBO Rate shall be
determined by the Administrative Agent, and such determination shall be conclusive absent manifest
error.

               SECTION 2.13. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurodollar Borrowing:

     (a) the Administrative Agent determines (which determination shall be conclusive absent
manifest error) that adequate and reasonable means do not exist for ascertaining the
Adjusted LIBO Rate for such Interest Period; or

     (b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO
Rate for such Interest Period will not adequately and fairly reflect the
cost to such Lenders (or Lender) of making or maintaining their Loans (or its Loan)
included in such Borrowing for such Interest Period;

then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by
telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent
notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer
exist, (i) any Interest Election Request that requests the conversion of any Revolving Borrowing
to, or continuation of any Revolving Borrowing as, a Eurodollar Borrowing shall be ineffective, and
(ii) if any Borrowing Request requests a Eurodollar Revolving Borrowing, such Borrowing shall be
made as an ABR Borrowing.

               SECTION 2.14. Increased Costs. (a) If any Change in Law shall:

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	 	(i)	 	impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit extended
by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO
Rate) or the Issuing Bank; or
	 
	 	(ii)	 	impose on any Lender or the Issuing Bank or the London interbank market any
other condition affecting this Agreement or Eurodollar Loans made by such Lender or any
Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or
maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to
increase the cost to such Lender or the Issuing Bank of participating in, issuing or maintaining
any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or
the Issuing Bank hereunder (whether of principal, interest or otherwise), then the Borrower will
pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as
will compensate such Lender or the Issuing Bank, as the case may be, for such additional costs
incurred or reduction suffered.

          (b) If any Lender or the Issuing Bank determines that any Change in Law regarding capital
requirements has or would have the effect of reducing the rate of return on such Lender’s or the
Issuing Bank’s capital or on the capital of such Lender’s or the Issuing Bank’s holding company, if
any, as a consequence of this Agreement or the Loans made by, or participations in Letters of
Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below
that which such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company
could have achieved but for such Change in Law (taking into consideration such Lender’s or the
Issuing Bank’s policies and the policies of such Lender’s or the Issuing Bank’s holding company
with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or
the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such
Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company for any such
reduction suffered.

          (c) A certificate of a Lender or the Issuing Bank setting forth the amount or amounts
necessary to compensate such Lender or the Issuing Bank or its holding company, as
the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to
the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or
the Issuing Bank, as the case may be, the amount shown as due on any such certificate within 10
Business Days after receipt thereof.

          (d) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation
pursuant to this Section shall not constitute a waiver of such Lender’s or the Issuing Bank’s right
to demand such compensation; provided that the Borrower shall not be required to compensate
a Lender or the Issuing Bank pursuant to this Section for any increased costs or reductions
incurred more than 270 days prior to the date that such Lender or the Issuing Bank, as the case may
be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions
and of such Lender’s or the Issuing Bank’s intention to claim compensation therefor;
provided further that, if the Change in Law giving rise to such increased

32

 

costs or
reductions is retroactive, then the 270-day period referred to above shall be extended to include
the period of retroactive effect thereof.

               SECTION 2.15. Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last
day of an Interest Period applicable thereto (including as a result of an Event of Default), (b)
the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable
thereto, (c) the failure to borrow, convert, continue or prepay any Eurodollar Loan on the date
specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked
under Section 2.10(b) and is revoked in accordance therewith), (d) the assignment of any
Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of
a request by the Borrower pursuant to Section 2.18, then, in any such event, the Borrower
shall compensate each Lender for the loss, cost and expense attributable to such event. In the
case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an
amount determined by such Lender to be the excess, if any, of (i) the amount of interest which
would have accrued on the principal amount of such Loan had such event not occurred, at the
Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of
such event to the last day of the then current Interest Period therefor (or, in the case of a
failure to borrow, convert or continue, for the period that would have been the Interest Period for
such Loan), over (ii) the amount of interest which would accrue on such principal amount for such
period at the interest rate which such Lender would bid were it to bid, at the commencement of such
period, for dollar deposits of a comparable amount and period from other banks in the eurodollar
market. A certificate of any Lender setting forth any amount or amounts that such Lender is
entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on
any such certificate within 10 Business Days after receipt thereof.

               SECTION 2.16. Taxes. (a) Any and all payments by or on account of any obligation of the Borrower hereunder shall be
made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided
that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such
payments, then (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional sums payable under
this Section) the Administrative Agent, Lender or Issuing Bank (as the case may be) receives an
amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower
shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the
relevant Governmental Authority in accordance with applicable law.

          (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental
Authority in accordance with applicable law.

          (c) The Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank,
within 10 Business Days after written demand therefor, for the full amount of any Indemnified Taxes
or Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may
be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder
(including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts
payable under this Section) and any penalties, interest and reasonable

33

 

expenses arising therefrom
or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or
legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount
of such payment or liability delivered to the Borrower by a Lender or the Issuing Bank, or by the
Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Bank, shall be
conclusive absent manifest error.

          (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the
Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the
original or a certified copy of a receipt issued by such Governmental Authority evidencing such
payment, a copy of the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.

          (e) Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax
under the law of the jurisdiction in which the Borrower is located, or any treaty to which such
jurisdiction is a party, with respect to payments under this Agreement shall deliver to the
Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable
law, such properly completed and executed documentation prescribed by applicable law or reasonably
requested by the Borrower as will permit such payments to be made without withholding or at a
reduced rate.

          (f) If the Administrative Agent or a Lender determines, in its sole discretion, that it has
received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower
or with respect to which the Borrower has paid additional amounts pursuant to this Section
2.16, it shall pay over such refund to the Borrower (but only to the extent of indemnity
payments made, or additional amounts paid, by the Borrower under this Section 2.16 with
respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses
of the Administrative Agent or such Lender and without interest (other than any interest paid by
the relevant Governmental Authority with respect to such refund); provided, that the
Borrower, upon the request of the Administrative Agent or such Lender, agrees to repay the amount
paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant
Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative
Agent or such Lender is required to repay such refund to such Governmental
Authority. This Section shall not be construed to require the Administrative Agent or any
Lender to make available its tax returns (or any other information relating to its taxes which it
deems confidential) to the Borrower or any other Person.

               SECTION 2.17. Payments Generally; Pro Rata Treatment; Sharing of
Set-offs. (a) The Borrower shall make each payment required to be made by it hereunder (whether of
principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under
Section 2.14, 2.15 or 2.16, or otherwise) prior to 12:00 noon, New York City time, on the
date when due, in immediately available funds, without set off or counterclaim. Any amounts
received after such time on any date may, in the discretion of the Administrative Agent, be deemed
to have been received on the next succeeding Business Day for purposes of calculating interest
thereon. All such payments shall be made to the Administrative Agent at its offices at 270 Park
Avenue, New York, New York, except payments to be made directly to the Issuing Bank or Swingline
Lender as expressly provided herein and except that payments pursuant to Sections 2.14, 2.15,
2.16 and 9.03 shall be made directly to the

34

 

Persons entitled thereto. The Administrative Agent
shall distribute any such payments received by it for the account of any other Person to the
appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on
a day that is not a Business Day, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable
for the period of such extension. All payments hereunder shall be made in dollars.

          (b) If at any time insufficient funds are received by and available to the Administrative
Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then
due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due
hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest
and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed
LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with
the amounts of principal and unreimbursed LC Disbursements then due to such parties.

          (c) If any Lender shall, by exercising any right of set off or counterclaim or otherwise,
obtain payment in respect of any principal of or interest on any of its Revolving Loans or
participations in LC Disbursements or Swingline Loans resulting in such Lender receiving payment of
a greater proportion of the aggregate amount of its Revolving Loans and participations in LC
Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any
other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face
value) participations in the Revolving Loans and participations in LC Disbursements and Swingline
Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be
shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued
interest on their respective Revolving Loans and participations in LC Disbursements and Swingline
Loans; provided that (i) if any such participations are purchased and all or any portion of
the payment giving rise thereto is recovered, such participations shall be rescinded and the
purchase price restored to the extent of such recovery, without interest, and (ii) the provisions
of this paragraph shall not be construed to
apply to any payment made by the Borrower pursuant to and in accordance with the express terms
of this Agreement or any payment obtained by a Lender as consideration for the assignment of or
sale of a participation in any of its Loans or participations in LC Disbursements to any assignee
or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the
provisions of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to
the extent it may effectively do so under applicable law, that any Lender acquiring a participation
pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and
counterclaim with respect to such participation as fully as if such Lender were a direct creditor
of the Borrower in the amount of such participation.

          (d) Unless the Administrative Agent shall have received notice from the Borrower prior to the
date on which any payment is due to the Administrative Agent for the account of the Lenders or the
Issuing Bank hereunder that the Borrower will not make such payment, the Administrative Agent may
assume that the Borrower has made such payment on such date in accordance herewith and may, in
reliance upon such assumption, distribute to the Lenders or the Issuing Bank, as the case may

35

 

be,
the amount due. In such event, if the Borrower has not in fact made such payment, then each of the
Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the Administrative
Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest
thereon, for each day from and including the date such amount is distributed to it to but excluding
the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking industry rules on
interbank compensation.

          (e) If any Lender shall fail to make any payment required to be made by it pursuant to
Section 2.04(c), 2.05(d) or (e), 2.06(b), 2.17(d) or 9.03(c), then the Administrative Agent
may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts
thereafter received by the Administrative Agent for the account of such Lender to satisfy such
Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid.

               SECTION 2.18. Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.14, or if the Borrower is
required to pay any additional amount to any Lender or any Governmental Authority for the account
of any Lender pursuant to Section 2.16, then such Lender shall use reasonable efforts to
designate a different lending office for funding or booking its Loans hereunder or to assign its
rights and obligations hereunder to another of its offices, branches or affiliates, if, in the
judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts
payable pursuant to Section 2.14 or 2.16, as the case may be, in the future and (ii) would
not subject such Lender to any unreimbursed cost or expense and would not otherwise be
disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and
expenses incurred by any Lender in connection with any such designation or assignment.

          (b) If any Lender requests compensation under Section 2.14, or if the Borrower is
required to pay any additional amount to any Lender or any Governmental Authority for the account
of any Lender pursuant to Section 2.16, or if any Lender defaults in its obligation to fund
Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such
Lender and the Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in Section 9.04),
all its interests, rights and obligations under this Agreement to an assignee that shall assume
such obligations (which assignee may be another Lender, if a Lender accepts such assignment);
provided that (i) the Borrower shall have received the prior written consent of the
Administrative Agent (and if a Commitment is being assigned, the Issuing Bank), which consent shall
not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to
the outstanding principal of its Loans and participations in LC Disbursements and Swingline Loans,
accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the
assignee (to the extent of such outstanding principal and accrued interest and fees) or the
Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting
from a claim for compensation under Section 2.14 or payments required to be made pursuant
to Section 2.16, such assignment will result in a reduction in such compensation or
payments. A Lender shall not be required to make any such assignment and delegation if, prior
thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the
Borrower to require such assignment and delegation cease to apply.

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ARTICLE III.

Representations and Warranties

          The Borrower represents and warrants to the Lenders that:

               SECTION 3.01. Organization; Powers. Each of the Borrower and its Subsidiaries is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, has all requisite power and
authority to carry on its business as now conducted and, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in a Material Adverse
Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such
qualification is required.

               SECTION 3.02. Authorization; Enforceability. (a) The Transactions are within the Borrower’s corporate powers and have been duly authorized by
all necessary corporate and, if required, stockholder action. This Agreement has been duly
executed and delivered by the Borrower and constitutes a legal, valid and binding obligation of the
Borrower, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors’ rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding in equity or at law.

     (b) Each of the Guaranties is within the corporate powers of the Guarantor that is a
signatory thereto and has been duly authorized by all necessary corporate and, if required,
stockholder action. Each of the Guaranties has been duly executed and delivered by the Guarantor
that is a signatory thereto and constitutes a legal, valid and binding obligation of such
Guarantor, enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and
subject to general principles of equity, regardless of whether considered in a proceeding in equity
or at law.

               SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions and the Guaranties (a) do not require any consent or approval of, registration
or filing with, or any other action by, any Governmental Authority, except such as have been
obtained or made and are in full force and effect, (b) will not violate any applicable law or
regulation or the charter, by-laws or other organizational documents of the Borrower or any of its
Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a
default under any indenture, agreement or other instrument binding upon the Borrower or any of its
Subsidiaries or its assets, or give rise to a right thereunder to require any payment to be made by
the Borrower or any of its Subsidiaries (except for payments made pursuant to and in connection
with this Agreement, the Guaranties, and the other Loan Documents), and (d) will not result in the
creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries.

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               SECTION 3.04. Financial Condition; No Material Adverse Change. (a) The Borrower has heretofore furnished to the Lenders its consolidated balance sheet and
statements of income, stockholders equity and cash flows (i) as of and for the fiscal year ended
December 31, 2006, reported on by Deloitte & Touche LLP, independent public accountants, and (ii)
as of and for the fiscal quarter and the portion of the fiscal year ended June 30, 2007, certified
by its chief financial officer. Such financial statements present fairly, in all material
respects, the financial position and results of operations and cash flows of the Borrower and its
consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to
year end audit adjustments and the absence of footnotes in the case of the statements referred to
in clause (ii) above.

          (b) Since December 31, 2006, there has been no Material Adverse Change.

               SECTION 3.05. Properties. (a) Each of the Borrower and its Subsidiaries has good title to, or valid leasehold interests
in, all its real and personal property material to its business, except for defects in title that
could not reasonably be expected to have a Material Adverse Effect.

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

               SECTION 3.06. Litigation and Environmental Matters. (a) There are no actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of the Borrower, threatened against or affecting the
Borrower or any of its Subsidiaries (i) as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined, would reasonably be expected, individually or in
the aggregate, to result in a Material Adverse Effect (other than the Disclosed Matters) or (ii)
that involve this Agreement, the Guaranties, or the Transactions.

          (b) Except for the Disclosed Matters and except with respect to any other matters that,
individually or in the aggregate, would not reasonably be expected to result in a Material Adverse
Effect, neither the Borrower nor any of its Subsidiaries (i) has failed to comply with any
Environmental Law or to obtain, maintain or comply with any permit, license or other approval
required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii)
has received notice of any claim with respect to any Environmental Liability or (iv) knows of any
basis for any Environmental Liability.

          (c) Since the date of this Agreement, or with respect to any action, suit or proceeding or
environmental matter as to which notice is given pursuant to Section 5.02, the date of such
notice, there has been no change in the status of the Disclosed Matters that, individually or in
the aggregate, has resulted in or could reasonably be expected to have, a Material Adverse Effect.

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               SECTION 3.07. Compliance with Laws and Agreements. Each of the Borrower and its Subsidiaries is in compliance with all laws, regulations and orders
of any Governmental Authority applicable to it or its property and all indentures, agreements and
other instruments binding upon it or its property, except where the failure to do so, individually
or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect. No
Default has occurred and is continuing.

               SECTION 3.08. Investment Company Status. Neither the Borrower nor any of its Subsidiaries is (a) an “investment company” as defined in,
or subject to regulation under, the Investment Company Act of 1940.

               SECTION 3.09. Taxes. Each of the Borrower and its Subsidiaries has timely filed or caused to be filed all Tax returns
and reports required to have been filed and has paid or caused to be paid all Taxes required to
have been paid by it, except (a) Taxes that are being contested in good faith by appropriate
proceedings and for which the Borrower or such Subsidiary, as applicable, has set aside on its
books adequate reserves or (b) to the extent that the failure to do so would not reasonably be
expected to result in a Material Adverse Effect.

               SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with
all other such ERISA Events for which liability is reasonably expected to occur, would reasonably
be expected to result in a Material Adverse Effect. The present value of all
accumulated benefit obligations under each Plan (based on the assumptions used for purposes of
Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent
financial statements reflecting such amounts, exceed by more than $250,000 the fair market value of
the assets of such Plan, and the present value of all accumulated benefit obligations of all
underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting
Standards No. 87) did not, as of the date of the most recent financial statements reflecting such
amounts, exceed by more than $250,000 the fair market value of the assets of all such underfunded
Plans.

               SECTION 3.11. Disclosure. The Borrower has disclosed to the Lenders all agreements, instruments and corporate or other
restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it,
that, individually or in the aggregate, would reasonably be expected to result in a Material
Adverse Effect. The Borrower represents and warrants to the Lenders and the Administrative Agent
that the representations and warranties made by the Borrower in the Commitment Letter dated August
8, 2007 among the Borrower, the Administrative Agent and J.P. Morgan Securities Inc. are true and
correct as of the date hereof.

ARTICLE IV.

Conditions

               SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans and of the Issuing Bank to issue Letters of Credit
hereunder shall not become effective until the date on which each of the following conditions is
satisfied (or waived in accordance with Section 9.02):

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     (a) The Administrative Agent (or its counsel) shall have received from each party
hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii)
written evidence satisfactory to the Administrative Agent (which may include telecopy
transmission of a signed signature page of this Agreement) that such party has signed a
counterpart of this Agreement.

     (b) The Administrative Agent (or its counsel) shall have received from each Guarantor
either (i) a counterpart of the Guaranty signed by such Guarantor or (ii) written evidence
satisfactory to the Administrative Agent (which may include telecopy transmission of a
signed signature page of such Guaranty from each of the Guarantors) that such party has
signed a counterpart of this Guaranty.

     (c) The Administrative Agent shall have received a favorable written opinion (addressed
to the Administrative Agent and the Lenders and dated the Effective Date) of Heller Ehrman
LLP, counsel for the Borrower and the Guarantors, substantially in the form of Exhibit
B, and covering such other matters relating to the Borrower and the Guarantors, this
Agreement, the Guaranties, and the Transactions as the Required Lenders shall reasonably
request. The Borrower and the Guarantors hereby request such counsel to deliver such
opinion.

     (d) The Administrative Agent shall have received such documents and certificates as the
Administrative Agent or its counsel may reasonably request relating to the organization,
existence and good standing of the Borrower and the Guarantors, the authorization of the
Transactions and any other legal matters relating to the Borrower, this Agreement, the
Guarantors, the Guaranties, and the Transactions, all in form and substance satisfactory to
the Administrative Agent and its counsel.

     (e) The Administrative Agent shall have received a certificate, dated the Effective
Date and signed by the President, a Vice President or a Financial Officer of the Borrower,
in form and substance satisfactory to the Administrative Agent, confirming compliance with
the conditions set forth in paragraphs (a) and (b) of Section 4.02.

     (f) The Administrative Agent shall have received a certificate, dated the Effective
Date and signed by the President, a Vice President or a Financial Officer of each of the
Guarantors, in form and substance satisfactory to the Administrative Agent, confirming
compliance with the conditions set forth in paragraph (a) of Section 4.02 and
stating that the representations and warranties contained in this Agreement pertaining to
the Guarantors are true and correct as of the date hereof.

     (g) Subject to the proviso in Section 9.03(a), the Lenders, the Administrative
Agent, and the Sole Lead Arranger shall have received all fees and other amounts due and
payable on or prior to the Effective Date, including, to the extent invoiced, reimbursement
or payment of all out of pocket expenses required to be reimbursed or paid by the Borrower
hereunder.

     (h) All approvals of any Governmental Authority and any other third parties necessary
in connection with the Loans contemplated by this Agreement and the

40

 

continuing operations of
the Borrower and its Subsidiaries (including shareholder approvals, if any) shall have been
obtained on satisfactory terms and shall be in full force and effect.

     (i) The Lenders shall have received (i) satisfactory audited consolidated financial
statements of the Borrower for the two most recent fiscal years ended prior to the Effective
Date as to which such financial statements are available, (ii) satisfactory unaudited
interim consolidated financial statements of the Borrower for each quarterly period ended
subsequent to the date of the latest financial statements delivered pursuant to clause (i)
of this subsection as to which such financial statements are available, and (iii) the
Borrower’s most recent projected income statement, balance sheet and cash flows for the
period beginning January 1, 2007 and ending December 31, 2010.

     (j) The Lenders shall have received resolutions, incumbency certificates, a solvency
certificate from the Borrower’s chief financial officer, organizational documents and
collateral releases from prior lenders (if any), all in form and substance reasonably
acceptable to the Administrative Agent, the Sole Lead Arranger, and their counsel.

     (k) The corporate structure, capital structure, other debt instruments, material
accounts, and governing documents of the Borrower and its Affiliates, shall be acceptable to
the Administrative Agent.

     (l) Prepayment in full of all obligations under any existing loan facilities,
termination of the commitments thereunder and release of all liens, if any, granted
thereunder (unless otherwise permitted under this Agreement).

The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and such
notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the
Lenders to make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become
effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section
9.02) at or prior to 3:00 p.m., New York City time, on September 5, 2007 (and, in the event
such conditions are not so satisfied or waived, the Commitments shall terminate at such time).

               SECTION 4.02. Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing, and of the
Issuing Bank to issue, amend, renew or extend any Letter of Credit, is subject to the satisfaction
of the following conditions:

     (a) The representations and warranties of the Borrower set forth in this Agreement
(including, without limitation, the representations and warranties set forth in Section
3.04(b) and Section 3.06) and the representations and warranties of the
Guarantors set forth in the Guaranties shall be true and correct on and as of the date of
such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of
Credit, as applicable, except to the extent that such representations and warranties

41

 

specifically refer to an earlier date, in which case they shall be true and correct as of
such earlier date.

     (b) At the time of and immediately after giving effect to such Borrowing or the
issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no
Default or Event of Default shall have occurred and be continuing.

     (c) At the time of and immediately after giving effect to such Borrowing or the
issuance, amendment, renewal or extensions of such Letter of Credit, as applicable, the sum
of the total Revolving Credit Exposures shall not exceed the total Commitments.

     (d) Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the Borrower on the
date thereof as to the matters specified in paragraphs (a) and (b) of this Section.

ARTICLE V.

Affirmative Covenants

          Until the Commitments have expired or been terminated and the principal of and interest on
each Loan and all fees payable hereunder shall have been paid in full and all Letters of Credit
shall have expired or terminated and all LC Disbursements shall have been reimbursed, the Borrower
covenants and agrees with the Lenders that:

               SECTION 5.01. Financial Statements; Ratings Change and Other Information. The Borrower will furnish to the Administrative Agent and each Lender:

     (a) within 90 days after the end of each fiscal year of the Borrower, its audited
consolidated balance sheet and related statements of operations, stockholders’ equity and
cash flows as of the end of and for such year, setting forth in each case in comparative
form the figures for the previous fiscal year, all reported on by Deloitte & Touche LLP or
other independent public accountants of recognized national standing (without a “going
concern” or like qualification or exception and without any qualification or exception as to
the scope of such audit) to the effect that such consolidated financial statements present
fairly in all material respects the financial condition and results of operations of the
Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied;

     (b) within 45 days after the end of each of the first three fiscal quarters of each
fiscal year of the Borrower, its consolidated balance sheet and related statements of
operations, stockholders’ equity and cash flows as of the end of and for such fiscal quarter
and the then elapsed portion of the fiscal year, setting forth in each case in comparative
form the figures for the corresponding period or periods of (or, in the case of the balance
sheet, as of the end of) the previous fiscal year, all certified by one of its Financial
Officers as presenting fairly in all material respects the financial condition and results
of operations of the Borrower and its consolidated Subsidiaries on a consolidated

42

 

basis in
accordance with GAAP consistently applied, subject to normal year-end audit adjustments and
the absence of footnotes;

          concurrently with any delivery of financial statements under clause (a) or (b) above, a
certificate of a Financial Officer of the Borrower in the form of Exhibit G or any other
form approved by the Administrative Agent (i) certifying as to whether a Default has occurred and,
if a Default has occurred, specifying the details thereof and any action taken or proposed to be
taken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating
compliance with Sections 6.09 and 6.10 and (iii) stating whether any change in GAAP or in
the application thereof has occurred since the date of the audited financial statements referred to
in Section 3.04 and, if any such change has occurred, specifying the effect of such change
on the financial statements accompanying such certificate;

     (c) promptly after the same become publicly available, copies of all periodic and other
reports, proxy statements and other materials filed by the Borrower or any Subsidiary with
the Securities and Exchange Commission, or any Governmental Authority succeeding to any or
all of the functions of said Commission, or with any national securities exchange, or
distributed by the Borrower to its shareholders generally, as the case may be;
provided that such information need not be provided by the Borrower if it is
available on the Security and Exchange Commission’s EDGAR system and the Borrower sends an
email notification to the Administrative Agent at the time such information becomes
available on such system; and

     (d) promptly following any request therefor, such other information regarding the
operations, business affairs and financial condition of the Borrower or any Subsidiary, or
compliance with the terms of this Agreement, as the Administrative Agent or any Lender may
reasonably request.

               SECTION 5.02. Notices of Material Events. The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of
the following:

          (a) the occurrence of any Default;

          (b) the filing or commencement of any action, suit or proceeding by or before any
arbitrator or Governmental Authority against or affecting the Borrower or any Affiliate
thereof that, if adversely determined, would reasonably be expected to result in a Material
Adverse Effect, provided, that such information need not be provided by the Borrower
in a written notice to Lenders and Administrative Agent if it is available on the Security
and Exchange Commission’s EDGAR system and the Borrower sends an email notification to the
Administrative Agent at the time such information becomes available on such system;

          (c) the occurrence of any ERISA Event that, alone or together with any other ERISA
Events that have occurred, would reasonably be expected to result in liability of the
Borrower and its Subsidiaries in an aggregate amount exceeding $250,000; and

          (d) any other development that results in, or would reasonably be expected to result
in, a Material Adverse Effect.

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Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer
or other executive officer of the Borrower setting forth the details of the event or development
requiring such notice and any action taken or proposed to be taken with respect thereto.

               SECTION 5.03. Existence; Conduct of Business. The Borrower will, and will cause each of its Subsidiaries to, do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal existence and the rights,
licenses, permits, privileges and franchises material to the conduct of its business; provided that
the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted
under Section 6.03.

               SECTION 5.04. Payment of Obligations. The Borrower will, and will cause each of its Subsidiaries to, pay its obligations, including
Tax liabilities, that, if not paid, would result in a Material Adverse Effect before the same shall
become delinquent or in default, except where (a) the validity or amount thereof is being contested
in good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has set aside on its
books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make
payment pending such contest would not reasonably be expected to result in a Material Adverse
Effect.

               SECTION 5.05. Maintenance of Properties; Insurance. The Borrower will, and will cause each of its Subsidiaries to, (a) keep and maintain all
property material to the conduct of its business in good working order and condition, ordinary wear
and tear excepted, and (b) maintain, with financially sound and reputable insurance companies,
insurance in such amounts and against such risks as are customarily maintained by companies engaged
in the same or similar businesses operating in the same or similar locations.

               SECTION 5.06. Books and Records; Inspection Rights. The Borrower will, and will cause each of its Subsidiaries to, keep proper books of record and
account in which full, true and correct entries are made of all dealings and transactions in
relation to its business and activities. The Borrower will, and will cause each of its
Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender,
upon reasonable prior notice, to visit and inspect its properties up to twice each calendar year,
during business hours, to examine and make extracts from its books and records, and to discuss its
affairs, finances and condition with its officers and independent accountants, provided
that upon the occurrence and during the continuation of a payment Default or an Event of Default,
no prior notice shall be required and the Administrative Agent or any Lender may make unlimited
visits and inspect, examine, make extracts, and discuss, from time to time and at any and all times
as it may elect in its sole discretion.

               SECTION 5.07. Compliance with Laws. The Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules,
regulations and orders of any Governmental Authority applicable to it or its property, except where
the failure to do so, individually or in the aggregate, would not reasonably be expected to result
in a Material Adverse Effect.

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               SECTION 5.08. Use of Proceeds and Letters of Credit. The proceeds of the Loans will be used only to
finance future construction projects and acquisitions of the Borrower in accordance with the terms
of this Agreement and for other working capital needs and general corporate purposes of the
Borrower and the Subsidiaries in the ordinary course of business. No part of the proceeds of any
Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any
of the regulations of the Board, including Regulations T, U and X.

               SECTION 5.09. Additional Guarantors

     Subject to applicable law, the Borrower and each Subsidiary shall cause each of its direct or
indirect domestic Subsidiaries formed or acquired after the date of this Agreement in accordance
with the terms of this Agreement to become a Guarantor by executing a Guaranty in the form of
Exhibit C. Upon execution and delivery thereof, each such Person shall automatically
become a Guarantor hereunder and thereupon shall have all of the rights, benefits, duties, and
obligations in such capacity under the Guaranty and with respect to the Loan Documents.

ARTICLE VI.

Negative Covenants

          Until the Commitments have expired or terminated and the principal of and interest on each
Loan and all fees payable hereunder have been paid in full and all Letters of Credit have expired
or terminated and all LC Disbursements shall have been reimbursed, the Borrower covenants and
agrees with the Lenders that:

               SECTION 6.01. Indebtedness. The Borrower will not, and will not permit any Subsidiary to, create, incur,
assume or permit to exist any Indebtedness, except the following, to the extent that, unless
otherwise provided, immediately prior to incurring such Indebtedness and after giving effect
thereto, the Borrower is in compliance with Section 6.09:

     (a) Indebtedness created hereunder;

     (b) Indebtedness existing on the date hereof and set forth in Schedule 6.01;

     (c) Indebtedness of the Borrower to any Subsidiary and of any Subsidiary to the
Borrower or any other Subsidiary;

     (d) Guarantees by the Borrower of Indebtedness of any Subsidiary and by any Subsidiary
of Indebtedness of the Borrower or any other Subsidiary;

     (e) Indebtedness of the Borrower or any Subsidiary incurred to finance the acquisition,
construction or improvement of any real property or fixed or capital assets, including
Capital Lease Obligations and any Indebtedness assumed in connection with the acquisition of
any such real property or assets or secured by a Lien on any such assets
prior to the acquisition thereof, and extensions, renewals and replacements of any such
Indebtedness that do not increase the outstanding principal amount thereof; provided
that (i) such Indebtedness is incurred prior to or within 90 days after such acquisition or
the

45

 

completion of such construction or improvement and (ii) the aggregate principal amount
of Indebtedness permitted by this clause (e) shall not exceed $5,000,000 at any time
outstanding;

     (f) Indebtedness of any Person that becomes a Subsidiary after the date hereof, and
extensions, renewals and replacements of any such Indebtedness that do not increase the
principal amount thereof; provided that (i) such Indebtedness exists at the time
such Person becomes a Subsidiary and is not created in contemplation of or in connection
with such Person becoming a Subsidiary and (ii) the aggregate principal amount of
Indebtedness permitted by this clause (f) shall not exceed $1,000,000 at any time
outstanding;

     (g) Indebtedness of the Borrower or any Subsidiary as an account party in respect of
trade letters of credit;

     (h) Indebtedness in respect of Swap Agreements permitted by Section 6.05;

     (i) Indebtedness in respect of any Sale and Leaseback Transactions permitted under
Section 6.12;

     (j) Subordinated Indebtedness;

     (k) Service Center Indebtedness;

     (l) Indebtedness in respect of advances made to the Borrower and/or its Subsidiaries by
sponsoring banks for Interchange Fees; and

     (m) other unsecured Indebtedness in an aggregate principal amount not exceeding
$5,000,000 at any time outstanding.

               SECTION 6.02. Liens. The Borrower will not, and will not permit any Subsidiary to, create, incur, assume
or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or
assign or sell any income or revenues (including accounts receivable) or rights in respect of any
thereof, except:

     (a) Permitted Encumbrances;

     (b) any Lien on any property or asset of the Borrower or any Subsidiary existing on the
date hereof and set forth in Schedule 6.02; provided that (i) such Lien
shall not apply to any other property or asset of the Borrower or any Subsidiary and (ii)
such Lien shall secure only those obligations which it secures on the date hereof and
extensions, renewals and replacements thereof that do not increase the outstanding principal
amount thereof;

     (c) any Lien existing on any property or asset prior to the acquisition thereof by the
Borrower or any Subsidiary or existing on any property or asset of any Person that becomes a
Subsidiary after the date hereof prior to the time such Person becomes a Subsidiary;
provided that (i) such Lien is not created in contemplation of or in connection

46

 

with such acquisition or such Person becoming a Subsidiary , as the case may be, (ii) such Lien
shall not apply to any other property or assets of the Borrower or any Subsidiary and (iii)
such Lien shall secure only those obligations which it secures on the date of such
acquisition or the date such Person becomes a Subsidiary, as the case may be and extensions,
renewals and replacements thereof that do not increase the outstanding principal amount
thereof;

     (d) Liens on real property or fixed or capital assets acquired, constructed or improved
by the Borrower or any Subsidiary; provided that (i) such Liens secure Indebtedness
permitted by clause (e) or clause (k) of Section 6.01, (ii) such security interests
and the Indebtedness secured thereby are incurred prior to or within 90 days after such
acquisition or the completion of such construction or improvement, (iii) the Indebtedness
secured thereby does not exceed 100% of the cost of acquiring, constructing or improving
such fixed or capital assets and (iv) such Lien shall not apply to any other property or
assets of the Borrower or any Subsidiary; and

     (e) Liens securing Indebtedness permitted by clause (i) of Section 6.01.

               SECTION 6.03. Fundamental Changes

     (a) The Borrower will not, and will not permit any Subsidiary to, merge into or
consolidate with any other Person, or permit any other Person to merge into or consolidate
with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series
of transactions) all or substantially all of its assets, or all or substantially all of the
stock of any of its Subsidiaries (in each case, whether now owned or hereafter acquired), or
liquidate or dissolve, except that, if at the time thereof and immediately after giving
effect thereto no Default shall have occurred and be continuing (i) any Subsidiary may merge
into the Borrower in a transaction in which the Borrower is the surviving corporation, (ii)
any Subsidiary may merge into any other Subsidiary in a transaction in which the surviving
entity is a Subsidiary, (iii) any Subsidiary may sell, transfer, lease or otherwise dispose
of its assets to the Borrower or to another Subsidiary and (iv) any Subsidiary may liquidate
or dissolve if the Borrower determines in good faith that such liquidation or dissolution is
in the best interests of the Borrower and is not materially disadvantageous to the Lenders;
provided that any such transaction described in clauses (i) — (iii) above involving a
Subsidiary that is not a wholly owned Subsidiary immediately prior to such merger shall not
be permitted unless also permitted by Section 6.04.

     (b) The Borrower will not, and will not permit any of its Subsidiaries to, engage to
any material extent in any business other than businesses of the type conducted by the
Borrower and its Subsidiaries on the date of execution of this Agreement and businesses
reasonably related thereto, including payment and transaction processing businesses.

               SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions. The Borrower will not, and will
not permit any of its Subsidiaries to, purchase, hold or acquire (including pursuant to any merger
with any Subsidiary that was not a wholly owned Subsidiary prior to such merger) any capital stock,
evidences of indebtedness or

47

 

other securities (including any option, warrant or other right to
acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any
obligations of, or make or permit to exist any investment or any other interest in, any other
Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any
assets of any other Person constituting a business unit, except:

     (a) Permitted Investments;

     (b) investments by the Borrower existing on the date hereof in the capital stock of its
Subsidiaries;

     (c) loans or advances made by the Borrower to any Subsidiary and made by any Subsidiary
to the Borrower or any other Subsidiary;

     (d) acquisitions of any capital stock, evidences of indebtedness or other securities
(including any option, warrant or other right to acquire any of the foregoing) or
acquisitions of assets of any Person constituting a business unit that comply on a pro forma
basis with all provisions of this Agreement and the other Loan Documents;

     (e) Guarantees constituting Indebtedness permitted by Section 6.01;

     (f) investments made with Payroll Deposits in accordance with the Investment Standards;

     (g) advances of Interchange Fees to merchants with respect to Processing Transactions
in the ordinary course of business; and

     (h) loans or advances to (i) non-sales employees of the Borrower or any Subsidiary in
an aggregate outstanding principal amount not to exceed $1,000,000 at any time and (ii)
sales employees of the Borrower or any Subsidiary in an aggregate outstanding principal
amount not to exceed $5,000,000 at any time.

               SSECTION 6.05. Swap Agreements. The Borrower will not, and will not permit any of its Subsidiaries to,
enter into any Swap Agreement, except (a) Swap Agreements entered into to hedge or mitigate risks
to which the Borrower or any Subsidiary has actual exposure (other than those in respect of Equity
Interests of the Borrower or any of its Subsidiaries or payments restricted by Section
6.06), and (b) Swap Agreements entered into in order to effectively cap, collar or exchange
interest rates (from fixed to floating rates, from one floating rate to another floating rate or
otherwise) with respect to any interest-bearing liability or investment of the Borrower or any
Subsidiary.

          SECTION 6.06. Restricted Payments. (a) The Borrower will not, and will not permit any of its Subsidiaries to, declare or
make, or agree to pay or make, directly or indirectly, any Restricted Payment, except, so
long as no Event of Default shall exist immediately before and after giving effect to any
such payment, (a) the Borrower may declare and pay dividends with respect to its Equity
Interests payable in additional shares of its common stock, (b) the Borrower may declare
and pay cash dividends with respect to its Equity Interests, (c) Subsidiaries may declare
and pay

48

 

dividends ratably with respect to their Equity Interests, (d) the Borrower may make
repurchases with respect to its Equity Interests, and (e) the Borrower may make Restricted
Payments pursuant to and in accordance with stock option plans or other benefit plans for
management or employees of the Borrower and its Subsidiaries.

          (b) The Borrower will, nor will it permit any Subsidiary to, make or agree to pay or
make, directly or indirectly, any payment or other distribution (whether in cash, securities
or other property) of or in respect of principal of or interest on any Indebtedness, or any
payment or other distribution (whether in cash, securities or other property), including any
sinking fund or similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancellation or termination of any Indebtedness, except:

     (i) payment of Indebtedness created under the Loan Documents;

     (ii) payment of regularly scheduled interest and principal payments as and when due in
respect of any Indebtedness, other than payments in respect of the Subordinated Indebtedness
prohibited by the subordination provisions thereof;

     (iii) refinancings of Indebtedness to the extent permitted by Section 6.01;
and

     (iv) payment of secured Indebtedness that becomes due as a result of the voluntary
sale or transfer of the property or assets securing such Indebtedness.

               SECTION 6.07. Transactions with Affiliates. The Borrower will not, and will not permit any of its
Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or
otherwise acquire any property or assets from, or otherwise engage in any other transactions with,
any of its Affiliates, except (a) in the ordinary course of business at prices and on terms and
conditions not less favorable to the Borrower or such Subsidiary than could be obtained on an
arm’s-length basis from unrelated third parties, (b) transactions between or among the Borrower and
its wholly owned Subsidiaries not involving any other Affiliate, (c) any Restricted Payment
permitted by Section 6.06 and (d) any investment permitted by clause (h) of Section
6.04.

               SECTION 6.08. Restrictive Agreements. The Borrower will not, and will not permit any of its Subsidiaries
to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement
that prohibits, restricts or imposes any condition upon (a) the ability of the Borrower or any
Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets, or (b)
the ability of any Subsidiary to pay dividends or other distributions with respect to any shares of
its capital stock or to make or
repay loans or advances to the Borrower or any other Subsidiary or to Guarantee Indebtedness of the
Borrower or any other Subsidiary; provided that (i) the foregoing shall not apply to restrictions
and conditions imposed by law or by this Agreement, (ii) the foregoing shall not apply to
restrictions and conditions existing on the date hereof identified on Schedule 6.08 (but
shall apply to any extension or renewal of, or any amendment or modification expanding the scope
of, any such restriction or condition), (iii) the foregoing shall not apply to customary
restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending
such sale,

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provided such restrictions and conditions apply only to the Subsidiary that is to be
sold and such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not apply to
restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by
this Agreement if such restrictions or conditions apply only to the property or assets securing
such Indebtedness and (v) clause (a) of the foregoing shall not apply to customary provisions in
leases restricting the assignment thereof.

               SECTION 6.09. Leverage Ratios.

     (a) Total Leverage Ratio. The Borrower will not permit the ratio of Funded
Debt to EBITDA to be greater than 2.5 to 1.00 (the “Total Leverage Ratio”),
determined on the last day of each fiscal quarterly period for the four fiscal quarters
ending on such date.

     (b) Senior Leverage Ratio. The Borrower will not permit the Senior Leverage
Ratio to be greater than 2.25 to 1.00, determined on the last day of each fiscal quarterly
period for the four fiscal quarters ending on such date.

               SECTION 6.10. Fixed Charge Coverage Ratio.

     The Borrower shall not permit the ratio of EBITDA minus Customer Acquisition Costs
minus the net amount paid by Borrower with respect to any repurchases of its Equity
Interests (excluding Permitted Repurchases) minus Capital Expenditures (excluding any
Capital Expenditures with respect to the Service Center) minus Dividends (all of the
foregoing operations resulting in an amount that equals the numerator) divided by Fixed Charges (as
the denominator) to be less than 1.35 to 1:00, determined on the last day of each fiscal quarterly
period for the four fiscal quarters ending on such date.

               SECTION 6.11. Asset Sales

          The Borrower shall not and shall not permit any Subsidiary to, sell, transfer, lease or
otherwise dispose of any asset, including any Equity Interest owned by it, nor will the Borrower
permit any Subsidiary to issue any additional Equity Interest in such Subsidiary (other than to the
Borrower or another Subsidiary in compliance with Section 6.03), except:

     (a) sales, transfers and dispositions of (i) inventory in the ordinary course of
business and (ii) used, obsolete, worn out or surplus equipment or property in the ordinary
course of business;

     (b) sales, transfers and dispositions to the Borrower or any Subsidiary,
provided that any such sales, transfers or dispositions involving a Subsidiary shall
be made in compliance with Section 6.07;

     (c) sales, transfers and dispositions of accounts receivable in connection with the
compromise, settlement or collection thereof;

     (d) sales, transfers and dispositions of investments permitted by Section 6.04 (a)
 and (f);

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     (e) Sale and Leaseback Transactions permitted by Section 6.12;

     (f) dispositions resulting from any casualty or other insured damage to, or any taking
under power of eminent domain or by condemnation or similar proceeding of, any property or
asset of the Borrower or any Subsidiary; and

     (g) sales, transfers and other dispositions of assets (including Equity Interests in a
Subsidiary) that are not permitted by any other paragraph of this Section, provided
that the aggregate amount thereof during any fiscal year does not exceed 10% of Tangible
Assets as of the end of the immediately preceding fiscal year;

provided that all sales, transfers, leases and other dispositions permitted hereby (other
than those permitted by paragraphs (b) and (f) above) shall be made for fair value and for at
least 75% cash consideration.

               SECTION 6.12. Sale and Leaseback Transactions

          Borrower shall not and shall not permit any Subsidiary to, enter into any Sale and Leaseback
Transaction, except for any such sale of any fixed or capital assets by the Borrower or any
Subsidiary that is made for cash consideration in an amount not less than the fair value of such
fixed or capital asset and is consummated within 90 days after the Borrower or such Subsidiary
acquires or completes the construction of such fixed or capital asset.

ARTICLE VII.

Events of Default

     If any of the following events (“Events of Default”) shall occur:

     (a) the Borrower shall fail to pay any principal of any Loan or any reimbursement
obligation in respect of any LC Disbursement when and as the same shall become due and
payable, whether at the due date thereof or at a date fixed for prepayment thereof or
otherwise;

     (b) the Borrower shall fail to pay any interest on any Loan or any fee or any other
amount (other than an amount referred to in clause (a) of this Article) payable under this
Agreement, when and as the same shall become due and payable, and such failure shall
continue unremedied for a period of five days Business Days;

     (c) any representation or warranty made or deemed made by or on behalf of the Borrower,
any Subsidiary, or any Guarantor in or in connection with this Agreement or any Guaranty, or
any amendment or modification hereof or thereof or waiver hereunder or thereunder, or in any
report, certificate, financial statement or other document furnished pursuant to or in
connection with this Agreement or any Guaranty, or other Loan Document, or any amendment or
modification hereof or thereof or waiver hereunder or thereunder, shall prove to have been
untrue in any material respect when made or deemed made;

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     (d) the Borrower shall fail to observe or perform any covenant, condition or agreement
contained in Section 5.02, 5.03 (with respect to the Borrower’s existence) or 5.08
or in Article VI or the Guarantor shall fail to observe or perform any covenant,
condition, or agreement contained in any Guaranty;

     (e) the Borrower shall fail to observe or perform any covenant, condition or agreement
contained in this Agreement (other than those specified in clause (a), (b) or (d) of this
Article), and such failure shall continue unremedied for a period of 30 days after notice
thereof from the Administrative Agent to the Borrower (which notice will be given at the
request of any Lender);

     (f) the Borrower or any Subsidiary shall fail to make any payment (whether of principal
or interest and regardless of amount) in respect of any Material Indebtedness, when and as
the same shall become due and payable (whether or not such failure results in acceleration);

     (g) any event or condition occurs that results in any Material Indebtedness becoming
due prior to its scheduled maturity or that enables or permits (with or without the giving
of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or
any trustee or agent on its or their behalf to cause any Material Indebtedness to become
due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to
its scheduled maturity (whether or not such event or condition results in acceleration);
provided that this clause (g) shall not apply to secured Indebtedness that becomes
due as a result of the voluntary sale or transfer of the property or assets securing such
Indebtedness;

     (h) an involuntary proceeding shall be commenced or an involuntary petition shall be
filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower,
any Subsidiary, or any Guarantor or its debts, or of a substantial part of its assets, under
any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or
hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower, any Subsidiary, or any Guarantor or for a
substantial part of its assets, and, in any such case, such proceeding or petition shall
continue undismissed for 60 days or an order or decree approving or ordering any of the
foregoing shall be entered;

     (i) the Borrower, any Subsidiary, or any Guarantor shall (i) voluntarily commence any
proceeding or file any petition seeking liquidation, reorganization or other
relief under any Federal, state or foreign bankruptcy, insolvency, receivership or
similar law now or hereafter in effect, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition described in clause
(h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Borrower, any Guarantor, or
any Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the
material allegations of a petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors or (vi) take any action for the purpose of
effecting any of the foregoing;

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     (j) the Borrower, any Subsidiary, or any Guarantor shall become unable, shall admit in
writing its inability, or shall fail generally, to pay its debts as they become due;

     (k) one or more judgments for the payment of money in an aggregate amount in excess of
$5,000,000 shall be rendered against the Borrower, any Subsidiary, or any Guarantor, or any
combination thereof and the same shall remain undischarged for a period of 30 consecutive
days during which execution shall not be effectively stayed, or any action shall be legally
taken by a judgment creditor to attach or levy upon any assets of the Borrower, any
Subsidiary, or any Guarantor to enforce any such judgment;

     (l) an ERISA Event shall have occurred that, in the opinion of the Required Lenders,
when taken together with all other ERISA Events that have occurred, would reasonably be
expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount
exceeding (i) $1,000,000 in any year or (ii) $2,000,000 for all periods;

     (m) any of the Loan Documents shall cease to be enforceable or in full force and
effect; or

     (n) a Change in Control shall occur;

then, and in every such event (other than an event with respect to the Borrower described in clause
(h) or (i) of this Article), and at any time thereafter during the continuance of such event, the
Administrative Agent may, and at the request of the Required Lenders shall, by notice to the
Borrower, take either one or both of the following actions, at the same or different times: (i)
terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii)
declare the Loans then outstanding to be due and payable in whole (or in part, in which case any
principal not so declared to be due and payable may thereafter be declared to be due and payable),
and thereupon the principal of the Loans so declared to be due and payable, together with accrued
interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall become
due and payable immediately, without presentment, demand, protest or other notice of any kind,
including without limitation, notice of intent to accelerate and notice of acceleration, all of
which are hereby waived by the Borrower; and in case of any event with respect to the Borrower
described in clause (h) or (i) of this Article, the Commitments shall automatically terminate and
the principal of the Loans then outstanding, together with accrued interest thereon and all fees
and other obligations of the Borrower accrued hereunder, shall automatically become due and
payable, without presentment, demand, protest or other notice of
any kind, including without limitation, notice of intent to accelerate and notice of acceleration,
all of which are hereby waived by the Borrower.

ARTICLE VIII.

The Administrative Agent

          Each of the Lenders and the Issuing Bank hereby irrevocably appoints the Administrative Agent
as its agent and authorizes the Administrative Agent to take such actions on its behalf and to
exercise such powers as are delegated to the Administrative Agent by the terms hereof, together
with such actions and powers as are reasonably incidental thereto.

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          The bank serving as the Administrative Agent hereunder shall have the same rights and powers
in its capacity as a Lender as any other Lender and may exercise the same as though it were not the
Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate
thereof as if it were not the Administrative Agent hereunder.

          The Administrative Agent shall not have any duties or obligations except those expressly set
forth herein. Without limiting the generality of the foregoing, (a) the Administrative Agent shall
not be subject to any fiduciary or other implied duties, regardless of whether a Default has
occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary rights and powers
expressly contemplated hereby that the Administrative Agent is required to exercise in writing as
directed by the Required Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances as provided in Section 9.02 or Section 2.05(j)),
and (c) except as expressly set forth herein, the Administrative Agent shall not have any duty to
disclose, and shall not be liable for the failure to disclose, any information relating to the
Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as
Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not
be liable for any action taken or not taken by it with the consent or at the request of the
Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 9.02 or Section 2.05(j)) or in the absence of
its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to
have knowledge of any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrower or a Lender, and the Administrative Agent shall not be
responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with this Agreement or any Guaranty, (ii) the contents of
any certificate, report or other document delivered hereunder or in connection herewith or in
connection with any Guaranty, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth herein or in any Guaranty, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement, the Guaranties, or any other
agreement, instrument or document, or (v) the satisfaction of any condition set forth in
Article IV or elsewhere herein, other than to confirm receipt of items expressly required
to be delivered to the Administrative Agent.

          The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for
relying upon, any notice, request, certificate, consent, statement, instrument, document or other
writing believed by it to be genuine and to have been signed or sent by the proper Person. The
Administrative Agent also may rely upon any statement made to it orally or by telephone and
believed by it to be made by the proper Person, and shall not incur any liability for relying
thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and shall not be liable for
any action taken or not taken by it in accordance with the advice of any such counsel, accountants
or experts.

          The Administrative Agent may perform any and all its duties and exercise its rights and powers
by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative
Agent and any such sub-agent may perform any and all its duties and

54

 

exercise its rights and powers
through their respective Related Parties. The exculpatory provisions of the preceding paragraphs
shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any
such sub-agent, and shall apply to their respective activities in connection with the syndication
of the credit facilities provided for herein as well as activities as Administrative Agent.

          Subject to the appointment and acceptance of a successor Administrative Agent as provided in
this paragraph, the Administrative Agent may resign at any time by notifying the Lenders, the
Issuing Bank and the Borrower. Upon any such resignation, the Required Lenders shall have the
right, in consultation with the Borrower, to appoint a successor. If no successor shall have been
so appointed by the Required Lenders and shall have accepted such appointment within 30 days after
the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative
Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent
which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon
the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor
shall succeed to and become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its
duties and obligations hereunder. The fees payable by the Borrower to a successor Administrative
Agent shall be the same as those payable to its predecessor unless otherwise agreed between the
Borrower and such successor. After the Administrative Agent’s resignation hereunder, the
provisions of this Article and Section 9.03 shall continue in effect for the benefit of
such retiring Administrative Agent, its sub agents and their respective Related Parties in respect
of any actions taken or omitted to be taken by any of them while it was acting as Administrative
Agent.

          Each Lender acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each
Lender also acknowledges that it will, independently and without reliance upon the Administrative
Agent or any other Lender and based on such documents and information as it shall from time to time
deem appropriate, continue to make its own decisions in taking or not taking action under or based
upon this Agreement, any related agreement or any document furnished hereunder or thereunder.

ARTICLE IX.

Miscellaneous

               SECTION 9.01. Notices. (a) Except in the case of notices and other communications expressly permitted to
be given by telephone (and subject to paragraph (b) below), all notices and other communications
provided for herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as follows:

	 	(i)	 	if to the Borrower, to it at 90 Nassau Street, Princeton, NJ 08542, Attention
of Robert H.B. Baldwin, Jr. and the Legal Department (Telecopy No. 609-683-3815);

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	 	(ii)	 	if to the Administrative Agent, to the Issuing Bank or to the Swingline Lender,
to JPMorgan Chase Bank, N.A., Loan and Agency Services Group, 10 South Dearborn Street,
19th Floor, Chicago, Illinois, with a copy to (A) JPMorgan Chase Bank, N.A., P.O. Box
660197, Dallas, Texas 75266, Attention of John Horst, Mail Code-TX1-2669, Telephone
No. (214) 965-3572, Telecopy No. (214) 965-2884, or (B) JPMorgan Chase Bank, N.A.,
700 North Pearl Street, Suite 705, Dallas, Texas 75201, Attention of John Horst, Mail
Code-TX1-2669, Telephone No. (214) 965-3572, Telecopy No. (214) 965-2884; and
	 
	 	(iii)	 	if to any other Lender, to it at its address (or telecopy number) set forth in
its Administrative Questionnaire.

          (b) Notices and other communications to the Lenders hereunder may be delivered or furnished
by electronic communications pursuant to procedures approved by the Administrative Agent;
provided that the foregoing shall not apply to notices pursuant to Article II
unless otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative
Agent or the Borrower may, in its discretion, agree to accept notices and other communications to
it hereunder by electronic communications pursuant to procedures approved by it; provided that
approval of such procedures may be limited to particular notices or communications.

          (c) Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and other
communications given to any party hereto in accordance with the provisions of this Agreement shall
be deemed to have been given on the date of receipt.

               SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the Administrative Agent, the Issuing
Bank or any Lender in exercising any right or power hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of the Administrative
Agent, the Issuing Bank
and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they
would otherwise have. No waiver of any provision of this Agreement or consent to any departure by
the Borrower therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) of this Section, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. Without limiting the generality of the
foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a
waiver of any Default, regardless of whether the Administrative Agent, any Lender or the Issuing
Bank may have had notice or knowledge of such Default at the time.

          (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except
pursuant to an agreement or agreements in writing entered into by the Borrower and the Required
Lenders or by the Borrower and the Administrative Agent with the consent of the Required Lenders;
provided that no such agreement shall (i) increase the Commitment of any Lender without
the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement
or reduce the rate of interest thereon, or reduce any fees payable

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hereunder, without the written
consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the
principal amount of any Loan or LC Disbursement, or any interest thereon, or any fees payable
hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled
date of expiration of any Commitment, without the written consent of each Lender affected thereby,
(iv) change Section 2.17(b) or (c) in a manner that would alter the pro rata sharing of
payments required thereby, without the written consent of each Lender, or (v) change any of the
provisions of this Section or the definition of “Required Lenders” or any other provision hereof
specifying the number or percentage of Lenders required to waive, amend or modify any rights
hereunder or make any determination or grant any consent hereunder, without the written consent of
each Lender; provided further that no such agreement shall amend, modify or
otherwise affect the rights or duties of the Administrative Agent, the Issuing Bank or the
Swingline Lender hereunder without the prior written consent of the Administrative Agent, the
Issuing Bank or the Swingline Lender, as the case may be.

               SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower shall pay (i) all reasonable out of
pocket expenses incurred by the Administrative Agent, the Sole Lead Arranger, and their respective
Affiliates, including the reasonable fees, charges and disbursements of counsel for the
Administrative Agent, in connection with the syndication of the credit facilities provided for
herein, the preparation and administration of this Agreement and any amendments, modifications or
waivers of the provisions hereof (whether or not the transactions contemplated hereby or thereby
shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in
connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand
for payment thereunder and (iii) all out-of-pocket expenses incurred by the Administrative Agent,
the Issuing Bank or any Lender, including the fees, charges and disbursements of any counsel for
the Administrative Agent, the Issuing Bank or any Lender, in connection with the enforcement or
protection of its rights in connection with this Agreement, including its rights under this
Section, or in connection with the Loans made or Letters of Credit issued hereunder, including all
such out-of pocket expenses incurred during any workout, restructuring or negotiations in respect
of such Loans or Letters of Credit; provided that the Administrative Agent shall provide
notice to Borrower if the Administrative Agent expects that
the fees and other charges of its outside counsel in connection with the preparation of the Loan
Documents will exceed $65,000; and the Administrative Agent agrees that it will not charge the
Borrower more than $10,000 in regards to the fees, costs, and expenses described in subsection (i)
above as such fees, costs and expenses relate to the syndication of the Commitments and the Loans
under this Agreement and the preparation and administration of this Agreement at the time of, and
in connection with, the initial closing.

          (b) The Borrower shall indemnify the Administrative Agent, the Issuing Bank and each Lender,
and each Related Party of any of the foregoing Persons (each such Person being called an
“Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses, including the fees, charges and disbursements of any
counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in
connection with, or as a result of (i) the execution or delivery of this Agreement, the Guaranties,
or any agreement or instrument contemplated hereby, the performance by the parties hereto of their
respective obligations hereunder, under the Guaranties, or the consummation of the Transactions or
any other transactions contemplated hereby and under the Guaranties, (ii) any Loan or Letter of
Credit or the use of the proceeds therefrom

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(including any refusal by the Issuing Bank to honor a
demand for payment under a Letter of Credit if the documents presented in connection with such
demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged
presence or release of Hazardous Materials on or from any property owned or operated by the
Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the
Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on contract, tort or
any other theory and regardless of whether any Indemnitee is a party thereto; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses are determined by a court of competent jurisdiction by
final and nonappealable judgment to have resulted from the gross negligence or willful misconduct
of such Indemnitee.

          (c) To the extent that the Borrower fails to pay any amount required to be paid by it to the
Administrative Agent, the Issuing Bank or the Swingline Lender under paragraph (a) or (b) of this
Section, each Lender severally agrees to pay to the Administrative Agent, the Issuing Bank or the
Swingline Lender, as the case may be, such Lender’s Applicable Percentage (determined as of the
time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid
amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or
related expense, as the case may be, was incurred by or asserted against the Administrative Agent,
the Issuing Bank or the Swingline Lender in its capacity as such.

          (d) To the extent permitted by applicable law, the Borrower shall not assert, and hereby
waives, any claim against any Indemnitee, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement, the Loan Documents, or any agreement or
instrument contemplated hereby, the Transactions, any Loan or Letter of Credit or the use of the
proceeds thereof.

          (e) All amounts due under this Section shall be payable not later than three (3) Business
Days after written demand therefor.

               SECTION 9.04. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and assigns permitted
hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), except that
(i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder
without the prior written consent of each Lender (and any attempted assignment or transfer by the
Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise
transfer its rights or obligations hereunder except in accordance with this Section. Nothing in
this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the
parties hereto, their respective successors and assigns permitted hereby (including any Affiliate
of the Issuing Bank that issues any Letter of Credit), Participants (to the extent provided in
paragraph (c) of this Section) and, to the extent expressly contemplated hereby, the Related
Parties of each of the Administrative Agent, the Issuing Bank and the Lenders) any legal or
equitable right, remedy or claim under or by reason of this Agreement.

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          (b)(i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign
to one or more assignees all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans at the time owing to it) with the prior
written consent (such consent not to be unreasonably withheld) of the Administrative Agent and, so
long as no Event of Default has occurred and is continuing, the Borrower, provided that (i)
no consent of the Borrower shall be required for an assignment to a Lender, an Affiliate of a
Lender or an Approved Fund and (ii) no consent of the Administrative Agent shall be required for an
assignment of any Commitment to an assignee that is a Lender with a Commitment immediately prior to
giving effect to such assignment or if an Event of Default has occurred and is continuing.

	 	(ii)	 	Assignments shall be subject to the following additional conditions:

     (A) except in the case of an assignment to a Lender or an Affiliate of a Lender
or an assignment of the entire remaining amount of the assigning Lender’s Commitment
or Loans of any Class, the amount of the Commitment or Loans of the assigning Lender
subject to each such assignment (determined as of the date the Assignment and
Assumption with respect to such assignment is delivered to the Administrative Agent)
shall not be less than $5,000,000 unless each of the Borrower and the Administrative
Agent otherwise consent, provided that no such consent of the Borrower shall
be required if an Event of Default has occurred and is continuing;

     (B) each partial assignment shall be made as an assignment of a proportionate
part of all the assigning Lender’s rights and obligations under this Agreement,
provided that this clause shall not be construed to prohibit the assignment
of a proportionate part of all the assigning Lender’s rights and obligations in
respect of one Class of Commitments or Loans;

     (C) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing and
recordation fee of $3,500;

     (D) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire; and

     (E) if the assignee is a Foreign Lender, it shall have delivered any
documentation required by Section 2.16(e).

For the purposes of this Section 9.04(b), the term “Approved Fund” has the following
meaning:

          “Approved Fund” means any Person (other than a natural person) that is engaged in
making, purchasing, holding or investing in bank loans and similar extensions of credit in the
ordinary course of its business and that is administered or managed by (a) a Lender, (b) an
Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a
Lender.

59

 

	 	(iii)	 	Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) of
this Section, from and after the effective date specified in each Assignment and
Assumption the assignee thereunder shall be a party hereto and, to the extent of the
interest assigned by such Assignment and Assumption, have the rights and obligations of
a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent
of the interest assigned by such Assignment and Assumption, be released from its
obligations under this Agreement (and, in the case of an Assignment and Assumption
covering all of the assigning Lender’s rights and obligations under this Agreement,
such Lender shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.14, 2.15, 2.16 and 9.03). Any assignment or transfer by
a Lender of rights or obligations under this Agreement that does not comply with this
Section 9.04 shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with paragraph
(c) of this Section.
	 
	 	(iv)	 	The Administrative Agent, acting for this purpose as an agent of the Borrower,
shall maintain at one of its offices a copy of each Assignment and Assumption delivered
to it and a register for the recordation of the names and addresses of the Lenders, and
the Commitment of, and principal amount of the Loans and LC Disbursements owing to,
each Lender pursuant to the terms hereof from time to time (the “Register”).
The entries in the Register shall be conclusive, and the Borrower, the Administrative
Agent, the Issuing Bank and the Lenders may treat each Person whose name is recorded in
the Register pursuant to the terms hereof as a Lender hereunder for all purposes of
this Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Borrower, the Issuing Bank and any Lender, at any
reasonable time and from time to time upon reasonable prior notice.
	 
	 	(v)	 	Upon its receipt of a duly completed Assignment and Assumption executed by an
assigning Lender and an assignee, the assignee’s completed Administrative Questionnaire
(unless the assignee shall already be a Lender hereunder), the processing and
recordation fee referred to in paragraph (b) of this Section and the fulfillment of the
other applicable conditions of paragraph (b) of this Section, the Administrative Agent
shall accept such Assignment and Assumption and record the information contained
therein in the Register; provided that if either the assigning Lender or the
assignee shall have failed to make any payment required to be made by it pursuant to
Section 2.04(c), 2.05(d) or (e), 2.06(b), 2.17(d) or 9.03(c), the
Administrative Agent shall have no obligation to accept such Assignment and Assumption
and record the information therein in the Register unless and until such payment shall
have been made in full, together with all accrued interest thereon. No assignment
shall be effective for purposes of this Agreement unless it has been recorded in the
Register as provided in this paragraph.

          (c)(i) Any Lender may, without the consent of the Borrower, the Administrative Agent, the
Issuing Bank or the Swingline Lender, sell participations to one or more banks or other entities (a
“Participant”) in all or a portion of such Lender’s rights and obligations under
this

60

 

Agreement (including all or a portion of its Commitment and the Loans owing to it);
provided that (A) such Lender’s obligations under this Agreement shall remain unchanged,
(B) such Lender shall remain solely responsible to the other parties hereto for the performance of
such obligations and (C) the Borrower, the Administrative Agent, the Issuing Bank and the other
Lenders shall continue to deal solely and directly with such Lender in connection with such
Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to
which a Lender sells such a participation shall provide that such Lender shall retain the sole
right to enforce this Agreement and to approve any amendment, modification or waiver of any
provision of this Agreement; provided that such agreement or instrument may provide that
such Lender will not, without the consent of the Participant, agree to any amendment, modification
or waiver described in the first proviso to Section 9.02(b) that affects such Participant.
Subject to paragraph (c)(ii) of this Section, the Borrower agrees that each Participant shall be
entitled to the benefits of Sections 2.14, 2.15 and 2.16 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To
the extent permitted by law, each Participant also shall be entitled to the benefits of Section
9.08 as though it were a Lender, provided such Participant agrees to be subject to Section
2.17(c) as though it were a Lender.

     (c)(ii) A Participant shall not be entitled to receive any greater payment under Section
2.14 or 2.16 than the applicable Lender would have been entitled to receive with respect to the
participation sold to such Participant, unless the sale of the participation to such Participant is
made with the Borrower’s prior written consent. A Participant that would be a Foreign Lender if it
were a Lender shall not be entitled to the benefits of Section 2.16 unless the Borrower is
notified of the participation sold to such Participant and such Participant agrees, for the benefit
of the Borrower, to comply with Section 2.16(e) as though it were a Lender.

     (d) Any Lender may at any time pledge or assign a security interest in all or any portion of
its rights under this Agreement to secure obligations of such Lender, including
without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank,
and this Section shall not apply to any such pledge or assignment of a security interest;
provided that no such pledge or assignment of a security interest shall release a Lender
from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as
a party hereto.

          SECTION 9.05. Survival. All covenants, agreements, representations and warranties made by
the Borrower herein, and by the Guarantors in the Guaranties, and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement and the Guaranties shall be
considered to have been relied upon by the other parties hereto and shall survive the execution and
delivery of this Agreement and the making of any Loans and issuance of any Letters of Credit,
regardless of any investigation made by any such other party or on its behalf and notwithstanding
that the Administrative Agent, the Issuing Bank or any Lender may have had notice or knowledge of
any Default or incorrect representation or warranty at the time any credit is extended hereunder,
and shall continue in full force and effect as long as the principal of or any accrued interest on
any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or
any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated.
The provisions of Sections 2.14, 2.15, 2.16 and 9.03 and Article VIII shall survive
and remain in full force and

61

 

effect regardless of the consummation of the transactions contemplated
hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.

          SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a single contract.
This Agreement and any separate letter agreements with respect to fees payable to the
Administrative Agent constitute the entire contract among the parties relating to the subject
matter hereof and supersede any and all previous agreements and understandings, oral or written,
relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement
shall become effective when it shall have been executed by the Administrative Agent and when the
Administrative Agent shall have received counterparts hereof which, when taken together, bear the
signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns. Delivery of an
executed counterpart of a signature page of this Agreement by telecopy shall be effective as
delivery of a manually executed counterpart of this Agreement.

          SECTION 9.07. Severability. Any provision of this Agreement held to be invalid, illegal or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity, illegality or unenforceability without affecting the validity, legality and
enforceability of the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

          SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time
to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general
or special, time or demand, provisional or final) at any time held and other obligations at any
time owing by such Lender or Affiliate to or for the credit or the account of the Borrower against
any of and all the obligations of the Borrower now or hereafter existing under this Agreement held
by such Lender, irrespective of whether or not such Lender shall have made any demand under this
Agreement and although such obligations may be unmatured. The rights of each Lender under this
Section are in addition to other rights and remedies (including other rights of setoff) which such
Lender may have.

          SECTION 9.09. 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.

     (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

62

 

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
Administrative Agent, the Issuing Bank or any 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 9.01. 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 9.10. 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 9.11. Headings. Article and Section headings and the Table of Contents used herein
are for convenience of reference only, are not part of this Agreement and shall not affect the
construction of, or be taken into consideration in interpreting, this Agreement.

          SECTION 9.12. Confidentiality. Each of the Administrative Agent, the Issuing Bank and the
Lenders 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,

63

 

action or proceeding relating to this
Agreement, or the Guaranties, or the enforcement of rights hereunder or thereunder, (f) subject to
an agreement containing provisions substantially the same as those of this Section, to (i) any
assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights
or obligations under this Agreement or (ii) any actual or prospective counterparty (or its
advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (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 or (ii) becomes available to the
Administrative Agent, the Issuing Bank or any 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 Administrative Agent, the Issuing Bank or any 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 9.13. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to
any Loan, together with all fees, charges and other amounts which are treated as interest on such
Loan under applicable law (collectively the “Charges”), shall exceed the maximum lawful
rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved
by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in
respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be
limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the operation of this
Section shall be cumulated and the interest and Charges payable to such Lender in respect of other
Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated
amount, together with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.

          SECTION 9.14. USA PATRIOT ACT. Each Lender that is subject to the requirements of the USA
Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”) hereby
notifies the Borrower that pursuant to the requirements of the Act, it is required to obtain,
verify and record information that identifies the Borrower, which information includes the name and
address of the Borrower and other information that will allow such Lender to identify the Borrower
in accordance with the Act.

64

 

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

	 	 	 	 	 
	 	HEARTLAND PAYMENT SYSTEMS, INC., a Delaware

corporation

 	 
	 	By:  	/s/ Robert H.B. Baldwin, Jr.
 	 
	 	 	Name:  	Robert H.B. Baldwin, Jr. 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

 

 

	 	 	 	 	 
	 	JPMORGAN CHASE BANK, N.A., individually and as Administrative Agent

 	 
	 	By:  	/s/ Chad N. Smith
 	 
	 	 	Chad N. Smith 	 
	 	 	Senior Vice President 	 
	 

 

 

	 	 	 	 	 
	 	SUNTRUST BANK

 	 
	 	By:  	/s/ Timothy M. O’Leary
 	 
	 	 	Timothy M. O’Leary 	 
	 	 	Managing Director 	 
	 

 

 

	 	 	 	 	 
	 	KEYBANK NATIONAL ASSOCIATION

 	 
	 	By:  	/s/ Jeff Kalinowski
 	 
	 	 	Jeff Kalinowski 	 
	 	 	Senior Vice President 	 
	 

 

 

Schedule 2.01

Commitments

	 	 	 	 	 
	LENDER	 	COMMITMENT
	JPMORGAN CHASE BANK, N.A
	 	$	18,000,000	 
	KEYBANK NATIONAL ASSOCIATION
	 	$	16,000,000	 
	SUNTRUST BANK
	 	$	16,000,000	 

Schedule 2.01

-1-

 

 

EXHIBIT A

ASSIGNMENT AND ASSUMPTION

          This Assignment and Assumption (the “Assignment and Assumption”) is dated as of the
Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the
“Assignor”) and [Insert name of Assignee] (the “Assignee”). Capitalized terms used
but not defined herein shall have the meanings given to them in the Credit Agreement identified
below (as amended, the “Credit Agreement”), receipt of a copy of which is hereby
acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached
hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment
and Assumption as if set forth herein in full.

          For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the
Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to
and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the
Effective Date inserted by the Administrative Agent as contemplated below (i) all of the Assignor’s
rights and obligations in its capacity as a Lender under the Credit Agreement and any other
documents or instruments delivered pursuant thereto to the extent related to the amount and
percentage interest identified below of all of such outstanding rights and obligations of the
Assignor under the respective facilities identified below (including any letters of credit,
guarantees, and swingline loans included in such facilities) and (ii) to the extent permitted to be
assigned under applicable law, all claims, suits, causes of action and any other right of the
Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under
or in connection with the Credit Agreement, any other documents or instruments delivered pursuant
thereto or the loan transactions governed thereby or in any way based on or related to any of the
foregoing, including contract claims, tort claims, malpractice claims, statutory claims and all
other claims at law or in equity related to the rights and obligations sold and assigned pursuant
to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii)
above being referred to herein collectively as the “Assigned Interest”). Such sale and assignment
is without recourse to the Assignor and, except as expressly provided in this Assignment and
Assumption, without representation or warranty by the Assignor.

	 	 	 	 	 
	1.

	 	Assignor	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	2.

	 	Assignee:	 	 
	 

	 	 	 	 
	 

	 	 	 	[and is an Affiliate/Approved Fund of (identify Lender]1]
	 
	 	 	 	 
	3.

	 	Borrower(s):	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	4.

	 	Administrative Agent:
	 	                                        , as the administrative agent under the Credit Agreement

 

			
	1	 	Select as applicable.

Exhibit A-1

 

 

	 	 	 	 	 
	5.

	 	Credit Agreement:
	 	The Credit Agreement dated as of September 5, 2007, among Heartland
Payment Systems, Inc., the Lenders parties thereto, JPMorgan Chase
Bank, N.A., as Administrative Agent, and the other agents parties
thereto
	 
	 	 	 	 
	6.
	 	 	 	 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Aggregate Amount of	 	Amount of	 	Percentage Assigned
	 	 	Commitment/Loans	 	Commitment/Loans	 	of
	Facility Assigned	 	for all Lenders	 	Assigned	 	Commitment/Loans2
	 
	 	$	 	 	 	$	 	 	 	 	  	%
	 
	 	$	 	 	 	$	 	 	 	 	 	%
	 
	 	$	 	 	 	$	 	 	 	 	  	%

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

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

	 	 	 	 	 
	 	ASSIGNOR

[NAME OF ASSIGNOR]

 	 
	 	By:  	 	 
	 	 	Title: 	 
	 	 	 	 
	 
	 	ASSIGNEE

[NAME OF ASSIGNEE]

 	 
	 	By:  	 	 
	 	 	Title: 	 
	 	 	 	 
	 

Consented to and Accepted:

 

			
	2	 	Set forth, to at least 9 decimals, as a percentage
of the Commitment/Loans of all Lenders thereunder.

Exhibit A-2

 

 

JPMORGAN CHASE BANK, N.A. as

     Administrative Agent

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Title:
	 	 

Exhibit A-3

 

 

ANNEX 1

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

          1. Representations and Warranties.

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

          1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full power
and authority, and has taken all action necessary, to execute and deliver this Assignment and
Assumption and to consummate the transactions contemplated hereby and to become a Lender under the
Credit Agreement, (ii) it satisfies the requirements, if any, specified in the Credit Agreement
that are required to be satisfied by it in order to acquire the Assigned Interest and become a
Lender, (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit
Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the
obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together
with copies of the most recent financial statements delivered pursuant to Section 5.01
thereof, as applicable, and such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into this Assignment and Assumption and to
purchase the Assigned Interest on the basis of which it has made such analysis and decision
independently and without reliance on the Administrative Agent or any other Lender, and (v) if it
is a Foreign Lender, attached to the Assignment and Assumption is any documentation required to be
delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the
Assignee; and (b) agrees that (i) it will, independently and without reliance on the Administrative
Agent, the Assignor or any other Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in taking or not taking
action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the
obligations which by the terms of the Loan Documents are required to be performed by it as a
Lender.

          2. Payments. From and after the Effective Date, the Administrative Agent shall
make all payments in respect of the Assigned Interest (including payments of principal, interest,

Annex 1-1

 

 

fees and other amounts) to the Assignor for amounts which have accrued to but excluding the
Effective Date and to the Assignee for amounts which have accrued from and after the Effective
Date.

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

Annex 1.2

 

 

EXHIBIT B

OPINION OF COUNSEL FOR THE BORROWER

[September 5, 2007]

To the Lenders and the Administrative
 Agent
Referred to Below

c/o JPMorgan Chase Bank, N.A., as
 Administrative
Agent

270 Park Avenue

New York, New York 10017

Dear Sirs:

          We have acted as counsel for Heartland Payment Systems, Inc., a Delaware corporation (the
“Borrower”), in connection with the Credit Agreement dated as of September 5, 2007 (the “Credit
Agreement”), among the Borrower, the banks and other financial institutions identified therein as
Lenders, and JPMorgan Chase Bank, N.A., as Administrative Agent, and as counsel for The Heartland
Payment Company, L.L.C. an Ohio limited liability company (“HPS”) and Debitek, Inc., a
Delaware corporation (“Debitek”), the Guarantors. Terms defined in the Credit Agreement
are used herein with the same meanings.

          We have examined originals or copies, certified or otherwise identified to our satisfaction,
of such documents, corporate records, certificates of public officials and other instruments and
have conducted such other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.

          Upon the basis of the foregoing, we are of the opinion that:

          1. The Borrower (a) is a corporation duly organized, validly existing and in good standing
under the laws of Delaware, (b) has all requisite power and authority to carry on its business as
now conducted and (c) except where the failure to do so, individually or in the aggregate, would
not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in,
and is in good standing in, every jurisdiction where such qualification is required.

          2. HPS (a) is a limited liability company duly organized, validly existing and in good
standing under the laws of Ohio (b) has all requisite power and authority to carry on its business
as now conducted and (c) except where the failure to do so, individually or in the aggregate, would
not reasonably be expected to result in a Material Adverse Effect, is qualified

Exhibit B-1

 

 

to do business in, and is in good standing in, every jurisdiction where such qualification is
required.

          3. Debitek (a) is a corporation duly organized, validly existing and in good standing under
the laws of Delaware (b) has all requisite power and authority to carry on its business as now
conducted and (c) except where the failure to do so, individually or in the aggregate, would not
reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and
is in good standing in, every jurisdiction where such qualification is required.

          4. The Transactions are within the Borrower’s corporate powers and have been duly authorized
by all necessary corporate and, if required, stockholder action. The Credit Agreement has been
duly executed and delivered by the Borrower and constitutes a legal, valid and binding obligation
of the Borrower, enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and
subject to general principles of equity, regardless of whether considered in a proceeding in equity
or at law.

          5. The Guaranty signed by HPS (the “HPS Guaranty”) is within the HPS’s corporate
powers and has been duly authorized by all necessary corporate and, if required, stockholder
action. The HPS Guaranty has been duly executed and delivered by HPS and constitutes a legal,
valid and binding obligation of HPS, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’
rights generally and subject to general principles of equity, regardless of whether considered in a
proceeding in equity or at law.

          6. The Guaranty signed by Debitek (the “Debitek Guaranty”) is within the Debitek’s
corporate powers and has been duly authorized by all necessary corporate and, if required,
stockholder action. The Debitek Guaranty has been duly executed and delivered by Debitek and
constitutes a legal, valid and binding obligation of Debitek, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors’ rights generally and subject to general principles of equity, regardless of
whether considered in a proceeding in equity or at law.

          7. The Transactions and the Guaranties (a) do not require any consent or approval of,
registration or filing with, or any other action by, any Governmental Authority, except such as
have been obtained or made and are in full force and effect, (b) will not violate any applicable
law or regulation or the charter, by-laws or other organizational documents of the Borrower or any
of its Subsidiaries (including the Guarantors) or any order of any Governmental Authority, (c) will
not violate or result in a default under any indenture, agreement or other instrument binding upon
the Borrower or any of its Subsidiaries (including the Guarantors) or its assets, or give rise to a
right thereunder to require any payment to be made by the Borrower or any of its Subsidiaries
(including the Guarantors) except as provided in the Credit Agreement and the Guaranties, and (d)
will not result in the creation or imposition of any Lien on any asset of the Borrower or any of
its Subsidiaries (including the Guarantors).

Exhibit C

 

 

          6. There are no actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to our knowledge, threatened against or affecting the Borrower or any
of its Subsidiaries (including the Guarantors) (a) as to which there is a reasonable possibility of
an adverse determination and that, if adversely determined, would reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect (other than the Disclosed
Matters) or (b) that involve the Credit Agreement, the Guaranties, or the Transactions.

          7. Neither the Borrower nor any of its Subsidiaries nor any of the Guarantors is an
“investment company” as defined in, or subject to regulation under, the Investment Company Act of
1940.

          We are members of the bar of the State of New York and the foregoing opinion is limited to the
laws of the State of New York, the General Corporation Law of the State of Delaware and the Federal
laws of the United States of America. This opinion is rendered solely to you in connection with
the above matter. This opinion may not be relied upon by you for any other purpose or relied upon
by any other Person (other than your successors and assigns as Lenders and Persons that acquire
participations in your Loans) without our prior written consent.

	 	 	 
	 

	 	Very truly yours,
	 
	 	 
	 

	 	[Borrower’s counsel]

Exhibit C

 

 

EXHIBIT C

FORM OF GUARANTY

Exhibit CEXHIBIT 10.43

 

Exhibit 10.43

CONFIDENTIAL TREATMENT REQUESTED: INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED
IS OMITTED AND NOTED WITH “[REDACTED].” AN UNREDACTED VERSION OF THIS DOCUMENT HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

EXECUTION COPY

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

by and among

DRAKE FAMILY TRUST DATED AUGUST 29, 2002,

NATHAN KAHANE,

BRIAN GOLDSMITH,

MANDATE PICTURES, LLC,

LIONS GATE ENTERTAINMENT, INC.,

LIONS GATE ENTERTAINMENT CORP.,

and

JOSEPH DRAKE

Dated as of September 10, 2007

 

 

Table of Contents

	 	 	 	 	 
	 	 	Page
	ARTICLE 1 DEFINITIONS
	 	 	1	 
	 
	 	 	 	 
	1.1 Certain Defined Terms
	 	 	1	 
	1.2 Definition Cross-References
	 	 	16	 
	1.3 Computation of Time Periods
	 	 	18	 
	1.4 Accounting Terms / Ratios
	 	 	18	 
	1.5 Rules of Construction
	 	 	18	 
	 
	 	 	 	 
	ARTICLE 2 TRANSACTIONS AND CLOSING
	 	 	19	 
	 
	 	 	 	 
	2.1 Purchase and Sale of Mandate Membership Interests
	 	 	19	 
	2.2 Base Consideration
	 	 	19	 
	2.3 Contingent Participation
	 	 	21	 
	2.4 Derivative Works
	 	 	22	 
	2.5 The Closing
	 	 	25	 
	2.6 Deliveries at the Closing
	 	 	25	 
	2.7 [Intentionally omitted]
	 	 	27	 
	2.8 Disbursement of Holdback Consideration
	 	 	27	 
	2.9 S-3 Registration Statement Supplement
	 	 	28	 
	2.10 Mandate Representative
	 	 	28	 
	 
	 	 	 	 
	ARTICLE 3 REPRESENTATIONS AND WARRANTIES CONCERNING MANDATE
	 	 	29	 
	 
	 	 	 	 
	3.1 Organization
	 	 	29	 
	3.2 Status, Power and Enforceability
	 	 	29	 
	3.3 Capitalization
	 	 	30	 
	3.4 Financial Statements; Accounts Receivable; Distributions and Payments
	 	 	30	 
	3.5 Absence of Changes
	 	 	32	 
	3.6 No Unpaid Participations
	 	 	33	 
	3.7 Legal Compliance
	 	 	33	 
	3.8 Tax Matters
	 	 	33	 
	3.9 Title
	 	 	35	 
	3.10 Intellectual Property
	 	 	35	 
	3.11 Mandate Motion Pictures
	 	 	37	 
	3.12 Contracts
	 	 	38	 
	3.13 Insurance
	 	 	41	 
	3.14 Litigation
	 	 	41	 
	3.15 Labor; Employees
	 	 	41	 
	3.16 Employee Benefit Plans and Agreements
	 	 	42	 
	3.17 Environmental, Health and Safety Matters
	 	 	43	 
	3.18 Certain Interests
	 	 	43	 
	3.19 Non-Contravention
	 	 	44	 
	3.20 No Brokers or Finders
	 	 	44	 

i

 

	 	 	 	 	 
	 	 	Page
	3.21 Sufficiency of Assets
	 	 	44	 
	3.22 Federal Reserve Regulations
	 	 	44	 
	3.23 Investment Company Act
	 	 	44	 
	3.24 Anti-Money Laundering Regulations
	 	 	44	 
	3.25 Foreign Corrupt Practices
	 	 	45	 
	3.26 Representations Complete
	 	 	45	 
	3.27 Motion Pictures on Budget; Motion Pictures Bonded
	 	 	45	 
	 
	 	 	 	 
	ARTICLE 4 REPRESENTATIONS AND WARRANTIES CONCERNING SELLERS AND PURCHASER
	 	 	45	 
	 
	 	 	 	 
	4.1 Representations and Warranties of the Sellers
	 	 	45	 
	4.2 Representations and Warranties of LGE and Purchaser
	 	 	47	 
	 
	 	 	 	 
	ARTICLE 5 COVENANTS
	 	 	48	 
	 
	 	 	 	 
	5.1 Tax Matters
	 	 	48	 
	5.2 Noncompetition Agreement Related to the Acquisition of Goodwill
	 	 	52	 
	5.3 Nondisclosure
	 	 	53	 
	5.4 Public Announcements
	 	 	54	 
	5.5 Additional Tax Matters
	 	 	54	 
	5.6 Release
	 	 	55	 
	5.7 Indemnity
	 	 	56	 
	5.8 D&O and EPLI Insurance
	 	 	56	 
	5.9 Payroll and Bonus Adjustments to Purchase Price
	 	 	57	 
	 
	 	 	 	 
	ARTICLE 6 INTENTIONALLY OMITTED
	 	 	57	 
	 
	 	 	 	 
	ARTICLE 7 INTENTIONALLY OMITTED
	 	 	57	 
	 
	 	 	 	 
	ARTICLE 8 INDEMNIFICATION
	 	 	57	 
	 
	 	 	 	 
	8.1 Survival of Representations and Warranties
	 	 	57	 
	8.2 Indemnification Provisions for Purchaser’s Benefit
	 	 	57	 
	8.3 Indemnification Provisions for the Sellers’ Benefit
	 	 	58	 
	8.4 Indemnification Notice; Holdback Shares Offset
	 	 	58	 
	8.5 Third Party Claim Procedures
	 	 	60	 
	8.6 Other Indemnification Provisions
	 	 	61	 
	 
	 	 	 	 
	ARTICLE 9 MISCELLANEOUS
	 	 	62	 
	 
	 	 	 	 
	9.1 Entire Agreement
	 	 	62	 
	9.2 Successors
	 	 	62	 
	9.3 Assignments
	 	 	62	 
	9.4 Notices
	 	 	62	 
	9.5 Ownership of Purchaser Equity
	 	 	64	 
	9.6 Counterparts
	 	 	64	 

ii

 

	 	 	 	 	 
	 	 	Page
	9.7 Headings
	 	 	64	 
	9.8 Amendments and Waivers
	 	 	64	 
	9.9 Expenses
	 	 	64	 
	9.10 Construction
	 	 	64	 
	9.11 Incorporation of Exhibits, Schedules and Disclosure Letters
	 	 	65	 
	9.12 Remedies
	 	 	65	 
	9.13 Specific Performance
	 	 	65	 
	9.14 Submission to Jurisdiction
	 	 	65	 
	9.15 Dispute Resolution
	 	 	65	 
	9.16 Severability
	 	 	66	 
	9.17 GOVERNING LAW
	 	 	66	 
	9.18 Further Assurances
	 	 	66	 

List of Schedules, Exhibits

	 	 	 
	Schedule 1.1(a):

	 	Permitted Liens
	Schedule 1.1(b):

	 	Derivative Works Permitted Liens
	Schedule 2.7:

	 	Allocation of Holdback Consideration
	Schedule 3(a):

	 	List of 3(a) Pictures
	Schedule 5.1(c):

	 	Purchase Price Allocation
	Schedule 5.5(c):

	 	2007 Tax Distributions
	 
	 	 
	Exhibit A-1:

	 	Form of Drake Employment Agreement
	Exhibit A-2:

	 	Form of Kahane Employment Agreement
	Exhibit A-3:

	 	Form of Goldsmith Employment Agreement
	Exhibit B:

	 	Form of Ghost House Assignment
	Exhibit C:

	 	Form of Additional Agreement
	Exhibit D:

	 	Form of Registration Rights Agreement
	Exhibit E:

	 	Form of Instrument of Assignment
	Exhibit F-1:

	 	Form of Mandate’s Officer Certificate
	Exhibit F-2:

	 	Form of Purchaser’s Officer Certificate
	Exhibit F-3:

	 	Form of LGE’s Officer Certificate
	Exhibit G-1:

	 	Form of Legal Opinion of Counsel to Mandate and Sellers
	Exhibit G-2:

	 	Form of Legal Opinion of Counsel to the Drake Family Trust
	Exhibit G-3:

	 	Form of Legal Opinion of U. S. Deal Counsel to Purchaser and LGE
	Exhibit G-4:

	 	Form of Legal Opinion of U.S. Counsel to Purchaser and LGE
	Exhibit G-5:

	 	Form of Legal Opinion of Canadian Counsel to LGE
	Exhibit H:

	 	Form of Spousal Consent
	Exhibit I:

	 	Form of Indemnification Agreement

iii

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

     THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT, dated as of September 10, 2007, is entered into
by and among:

	 	(i)	 	Joseph Drake (“J. Drake”) and Margaret Drake (“M. Drake”), as
trustees of the Drake Family Trust, dated August 29, 2002 (the “Drake Family
Trust”), Nathan Kahane, an individual (“Kahane”), Brian Goldsmith, an
individual (“Goldsmith” and together with the Drake Family Trust and Kahane,
the “Sellers” and individually a “Seller”);
	 
	 	(ii)	 	Mandate Pictures, LLC, a Delaware limited liability company
(“Mandate”);
	 
	 	(iii)	 	Lions Gate Entertainment, Inc., a Delaware corporation (“Purchaser”);
	 
	 	(iv)	 	with respect to Sections 2.2, 2.6(b), 2.8, 2.9,
4.2, 5.1, 5.3, 5.4, 5.5, 5.6,
5.7, 5.8, and 5.10 only, Lions Gate Entertainment Corp., a British
Columbia corporation; and
	 
	 	(v)	 	J. Drake, in his individual capacity, with respect to Sections 5.2,
5.6 and 5.10 only, and in his capacity as the Mandate Representative
(as defined below).

The Sellers, Mandate, Purchaser, LGE and J. Drake (in his individual capacity and as the Mandate
Representative) are collectively referred to herein as the “Parties” and individually as a
“Party.”

RECITALS:

     WHEREAS, the Drake Family Trust owns [REDACTED] Class A Units (the “Drake Membership
Interest”) of Mandate, Kahane owns [REDACTED] Class B Units of Mandate (the “Kahane
Membership Interest”), and Goldsmith owns [REDACTED] Class B Units of Mandate (the
“Goldsmith Membership Interest”);

     WHEREAS, the Drake Membership Interest, the Kahane Membership Interest and the Goldsmith
Membership Interest (collectively, the “Mandate Membership Interests”) represent all of the
issued and outstanding Equity Interests of Mandate; and

     WHEREAS, Purchaser desires to acquire from the Sellers all of the Mandate Membership
Interests, and through such acquisition, all of Mandate’s interests in each of its Subsidiaries in
accordance with the terms and subject to the conditions set forth herein.

AGREEMENT:

     NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in
consideration of the representations, warranties, and covenants contained herein, the Parties agree
as follows:

 

ARTICLE 1

DEFINITIONS

     1.1 Certain Defined Terms. As used in this Agreement (including the preamble and
recitals), the following terms shall have the respective meanings set forth in this Section
1.1:

     “3(a) Amounts” means all non-refundable pre-income Tax amounts remaining after the
deduction from (x) the sum of (i) the Gross Receipts (whenever received after the Closing Date) of
the 3(a) Pictures and (ii) the Gross Receipts of any sales agency fee arrangements and any producer
fee arrangements (fixed or contingent) existing prior to the Closing Date, of (y) all out-of-pocket
amounts (net of discounts, rebates and similar items) incurred or accrued after the Closing Date
that are payable to third parties by Purchaser for the development, acquisition, production,
marketing and distribution of such 3(a) Pictures and, if Purchaser is the distributor of such 3(a)
Pictures, a reasonable reserve for video returns not to exceed [REDACTED], and in any event,
liquidated within twelve (12) months. In calculating “3(a) Amounts”, if there are losses on a 3(a)
Picture that are non-recourse losses to Mandate or Purchaser on a cash basis, whether because such
3(a) Picture was financed with a non-recourse production loan, equity from a Third Party or
otherwise, then such non-recourse, non-cash losses will not be counted. “3(a) Amounts” shall not
include a deduction for any Overhead amounts. If Purchaser advances or is obligated to advance any
sums in order to pay for any of the items deducted in calculating the 3(a) Amounts (i.e. the items
deducted in clause (y) above), such amounts will be recouped in calculating “3(a) Amounts.” For
clarification, if Purchaser advances or is obligated to advance any portion of the production costs
and/or distribution expenses with respect to 3(a) Pictures, Purchaser shall be entitled to recoup
such amounts in calculating 3(a) Amounts.

     “3(a) and 3(b) Contingent Participation” means, collectively, 3(a) Contingent
Participation and 3(b) Contingent Participation.

     “3(a) Pictures” has the meaning set forth on Schedule 3(a) attached hereto.

     “3(b) Amounts” means, with respect to a 3(b) Picture Group, all non-refundable
pre-income Tax amounts remaining after the deduction from the Gross Receipts (whenever received
after the Closing Date) of all 3(b) Pictures in such 3(b) Picture Group of (x) the Overhead of such
3(b) Picture Group incurred in the year such Motion Pictures were acquired or, if produced by
Mandate, greenlit for production; and (y) all out-of-pocket amounts (net of discounts and rebates)
incurred or accrued that are payable to third parties by Purchaser for the development,
acquisition, production, marketing and distribution of the 3(b) Pictures in such 3(b) Picture
Group, and, if Purchaser is the distributor of such picture, a reasonable reserve for video
returns, not to exceed [REDACTED], and in any event, liquidated within twelve (12) months.

     “3(b) Picture Group” means the slate of 3(b) Pictures acquired or greenlit for
production in any given fiscal year. By way of example but not limitation, if three 3(b) Pictures
were acquired or greenlit for production in fiscal year 2008 then such three 3(b) Pictures would be
considered a 3(b) Picture Group and if four 3(b) Pictures were acquired or greenlit for production
in fiscal year 2009 then such four 3(b) Pictures would be considered a separate 3(b) Picture Group.

2

 

     “3(b) Pictures” means all Motion Pictures produced or acquired by Mandate after the
Closing Date that are not 3(a) Pictures or Derivative Works.

     “Accounts Receivable” means all receivables of Mandate and its Subsidiaries,
including, without limitation, all notes receivable, accounts receivable, trade accounts receivable
and insurance proceeds receivables that, in accordance with GAAP, are or should be accounted for as
receivables on the financial statements of Mandate or its Subsidiaries.

     “Accrued Tax Liabilities” means Liabilities for Taxes on the net income of Mandate’s
Subsidiaries for the period ending prior to and including the period ending on the Closing Date to
the extent that such Liabilities have been accrued for or reserved against on the Financial
Statements.

     “Action” means any action, suit, appeal, petition, plea, charge, complaint, claim,
demand, litigation, arbitration, mediation, hearing, inquiry, investigation or similar event,
occurrence or proceeding, whether at law or in equity.

     “Additional Agreement” means the agreement of even date herewith in substantially the
form of Exhibit C attached hereto.

     “Adverse Claim” means any lien (statutory or other), charge, security interest,
mortgage, pledge, hypothecation, assignment, conditional sale or other title retention agreement,
preference, priority or other security agreement. For the avoidance of doubt, (a) obligations to
pay participations, residuals and other contractual obligations under Guild collective bargaining
agreements (including security interests related to Guild collective bargaining agreements) do not
constitute Adverse Claims and (b) security interests granted to secure the payment of
participations do constitute Adverse Claims.

     “Affiliate” with respect to a specified Person, means a Person that, directly or
indirectly, through one or more intermediaries, controls or is controlled by, or is under common
control with, such specified Person. For this definition, “control” (and its derivatives) means
the possession, directly or indirectly, or as trustee or executor, of the power to direct or cause
the direction of the management and policies of a Person, whether through ownership of voting
Membership Interests, as trustee or executor, by Contract or credit arrangements or otherwise.

     “Agreement” means this Membership Interest Purchase Agreement, as from time to time
amended, supplemented or otherwise modified pursuant to the terms hereof.

     “Average Price” means, as of the date of determination, the average closing price of a
share of LGE Common Stock on the NYSE for the twenty (20) trading days ending on (and including)
the third (3rd) trading day immediately preceding the applicable date of determination. The
“Average Price” as of the Closing Date is $9.4185.

     “Budget” means, with respect to a Derivative Work, the budget for production of such
Derivative Work.

     “Business Day” means any day, other than a Saturday, Sunday or one on which banks are
authorized by Law to be closed in Los Angeles, California.

3

 

     “Capital Lease” means, with respect to any Person, any lease of any property (whether
real, personal or mixed) by that Person as lessee which, in accordance with GAAP, is or should be
accounted for as a capital lease on the balance sheet of that Person.

     “Cause,” with respect to J. Drake or Kahane, shall have the meaning for such term set
forth in such Mandate Individual’s Employment Agreement; provided, however, that
the expiration or other termination of such Employment Agreement shall not affect the definition of
“Cause” for purposes of this Agreement.

     “Closing Price” means Nine Dollars and Thirty-One Cents ($9.31), the closing price of
a share of LGE Common Stock on the NYSE on the third (3rd) trading day immediately preceding the
Closing Date.

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

     “Co-Financier” shall have the meaning set forth in the definition of Co-Financing
Transaction.

     “Co-Financing Transaction” means, with respect to a Motion Picture, (a) transactions
contemplated to create a Soft Money Benefit, or (b) a transaction pursuant to which a Person that
is not Mandate, Purchaser, or any of their respective Subsidiaries or Affiliates makes an equity
investment in such Motion Picture (a “Co-Financier”).

     “Commitment” means, with respect to a Person, (a) options, warrants, convertible
securities, exchangeable securities, subscription rights, conversion rights, exchange rights or
other Contracts that could require such Person to issue any of its Membership Interests or to sell
any Membership Interests it owns in another Person; (b) any other securities convertible into,
exchangeable or exercisable for, or representing the right to subscribe for any Equity Interest of
such Person or owned by such Person; (c) statutory pre-emptive rights or pre-emptive rights granted
under a Person’s Constitutive Documents or any Contract; and (d) stock appreciation rights, phantom
stock, profit participation or other similar rights with respect to such Person.

     “Competitive Business” means the business of film and/or television production,
development, distribution and sales.

     “Consent” means any consent, approval, notification, registration, waiver or other
similar action.

     “Constitutive Documents” means, as to a Person, such Person’s certificate of
incorporation, formation or registration (including, if relevant, certificates of change of name),
memorandum of association, articles of association or incorporation, charter, by-laws, trust deed,
trust instrument, partnership, operating agreement, limited liability company, joint venture or
shareholders’ agreement or equivalent documents constituting the organization or forming of such
Person, in each case as the same may from time to time be amended, supplemented or otherwise
modified pursuant to the terms thereof.

     “Contingent Participation” means the 3(a) and 3(b) Contingent Participation and the
Derivative Works Contingent Participation.

4

 

     “Contract” means any contract, agreement, commitment, promise, obligation, right,
instrument or other similar binding understanding, arrangement, commitment, letter of intent,
memorandum of understanding or heads of agreement.

     “Cost of Funds” means the amount equivalent to the aggregate interest on the Base
Consideration not yet recouped, calculated using LIBOR plus Two and Three-Quarters Percent (2.75%)
(compounded semi-annually) over the period of time it takes for Purchaser to recoup the Base
Consideration.

     “Damages” means all damages, losses, liabilities, payments, amounts paid in
settlement, obligations, fines, penalties, expenses and other costs (including reasonable fees and
expenses of outside attorneys, accountants and other professional advisors).

     “Derivative Work” means, with respect to a 3(a) Picture, all derivative works based on
or derived from such 3(a) Picture for which principal photography is commenced within seven (7)
years of the initial release of the applicable 3(a) Picture, and for each subsequent derivative
work that, on a rolling basis, commences principal photography within seven (7) years from the
initial release of the prior derivative work based on the same 3(a) Picture, or the prior
derivative work(s) based thereon.

     “Derivative Works Contingent Participation” means amounts earned (if any) by the
Sellers pursuant to the terms of Section 2.4 herein.

     “Direct Negative Costs” means, with respect to a Motion Picture, the aggregate sum of
all Third Party out-of-pocket costs and expenses paid by Purchaser or any of its Subsidiaries or
Affiliates directly related to such Motion Picture, in connection with the financing, development,
production, completion and delivery of such Motion Picture, less the contribution from any Third
Party equity (net of transaction costs) and Soft Money Benefits and the net amount of discounts,
rebates and other reimbursements, and excluding any Overhead.

     “Disclosure Letters” means the Mandate Disclosure Letter and the Purchaser Disclosure
Letter. The sections of each Disclosure Letter will be numbered to correspond to the applicable
Sections of this Agreement. Each section of a Disclosure Letter shall be deemed to incorporate by
reference all information disclosed in each other section of such Disclosure Letter where the
nature of the exception and disclosure is reasonably apparent from the text thereof regardless of
any placement of such disclosure in such Disclosure Letter or any reference to a particular section
of this Agreement.

     “Dollar(s)” or “$” means United States dollar(s).

     “Domestic Territory” means the fifty (50) states of the United States of America, the
District of Columbia and Puerto Rico, Canada (i.e. the ten (10) provinces, the Yukon, Northwest and
Nunavuit territories of Canada, and any successor countries occupying in whole or in part the
geographic territory known as Canada as of the date of this Agreement), and the respective
territories, possessions and commonwealths of the United States of America and Canada (including
the U.S. Virgin Islands and Guam), any territory subject to the jurisdiction of an Indian tribe or
band, or Alaskan village, which is recognized by United States or Canadian federal law or formally
acknowledged by a state of the United States or province of Canada,

5

 

ships and aircraft registered in and/or flying the flag of the United States or Canada, marine
installations including oil rigs serviced from any jurisdiction comprising part of the “Domestic
Territory” as described above, military installations wherever situated at which armed forces of
the United States or Canada are stationed, and any other governmental installations of the United
States or Canada wherever situated throughout the universe.

     “Employment Agreements” means the employment agreements to be entered into at Closing
(a) by and between LGF and Drake, substantially in the form of Exhibit A-1 attached hereto,
(b) by and between LGF and Kahane, substantially in the form of Exhibit A-2 attached
hereto, and (c) by and between LGF and Goldsmith, substantially in the form of Exhibit A-3
attached hereto, as each may from time to time be amended, supplemented or otherwise modified.

     “Enforceable” means, with respect to a Contract, that such Contract is the legal,
valid and binding obligation of the applicable Person, enforceable against such Person in
accordance with its terms, except as such enforceability may be subject to the effects of
bankruptcy, insolvency, reorganization, moratorium or other similar Laws relating to or affecting
the rights of creditors, and general principles of equity regardless of whether such enforceability
is considered in a proceeding in equity or at law.

     “Environmental, Health and Safety Requirements” means any and all applicable Orders
and Laws (including, without limitation, Environmental Laws) concerning or relating to public
health and safety, worker/occupational health and safety, or pollution or protection of the
environment, including those relating to the presence, use, manufacturing, refining, production,
generation, handling, transportation, treatment, recycling, transfer, storage, disposal,
distribution, importing, labeling, testing, processing, discharge, release, threatened release,
control or other action or failure to act involving cleanup of any hazardous materials, substances
or wastes, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals,
petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise or radiation, each as
amended and as now in effect.

     “Environmental Law” means any and all applicable federal, state, local or municipal
laws, rules, orders, regulations, statutes, ordinances, codes, decrees or requirements of any
Governmental Body regulating, relating to, or imposing liability or standards of conduct
concerning, any Hazardous Material or environmental protection or health and safety, each as
amended and as now in effect, including, without limitation, the Clean Water Act also known as the
Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq., the Clean Air Act, 42 U.S.C. §§ 7401
et seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. §§ 136 et seq., the
Surface Mining Control and Reclamation Act, 30 U.S.C. §§ 1201 et seq., the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq., the Superfund
Amendments and Reauthorization Act of 1986, Public Law 99-499, 100 Stat. 1613, the Emergency
Planning and Community Right to Know Act, 42 U.S.C. § 11001 et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. § 6901 et seq., the Occupational Safety and Health Act as amended, 29
U.S.C. § 655 and § 657, together, in each case, with any amendment thereto, and the regulations
adopted and the publications promulgated thereunder and all substitutions thereof.

6

 

     “Equity Interest” means (a) with respect to a corporation, any and all shares of
capital stock and any Commitments with respect thereto, (b) with respect to a partnership, limited
liability company, trust or similar Person, any and all units, interests or other
partnership/limited liability company interests, including economic or profits interests, and any
Commitments with respect thereto, and (c) with respect to any other Person, any other equity
ownership in such Person.

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

     “ERISA Affiliate” means each Person (as defined in Section 3(9) of ERISA) which is
treated as a single employer with Mandate or any of its Subsidiaries or Affiliates under Section
414 (b), (c), (m) or (o) of the Code.

     “Excluded Tax Liabilities” means any Liability for Taxes (including any failure to
file Tax Returns) on the net income of Mandate or any of its Subsidiaries for periods ending prior
to and including the period ending on the Closing Date; provided, however, that
Excluded Tax Liabilities shall not include Accrued Tax Liabilities.

     “Film Materials” means all physical elements of any Motion Picture owned or controlled
by Mandate or its Affiliates, including, without limitation, all negatives, duplicate negatives,
fine grain prints, soundtracks, positive prints (cutouts and trims excepted), and sound, all video
formats (including PAL/NTSC), trailers, exposed film, developed film, positives, negatives, prints,
answer prints, special effects, pre-print materials (including interpositives, negatives, duplicate
negatives, internegatives, color reversals, intermediates, lavenders, fine grain master prints and
matrices and all other forms of pre-print elements which may be necessary or useful to produce
prints or other copies or additional pre-print elements, whether now known or hereafter devised)
soundtracks, recordings, audio and video tapes and discs of all types and gauges, cutouts, trims,
non-analog recordings and tapes, including without limitation, any video digital recordings and
HDTV format recordings, and any and all other physical properties of every kind and nature relating
to the Motion Picture in whatever state of completion, and all duplicates, drafts, versions,
variations and copies of each thereof.

     “GAAP” means generally accepted accounting principles as in effect in the United
States from time to time, consistently applied throughout the period indicated.

     “Ghost House Pictures” means Ghost House Pictures Holdings, LLC, a Delaware limited
liability company and its Subsidiaries, Dark Days, LLC, GHP-3 Scarecrow, LLC, Rise Productions, LLC
and New GHP, LLC.

     “Ghost House Mobile” means Ghost House Mobile, LLC, a Delaware limited liability
company.

     “Ghost House Mobile Assignment” means the assignment agreement with respect to Ghost
House Mobile in the form of Exhibit B attached hereto.

     “Good Reason,” with respect to J. Drake or Kahane, shall have the meaning for such
term set forth in such Mandate Individual’s Employment Agreement; provided,
however, that the

7

 

expiration or other termination of such Employment Agreement shall not affect the definition
of “Good Reason” for purposes of this Agreement.

     “Governmental Body” means any legislature, agency, bureau, branch, department,
division, commission, court, tribunal, magistrate, justice, multi-national organization,
quasi-governmental body or other similar recognized organization or body of any federal, state,
county, municipal, local or foreign government.

     “Governmental Order” means any order, writ, judgment, injunction, decree, stipulation,
determination or award entered by or with any Governmental Body.

     “Gross Receipts” means, with respect to a Motion Picture, all non-refundable amounts
actually received by or credited to (in lieu of payment) Purchaser or its Affiliates from all
sources of every kind and nature on or after the Closing Date (including amounts from the license
or other exploitation of such Motion Picture’s distribution rights, soundtrack, music publishing
rights, merchandising, videogame rights, commercial tie-ins and other ancillary and subsidiary
rights), lab and other rebates, Soft Money Benefits to the extent not deducted in calculating
Direct Negative Costs, net materials profits, AGICOA income and subsidies), in each case, without
double-counting; provided, that with respect to such cash received by any such Affiliate
that is not, directly or indirectly, a wholly-owned Subsidiary of Purchaser, “Gross Receipts” shall
include only the amount thereof allocable to or received by Purchaser or its wholly-owned
Subsidiaries; provided, further, that such amounts shall be included in Gross
Receipts at such time as they are earned or are otherwise no longer subject to refund. For the
avoidance of doubt, Gross Receipts includes the net benefit of true-up payments received from any
Co-Financier in connection with such Motion Picture.

     “Guaranty” shall mean, as to any Person, any direct or indirect obligation of such
Person guaranteeing or intended to guarantee any Indebtedness, Capital Lease, dividend or other
monetary obligation (“primary obligation”) of any other Person (the “primary
obligor”) in any manner, whether directly or indirectly, including, without limitation, any
obligation of such Person, whether or not contingent, (a) to purchase any such primary obligation
or any property constituting direct or indirect security therefor, (b) to advance or supply funds
(i) for the purchase or payment of any such primary obligation, or (ii) to maintain working capital
or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, or (c) to purchase property, securities or services, in each case, primarily for
the purpose of assuring the performance by the primary obligor of any such primary obligation;
provided, however, that the term Guaranty shall not include endorsements for collection or
collections for deposit, in either case in the Ordinary Course of Business. The amount of any
Guaranty shall be deemed to be an amount equal to (x) the stated or determinable amount of the
primary obligation in respect of which such Guaranty is made (or, if the amount of such primary
obligation is not stated or determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such Person is required to perform thereunder)), or (y) the stated maximum
liability under such Guaranty, whichever is less.

     “Guild” means the Screen Actors Guild, the Directors Guild of America, the Writers
Guild of America, I.A.T.S.E. or any other trade organization, collective bargaining entity or

8

 

union, domestic or foreign, which bargains on behalf of its members with third parties in
order to determine wages, hours, rules, working conditions and the like.

     “Home Video Rights” means and includes the right (a) to manufacture, advertise,
promote, exploit and distribute a Motion Picture on a sale, lease or rental basis directly or
through licensees, in all languages, versions, and sizes, on all formats of video devices now known
or hereafter known or devised, including, without limitation (i) any and all forms of
videocassettes, cartridges, phonograms, tape, video discs, laser discs, 8mm recordings and any
other visual or optical recording, (ii) any and all forms of DVD, DVD-ROM, and Internet
access-ready DVDs, CD-I and CD-ROM, Video Compact Discs, HD-DVD, Blu-Ray, or (iii) any and all
forms of computer software, or any configuration of computer software and technology, for private
use by consumers by any means, whether now known or hereafter known or devised (all such devices
collectively, “Videograms”) and (b) to exploit a Motion Picture by means of electronic
sell-throughs, download-to-own, and computerized or computer-assisted media (it being understood
that the transmission of electronic sell-throughs or download-to-own may be through an online or
Internet-based method). For the avoidance of doubt, “Video-on-Demand” and “Near Video-on-Demand”
exploitation rights are not Home Video Rights. “Video-On-Demand” means the transmission of
a Motion Picture through any method now known or hereafter devised, including, without limitation,
broadcast television signal, whether analog or digital, or via satellite, cable, telephone wire,
fiber optics, cyberspace, Internet or other computerized or digital technology, on-line
transmission, every sort of electronic transmission or any and all other delivery systems, to a
television receiver, computer monitor or other comparable display, whereby the consumer can select
the Motion Picture from a central library and whereby the consumer determines the starting time of
the Motion Picture. “Near Video-On-Demand” incorporates the definition of Video-On-Demand,
except that, instead of the consumer determining the starting time for viewing the Motion Picture,
the consumer is able to select the starting time from viewing times determined by the provider,
where the provider permits a selection of starting times not more than fifteen (15) minutes apart.

     “Indebtedness” of a Person means, without duplication: (a) all indebtedness of such
Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of
property or services (other than any portion of any trade payables), (c) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (d) all obligations of
such Person created or arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (whether or not the rights and remedies of the seller
or lender under such agreement in an event of default are limited to repossession or sale of such
property), (e) all leases which are capitalized in accordance with GAAP to which such Person is a
party, (f) all obligations, contingent or otherwise, of such Person under banker’s acceptance,
letter of credit or similar facilities, (g) all obligations of such Person to purchase, redeem,
retire, defease or otherwise acquire for value any equity interests of such Person, (h) the net
amount of all financial obligations of such Person in respect of any interest rate swap, hedge or
cap agreement, (i) the net amount of all other financial obligations of such Person, which would be
considered debt in accordance with GAAP, under any contract or other agreements to which such
Person is a party, (j) all indebtedness of other Persons of the type described in clauses (a)
through (i) above guaranteed, directly or indirectly, in any manner by such Person, or in effect
guaranteed, directly or indirectly, by such Person through an agreement (A) to pay or purchase such
indebtedness or to advance or supply funds for the payment or purchase of such

9

 

indebtedness, (B) to purchase, sell or lease (as lessee or lessor) property, or to purchase or
sell services, primarily for the purpose of enabling the debtor to make payment of such
indebtedness or to assure the holder of such indebtedness against loss, (C) to supply funds to or
in any other manner invest in the debtor (including any agreement to pay for property or services
irrespective of whether such property is received or such services are rendered) or (D) otherwise
to assure a creditor against loss, and (k) all indebtedness of the type described in clauses (a)
through (i) above secured by (or for which the holder of such indebtedness has an existing right,
contingent or otherwise, to be secured by) any Adverse Claim (other than Permitted Liens) on
property (including accounts and contract rights) owned by such Person, even though such Person has
not assumed or become liable for payment of such indebtedness.

     “Indemnified Parties” means, individually and as a group, the Purchaser Indemnified
Parties and the Seller Indemnified Parties.

     “Indemnification Agreement” means the indemnification agreement of even date herewith
in substantially the form of Exhibit I attached hereto.

     “Initial Theatrical Release Date” means the initial date on which a Motion Picture is
Theatrically Exhibited in the Domestic Territory.

     “Intellectual Property” means any or all of the following and all rights in, arising
out of, or associated therewith: (a) all Patent Rights; (b) all inventions (whether patentable or
not), invention disclosures, improvements, trade secrets, proprietary information, confidential
information, know-how, technology, processes, designs and all documentation relating to any of the
foregoing; (c) works of authorship and art in any media, and all copyrights, copyright
registrations and applications therefor, and all other rights, including authors’ or moral rights,
corresponding thereto throughout the universe; (d) all computer software, including all source
code, object code, firmware, development tools, files, records and data, and all media on which any
of the foregoing is recorded; (e) all trademarks, service marks, trade dress, trade names, designs,
logos, slogans and general intangibles of like nature, including those existing under common law
and all registrations and applications therefor throughout the universe, and all goodwill
associated with or symbolized by any of the foregoing; (f) all Internet domain names; (g) with
respect to all of the foregoing, all rights, benefits, privileges, causes of action and remedies,
including the right to bring an Action in law for infringement or other impairment of rights,
benefits or privileges, including the right to receive and retain damages, proceeds or any other
legal or equitable protections; and (h) any similar or equivalent rights to any of the foregoing
anywhere in the universe.

     “Internal Revenue Service” means the United States Internal Revenue Service.

     “Knowledge” or “knowledge” means (a) with respect to a representation or
warranty of Mandate, the actual knowledge, as of the applicable date, of any of the Mandate
Individuals or officer or director of Mandate, (b) with respect to a representation or warranty of
a Seller, the actual knowledge, as of the applicable date, of such Seller, and (c) with respect to
a representation or warranty of Purchaser, the actual knowledge, as of the applicable date, of Jon
Feltheimer, Steve Beeks, Michael Burns, Wayne Levin and Jim Keegan.

10

 

     “Law” means any applicable law (statutory, common, or otherwise), constitution,
treaty, convention, ordinance, equitable principle, code, rule, regulation, executive order or
other similar authority enacted, adopted, promulgated or applied by any Governmental Body, each as
amended and now in effect.

     “LGE” means Lions Gate Entertainment Corp., a corporation organized under the laws of
British Columbia.

     “LGE Common Stock” means the common stock, no par value, of LGE.

     “LGE Credit Agreement” means that certain Amended and Restated Credit, Security,
Guaranty and Pledge Agreement dated as of September 25, 2000, as amended and restated as of
December 15, 2003 (as the same may be further amended, supplemented or otherwise modified), by and
among Lions Gate Entertainment Corp. and Purchaser as borrowers, the lenders and guarantors party
thereto and JPMorgan Chase Bank, N.A., as administrative agent.

     “LGF” means Lions Gate Films, Inc., a Delaware corporation.

     “Liability” means any liability or obligation, whether known or unknown, asserted or
unasserted, absolute or contingent, matured or unmatured, conditional or unconditional, latent or
patent, accrued or unaccrued, liquidated or unliquidated, or due or to become due.

     “LIBOR” means the six-month LIBOR rate (expressed as a percentage per annum rounded
upwards, if necessary, to the nearest one-sixteenth (1/16) of one percent (1%)) for deposits in
Dollars for a period comparable to such period that appears on Telerate Page 3750 (or such page as
may replace Telerate Page 3750) as of 11:00 AM (London time) on the LIBOR Determination Date for
such period. If such rate does not appear on Telerate Page 3750 (or such page as may replace
Telerate Page 3750) as of 11:00 AM (London time) on the LIBOR Determination Date for such period,
the LIBOR will be the arithmetic mean of the offered rates (expressed as a percentage per annum
rounded upwards, if necessary, to the nearest one-sixteenth (1/16) of one percent (1%)) for
deposits in Dollars for a period comparable to such period that appears on the Reuters Screen LIBOR
Page as of 11:00 AM (London time) on the LIBOR Determination Date for such period, if at least two
such offered rates so appear. If fewer than two such offered rates appear on the Reuters Screen
LIBOR Page as of 11:00 AM (London time) on any such date, Purchaser will request the principal
London office of any four (4) major reference banks in the London interbank market to provide such
bank’s offered quotation (expressed as a percentage per annum rounded upwards, in necessary, to the
nearest one sixteenth (1/16) of one percent (1%)) to prime banks in the London interbank market for
deposits in Dollars for a period comparable to such period as of 11:00 AM (London time) on such
date for amounts comparable to such period (if available). If at least two such offered quotations
are so provided, LIBOR will be the arithmetic mean of such quotations. If fewer than two such
quotations are so provided, Purchaser will request any three (3) major banks in New York City to
provide such bank’s rate (expressed as a percentage per annum rounded upwards, if necessary, to the
nearest one sixteenth (1/16) of one percent (1%)) for loans in Dollars to leading European banks
for a period comparable to such period as of approximately 11:00 AM (New York City time) on the
first day of such period for comparable amounts. If at least two such rates are so provided, LIBOR
will be the arithmetic mean of such rates. If fewer than two such rates are so

11

 

provided, then LIBOR will be the rate provided. If no such rate is provided, LIBOR for such
period will be the LIBOR in effect for the prior interest period. In respect of any period for
which deposits of the comparable period do not appear on the relevant electronic screen display,
LIBOR shall be determined through the use of a straight-line interpolation by reference to two
rates calculated in accordance with the preceding sentences, one of which rates shall be determined
as if the maturity of the applicable deposits referred to therein were the period of time for which
rates are available next shorter than the period and the other of which rates shall be determined
as if the maturity of the applicable deposits referred to therein were the period of time for which
rates are available next longer than the period.

     “Mandate Individuals” means J. Drake, Kahane and Goldsmith.

     “Mandate Intellectual Property” means any Intellectual Property that is owned by, or
licensed by a Third Party to, Mandate or any of its Subsidiaries, including the Mandate Registered
Intellectual Property. For the avoidance of doubt, the term Mandate Intellectual Property shall
not include any Intellectual Property with respect to Motion Pictures for which Mandate renders
sales agency services and which Mandate does not otherwise own or license.

     “Mandate Licensed Pictures” means “Juno”, “30 Days of Night” and “Within” (a/k/a
“Cavern”).

     “Mandate Material Adverse Effect” means any changes, effects or conditions that,
individually or in the aggregate, would reasonably be expected to have a materially adverse effect
on (a) the business, assets, liabilities, financial condition, or results of operations of Mandate
and its Subsidiaries, taken as a whole, or (b) the ability of Mandate and the Sellers to consummate
the transactions contemplated by this Agreement or the other Transaction Documents;
provided, however, that any such change, effect or condition arising out of or
relating to any change or development (i) applicable to the entertainment or media industry
generally or (ii) resulting from the entry into, consummation or announcement of this Agreement or
the transactions contemplated hereby (including the effect of any actions with respect to any of
the transactions contemplated hereby permitted to be taken in accordance with the terms of this
Agreement), or performance of a party’s obligations hereunder or contemplated hereby in accordance
with the terms hereof shall not constitute a “Mandate Material Adverse Effect.”

     “Mandate Motion Pictures” means the Mandate Produced Pictures and the Mandate Licensed
Pictures.

     “Mandate Produced Pictures” means “The Grudge 2,” “Stranger Than Fiction”, “Rise,”
“Mr. Magorium’s Wonder Emporium,” “Boogeyman 2,” “Passengers,” “Horsemen”, “Harold and Kumar 2” and
“Messengers” (a/k/a “Scarecrow” and f/k/a “The Untitled Pang Brothers Project).

     “Mandate Registered Intellectual Property” means all of the following types of United
States, international and foreign Intellectual Property owned by Mandate or its Subsidiaries: (a)
patents and design or utility patent applications, and all reissues, divisions, extensions,
provisionals, continuations and continuations-in-part thereof; (b) registered trademarks, service
marks, designs, logos, slogans and general intangibles of like nature, applications (including

12

 

intent-to-use applications) to register trademarks, service marks, designs, logos, slogans and
general intangibles of like nature and all goodwill associated with or symbolized by any of the
foregoing; (c) registered Internet domain names and applications to register Internet domain names;
and (d) registered copyrights and applications for copyright registration.

     “Mandate Registered Trademark” means the following mark:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Country	 	Mark	 	Class	 	Reg. No. / Reg. Date
	U.S.A.
	 	Ghost House Pictures	 	 	41	 	 	 	2,940,795/4/12/2005	 

     “Motion Picture” means pictures of every kind and character whatsoever, including all
present and future technological developments, whether produced by means of any photographic,
electrical, electronic, optical, mechanical or other processes or devices now known or hereafter
devised, and their accompanying devices and processes whereby pictures, images, visual and aural
representations are recorded or otherwise preserved for projection, reproduction, exhibition, or
transmission by any means or media now known or hereafter devised in such manner as to appear to be
in motion or sequence, including computer generated pictures and graphics other than video games.
For the avoidance of doubt, Motion Picture includes all audio-visual works made for theatrical,
video or television or any other means of exploitation now known or hereafter devised that are used
for purposes of viewing such audio-visual works in a linear manner, including all merchandising and
licensing items based thereon (including video games).

     “Natixis Facility” means the Credit and Security Agreement dated as of December 19,
2006, as amended, by and among MH Funding, LLC, as borrower, Natixis, as agent and lender, and CIT
Lending Services Corporation, as lender, and the various agreements and ancillary instruments
contemplated thereby.

     “Net Profits” means, with respect to a Motion Picture, Gross Receipts for such Motion
Picture, less the actual out-of-pocket Third Party costs and expenses paid or incurred by Purchaser
or its Affiliates (provided, that with respect to such Third Party costs and expenses paid
or incurred by any Affiliate that is not, directly or indirectly, a wholly-owned Subsidiary of
Purchaser, the calculation of “Net Profits” shall include only the amount thereof payable by
Purchaser or its wholly-owned Subsidiaries) net of all discounts, rebates, allowances and insurance
recoveries, taking into account all Soft Money Benefits, and without any overhead, supervisory fees
or distribution fees, in each case with respect to such Motion Picture. For the purpose of
calculating “Net Profits” for this Agreement, one hundred percent (100%) of revenue and one hundred
percent of (100%) of expenses from exploitation of Home Video Rights shall be included on a rolling
basis.

     “NYSE” means the New York Stock Exchange, or its successor.

     “Online Data Room” means the online data room established for this transaction by
Mandate at www.merrillcorp.com, as updated as of the calendar day immediately preceding the
Closing.

13

 

     “Open to the General Public” means, in the case of a Motion Picture, being
Theatrically Exhibited on screens in a walk-in theater and open to the general public on a
regularly scheduled basis where a fee is charged for admission to view such Motion Picture
(excluding previews, premieres, festivals, charitable screenings, test-market screenings,
screenings for Academy Award consideration, Theatrical Exhibition for Academy Award qualification,
and other similar special exhibitions of such Motion Picture).

     “Order” means any order, ruling, decision, verdict, decree, writ, subpoena, mandate,
precept, command, directive, consent, approval, award, judgment, injunction or other similar
determination or finding by, before or under the supervision of any Governmental Body, arbitrator
or mediator.

     “Ordinary Course of Business” means, with respect to a Person, the ordinary course of
business consistent with past practice of such Person and its Subsidiaries.

     “Outstanding Claim” means the amount of any indemnification claim in Dollars made in
good faith by any Purchaser Indemnified Party pursuant to Article 8 which shall be
outstanding and unresolved, or resolved in whole or in part in favor of the Purchaser Indemnified
Party but not yet paid.

     “Overhead” means all overhead expenses, including employee salaries, utility costs,
office rent, equipment costs, travel and entertainment expenses, corporate insurance premiums and
similar items customarily characterized as overhead.

     “Overhead Cap” means, from and after the Closing Date, an annual cap on Overhead in
the aggregate amount of [REDACTED]; provided, that (a) J. Drake’s salary and
bonuses, (b) any bonuses paid to employees of Mandate and/or its Subsidiaries for work done on
projects of LGE or its Subsidiaries (other than Mandate and/or its Subsidiaries), and (c) the value
of any cash or stock options (or restricted stock units or other equity interests) paid by
Purchaser or its Affiliates to any employee of Mandate and/or its Subsidiaries as part of
Purchaser’s discretionary bonus compensation plan from and after the Closing Date as well as the
value of any such items paid to J. Drake under the Employment Agreement shall not be counted
towards the foregoing annual Overhead Cap; provided, further, that, (i) for
the period from the Closing Date through December 31, 2007, the foregoing Overhead Cap amount shall
be prorated and (ii) all severance and termination pay (including accrued vacation) made to
employees of Mandate and/or its Subsidiaries terminated during the period from the Closing Date
through June 30, 2008 in connection with the post-Closing integration of Purchaser and Mandate
shall not be counted towards the foregoing annual Overhead Cap.

     “Patent Rights” means all United States, international and foreign patents and
applications therefor and all reissues, divisions, renewals, extensions, provisionals,
continuations and continuations-in-part thereof.

     “Permit” means any permit, license, certificate, approval, consent, notice, waiver,
franchise, registration, filing, accreditation or other similar authorization required by any Law
or Governmental Body.

     “Permitted Liens” means Adverse Claims:

14

 

     (a) for Taxes not yet due and payable;

     (b) for statutory liens in favor of film laboratories;

     (c) for mechanics and materialmen’s liens, provided that if Mandate or any of its Subsidiaries
is aware of such liens, they are reflected in the Financial Statements (to the extent then
outstanding);

     (d) for deposits under worker’s compensation and unemployment insurance;

     (e) arising in the ordinary course of production of a Motion Picture (including Adverse Claims
in favor of Guilds and production lenders and including completion guarantors);

     (f) created under or in connection with any distribution agreement entered into with a
distributor or subdistributor in the ordinary course of business in connection with the
distribution, subdistribution or exploitation of a Motion Picture;

     (g) created pursuant to the terms of any government tax incentive agreement or similar
Soft-Money Benefit transaction;

     (h) in favor of a Co-Financier (it being understood that a production lender is not a
Co-Financier) of a Motion Picture to secure the payment of amounts due to such Co-Financier in
connection with such Motion Picture; provided however that such Adverse Claims are subject to a
customary inter-party agreement with such Co-Financier; and

     (i) arising under or in connection with the Natixis Facility or otherwise set forth in
Schedule 1.1(a) attached hereto or imposed by Purchaser or LGE;

     provided, however, that with respect to Derivative Works, “Permitted Liens”
means only the Adverse Claims referenced in clauses (a), (b) and (c) above, Adverse Claims in favor
of Guilds, and the Adverse Claims set forth on Schedule 1.1(b) attached hereto.

     “Person” means any individual, sole proprietorship, partnership, limited liability
company, corporation, association, joint stock company, trust, trustee, entity, joint venture,
labor organization, unincorporated organization, Governmental Body, executor, administrator or
other legal representative.

     “Purchaser Indemnified Parties” means Purchaser, its Subsidiaries and Affiliates
(including, without limitation, Mandate and its Subsidiaries after the Closing) and their
respective officers, directors, managers, stockholders, members, partners, employees, agents and
representatives.

     “Purchaser Material Adverse Effect” means any changes, effects or conditions that,
individually or in the aggregate, would reasonably be expected to have a materially adverse effect
on (a) the business, assets, liabilities, financial condition, or results of operations of LGE and
its Subsidiaries, taken as a whole, or (b) the ability of Purchaser or LGE, as applicable, to
consummate the transactions contemplated by this Agreement or the other Transaction Documents;
provided, however, that any such change, effect or condition arising out of or

15

 

relating to any change or development (i) applicable to the entertainment or media industry
generally or (ii) resulting from the entry into, consummation or announcement of this Agreement or
the transactions contemplated hereby (including the effect of any actions with respect to any of
the transactions contemplated hereby permitted to be taken in accordance with the terms of this
Agreement), or performance of a party’s obligations hereunder or contemplated hereby in accordance
with the terms hereof shall not constitute a “Purchaser Material Adverse Effect.”

     “Records” means all of a Person’s books, records, files, documents and agreements,
whether in tangible, electronic or digital media or any other medium.

     “Registration Rights Agreement” means the registration rights agreement to be entered
into at Closing by and among Purchaser and the Sellers, substantially in the form of Exhibit
D attached hereto.

     “Reportable Event” shall mean any reportable event as defined in Section 4043(c) of
ERISA, other than a reportable event as to which provision for thirty (30)-day notice to the PBGC
has been waived under applicable regulations.

     “Restrictive Term” means, with respect to J. Drake or Kahane, the period commencing
with the Closing and ending on the three (3)-year anniversary of the Closing Date; provided that,
with respect to either such Mandate Individual, the Restrictive Term shall be deemed terminated
earlier as follows:

     (a) in the event that such Mandate Individual ceases to be employed by LGE or its Affiliates
as a result of a termination by such Mandate Individual without Good Reason, the Restrictive Term
with respect to such Mandate Individual shall terminate on the three (3)-year anniversary of the
Closing Date;

     (b) in the event that such Mandate Individual ceases to be employed by LGE or its Affiliates
as a result of a termination for Cause, the Restrictive Term with respect to such Mandate
Individual shall terminate on the two (2)-year anniversary of the Closing Date; or

     (c) in the event that such Mandate Individual ceases to be employed by LGE or its Affiliates
as a result of a termination without Cause or for Good Reason before the three (3)-year anniversary
of the Closing Date, the Restrictive Term with respect to such Mandate Individual shall terminate
on the date of such termination of employment.

     Notwithstanding anything contained in this Agreement to the contrary, the expiration or
termination of a Restrictive Term with respect to a Mandate Individual shall not affect any rights
or obligations of Purchaser or its Affiliates under the Employment Agreement with such Mandate
Individual, if any.

     “Securities Act” means the Securities Act of 1933, as amended.

     “Seller Accounts” means the accounts designated in writing by the Sellers to Purchaser
at least two (2) Business Days prior to either the Closing Date or the applicable payment date, as
applicable.

16

 

     “Seller Indemnified Parties” means the Sellers and their Affiliates and their
respective officers, directors, managers, stockholders, members, partners, employees, agents and
representatives.

     “Seller Material Adverse Effect” means, with respect to a Seller, any changes, effects
or conditions that, individually or in the aggregate, would reasonably be expected to have a
materially adverse effect on the ability of such Seller to consummate the transactions contemplated
by this Agreement or the other Transaction Documents.

     “Share Security Interest” means any Adverse Claim, other than those arising under
applicable securities Laws and those imposed by Purchaser.

     “Sharing Percentage” means [REDACTED] for the Drake Family Trust, [REDACTED] for
Kahane, and [REDACTED] for Goldsmith.

     “Soft-Money Benefit” means (a) the net benefit to Purchaser or its Subsidiaries of
labor-based or content-based tax rebates, tax credits, traditional sale/leaseback transactions,
German tax fund, S. African tax fund or similar programs, and excludes (b) Purchaser’s recent
Goldman Sachs slate financing transaction or similar slate financing transactions, securitizations,
interest gains on low cost or no interest loans and corporate financings; provided that, for
purposes of clarification, any equity investment in Motion Pictures contemplated by Purchaser’s
recent SGF financing transaction shall not be a Soft-Money Benefit and shall not be a Gross Receipt
but shall be deemed to reduce Direct Negative Costs.

     “Specified Rights” means the right to receive fees with respect to the Motion Pictures
“Boogeyman” and “The Grudge” under the following Contracts: (a) the “Boogeyman” and “The Grudge”
Payment Instruction and Commissions/Derivative Works Payments Agreement dated December 29, 2004,
with effect from August 1, 2004, by and among PBNJ Holdings, LLC (now Mandate Holdings, LLC), The
Rights Holding, Co., Bodyguard Pictures, LLC, GHP1-Boogeyman, LLC, GHP2-Grudge, LLC, Sam Raimi and
Rob Tapert, (b) the Memorandum dated June 18, 2002 from Senator International, Inc. to Sam Raimi
and Rob Tapert, (c) the Amendment to the Memorandum of Bodyguard Pictures, LLC dated as of December
29, 2004, with effect from August 1, 2004, by and among The Rights Holding, Co., PBNJ Holdings, LLC
(now Mandate Holdings, LLC), Sam Raimi and Rob Tapert, (d) the Operating Agreement of Ghost House
Pictures, LLC (now Bodyguard Pictures, LLC) effective as of July 25, 2003 by and among Senator
International, Inc., Sam Raimi and Rob Tapert, and (e) the Amendment to the Limited Liability
Company Operating Agreement of Bodyguard Pictures, LLC dated as of December 29, 2004, with effect
from August 1, 2004, by and among Sam Raimi, Rob Tapert, The Rights Holding, Co. and PBNJ Holdings,
LLC (now Mandate Holdings, LLC).

     “Subsidiary” means, with respect to a Person, (a) any other Person that is a
corporation of which at least fifty percent (50%) of the total voting power of all classes of the
common stock entitled (without regard to the occurrence of any contingency) to vote in the election
of directors is owned by such Person, directly or through one or more other Subsidiaries of such
Person, and (b) any other Person (other than a corporation) of which at least fifty percent (50%)
of the total voting power of all classes of the common Equity Interests (however designated, but on
an as-converted basis) entitled (without regard to the occurrence of any contingency) to vote in
the

17

 

election of the governing body, partners, managers or others that will control the management
of such entity is owned by such Person directly or through one or more other Subsidiaries of such
Person. Notwithstanding the foregoing, (i) B And G Derivatives Holdings, LLC, GHP-4-Grudge 2, LLC
and GHP-5-Boogeyman 2, LLC shall each be deemed a Subsidiary of Mandate and (ii) Stupid Zebra, LLC
shall not be a Subsidiary of Mandate (or any of its Subsidiaries).

     “Tax” or “Taxes” refers to any and all federal, state, local and foreign
Taxes, assessments and other governmental charges, duties, impositions and liabilities relating to
Taxes, including Taxes based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, franchise, withholding, payroll, recapture,
employment, excise and property Taxes, together with all interest, penalties and additions imposed
with respect to such amounts and any obligations under any agreements or arrangements with any
other person with respect to such amounts and including any liability for Taxes of a predecessor
entity. For purposes of this definition, the term “Tax” or “Taxes,” when used in reference to
Mandate’s tax obligations, shall also include those amounts paid by Mandate to third parties for
which Mandate is, under applicable local Laws, a withholding agent.

     “Tax Return” means any federal, state, local and foreign returns, estimates,
information statements, reports, declarations, an all other filings relating to Taxes required to
be submitted to a Governmental Body in connection with Taxes (including any attachment or schedule
thereto or any amendment thereof), including any claim for refund, declaration of any estimated Tax
and combined or consolidated return for any group of entities.

     “Theatrical Exhibition” or “Theatrically Exhibited” means, with respect to a
Motion Picture, the commercial exhibition of such Motion Picture using any form of Motion Picture
copy by any process now known or hereafter devised in walk-in or drive-in theaters Open to the
General Public.

     “Third Party” means a Person unaffiliated with any of the Parties.

     “Third Party Licenses” means all Contracts entered into between Mandate, a Subsidiary
of Mandate, or Stupid Zebra, LLC, on the one hand, and one or more Persons, on the other hand,
pursuant to which such Persons acquired or were licensed rights in Motion Pictures or Intellectual
Property (including Mandate Registered Intellectual Property or Mandate Intellectual Property).

     “Transaction Documents” means this Agreement, the Employment Agreements, the
Registration Rights Agreement, the Additional Agreement, the Indemnification Agreement, the
Instruments of Assignment, and the Spousal Consents.

     “Transactions” means the transactions contemplated under the Transaction Documents.

     “Transfer Taxes” means any charge or duty imposed, assessed or levied on the transfer
or disposition of tangible, intangible, real or personal property including but not limited to
documentary, sales, use, registration, value-added, stamp, recording and other such Taxes which are
similar in nature as the aforementioned.

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     “Treasury Regulations” means the proposed, temporary and final regulations promulgated
under Title 26 of the Internal Revenue Code.

     1.2 Definition Cross-References. The following defined terms used in this Agreement
and not defined in Section 1.1 are defined in the corresponding Sections of this Agreement:

	 	 	 
	Term	 	Section
	[REDACTED] DW Gross Receipts Amount
	 	2.4(a)(ii)(A)
	[REDACTED] Retained Rights Receipts Amount
	 	2.4(b)(iii)(A)
	3(a) Contingent Participation
	 	2.3(a)
	3(a) Contingent Payment Period
	 	2.3(a)
	3(b) Contingent Participation
	 	2.3(b)
	3(b) Contingent Payment Period
	 	2.3(b)
	2006 Tax Returns
	 	5.1(d)(i)
	2006 Tax Return Arbitration
	 	5.1(d)(i)
	2006 Tax Year
	 	5.1(d)(ii)
	2007 Stub Tax Period
	 	5.1(d)(ii)
	2007 Stub Period Tax Return Arbitration
	 	5.1(d)(ii)
	2007 Stub Period Tax Returns
	 	5.1(d)(ii)
	2007 Tax Distribution
	 	5.5(a)
	Actual 2007 Stub Period Taxable Income
	 	5.5(b)
	Affiliated Person
	 	3.18
	Arbitration Notice
	 	9.15(b)
	Audited Financial Statements
	 	3.4(a)
	Base Consideration
	 	2.2(a)
	Closing
	 	2.5
	Closing Consideration
	 	2.2(a)(i)
	Closing Date
	 	2.5
	Contingent Participation Hurdle
	 	2.3(c)
	Contingent Producer Fee
	 	2.4(a)(ii)
	Dispute
	 	9.15
	Drake Family Trust Indemnity Holdback Shares
	 	2.2(b)
	Drake Family Trust Regular Holdback Shares
	 	2.2(b)
	Estimated 2007 Stub Taxable Income
	 	5.5(b)
	Excluded Contracts
	 	3.12(c)
	Financial Statements
	 	3.4(a)
	Fixed Producer Fee
	 	2.4(a)(i)
	Fundamental Claims
	 	8.4(c)
	Fundamental Representations
	 	8.1
	Goldsmith Indemnity Holdback Shares
	 	2.2(b)
	Goldsmith Trust Regular Holdback Shares
	 	2.2(b)
	Guaranty Holdback Shares
	 	2.2(a)(ii)
	Holdback Consideration
	 	2.2(a)(ii)
	Holdback Shares
	 	2.2(a)(ii)
	Indemnification Notice
	 	8.4(a)
	Indemnifying Party
	 	8.5
	Indemnity Basket
	 	8.6(c)
	Indemnity Deductible
	 	8.6(c)
	Indemnity Holdback Sharing Percentage
	 	8.4(b)(i)
	Instruments of Assignment
	 	2.6(a)(i)
	Kahane Indemnity Holdback Shares
	 	2.2(b)
	Kahane Regular Holdback Shares
	 	2.2(b)
	LGE Secretary’s Certificate
	 	2.6(b)(iii)(B)

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	Term	 	Section
	LGE Stock
	 	4.1(f)(ii)
	JAMS
	 	9.15(b)
	Leases
	 	3.9
	Mandate
	 	Preamble
	Mandate COO’s Certificate
	 	2.6(a)(ii)
	Mandate Disclosure Letter
	 	ARTICLE 3
	Mandate Employees
	 	3.16(a)
	Mandate Membership Interests
	 	Recitals
	Mandate Releasor
	 	5.6(b)
	Mandate Representative
	 	2.10(a)
	Material Contract
	 	3.12(a)
	Mandate Permits
	 	3.7
	Noncompetition Covenants
	 	5.2(a)
	Parties
	 	Preamble
	Plans
	 	3.16(a)
	Potential Claims
	 	8.2(a)(v)
	Purchase Price
	 	5.1
	Purchaser
	 	Preamble
	Purchaser Covered Persons
	 	5.6(a)
	Purchaser Disclosure Letter
	 	4.2
	Purchaser Secretary’s Certificate
	 	2.6(b)(iii)(A)
	Reference Date
	 	3.5
	Regular Holdback Shares
	 	2.2(a)(ii)
	Releases
	 	5.6(c)
	Reports
	 	4.2(f)
	Resolved Amount
	 	8.4(a)
	Resolved Claim Notice
	 	8.4(a)
	Retained Distribution Rights
	 	2.4(b)(iii)
	Rights Consideration
	 	2.4(b)(i)
	S-3 Registration Statement Supplement
	 	2.9
	SEC
	 	2.9
	Seller Releasor
	 	5.6(a)
	Sellers
	 	Preamble
	Seller Covered Persons
	 	5.6(b)
	Sellers’ Indemnification Cap
	 	8.6(a)
	Spousal Consent
	 	4.1(a)
	Straddle Period
	 	5.1(g)(iv)
	Studio Co-Financing Amount
	 	2.4(c)
	Studio Co-Financing Producer Fee
	 	2.4(c)(i)
	Studio Shared Pot Co-Financing
	 	2.4(c)
	Tax Claim
	 	5.1(g)
	Third Party Claim
	 	8.5
	Third Party Disposition
	 	2.4(b)(i)
	True Cash Breakeven
	 	2.4(a)(ii)
	Unaudited Financial Statements
	 	3.4(a)
	Unobjected Amount
	 	8.4(a)

     1.3 Computation of Time Periods.

     Unless otherwise stated in this Agreement, in the computation of a period of time from a
specified date to a later specified date, the word “from” means “from and including”, the word
“through” means “to and including”, and the words “to” and “until” each mean “to but excluding.”

20

 

     1.4 Accounting Terms / Ratios.

     (a) Except as otherwise expressly provided herein, all accounting terms not defined
herein shall be construed in accordance with GAAP.

     (b) All calculations of financial ratios hereunder shall be calculated to the same
number of decimal places as the relevant ratios are expressed in and shall be rounded upward
if the number in the decimal place immediately following the last calculated decimal place
is five or greater, and rounded down if otherwise.

     (c) All currency amounts are in Dollars unless expressly stated in a different
currency.

     1.5 Rules of Construction. Unless the context otherwise clearly requires:

     (a) whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms;

     (b) the singular includes the plural and the plural includes the singular;

     (c) the words “include,” “includes” and “including” shall be deemed to be followed by
the phrase “without limitation”;

     (d) “or” is not exclusive;

     (e) the word “shall” shall be construed to have the same meaning and effect as the word
“will”, and vice versa;

     (f) any definition of or reference to any agreement, instrument or other document
herein shall be construed as referring to such agreement, instrument or other document as
from time to time amended, supplemented or otherwise modified (subject to any restrictions
on such amendments, supplements or modification set forth herein);

     (g) any reference herein to any Person, or to any Person in a specified capacity, shall
be construed to include such Person’s successors and permitted assigns or such Person’s
successors in such capacity, as the case may be;

     (h) any reference to any Law herein shall be construed as referring to such Law as from
time to time amended;

     (i) any reference to “out of pocket expenses” shall mean “actual, direct, third-party
out of pocket expenses”; and

     (j) the words “herein,” “hereof” and “hereunder” and other words of similar import
refer to this Agreement as a whole and not to any particular Section, clause or other
subdivision.

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ARTICLE 2

TRANSACTIONS AND CLOSING

     2.1 Purchase and Sale of Mandate Membership Interests. On the terms and subject to
the conditions of this Agreement, on the Closing Date, each Seller shall transfer, sell and deliver
to Purchaser all of the Mandate Membership Interests owned beneficially or of record by such
Seller, which Mandate Membership Interests collectively constitute all of the Equity Interests of
Mandate.

     2.2 Base Consideration.

     (a) Amount of Base Consideration. In consideration for the Mandate Membership
Interests, Purchaser shall pay to the Sellers (in addition to the other amounts payable
pursuant to Section 2.3 and Section 2.4) an aggregate amount equal to
Fifty-Six Million Three Hundred Twenty-Four Thousand Two Hundred Sixty-Seven Dollars
($56,324,267) (the “Base Consideration”), which amount shall be allocated among the
Sellers in accordance with each Seller’s respective Sharing Percentage. The Base
Consideration shall be payable by Purchaser (provided, that to the extent any Base
Consideration is payable in shares of LGE Common Stock, LGE shall issue and deliver such
Base Consideration on Purchaser’s behalf) as follows:

     (i) Forty-Four Million Three Hundred Twenty-Four Thousand Two Hundred
Sixty-Seven Dollars ($44,324,267) shall be payable at Closing in the form of cash by
wire transfer of immediately available U.S. funds to the Seller Accounts
(collectively, the “Closing Consideration”); provided that $1.5 million of
the Closing Consideration shall instead be paid one-third to each of the Sellers
instead of in accordance with their respective Sharing Percentages;

     (ii) Twelve Million Dollars ($12,000,000) payable in the form of shares of LGE
Common Stock (the number of shares to be determined in accordance with Section
2.2(b)), which shares shall be issued and delivered as provided in Section
2.8, but subject to Article 8 (collectively, the “Holdback
Consideration” or the “Holdback Shares”). Of the Holdback Shares,
shares representing Five Million Dollars ($5,000,000) at Closing shall constitute
“Indemnity Holdback Shares” and shares representing Seven Million Dollars
($7,000,000) at Closing shall constitute “Regular Holdback Shares.”

     (b) Determination of Number of Shares of LGE Common Stock Issuable as Part of Base
Consideration. The number of Indemnity Holdback Shares to be issued to the Drake Family
Trust (the “Drake Family Trust Indemnity Holdback Shares”) shall be determined by
multiplying (x) Five Million Dollars ($5,000,000) by (y) the Drake Family Trust’s Sharing
Percentage and dividing the result by (z) the lesser of (1) the Average Price as of the
Closing and (2) the Closing Price (calculated to be [$5,000,000 x .60]/$9.31=322,234 Drake
Family Trust Indemnity Holdback Shares). The number of Indemnity Holdback Shares to be
issued to Kahane and Goldsmith (as applicable, the “Kahane Indemnity Holdback
Shares” or the “Goldsmith Indemnity Holdback Shares”) shall be determined by
multiplying (A) Five Million Dollars ($5,000,000) by (B) such

22

 

Seller’s Sharing Percentage and dividing the result by (C) the Average Price as of the
Closing (calculated to be [$5,000,000 x .25]/$9.4185=132,718 Kahane Indemnity Holdback
Shares; [$5,000,000 x .15]/$9.4185=79,631 Goldsmith Indemnity Holdback Shares). The number
of Regular Holdback Shares to be issued to the Drake Family Trust (the “Drake Family
Trust Regular Holdback Shares”) shall be determined by multiplying (X) Seven Million
Dollars ($7,000,000) by (Y) the Drake Family Trust’s Sharing Percentage and dividing the
result by (Z) the lesser of (1) the Average Price as of the Closing and (2) the Closing
Price (calculated to be [$7,000,000 x .60]/$9.31=451,128 Drake Family Trust Regular Holdback
Shares). The number of Regular Holdback Shares to be issued to Kahane and Goldsmith (as
applicable, the “Kahane Regular Holdback Shares” or the “Goldsmith Regular
Holdback Shares”) shall be determined by multiplying (xx) Seven Million Dollars
($7,000,000) by (yy) such Seller’s Sharing Percentage and dividing the result by (zz) the
Average Price as of the Closing (calculated to be [$7,000,000 x .25]/$9.4185=185,805 Kahane
Regular Holdback Shares; [$7,000,000 x .15]/$9.4185=111,483 Goldsmith Regular Holdback
Shares).

     2.3 3(a) and 3(b) Contingent Participation. The Sellers shall be entitled to receive
from Purchaser certain contingent participation amounts on the terms and conditions set forth in
this Section 2.3.

     (a) 3(a) Contingent Participation. Subject to Section 2.3(c), from and
after the Closing Date, with respect to each 3(a) Picture, for the longer of (i) five (5)
years from and after the Closing Date, and (ii) a period of five (5) years from and after
the Initial Theatrical Release Date of the applicable 3(a) Picture (as applicable, the
“3(a) Contingent Payment Period”), Purchaser shall pay the Sellers (in accordance
with each Seller’s respective Sharing Percentage) an aggregate amount equal [REDACTED] of
the 3(a) Amounts derived from the exploitation of 3(a) Pictures (i.e. on a
cross-collateralized basis) during the 3(a) Contingent Payment Period (the “3(a)
Contingent Participation”); provided, however, 3(a) Contingent
Participation payable by Purchaser to the Sellers shall not exceed [REDACTED] in the
aggregate. Purchaser shall pay any 3(a) Contingent Participation to the Sellers within ten
(10) Business Days after the closing of Purchaser’s books with respect to the fiscal quarter
in which it is determined that the Contingent Participation Hurdle has been reached, and
thereafter, on a quarterly basis, within ten (10) Business Days after the closing of
Purchaser’s books with respect to each fiscal quarter.

     (b) 3(b) Contingent Participation. Subject to Section 2.3(c), from and
after the Closing Date, with respect to each 3(b) Picture for which principal photography
commences within five (5) years after the Closing Date, for a period of ten (10) years from
and after the Initial Theatrical Release Date of the applicable 3(b) Picture (as applicable,
the “3(b) Contingent Payment Period”), Purchaser shall pay the Sellers (in
accordance with each Seller’s respective Sharing Percentage) an aggregate amount equal to
[REDACTED] of the 3(b) Amounts, on a 3(b) Picture Group by 3(b) Picture Group basis, derived
from the exploitation of the 3(b) Pictures in each 3(b) Picture Group during the 3(b)
Contingent Payment Period (the “3(b) Contingent Participation”). Purchaser shall
pay any 3(b) Contingent Participation to the Sellers within ten (10) Business Days after the
closing of Purchaser’s books with respect to the fiscal quarter in which it is

23

 

determined that the Contingent Participation Hurdle has been reached, and thereafter,
on a quarterly basis, within ten (10) Business Days after the closing of Purchaser’s books
with respect to each fiscal quarter.

     (c) Contingent Participation Hurdle. Notwithstanding anything to the contrary
contained herein, the Sellers shall not be entitled to receive, and Purchaser shall have no
obligation to pay, any 3(a) and 3(b) Contingent Participation unless and until such time as
the aggregate amount of any 3(a) and 3(b) Contingent Participation and Derivative Works
Contingent Participation earned by the Sellers exceeds the sum of (i) the Base
Consideration, (ii) the Cost of Funds and (iii) the one-time cost of the D&O and EPLI
insurance tail coverage paid by Purchaser pursuant to Section 5.8 (the
“Contingent Participation Hurdle”), and in such event the aggregate amount of any
3(a) and 3(b) Contingent Participation payable to the Sellers shall be net of the Contingent
Participation Hurdle amount. For clarification, as an example, if the aggregate amount of
3(a) and 3(b) Contingent Participation is [REDACTED], and assuming for purposes of this
example there is no Cost of Funds or any Derivative Works Contingent Participation payable
to the Sellers, then the aggregate amount payable to the Sellers as 3(a) and 3(b) Contingent
Participation shall be [REDACTED]. So long as the Sellers are entitled to earn amounts under
Section 2.3 or Section 2.4, Purchaser shall report to the Sellers, on a
quarterly basis, within ten (10) Business Days after the closing of Purchaser’s books with
respect to each fiscal quarter, the amount of 3(a) and 3(b) Contingent Participation and
Derivative Works Contingent Participation earned during such quarter, with reasonable
supporting documentation.

     (d) Monetization at Sellers’ Request. The Sellers (as a group and not
individually, as exercised by the Mandate Representative on their behalf) may, with respect
to one or more 3(a) Picture(s), demand during the six (6) month period after the end of the
3(a) Contingent Payment Period applicable to such 3(a) Pictures(s) that Purchaser enter into
one (1) or more monetization transactions (i.e., a transaction where the present value of
the Sellers’ share of projected future income stream represented by such contingent
compensation with respect to such 3(a) Picture(s) is monetized, whether by loan, sale,
factoring or otherwise) allowing the Sellers to receive the net present value of any 3(a)
Contingent Participation that may be payable to the Sellers with respect to such 3(a)
Pictures) during the five (5) year period immediately following the end of the 3(a)
Contingent Payment Period as if the 3(a) Contingent Period was extended for an additional
five (5) years. All valuation of receivables and all net present value calculations for any
such monetization transaction shall be subject to Purchaser’s review and prior approval,
which approval shall not be unreasonably withheld or delayed. Notwithstanding anything to
the contrary, any such monetization transactions undertaken at the request of the Sellers
shall not cover any portion of Purchaser’s receipts without Purchaser’s written consent and
all costs, fees and expenses related to or arising from such monetization transactions
(including, without limitation, all costs, fees and legal expenses of Purchaser and/or
Mandate and its Subsidiaries and Affiliates) shall be borne solely and directly by the
Sellers and not paid from the monetization proceeds.

     2.4 Derivative Works. Subject to Section 2.4(d) below:

24

 

     (a) Producer Fees. From and after the date on which the Contingent
Participation Hurdle has been reached after the Closing Date, with respect to each
Derivative Work produced by Purchaser, Purchaser shall pay the Sellers (in accordance with
each Seller’s respective Sharing Percentage) the following amounts:

     (i) a producer fee, payable in cash, equal to [REDACTED] of the Budget
(excluding financing costs, contingency, third party completion guarantee costs, and
other customary exclusions) for such Derivative Work (the “Fixed Producer
Fee”); provided, that, for any Derivative Work that is a direct-to-video
production, the minimum Fixed Producer Fee shall be [REDACTED]; and

     (ii) a contingent producer fee, payable in cash (the “Contingent Producer
Fee”), equal to the greater of:

	 	(A)	 	[REDACTED] of the Gross Receipts
derived from such Derivative Work after True-Cash Breakeven
(the “[REDACTED]  DW Gross Receipts Amount”) against the
Fixed Producer Fee; and
	 
	 	(B)	 	[REDACTED] of the Net Profits for
such Derivative Picture as if such Derivative Picture were
treated as a 3(b) Picture and after giving effect to crossing
with other 3(b) Pictures.

For purposes of this Agreement, “True-Cash Breakeven” means the point at which the
Gross Receipts equals the actual out-of-pocket Third Party costs and expenses incurred by
Purchaser or its Affiliates (provided that, with respect to such Third Party costs
and expenses incurred by any Affiliate that is not, directly or indirectly, a wholly-owned
Subsidiary of Purchaser, the calculation of “True-Cash Breakeven” shall include only the
amount thereof allocable to Purchaser or its wholly-owned Subsidiaries), net of all
discounts, rebates, allowances and insurance recoveries, taking into account all Soft Money
Benefits, and without any overhead, supervisory fees or distribution fees. For the purpose
of calculating True-Cash Breakeven for this Agreement, one hundred percent (100%) of revenue
and one hundred percent of (100%) of expenses from exploitation of Home Video Rights to the
applicable Derivative Work shall be included on a rolling basis; provided,
however, that for the purposes of calculating the [REDACTED] DW Gross Receipts
Amount, revenue from exploitation of Home Video Rights to such Derivative Work shall be
included assuming a [REDACTED] royalty rate, and no distribution fees or expenses associated
with exploitation of Home Video Rights shall be deducted.

For purposes of clarification, Home Video Rights for all purposes of the calculation of
expenses for True-Cash Breakeven, the [REDACTED] DW Gross Receipts Amount and the [REDACTED]
Retained Rights Receipts Amount in this Section 2.4 shall be subject to a
reasonable reserve for video returns not to exceed [REDACTED], and in any event, liquidated
within twelve (12) months, if Purchaser is the distributor of such Derivative Work.

25

 

     (b) Third Party Disposition. From and after the Closing Date:

     (i) For all Derivative Works which are produced under arms-length arrangements
containing reasonable and customary industry terms with a Third Party pursuant to
which such Third Party acquires all rights (a “Third Party Disposition”)
(other than transfers for the accommodation of purely financial financing structures
such as the Goldman Sachs slate financing deal, sale leaseback transactions,
negative pickup financings, and German Tax funds which will be treated as
productions subject to the provisions of Section 2.4(a) above in all
respects) and such Third Party provides for (or arranges) production financing and
pays Purchaser (and Purchaser actually receives) as consideration either guaranteed
or contingent amounts or both (such amounts, “Rights Consideration”),
Purchaser shall remit to the Sellers (in accordance with each Seller’s respective
Sharing Percentage) an aggregate amount equal to [REDACTED] of all such Rights
Consideration (it being understood that the aggregate Rights Consideration before
calculation of the Sellers’ [REDACTED] share shall be net of any actual direct Third
Party costs incurred by Purchaser in the development of and not otherwise reimbursed
with respect to the applicable Derivative Work, if any).

     (ii) For all such Derivative Works, Purchaser shall require the Third Party to
include in the Budget for the applicable Derivative Work the Fixed Producer Fee, and
Purchaser shall remit to the Sellers (in accordance with each Seller’s respective
Sharing Percentage) an aggregate amount equal to [REDACTED] of all such Fixed
Producer Fees actually received by Purchaser and [REDACTED] of all other amounts
received by Purchaser (it being understood that the aggregate amount before
calculation of the Sellers’ [REDACTED] share shall be net of any actual direct
Third Party costs incurred by Purchaser in the development of and not otherwise
reimbursed with respect to the applicable Derivative Work, if any).

     (iii) For any Derivative Work produced under an arrangement with a Third Party
for which Purchaser retains rights in some but not all territories (“Retained
Distribution Rights”), then with respect to Gross Receipts received by Purchaser
from direct distribution of such Retained Distribution Rights, Purchaser shall pay
to the Sellers (in accordance with each Seller’s respective Sharing Percentage) an
aggregate amount equal to the greater of:

	 	(A)	 	[REDACTED] of Purchaser’s Gross
Receipts from the Retained Distribution Rights after True-Cash
Breakeven (taking into account only Purchaser’s costs and
expenses relating to the Retained Distribution Rights calculated
on a rolling basis and without a distribution fee) (“[REDACTED]
Retained Rights Receipts Amount”), after recouping the
Sellers’ [REDACTED] share of the Fixed Producer Fee (by way of
example, if the Fixed Producer Fee is [REDACTED] and the
[REDACTED] Retained

26

 

	 	 	 	Rights Receipts Amount is [REDACTED], then the Sellers would
be entitled to [REDACTED] of the Fixed Producer Fee or
[REDACTED] plus an additional [REDACTED] of the [REDACTED]
Retained Rights Receipts Amount for a total of [REDACTED]);
and
	 
	 	(B)	 	[REDACTED] of the Net Profits
derived from exploitation of such Retained Distribution Rights
after giving effect to the crossing with other 3(b) Pictures;

For the purposes of calculating the [REDACTED] Retained Rights Receipts Amount for this
Section 2.4(b), (x) one hundred percent (100%) of all receipts from exploitation of
the Retained Distribution Rights (other than exploitation of Home Video Rights) to such
Derivative Work shall be included, (y) receipts from the exploitation of Home Video Rights
to such Derivative Work shall be included assuming a [REDACTED] royalty rate, and (z) all
out-of-pocket costs incurred with respect to such Retained Distribution Rights (other than
costs and expenses incurred for Home Video Rights) on a rolling basis shall be included.

In the event that Purchaser licenses the Retained Distribution Rights to a Third Party for
distribution in a territory, then Purchaser’s Gross Receipts shall be calculated at the
level of Purchaser’s revenue (i.e., the revenue actually received by Purchaser, not by the
licensee). Notwithstanding anything contained in this Section 2.4(b)(iii), in no
event shall the Sellers be entitled to share in revenue from Retained Distribution Rights
from a Derivative Work in an amount greater than Purchaser’s actual profit from such
Retained Distribution Right (i.e., after True-Cash Breakeven) after giving effect to the
share payable to the Sellers under this Agreement; provided, that the foregoing
limitation shall not apply to the Sellers’ right to earn and be paid the Rights
Consideration and Fixed Producer Fee (which shall be treated in accordance with this
Section 2.4).

     (c) Studio Co-Financing Transactions. From and after the Closing Date, for all
Derivative Works co-financed with a Co-Financier under an arrangement similar to a so-called
“studio-to-studio shared pot arrangement” (as such arrangements are customarily understood
in the motion picture industry in Los Angeles, California as of the Closing Date)
(“Studio Shared Pot Co-Financing”), Purchaser shall pay to the Sellers (in
accordance with each Seller’s respective Sharing Percentage) an aggregate amount
(“Studio Co-Financing Amount”) equal to the sum of:

     (i) [REDACTED] of the Fixed Producer Fee (such [REDACTED] amount, the
“Studio Co-Financing Producer Fee”), net of any actual direct Third Party
costs incurred by Purchaser in the development of and not otherwise reimbursed with
respect to the applicable Derivative Work; and

     (ii) an amount equal to the greater of:

	 	(A)	 	  [REDACTED] of Purchaser’s Gross
Receipts (after taking into account all true-up payments between
the studios) from the applicable Derivative Work after
Purchaser’s

27

 

	 	 	 	True-Cash Breakeven with all expenses calculated on a rolling
basis (after taking into account all true-up payments between
the Co-Financiers), with no distribution fee deducted against
the Sellers’ Studio Co-Financing Producer Fee; or
	 
	 	(B)	 	[REDACTED] of Net Profits with
respect to such Derivative Work derived from the exploitation of
such Derivative Work after giving effect to crossing with other
3(b) Pictures.

Notwithstanding anything to the contrary contained in this Section 2.4(c),
in no event shall the Sellers be entitled to share in revenue from a Derivative
Work in an amount greater than Purchaser’s actual profit from such Derivative Work
after True-Cash Breakeven after giving effect to the share payable to the Sellers
under this Section 2.4(c); provided, that, the foregoing
shall not apply to the Sellers’ right to earn and be paid the Rights Consideration
or the Fixed Producer Fee (which shall be treated in accordance with this
Section 2.4).

     (d) All Derivative Works Contingent Participation shall be applied against the
Contingent Participation Hurdle for purposes of determining whether the Contingent
Participation Hurdle is reached; provided, that 3(a) and 3(b) Contingent Participation shall
only be payable by Purchaser to the Sellers to the extent in excess of the Contingent
Participation Hurdle (i.e., it will not be payable back to Dollar one).

     (e) For all Derivative Works that are produced under an arrangement other than those
described in Sections 2.4(a), 2.4(b) or 2.4(c) above, then Purchaser
and the Sellers shall negotiate in good faith for the Sellers to receive a share (allocated
among them in accordance with each Seller’s respective Sharing Percentage) in the revenue
derived from the distribution of such Derivative Work, giving effect to and within the same
basic parameters set forth in Sections 2.4(a), 2.4(b) or 2.4(c)
above.

     (f) For purposes of clarity, Section 2.4 shall also apply, mutatis mutandis,
with respect to Derivative Works produced by an Affiliate of LGE other than Purchaser. For
purposes of further clarity, the obligations set forth in Section 2.3 and this
Section 2.4 will survive any merger, consolidation, or other sale of Purchaser, LGE,
or Mandate after the Closing.

     2.5 The Closing. The closing of the transactions contemplated by this Agreement (the
“Closing”) will take place at the offices of Liner Yankelevitz Sunshine & Regenstreif LLP
at 1100 Glendon Avenue, 14th Floor, Los Angeles, California, commencing at 9:00 a.m., local time,
on the date hereof (the “Closing Date”).

     2.6 Deliveries at the Closing. At the Closing:

     (a) Sellers’ Deliveries. The Sellers will deliver, or cause Mandate to
deliver, to Purchaser:

28

 

     (i) assignment of membership interests (the “Instruments of
Assignment”), in substantially the form of Exhibit E attached hereto,
the Additional Agreement, the Indemnification Agreement, the Employment Agreements,
the Registration Rights Agreement, the Ghost House Mobile Assignment, and the
applicable Spousal Consents, in each case duly executed by all of the parties named
thereto (other than LGE, Purchaser and LGF);

     (ii) an officer’s certificate substantially in the form of Exhibit F-1
attached hereto, duly executed on Mandate’s behalf by its Chief Operating Officer,
(A) attesting to the incumbency of the officers executing this Agreement on its
behalf and the authenticity of the resolutions, consent or other approval (if any)
by its manager authorizing the transactions contemplated by this Agreement and the
other Transaction Documents to which it is a party and (B) attaching as exhibits
thereto copies of Mandate’s Constitutive Documents and a list of officers currently
in place for Mandate and each of its Subsidiaries (the “Mandate COO’s
Certificate”);

     (iii) certificates of good standing (including tax good standing) as to Mandate
and each of its Subsidiaries from their respective jurisdictions of formation and
each foreign jurisdiction in which they are registered to transact business (unless
“good standing” or “tax good standing” is not a concept that is recognized in the
applicable jurisdiction);

     (iv) all Records (including all minute books, stock/equity ownership ledgers,
corporate seals (or the equivalent for other business entities) of Mandate and its
Subsidiaries; provided, that such Records shall be deemed delivered if they
are at Mandate’s principal executive office at the Closing;

     (v) a signed opinion dated the Closing Date, in substantially the form of
Exhibit G-1 attached hereto, from O’Melveny & Myers, LLP, outside counsel to
Mandate;

     (vi) a signed opinion dated the Closing Date, in substantially the form of
Exhibit G-2 attached hereto, from Katten Muchin Rosenman LLP, counsel to the
Drake Family Trust;

     (vii) a receipt for each Seller’s respective portion of the Base Consideration
received on the Closing Date;

     (viii) the most recently received bank statements reflecting current balances
for each bank account of Mandate and its Subsidiaries; and

     (ix) lender statements reflecting current outstanding balances as of two (2)
Business Days prior to the Closing for all indebtedness for borrowed money of
Mandate and its Subsidiaries.

        (b) Purchaser and LGE Deliveries to Sellers.

29

 

     (i) Purchaser will deliver to each Seller (in accordance with each Seller’s
respective Sharing Percentage) the Closing Consideration in cash, by wire transfer
in immediately available funds to such Seller’s Seller Account;

     (ii) Purchaser will deliver to each Seller (A) a signed opinion dated the
Closing Date, in substantially the form of Exhibit G-3 attached hereto, from
Liner Yankelevitz Sunshine & Regenstreif LLP, outside U.S. deal counsel to Purchaser
and LGE, (B) a signed opinion dated the Closing Date, in substantially the form of
Exhibit G-4 attached hereto, from O’Melveny & Myers LLP, outside U.S.
counsel to Purchaser and LGE, and (C) a signed opinion dated the Closing Date, in
substantially the form of Exhibit G-5 attached hereto, from Heenan Blaikie
LLP, outside Canadian counsel to Purchaser and LGE;

     (iii) Purchaser or LGE, as applicable, will deliver to the Mandate
Representative on behalf of Sellers:

	 	(A)	 	a secretary’s certificate
substantially in the form of Exhibit F-2 attached
hereto, duly executed on Purchaser’s behalf by its secretary,
attesting to the incumbency of the officers executing this
Agreement on its behalf and the authenticity of the resolutions
of its board of directors authorizing the transactions
contemplated by this Agreement and the other Transaction
Documents to which it is a party and attaching as an exhibit
thereto copies of Purchaser’s Constitutive Documents (the
“Purchaser Secretary’s Certificate”).
	 
	 	(B)	 	a secretary’s certificate
substantially in the form of Exhibit F-3 attached
hereto, duly executed on LGE’s behalf by its secretary,
attesting to the incumbency of the officers executing this
Agreement on its behalf and the authenticity of the resolutions
of its board of directors authorizing the transactions
contemplated by this Agreement and the other Transaction
Documents to which it is a party and attaching as an exhibit
thereto copies of LGE’s Constitutive Documents (the “LGE’s
Secretary’s Certificate”).
	 
	 	(C)	 	the Additional Agreement, the
Indemnification Agreement, and the Employment Agreements, in
each case duly executed by LGE, LGF and/or Purchaser, as
applicable.

     2.7 [Intentionally omitted] 

     2.8 Disbursement of Holdback Consideration.

     (a) Within two (2) Business Days following the six (6) month anniversary of the Closing
Date, LGE shall issue and deliver four-sevenths of each of the Kahane Regular Holdback
Shares (calculated to be 106,174 Kahane Regular Holdback Shares)

30

 

and the Goldsmith Regular Holdback Shares (calculated to be 63,705 Goldsmith Regular
Holdback Shares) (as adjusted for stock splits and similar transactions) to Kahane and
Goldsmith, respectively, subject to reduction (if any) as a result of offset pursuant to
Section 8.4(b).

     (b) Within two (2) Business Days following the one (1) year anniversary of the Closing
Date, LGE shall issue and deliver three-sevenths of each of the Kahane Regular Holdback
Shares (calculated to be 79,631 Kahane Regular Holdback Shares) and the Goldsmith Regular
Holdback Shares (calculated to be 47,778 Goldsmith Regular Holdback Shares), and one-fifth
of each of the Kahane Indemnity Holdback Shares (calculated to be 26,544 Kahane Indemnity
Holdback Shares) and the Goldsmith Indemnity Holdback Shares (calculated to be 15,926
Goldsmith Indemnity Holdback Shares) (as adjusted for stock splits and similar transactions)
to Kahane and Goldsmith, respectively, subject in each case to reduction (if any) as a
result of offset pursuant to Section 8.4(b) and subject to Section 8.4(d).

     (c) Within two (2) Business Days following the eighteen (18) month anniversary of the
Closing Date, LGE shall issue and deliver the remaining four-fifths of the Kahane Indemnity
Holdback Shares (calculated to be 106,174 Kahane Indemnity Holdback Shares) and the
Goldsmith Indemnity Holdback Shares (calculated to be 63,705 Goldsmith Indemnity Holdback
Shares) (as adjusted for stock splits and similar transactions) to Kahane and Goldsmith,
respectively, and all of the Drake Family Trust Indemnity Holdback Shares (calculated to be
322,234 Drake Family Trust Indemnity Holdback Shares) and all of the Drake Family Trust
Regular Holdback Shares (calculated to be 451,128 Drake Family Trust Regular Holdback
Shares) (as adjusted for stock splits and similar transactions) to the Drake Family Trust,
subject in each case to reduction (if any) as a result of offset pursuant to Section
8.4(b) and subject to Section 8.4(d).

     2.9 S-3 Registration Statement Supplement. On or prior to the Closing Date, LGE shall
file with the Securities and Exchange Commission (the “SEC”) a supplement to its “shelf”
registration statement on Form S-3 pursuant to the Registration Rights Agreement, which supplement
shall be effective at the Closing and remain effective (or shall be replaced by another
registration statement that is and remains effective) through and until at least the two (2)-year
anniversary of the date that the last Holdback Share is delivered pursuant to Section 2.8, to
register for resale the LGE Common Stock issued to the Sellers as Base Consideration (the “S-3
Registration Statement Supplement”); provided, that, as a condition to the filing of
such S-3 Registration Statement Supplement, each Seller shall provide Purchaser with completed
security holder questionnaires with responses subject to Purchaser’s reasonable approval and have
entered into the Registration Rights Agreement.

     2.10 Mandate Representative.

     (a) Each Seller agrees that J. Drake is hereby constituted and appointed as agent and
attorney-in-fact (“Mandate Representative”) with full power and right of
substitution so long as J. Drake gives written notice thereof to Purchaser and each Seller,
for and on behalf of each Seller, with the sole and exclusive right and power on behalf of
each of them to execute and deliver any and all certificates or other documents required

31

 

to be executed and delivered by any Seller hereunder, to give and receive notices and
communications hereunder, to make claims against Purchaser hereunder, to authorize delivery
to the Purchaser Indemnified Parties of the Indemnity Holdback Shares or other Holdback
Consideration in satisfaction of indemnification claims by the Purchaser Indemnified Parties
as contemplated by Section 8.4, to object to such deliveries, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and comply with
orders of courts and awards of arbitrators with respect to such claims, to make amendments
and grant waivers hereunder, and to take all actions necessary or appropriate in the
judgment of the Mandate Representative for the accomplishment of the foregoing;
provided, that any amendment, settlement, compromise, or waiver that expressly
treats one Seller in a disproportionately adverse manner from another Seller shall require
the prior written consent of such adversely affected Seller. No bond shall be required of
the Mandate Representative, and the Mandate Representative shall receive no compensation for
services rendered. Notices or communications to or from the Mandate Representative shall
constitute notice to or from Mandate and the Sellers, as applicable. In the event of the
death or incapacity of J. Drake, Goldsmith shall serve as the Mandate Representative.

     (b) A decision, act, consent or instruction of the Mandate Representative shall
constitute a decision of Mandate and all of the Sellers and shall be final, binding and
conclusive upon each of such Parties, and Purchaser may rely upon any written decision, act,
consent or instruction of the Mandate Representative as being the decision, act, consent or
instruction of each of such Parties. Purchaser is hereby relieved from any Liability to any
person for any acts done by it in accordance with such decision, act, consent or instruction
of the Mandate Representative.

     (c) The Mandate Representative shall, at the expense of the Sellers, be entitled to
engage such counsel, experts and other agents and consultants as the Mandate Representative
shall deem necessary in connection with exercising his or her powers and performing his or
her function hereunder and (in the absence of bad faith on the part of the Mandate
Representative) shall be entitled to conclusively rely on the opinions and advice of such
Persons. The Mandate Representative shall have no liability to any of the Sellers for any
actions taken by him in good faith in his capacity as the Mandate Representative. The
Sellers will severally indemnify the Mandate Representative and hold the Mandate
Representative harmless against any loss, liability or expense incurred without negligence
or bad faith on the part of the Mandate Representative and arising out of or in connection
with the acceptance or administration of the Mandate Representative’s duties hereunder,
including each Seller’s respective share of the reasonable fees and expenses of any legal
counsel retained by the Mandate Representative.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES CONCERNING MANDATE

     Subject to the exceptions and disclosures set forth in writing in the disclosure letter
delivered by Mandate to Purchaser on the date hereof (the “Mandate Disclosure Letter”), and
other than with respect to Ghost House Mobile, Mandate represents and warrants to Purchaser as

32

 

follows. All references to Mandate and its Subsidiaries and their respective assets, rights,
properties, obligations, liabilities and businesses in these representations and warranties shall
not include Ghost House Mobile or any of its assets, rights, properties, obligations, liabilities
or businesses.

     3.1 Organization. Each of Mandate and its Subsidiaries is (a) duly organized, validly
existing and in good standing (unless “good standing” is not a concept that is recognized in the
applicable jurisdiction) under the Laws of its jurisdiction of organization and has the requisite
power to own or lease and operate its properties and to carry on its business as it is now being
conducted; (b) not in violation of its Constitutive Documents; and (c) duly qualified or otherwise
authorized to do business in each jurisdiction in which the nature of its business or the ownership
or leasing of its properties makes such qualification necessary, except where the failure to be so
qualified would not have a Mandate Material Adverse Effect (a list of the jurisdictions in which
Mandate and its Subsidiaries are so qualified is set forth in Section 3.1 of the Mandate
Disclosure Letter). True, accurate and complete copies of the currently effective Constitutive
Documents, each as amended to date, of Mandate and each of its Subsidiaries have been provided or
made available in the Online Data Room to Purchaser prior to the date hereof, and each of such
Constitutive Documents is in full force and effect. There is no pending or, to the Knowledge of
Mandate, threatened Action against Mandate or any of its Subsidiaries for the dissolution,
liquidation or insolvency of Mandate or any of its Subsidiaries. Except as disclosed in
Section 3.1 of the Mandate Disclosure Letter, neither Mandate nor any of its Subsidiaries
has done business and neither Mandate nor any of its Subsidiaries is currently doing business other
than under its current name, including, without limitation, under any trade name or other “doing
business as” name.

     3.2 Status, Power and Enforceability. Mandate has all requisite power and authority
to execute and deliver this Agreement and, if specified to be a party thereto, the other
Transaction Documents, and to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. All acts and other proceedings required to be
taken by Mandate to authorize the execution, delivery and performance of this Agreement and, if
specified to be a party thereto, the other Transaction Documents, and the consummation of the
transactions contemplated hereby and thereby have been duly and properly taken. This Agreement has
been duly authorized, executed and delivered by Mandate and constitutes an Enforceable obligation
of Mandate. At or prior to the Closing, Mandate shall have duly executed and delivered the other
Transaction Documents, if specified to be a party thereto, and such other Transaction Documents
shall constitute Enforceable obligations of Mandate in accordance with their terms.

     3.3 Capitalization.

     (a) The Mandate Membership Interests constitute the only issued and outstanding Equity
Interests of Mandate.

     (b) Except as set forth in Section 3.1 of the Mandate Disclosure Letter,
Mandate owns, directly or indirectly, all of the Equity Interests of each of its
Subsidiaries. Section 3.1 of the Mandate Disclosure Letter sets forth with respect
to each such Subsidiary: (i) its name, entity type and jurisdiction of organization, (ii)
its entire

33

 

authorized Equity Interests and (iii) its issued and outstanding Equity Interests.

     (c) All of the issued and outstanding Equity Interests of Mandate and its Subsidiaries
have been duly authorized, validly issued, are fully paid and nonassessable, have not been
issued in violation of any Contract or preemptive or similar rights, the Securities Act or
other applicable Law. Except as set forth in Sections 3.1 and 3.3(c) of the
Mandate Disclosure Letter, there are no outstanding warrants, options, rights, “phantom”
stock rights, agreements, convertible or exchangeable securities or other Commitments or
obligations (contingent or otherwise) (other than this Agreement) pursuant to which Mandate
or any of its Subsidiaries is or may become obligated to issue, sell, purchase, return or
redeem any Equity Interests or that give any Person the right to receive any similar equity
or ownership interests. There are no Equity Interests of Mandate or any of its Subsidiaries
reserved for issuance for any purpose. There are no outstanding bonds, debentures, notes or
other indebtedness having the right to vote on any matters on which holders of Equity
Interests of Mandate or any of its Subsidiaries may vote.

     (d) Except as set forth in Section 3.3(d) of the Mandate Disclosure Letter,
none of Mandate or its Subsidiaries directly or indirectly owns any Equity Interests in, or
any interest convertible or exchangeable or exercisable for any Equity Interest in, any
other Person, and there are no obligations, contingent or otherwise, of Mandate or any of
its Subsidiaries to provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in or to any other Person.

     3.4 Financial Statements; Accounts Receivable; Distributions and Payments.

     (a) Section 3.4(a) of the Mandate Disclosure Letter sets forth complete and
accurate copies of (i) (x) the audited consolidated balance sheets of Mandate and its
Subsidiaries as of December 31, 2005 and December 31, 2006, and (y) the audited consolidated
statements of operations, members’ capital and cash flows of Mandate and its Subsidiaries
for the twelve (12)-month periods ended December 31, 2005 and December 31, 2006
(collectively, the “Audited Financial Statements”), and (ii) (x) the unaudited
consolidated balance sheets of Mandate and its Subsidiaries as of March 31, 2007 and (y) the
unaudited consolidated statements of operations and cash flows of Mandate and its
Subsidiaries for the three (3) month period ended March 31, 2007 (collectively, the
“Unaudited Financial Statements”). The Audited Financial Statements and the
Unaudited Financial Statements, including the notes thereto, are sometimes collectively
referred to herein as the “Financial Statements.” The Financial Statements have
been prepared from the books and records of Mandate and its Subsidiaries in accordance with
GAAP. The Audited Financial Statements present fairly in all material respects the
consolidated financial position of Mandate and its Subsidiaries as of their respective dates
and the results of their operations, members’ capital and cash flows of Mandate and its
Subsidiaries for the periods covered thereby. The Unaudited Financial Statements (i) are
reconcilable to the books and records of Mandate and its Subsidiaries and (ii) present
fairly in all material respects in accordance with GAAP the consolidated financial position
of Mandate and its Subsidiaries as of their respective dates and the results of their
operations and cash flows of Mandate and its Subsidiaries for the periods

34

 

covered thereby, except for the absence of notes and normal year-end adjustments
consistent with year-end adjustments made in connection with the Audited Financial
Statements. The books of account and other financial records of Mandate and its
Subsidiaries have been maintained in accordance with reasonable business practices. Except
as set forth in the Financial Statements, since December 31, 2006, there has been no
material change in any accounting policies, principles, methods or practices, including any
change with respect to reserves or allowances (whether for bad debts, impairment, contingent
Liabilities or otherwise), of Mandate or its Subsidiaries.

     (b) Except as set forth in Section 3.4(b) of the Mandate Disclosure Letter, all
of the Accounts Receivable reflected on the Unaudited Financial Statements and all material
Accounts Receivable arising between the date of the Unaudited Financial Statements and the
date hereof (other than, in each case, those that have been collected before the date
hereof), (i) are legal, valid, binding and Enforceable obligations of the respective
debtors, (ii) arose in the Ordinary Course of Business, and (iii) are not subject to any
triggered right of set-off or counterclaim relating to the period prior to Closing and no
such set-off or counterclaim has been asserted in writing against Mandate or any of its
Subsidiaries by the respective obligor. Except as set forth in Section 3.4(b) of
the Mandate Disclosure Letter, no such Accounts Receivable are pledged or assigned to any
Person, except in connection with Permitted Liens.

     (c) Section 3.4(c) of the Mandate Disclosure Letter sets forth all
distributions and other payments made by Mandate or any of its Subsidiaries since January 1,
2007 to its respective partners, members or stockholders (other than inter-company transfers
and distributions, in each case, by a wholly-owned Subsidiary of Mandate to its parent) with
respect to their Equity Interests, and since January 1, 2007 there have been no other
payments by Mandate or any of its Subsidiaries to, on behalf of or for the benefit of such
Persons other than as set forth on Section 3.4(c) of the Mandate Disclosure Letter
and other than: (i) reimbursements of bona fide business expenses, (ii) cash advances not to
exceed [REDACTED] in advances per individual, (iii) payments pursuant to bona fide health or
other benefit arrangements, (iv) compensation (which compensation is pursuant to an
employment agreement to the extent one exists), and (v) budgeted producer fees for any
member, partner or shareholder (other than the Sellers) of New GHP, LLC, B and G Derivative
Holdings, LLC and Ghost House Pictures Holdings, LLC, and their respective Subsidiaries.

     (d) Section 3.4(d) of the Mandate Disclosure Letter sets forth each cash or
in-kind payment to a third party that was in excess of $125,000 made after March 31, 2007 in
satisfaction of Liabilities of Mandate and its Subsidiaries that arose after March 31, 2007
and prior to Closing, except for (i) any such Liabilities that arose in the Ordinary Course
of Business, (ii) payments with respect to productions included in the bonded budget for a
Motion Picture or with respect to development projects, (iii) payments to consolidated
Subsidiaries, and (iv) distributions to members, partners or shareholders.

     3.5 Absence of Changes. Other than as set forth on Section 3.5 of the Mandate
Disclosure Letter, between January 1, 2007 or such other date indicated below (the “Reference
Date”) and the date of this Agreement:

35

 

     (a) Mandate and its Subsidiaries have operated in the Ordinary Course of Business;

     (b) there has not been a Mandate Material Adverse Effect;

     (c) there has not been any damage, destruction, impairment or loss (whether or not
covered by insurance) to any material assets of Mandate or any of its Subsidiaries, taken as
a whole; and

     (d) none of Mandate or any of its Subsidiaries has taken any of the following actions:

     (i) (A) granted any increase in the compensation or fringe benefits of any
present or former director, officer or employee of Mandate or its Subsidiaries,
other than in the Ordinary Course of Business, (B) paid any severance or termination
pay to any present or former director, officer or employee of Mandate or its
Subsidiaries, except as set forth in Section 3.5 of the Mandate Disclosure
Letter or (C) issued any Membership Interests;

     (ii) canceled any Indebtedness or waived any claims or rights, other than in
the Ordinary Course of Business;

     (iii) made or incurred any capital expenditure, other than in the Ordinary
Course of Business;

     (iv) sold, leased or otherwise disposed of any of its assets, other than in the
Ordinary Course of Business;

     (v) made any loan, advance, or assignment of payment to any Person (other than
to direct or indirect Subsidiaries of Mandate), other than in the Ordinary Course of
Business;

     (vi) made any capital contribution to or investment in any Person (other than
to direct or indirect wholly-owned Subsidiaries of Mandate);

     (vii) created or incurred any Adverse Claim (other than Permitted Liens) on any
of the material assets or material properties (whether tangible or intangible) of
Mandate or any of its Subsidiaries, other than in the Ordinary Course of Business;

     (viii) merged with, entered into a consolidation with or acquired an interest
in any Person or acquired by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business or any
corporation, partnership, association, limited liability company, trust or other
business organization or division thereof;

     (ix) changed the overall manner in which it collects its Accounts Receivable or
pays its accounts payable; or

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     (x) agreed, whether in writing or otherwise, to do any of the foregoing, except
as expressly contemplated by this Agreement.

     3.6 No Unpaid Participations. Except as set forth on Section 3.6 of the
Mandate Disclosure Letter, Mandate and its Subsidiaries have fully and timely paid, or caused to be
paid, all participations and residuals due and payable by or on behalf of Mandate and its
Subsidiaries pursuant to the terms of the applicable underlying contracts or agreements creating
the obligation to pay such participations or residuals on or prior to the Closing other than
participations and residuals that have been properly accrued for in accordance with GAAP that are
reflected on the Financial Statements. No participations or residuals are subject to acceleration
in any manner whatsoever as a result or by reason of the transactions contemplated by this
agreement. Mandate and its Subsidiaries have accrued pursuant to SOP-002 for unpaid participations
and residuals.

     3.7 Legal Compliance. Except as set forth in Section 3.7(a) of the Mandate
Disclosure Letter, Mandate and its Subsidiaries are in compliance in all material respects with all
applicable Laws, and no Action is pending or, to the Knowledge of Mandate, threatened against them
alleging any failure to be in such compliance. Section 3.7(b) of the Mandate Disclosure
Letter sets forth a true and complete list of all Permits (other than Motion Picture
production-related Permits) that Mandate and its Subsidiaries hold (the “Mandate Permits”),
and such Permits are all the Permits that are required or necessary to operate their businesses as
currently conducted, except for those Permits, the failure of which to hold would not have a
Mandate Material Adverse Effect, and each material Mandate Permit is in full force and effect and
no Action is pending or, to the Knowledge of Mandate, threatened against Mandate or any of its
Subsidiaries, which would revoke or limit such Mandate Permit.

     3.8 Tax Matters. Except as set forth on Section 3.8 of the Mandate Disclosure
Letter:

     (a) Mandate and each of its Subsidiaries have duly and timely filed (or have had filed
on their behalf) all Tax Returns required to be filed by or with respect to Mandate and
each of its Subsidiaries. All such Tax Returns (i) were prepared in the manner required by
applicable Law; (ii) are true, correct and complete in all material respects; and (iii)
accurately reflect in all material respects the liability for Taxes of Mandate and each of
its Subsidiaries.

     (b) Mandate and each of its Subsidiaries have paid or caused to be paid any and all
Taxes of Mandate and its Subsidiaries that are currently due and payable other than Taxes
being contested in good faith for which adequate reserves have been established in the
Financial Statements.

     (c) Neither Mandate nor any of its Subsidiaries is the beneficiary of any extension of
time within which to file any Tax Return for periods ending prior to the Closing Date.
Neither Mandate nor any of its Subsidiaries has executed any unexpired waiver or extension
of any statute of limitations on or extending the period for the assessment or collection
of any Tax, nor has any such waiver or extension been requested from Mandate or any of its
Subsidiaries other than an extension resulting from the filing of a Tax Return after its
due date in the Ordinary Course of Business.

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     (d) Mandate and each of its Subsidiaries have complied in all material respects with
the provisions of the Code relating to the withholding and payment of Taxes including,
without limitation, the withholding and reporting requirements under Sections 1441 through
1464, 3401 through 3406, and 6041 through 6049 of the Code, as well as similar provisions
under any other applicable Laws, and have, within the time and in the manner prescribed by
Law, withheld and paid over to the proper Governmental Bodies all amounts required to be
withheld from employees, independent contractors, creditors, partners, or other third
parties.

     (e) The consolidated Audited Financial Statements and the Unaudited Financial
Statements of Mandate and each of its Subsidiaries each reflect an adequate reserve in
accordance with GAAP for the payment of all Taxes due and payable by Mandate and each of
its Subsidiaries for all periods through the date of such Financial Statements.

     (f) Since the date of the Mandate balance sheet included with the most recent
Financial Statements, neither Mandate nor any Subsidiary thereof has incurred any liability
for Taxes other than Taxes arising in the Ordinary Course of Business.

     (g) Except as set forth in Section 3.8(g) of the Mandate Disclosure Letter,
(i) to the Knowledge of Mandate, no audits, investigations or other Actions are pending or
have been or are being conducted by any Governmental Body with respect to Taxes or Tax
Returns of Mandate or its Subsidiaries, (ii) there are no, to the Knowledge of Mandate,
threatened actions, suits, proceedings, investigations, audits or claims against Mandate or
any of its Subsidiaries relating to or asserted for Taxes of Mandate or any of its
Subsidiaries, whether in writing or otherwise, and (iii) no claim has been made by a
Governmental Body in a jurisdiction where Mandate or any of its Subsidiaries does not file
Tax Returns that Mandate or any of its Subsidiaries is or may be subject to taxation by
that jurisdiction or is obliged to act as withholding agent under the Laws of that
jurisdiction.

     (h) To the Knowledge of Mandate, there are no proposed reassessments of any real
property owned by Mandate or any of its Subsidiaries or other written proposals that would
increase the amount of any Tax to which Mandate or any of its Subsidiaries could be
subject.

     (i) There are no Adverse Claims on any of the assets of Mandate or any of its
Subsidiaries that arose in connection with any failure (or alleged failure) to pay any
Taxes, except for Permitted Liens.

     (j) Neither Mandate nor any of its Subsidiaries is a party to or bound by any
agreement providing for the allocation, sharing or indemnification of Taxes other than such
agreements as were entered into in the Ordinary Course of Business and other tax allocation
provisions set forth in the Constitutive Documents of the Subsidiaries.

     (k) Neither Mandate nor any of its Subsidiaries has executed or entered into a closing
agreement pursuant to Section 7121 of the Code or any predecessor provision

38

 

thereof or any similar provision of state, local or foreign Law or any other agreement
relating to Taxes.

     (l) None of Mandate and its Subsidiaries has been a member of an affiliated group
filing a consolidated federal income Tax Return or has any liability for the Taxes of any
person under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local
or foreign law), as a transferee or successor, by contract or otherwise, except pursuant to
agreements entered into in the Ordinary Course of Business. Neither has Mandate and its
Subsidiaries been a member of an affiliated, combined, consolidated, unitary, or similar
group for state, local or foreign Tax purposes other than the group of which Mandate is the
common parent.

     (m) Mandate has been, since its formation, properly classified as a domestic
partnership for United States federal income Tax purposes and for purposes of any
corresponding provision of state and local Tax Law and has filed the requisite Tax Returns
reflecting such Tax classification. Each of Mandate’s Subsidiaries (other than
Subsidiaries organized as corporations) is and since its formation has been properly
characterized either as a domestic partnership or disregarded entity for United States
federal income Tax purposes and for any corresponding provision of state and local Tax law
and has filed the requisite Tax Returns reflecting such Tax classification. No election
has been made by Mandate or any Seller for Mandate to be excluded from the application of
any of the provisions of Subchapter K of the Code or from any similar provisions of any
state Tax laws. Neither Mandate nor any Seller or any Governmental Body has taken a
position inconsistent with such partnership tax treatment.

     (n) (i) Each Subsidiary of Mandate which is characterized as a partnership for United
States federal income Tax purposes has or will make for the taxable period that includes
the Closing Date a valid election under Section 754 of the Code and such election remains
in full force and effect, and will remain in full force and effect, through the Closing
Date, and (ii) Mandate will cause each such Subsidiary that has not made such election to
deliver a duly completed and executed election form with respect to such election to
Purchaser at Closing;

     (o) Neither Mandate nor any of its Subsidiaries has agreed or is required to include
in income any adjustments under either Section 481(a) or Section 482 of the Code (or any
analogous provision of state, local or foreign law) by reason of a change in accounting
method or otherwise.

     (p) Neither Mandate or any of its Subsidiaries is a party to any “safe harbor lease”
that is subject to the provisions of Section 168(f)(8) of the Code as in effect prior to
the Tax Reform Act of 1986 or to any “long-term contract” within the meaning of Section 460
of the Code.

     (q) None of the Sellers is a “foreign person” within the meaning of Section 1445 of
the Code. The Sellers will furnish Purchaser with affidavits that satisfy the requirements
of Section 1445(b)(2) of the Code and Treasury Regulation Section 1.1445-2.

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     (r) Mandate is not and has not been a beneficiary or otherwise participated in: (i)
any reportable transaction within the meaning of Treasury Regulation Section 1.6011-4(b);
and (ii) any transaction subject to comparable provisions of state law. In addition,
Mandate is not registered as a “tax shelter” pursuant to Section 6111 of the Code.

     3.9 Title. Neither Mandate nor any of its Subsidiaries own, beneficially or of
record, any real property. Section 3.9 of the Mandate Disclosure Letter sets forth all
leases, subleases or other agreements under which Mandate or any of its Subsidiaries use or occupy
or have the right to use or occupy, now or in the future, any real property (the “Leases”).
Each of Mandate and its Subsidiaries has good title to, or in the case of leased property and
assets have valid leasehold interests in, or a valid right to use, all tangible properties and
assets (whether real or personal) owned, leased, used or held for use by it (including, without
limitation, all tangible properties and assets reflected on the Unaudited Financial Statements), in
each case free and clear of all Adverse Claims other than Permitted Liens.

     3.10 Intellectual Property.

     (a) Registered Intellectual Property; Proceedings. Section 3.10(a) of
the Mandate Disclosure Letter sets forth as of the date hereof all (i) Mandate Registered
Intellectual Property and specifies the jurisdiction(s) in which each such item of Mandate
Registered Intellectual Property has been registered and (ii) to the Knowledge of Mandate, a
list of Actions pending before any Governmental Body (including the United States Copyright
Office (or any division thereof) or United States Patent and Trademark Office (or any
division thereof) or equivalent authority anywhere else in the world) related to any of the
Mandate Registered Intellectual Property or the name “Mandate Pictures”, including any
Action related to the termination, scope, validity, or ownership of such Mandate Registered
Intellectual Property.

     (b) No Order. No Mandate Intellectual Property is subject to any outstanding
order, injunction, or stipulation against Mandate or any of its Subsidiaries imposed by any
Governmental Body or other administrative or arbitration tribunal restricting in any manner
the use, transfer or licensing thereof by Mandate or any of its Subsidiaries, or which may
affect the validity, use or enforceability of such Mandate Intellectual Property.

     (c) Application/Registration. Except as set forth on Section 3.10(c)
of the Mandate Disclosure Letter, all necessary application, registration, maintenance and
renewal fees currently due in connection with the Mandate Registered Intellectual Property
have been made and all necessary documents, recordations and certificates in connection with
such Mandate Registered Intellectual Property have been filed with the relevant Governmental
Bodies in the United States, which applications for Mandate Registered Intellectual Property
have been filed, or registrations or renewals for the Mandate Registered Intellectual
Property have been issued, as the case may be, for the purposes of prosecuting, maintaining,
renewing or perfecting such Mandate Registered Intellectual Property.

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     (d) Title.

     (i) With respect to each Mandate Motion Picture, Mandate, its Subsidiaries
and/or Stupid Zebra, LLC own or have a license to the rights set forth in
Section 3.10(d) of the Mandate Disclosure Letter as described therein,
subject to Permitted Liens and subject to Third Party Licenses entered into in the
Ordinary Course of Business.

     (ii) With respect to all other Mandate Intellectual Property (excluding Mandate
Motion Pictures), Mandate and its Subsidiaries own and have good and valid title
(subject to, in the case of screenplays and development projects, customary
reversionary rights, turn-around rights, first negotiation rights, first refusal
rights, Guild requirements, creative approval rights and other similar arrangements
in the motion picture industry) or have a license to use each such Mandate
Intellectual Property, including, without limitation, the Mandate Registered
Trademark, free and clear of any Adverse Claims, subject to Permitted Liens and
subject to Third Party Licenses entered into in the Ordinary Course of Business.

     (iii) With respect to the Mandate Registered Trademark, Mandate’s or its
Subsidiary’s rights therein are sufficient in nature and class to permit New GHP,
LLC and Ghost House Pictures Holdings, LLC to utilize the Mandate Registered
Trademark in connection with the production and distribution of Motion Pictures and
pre-recorded videotapes featuring Motion Pictures produced or acquired by New GHP,
LLC and Ghost House Pictures Holdings, LLC in each country and/or territory of the
world in which legal protection is afforded such Mandate Registered Trademark as a
result of the registration of such Mandate Registered Trademark in the United States
Patent and Trademark Office.

     (e) No Infringement. Except as set forth in Section 3.10(e) of the
Mandate Disclosure Letter, to the Knowledge of Mandate, the conduct of the business of
Mandate and its Subsidiaries, as such business currently is conducted, does not infringe,
misappropriate or violate in any material respect the Intellectual Property of any Third
Party.

     (f) No Notice of Infringement. Except as set forth on Section 3.10(f)
of the Mandate Disclosure Letter, neither Mandate nor any of its Subsidiaries has received
written notice from any third party that the conduct of the business of Mandate and its
Subsidiaries or any act, product or service of Mandate or its Subsidiaries infringes,
misappropriates or violates the Intellectual Property of any third party (including cease
and desist letters or any requests by a third party that Mandate or any of its Subsidiaries
license such third party’s technology so as to not infringe such third party’s Intellectual
Property, or other notices of any third party patents or patent rights), other than matters
which have been resolved and for which no payment obligations remain.

     (g) No Third Party Infringement. Except as set forth in Section
3.10(g) of the Mandate Disclosure Letter, to the Knowledge of Mandate, no Person is
infringing,

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misappropriating or violating any Mandate Registered Trademark or Mandate Motion
Picture, other than film piracy that is not in the control of Mandate.

     3.11 Mandate Motion Pictures.

     (a) Claims and Actions. Except as set forth on Section 3.11(a) of the
Mandate Disclosure Letter, there has been no claim against Mandate or any of its
Subsidiaries that any Mandate Motion Picture or any portion thereof or any rights thereto,
infringes upon, violates or conflicts with any rights whatsoever of any Person. There is no
Action pending or, to the Knowledge of Mandate, threatened against Mandate or any of its
Subsidiaries with respect to any Mandate Motion Picture, the literary, dramatic or musical
material upon which any Mandate Motion Picture is based, or which is used therein, or the
physical properties thereof.

     (b) Copyright. Each Mandate Produced Picture has been duly and properly
registered (and, if appropriate, renewed) for copyright in the United States or when
completed can be so registered (and, if appropriate, renewed), and the copyright in and to
each Mandate Produced Picture is or will be valid and subsisting and no such Mandate
Produced Picture is in the public domain in the United States.

     (c) Compliance. Except as set forth on Section 3.11(c) of the Mandate
Disclosure Letter, each Mandate Produced Picture has been produced in compliance in all
material respects with any and all relevant Laws or any rules, regulations or guidelines by
any union, Guild, or labor organization, in any case applicable to the production and
completion of such Mandate Produced Picture.

     (d) No Infringement. No Mandate Produced Picture or any part thereof,
including, without limitation, its title and any literary or musical materials contained
therein or synchronized therewith, violates or infringes any trademark, trade name,
agreement, copyright, patent, literary or other property right, right of privacy, right of
publicity or “moral rights of authors” or any other rights whatsoever of any Person, or
unfairly competes with, or slanders or libels any Person.

     3.12 Contracts.

     (a) Material Contracts. Section 3.12(a) of the Mandate Disclosure
Letter lists each of the following Contracts (each a “Material Contract” and
collectively the “Material Contracts”) to which Mandate or any of its Subsidiaries
is a party or to which Mandate or any of its Subsidiaries or any of their respective assets,
rights or properties are subject and for which Mandate or any of its Subsidiaries has any
continuing rights, liabilities or obligations:

     (i) any Contract with outstanding obligations of any party with respect to the
financing, active development (i.e., excluding dormant development projects),
production, distribution, sale or other exploitation of any entertainment product or
any Intellectual Property right therein, including, without limitation, any Motion
Picture, television production or other audiovisual production, or any future rights
or obligations with respect to any such entertainment products, if

42

 

such Contract involves an outstanding obligation as of the date hereof to or of
Mandate or its Subsidiaries of more than Two Hundred Seventy-Five Thousand Dollars
($275,000):

     (ii) any Contract (or group of related Contracts) for the lease of real
property or personal tangible property to or from any Person providing for lease
payments in excess of Two Hundred Fifty Thousand Dollars ($250,000) per annum;

     (iii) any Contract creating or governing a partnership, joint venture or
similar arrangement;

     (iv) (A) any Contract (or group of related Contracts) under which it has
created, incurred, assumed or guaranteed any Liability for borrowed money or (B) any
capitalized lease, in each case, that has not been satisfied in full or under which
it has imposed or suffered to exist an Adverse Claim (other than Permitted Liens) on
any of its assets that has not been released, including any Guaranty;

     (v) any Contract for the employment of any individual on a full-time,
part-time, consulting or other basis that involves an outstanding obligation of more
than Two Hundred Fifty Thousand Dollars ($250,000) per annum;

     (vi) any Contract under which Mandate or any of its Subsidiaries has, directly
or indirectly, (A) made any loan, advance, or assignment of payment to any Person
(other than to direct or indirect Subsidiaries of Mandate) other than in the
Ordinary Course of Business or made any capital contribution to, or other investment
in, any Person (other than to Mandate or any of its direct or indirect wholly-owned
Subsidiaries) or (B) agreed to make after the date hereof any loan, advance, or
assignment of payment to any Person (other than to direct or indirect Subsidiaries
of Mandate) other than in the Ordinary Course of Business or any capital
contribution to, or other investment in, any Person (other than to Mandate or any of
its direct or indirect wholly-owned Subsidiaries);

     (vii) any Contract containing a covenant limiting the freedom of Mandate or any
of its Subsidiaries (or that would limit the freedom of Purchaser and its
Subsidiaries after the Closing) to engage in any line of business in any geographic
area or to compete with any Person or limiting the ability of Mandate or any of its
Subsidiaries (A) to incur Indebtedness for borrowed money, (B) to guarantee or
otherwise become responsible for the Indebtedness for borrowed money of any other
Person or (C) to create Adverse Claims;

     (viii) any Contract which grants a power of attorney, agency or similar
authority to another Person, other than Motion Picture distribution contracts and
other than in the Ordinary Course of Business;

     (ix) any Contract creating an Adverse Claim (other than Permitted Liens) upon
any material assets of Mandate or its Subsidiaries, including any Adverse Claims
(other than Permitted Liens) placed on the Mandate Intellectual

43

 

Property, excluding those involving the grant of rights (or any Adverse Claims
therein);

     (x) any Contract (other than this Agreement) for the sale of Mandate or any of
its Subsidiaries or its business, whether by sale of equity, all or substantially
all its assets, merger, consolidation or other transaction;

     (xi) any Contract pursuant to which Mandate or any of its Subsidiaries has
agreed to merge with, enter into a consolidation with or acquire an interest in any
Person or acquire by merging or consolidating with, or by purchasing all or
substantially all of the assets of, or by any other manner, any business or any
corporation, partnership, association, limited liability company, trust or other
business organization or division thereof providing for indemnification by Mandate
or any of its Subsidiaries or of any Person with respect to Liabilities relating to
any current or former business;

     (xii) any Contract between Mandate and any of its Affiliates, other than
Affiliates that are Subsidiaries; or

     (xiii) any other Contract that requires a cash or in-kind payment by, or the
incurrence of indebtedness for borrowed or owed money by, Mandate or any of its
Subsidiaries subsequent to the date hereof of Five Hundred Thousand Dollars
($500,000) or more over the life of such Contract, and where the ability to avoid
such payments or indebtedness is not within the control of Mandate or its
Subsidiaries without incurring a liability, and which Contract is not covered by
another subclause of this Section 3.12(a) (or would be covered by another
subclause of this Section 3.12(a), but for the limitations or restrictions
contained therein).

     (b) Delivery and Compliance. Mandate has delivered or made available to
Purchaser prior to the date hereof a correct and complete copy of each written Material
Contract (and a full, complete and accurate description of each oral Material Contract) (as
amended and supplemented to date) listed in the Mandate Disclosure Letter. With respect to
each Material Contract:

     (i) such Contract is Enforceable;

     (ii) such Contract will continue to be Enforceable on the same terms following
the consummation of the transactions contemplated by this Agreement;

     (iii) Mandate and its Subsidiaries have duly and fully performed in all
material respects all of their obligations under such Contract to the extent that
such obligations to perform have accrued, and no breach or default, alleged breach
or default, or, to the Knowledge of Mandate, event that would (with the passage of
time, the giving of notice or both) constitute a breach or default thereunder by
Mandate or any of its Subsidiaries, or, to the Knowledge of Mandate, any other party
or obligor with respect thereto, has occurred; and

44

 

     (iv) to the Knowledge of Mandate, no party to such Contract has repudiated any
provision of the Contract to Mandate or any of its Subsidiaries.

     (c) Exclusions. Regardless of the foregoing, each of the following shall be
deemed excluded from the definition of Material Contracts (collectively “Excluded
Contracts”):

     (i) any Contract providing for Liabilities of Mandate or a Subsidiary in
connection with a Motion Picture if such Liabilities are included in the bonded
budget for a Motion Picture;

     (ii) any development Contract, unless such Contract has an outstanding payment
obligation of Mandate or its Subsidiaries of more than Two Hundred Seventy-Five
Thousand Dollars ($275,000), or to the extent that such Contract will involve such
an obligation if Mandate or its Subsidiaries exercise an option under such Contract,
to the extent that it is reasonably likely that Mandate or its Subsidiaries will
exercise such option;

     (iii) any Contract providing for “at will” employment (unless the terms of such
Contract provide for post-termination severance or other termination payments (other
than accrued vacation) of $100,000 or more);

     (iv) any Contract providing for a participation with respect to a Motion
Picture that has not been greenlit, unless such participation is payable regardless
of whether such Motion Picture is greenlit;

     (v) any Contract providing for a participation with respect to a Motion Picture
that has been greenlit but has not been released, except with respect to the two (2)
participants with the most favorable participations for such Motion Picture;

     (vi) any Contract providing for a participation with respect to a Motion
Picture that has been released, except for those participation Contracts that have
an outstanding obligation of Mandate or its Subsidiaries of more than Two Hundred
Seventy-Five Thousand Dollars ($275,000);

     (vii) any Guaranty by Mandate or one of its Subsidiaries of (1) a Material
Contract or an Excluded Contract (unless such Contract is of a direct or indirect
non-wholly-owned Subsidiary of Mandate), (2) a Contract covered by a completion bond
that is currently in effect, (3) a customary Guild residual obligation, (4) an
obligation of less Two Hundred Seventy-Five Thousand Dollars ($275,000), (5)
non-financial performance that does not require material monetary expenditures, or
(6) Mandate or a direct or indirect wholly-owned Subsidiary thereof;

     (viii) any Guaranty by a non-wholly-owned Subsidiary of any of its direct or
indirect wholly-owned Subsidiaries;

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     (ix) any Contract that is a collection account agreement, except for (1)
collection account agreements for the films entitled “Boogeyman” and “The Grudge”
and (2) collection account agreements whereby the share of proceeds to which Mandate
or a Subsidiary thereof is entitled is remitted to any Person other than (A) Mandate
or its Subsidiaries, (B) a production lender, or (C) in connection with the Natixis
Facility;

     (x) any Contract that is a residual agreement with a Guild;

     (xi) any Constitutive Document, other than the limited liability company
operating agreement of Bodyguard Pictures, LLC, as amended;

     (xii) any license agreement resulting from a sales agency arrangement with a
third party producer;

     (xiii) any sales agency Contract for which the sales agency term has expired;
and

     (xiv) any customary notice or acknowledgement of assignment entered into in
connection with a single picture production loan that assigns payments from a
distribution or license agreement for such single picture to (1) the production
lender for such single picture for repayment of such production loan and interest
thereon and/or (2) the completion guarantor for such single picture to the extent
that amounts are advanced by such completion guarantor pursuant to the completion
guaranty for such single picture.

     (d) List of Certain Licenses. Attached hereto as Section 3.12(d) of
the Mandate Disclosure Letter is a complete list of all licenses pursuant to which Mandate
or a Subsidiary will receive a sales agency fee of more than Two Hundred Seventy-Five
Thousand Dollars ($275,000) for providing sales agency services to a third party producer.
To the Knowledge of Mandate, such Contracts have not been canceled and are currently in
effect.

     3.13 Insurance. Section 3.13(a) of the Mandate Disclosure Letter sets forth
as of the date hereof a true, complete and accurate list of all currently binding insurance
policies and bonds carried by Mandate and its Subsidiaries, and Mandate has delivered or made
available (via the Online Data Room) to Purchaser prior to the date hereof a true, complete and
accurate copy of each such policy and bond. Neither Mandate nor any of its Subsidiaries is in
default under any such policy or bond, has failed to pay timely any premiums or fees required to be
paid thereunder, or to the Knowledge of Mandate has received notice (orally or in writing) of
cancellation or lapse of any such policy or bond. Section 3.13(b) of the Mandate
Disclosure Letter contains a true, accurate and complete list of all pending claims made pursuant
to each such insurance policy (including any predecessor policy), and except as set forth in
Section 3.14(c) of the Mandate Disclosure Letter to the Knowledge of Mandate there is no
claim pending under any of such policies or bonds as to which coverage has been questioned, denied
or disputed by the underwriters of such policies or bonds. To the Knowledge of Mandate, there has
been no threatened termination of, or material premium increase with respect to, any of such

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policies, other than annual policy increases in the Ordinary Course of Business.

     3.14 Litigation. Other than as set forth on Section 3.14(a) of the Mandate
Disclosure Letter, there is no Action pending against or, to the Knowledge of Mandate, threatened
against Mandate or any of its Subsidiaries alleging more than Fifty Thousand Dollars ($50,000) in
damages. Other than as set forth on Section 3.14(b) of the Mandate Disclosure Letter, no
Action is pending or, to the Knowledge of Mandate, threatened by Mandate or any of its Subsidiaries
against any other Person.

     3.15 Labor; Employees. Other than as set forth on Section 3.15 of the Mandate
Disclosure Letter, to the Knowledge of Mandate, no executive, key employee or group of employees
has any plans to terminate its employment with Mandate or any of its Subsidiaries. Neither Mandate
nor any of its Subsidiaries is a party to or bound by any collective bargaining Contract (other
than standard Guild agreements), nor has Mandate or any of its Subsidiaries experienced within the
last two (2) years any strikes, work stoppages, work slowdowns, sickouts, grievances, claims of
unfair labor practices or other labor disputes. Mandate has no Knowledge of any organizational
effort currently being made, nor has any such effort been, to the Knowledge of Mandate, threatened
against Mandate or any of its Subsidiaries, by or on behalf of any labor union with respect to the
employees of Mandate or any of its Subsidiaries.

     3.16 Employee Benefit Plans and Agreements.

     (a) Section 3.16(a) of the Mandate Disclosure Letter lists each “employee
benefit plan” (within the meaning of ERISA), nonqualified deferred compensation plan
(including rabbi and secular trusts), and cafeteria plan (within the meaning of Code Section
125) including, without limitation, employee benefit plans, multiemployer plans (within the
meaning of Section 3(37) of ERISA), and all stock purchase, stock option, severance,
employment, change-in-control, collective bargaining, bonus, incentive, deferred
compensation, and employee loan agreements and plans, and all other material programs,
policies, fringe benefit or other arrangements, whether or not subject to ERISA, whether
formal or informal, funded or unfunded, oral or written, legally binding or not, under which
(i) any current or former employee, director or consultant of Mandate or its Subsidiaries
(the “Mandate Employees”) has any present or future right to benefits and which are
contributed to, sponsored by or maintained by Mandate or its Subsidiaries or (ii) Mandate or
any of its Subsidiaries has any present or future Liability. All such plans, agreements,
programs, policies and arrangements shall be collectively referred to as the
“Plans”. For purposes of clarity, the term “Plans” does not include the Employment
Agreements.

     (b) Section 3.16(b) of the Mandate Disclosure Letter sets forth a complete list
as of the day before Closing of all current Mandate Employees and, on a per employee basis,
vacation accrued as of June 30, 2007 for each such current Mandate Employee.

     (c) With respect to each Plan, Mandate has delivered to Purchaser a current, accurate
and complete copy thereof and, to the extent applicable: (i) any related trust agreement or
other funding instrument; (ii) the most recent Internal Revenue Service determination
letter, if applicable; (iii) the current version of any summary plan

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description and other material written communications (or a description of any material
oral communications) by Mandate or its Subsidiaries to the Mandate Employees concerning the
extent of the benefits provided under a Plan and (iv) for the two most recent years (A) the
most recent Form 5500 and attached schedules for each such year, (B) the most recent audited
financial statements for each such year, if any, and (C) the most recent actuarial valuation
reports, if any, for each such year.

     (d) (i) Each Plan has been established, registered, qualified, amended, funded,
invested, maintained and administered in all material respects in accordance with its terms
and in compliance with the applicable provisions of ERISA, the Code and other applicable
Laws, rules and regulations; (ii) each Plan which is intended to be qualified within the
meaning of Section 401(a) of the Code (A) is so qualified and has received a favorable
determination letter as to its qualification, and, to the Knowledge of Mandate, nothing has
occurred, whether by action or failure to act, that could reasonably be expected to cause
the loss of such qualification or require Mandate to seek corrective action under corrective
programs sponsored by the Internal Revenue Service or the Department of Labor, or (B) is
still within the “remedial amendment” period as described in Section 401(b) of the Code and
the regulations thereunder; (iii) to the Knowledge of Mandate, no event has occurred and no
condition exists that would subject Mandate or its Subsidiaries, either directly or by
reason of their affiliation with an ERISA Affiliate, to any material Tax, fine, lien,
penalty or other Liability imposed by ERISA, the Code or other applicable Laws; and (iv)
neither Mandate nor any of its Subsidiaries has incurred any Liability in respect of
post-employment or post-retirement health, medical or life insurance benefits for Mandate
Employees, except pursuant to Guild arrangements and except for benefits in the nature of
severance pay, as required to avoid an excise Tax under Section 4980B of the Code or
otherwise except as may be required pursuant to any other applicable Law.

     (e) No Reportable Event has occurred in the last five years as to any Plan, and the
present value of all benefits under all Plans subject to Title IV of ERISA (based on those
assumptions used to fund such Plans) did not, in the aggregate, as of the last annual
valuation date applicable thereto, exceed the actuarial value of the assets of such Plans
allocable to such benefits by more than Two Hundred Fifty Thousand Dollars ($250,000).

     (f) No material liability has been, and, to the Knowledge of Mandate, no circumstances
exist pursuant to which any material liability is reasonably likely to be, imposed upon
Mandate or any ERISA Affiliate (i) under sections 4971 through 4980E of the Code, sections
502(i) or 502(l) of ERISA, or Title IV of ERISA with respect to any Plan, or with respect to
any plan heretofore maintained by Mandate or any ERISA Affiliate, or any entity that
heretofore was an ERISA Affiliate, (ii) for the failure to fulfill any obligation to
contribute to any Plan that is a multiemployer Plan, or (iii) with respect to any Plan that
provides post-retirement welfare coverage (other than as required pursuant to Section 4980B
of the Code or severance obligations). Neither Mandate nor any ERISA Affiliate has received
any notification that any multiemployer Plan is in reorganization or has been terminated
within the meaning of Title IV of ERISA, and no multiemployer Plan is reasonably expected to
be in reorganization or to be terminated.

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     (g) Each of Mandate and its Subsidiaries has correctly classified all individuals who
perform services for it under the Plans, ERISA and the Code as common law employees,
independent contractors or leased employees.

     (h) No Plan exists that as a result of the execution of this Agreement (whether alone
or in connection with any subsequent event(s)), could result in (i) severance pay or any
increase in severance pay upon any termination of employment after the date of this
Agreement, (ii) accelerate the time of payment or vesting or result in any payment or
funding (through a grantor trust or otherwise) of compensation or benefits under, increase
the amount payable or result in any other material obligation pursuant to, any of the Plans,
(iii) limit or restrict the right of Mandate or any of its Subsidiaries to merge, amend or
terminate any of the Plans, except as would not give rise to any material liability to
Mandate or any of its Subsidiaries, or (iv) result in payments under any of the Plans which
would not be deductible under Section 280G of the Code.

     3.17 Environmental, Health and Safety Matters. (a) Each of Mandate and its
Subsidiaries is in compliance in all material respects with all Environmental, Health and Safety
Requirements in connection with the ownership, use, maintenance or operation of its business or
assets; (b) there are no pending or, to the Knowledge of Mandate, threatened allegations against
Mandate or any of its Subsidiaries by any Person that the properties or assets of Mandate or any of
its Subsidiaries are not, or that either of their respective businesses has not been conducted, in
compliance with all Environmental, Health and Safety Requirements; and (c) neither Mandate nor any
of its Subsidiaries has retained or assumed by Contract or operation of Law any Liability of any
other Person under any Environmental, Health and Safety Requirements.

     3.18 Certain Interests. Except as set forth in Section 3.18 of the Mandate
Disclosure Letter, no Affiliate, officer, director, or member of Mandate or any of its wholly-owned
Subsidiaries and no relative or spouse who resides with, or is a dependent of, any such Person
(collectively, a “Related Party”):

     (a) has any direct or indirect material financial interest in any competitor, supplier
or customer of Mandate or any of its Subsidiaries (other than Ghost House Mobile);

     (b) owns, directly or indirectly, in whole or in part, or has any other interest in any
material property, tangible or intangible, or material rights which is used in or is
necessary for the conduct of the business of Mandate or any of its Subsidiaries as it is
currently conducted; or

     (c) has any outstanding Indebtedness for borrowed money owed to Mandate or any of its
Subsidiaries.

Each Contract listed in Section 3.12(a) or Section 3.12(d) of the Mandate
Disclosure Letter that is between a Related Party, on the one hand, and Mandate or any of its
Subsidiaries, on the other hand, is annotated with an asterisk (*).

     3.19 Non-Contravention. Except as otherwise set forth on Section 3.19 of the
Mandate Disclosure Letter, the execution, delivery and performance by Mandate of this Agreement
and, to

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the extent a party thereto, the other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby and the compliance by Mandate with the provisions
hereof and thereof do not and will not, (i) conflict with or violate any of the Constitutive
Documents of Mandate or any of its Subsidiaries, (ii) in any material respect conflict with or
violate any Law or Governmental Order applicable to Mandate or any of its Subsidiaries or any of
the assets or properties of Mandate or any of its Subsidiaries or (iii) in any material respect
conflict with, result in any breach of, constitute a default (or event which with the giving of
notice or lapse of time, or both, would become a default) under, require any material Consent or
the giving of notice under, or any material rights of termination, amendment or acceleration of, or
result in the creation of any Adverse Claim (other than Permitted Liens) on the assets or
properties of Mandate or any of its Subsidiaries pursuant to, any Material Contract to which
Mandate or any of its Subsidiaries is a party or by which any of Mandate’s or its Subsidiaries’
properties or assets is bound or affected.

     3.20 No Brokers or Finders. No broker, finder or investment banker is entitled to any
brokerage, finders’ or other fee or commission from Mandate or any of its Subsidiaries in
connection with the transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Mandate or any of its Subsidiaries.

     3.21 Sufficiency of Assets. Except as otherwise set forth on Section 3.21 of
the Mandate Disclosure Letter, the assets and rights of Mandate and its Subsidiaries constitute in
all material respects all the assets and rights necessary to conduct the business of Mandate and
its Subsidiaries as currently conducted.

     3.22 Federal Reserve Regulations. None of Mandate, its Subsidiaries or their
Subsidiaries is engaged principally or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any “Margin Stock,” as such term is
defined in Regulation U of the Board of Governors of the Federal Reserve System, as now or from
time to time hereafter in effect.

     3.23 Investment Company Act. Mandate is not an “investment company”, within the
meaning of the Investment Company Act of 1940, as amended, or any foreign, federal or local statute
or any other applicable Law of the United States of America or any other jurisdiction, in any case
limiting its ability to incur indebtedness for borrowed money.

     3.24 Anti-Money Laundering Regulations. Mandate and each of its Subsidiaries have
complied in all material respects with all applicable anti-money laundering laws and regulations,
including, without limitation, the USA PATRIOT Act of 2001.

     3.25 Foreign Corrupt Practices. Neither Mandate or any of its Subsidiaries, nor to
the Knowledge of Mandate, any agent or other person acting on behalf of Mandate or its
Subsidiaries, has (i) directly or indirectly, used any corrupt funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to foreign or domestic political activity,
(ii) made any unlawful payment to foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose
fully any contribution made by Mandate or any of its Subsidiaries (or made by any person acting on
their behalf) which is in violation of law, or (iv) violated the Foreign Corrupt

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Practices Act of 1977, as amended.

     3.26 Representations Complete. To the Knowledge of Mandate, none of the
representations or warranties made pursuant to this ARTICLE 3, including the Mandate Disclosure
Letter, or any certificate furnished by or on behalf of Mandate or any of its Subsidiaries pursuant
to this Agreement, when all such documents are read together in their entirety, contains or will
contain at the Closing any untrue statement of a material fact, or omits or will omit at the
Closing to state any material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which made, not misleading, except as would not
have a Mandate Material Adverse Effect. Regardless of anything else contained in this Agreement, it
is agreed and acknowledged by the Parties that neither Mandate nor any Seller makes any express or
implied representation or warranty with respect to any projections, “ultimates”, forecasts of
financial performance of Motion Pictures, budgets (except as provided in Section 3.27) or
the likely or potential “box office performance” or other financial performance of any Motion
Picture, and all such representations and warranties are disclaimed.

     3.27 Motion Pictures on Budget; Motion Pictures Bonded. As of July 31, 2007, the
Mandate Produced Pictures currently in production (together with “30 Days of Night” and each other
Motion Picture currently in production for which Mandate or its Subsidiaries is currently liable
for all or a portion of budget overages in excess of bonded budgets), when aggregated, have not
exceeded the aggregated bonded budgets for such Motion Pictures such that Mandate and its
Subsidiaries would be liable for more than [REDACTED] in the aggregate of such budget overages.
Each budget for each such Mandate Produced Picture is bonded in accordance with the applicable
completion guaranty agreement.

     3.28 Production Loans. All principal, interest and fees in connection with all
production loans for the Motion Pictures “Boogeyman,” “Stranger Than Fiction,” “Messengers,” “The
Grudge 2” and “Rise” have been fully repaid.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES CONCERNING SELLERS AND PURCHASER

     4.1 Representations and Warranties of the Sellers. Each of the Sellers, severally and
not jointly, represents and warrants to Purchaser as follows:

     (a) Status and Enforceability. Such Seller, if an individual, is competent to
execute and deliver this Agreement and, if specified to be a party thereto, the other
Transaction Documents and to perform his obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. Such Seller, if not an
individual, is duly formed/organized, validly existing and in good standing under the Laws
of its formation/jurisdiction of organization and has all requisite power and authority to
execute and deliver this Agreement and, if specified to be a party thereto, the other
Transaction Documents and to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. All acts and other proceedings
required to be taken by such Seller that is not an individual to authorize the execution,
delivery and performance of this Agreement and, if specified to be a party thereto, the
other Transaction Documents and the consummation of the transactions

51

 

contemplated hereby and thereby have been duly and properly taken. This Agreement has
been duly executed and delivered by such Seller and constitutes an Enforceable obligation of
such Seller. Such Seller who is an individual is either unmarried or the spouse of such
Seller has executed and delivered to Purchaser a spousal consent (each, a “Spousal
Consent”) in the form of Exhibit H attached hereto. At or prior to the Closing,
such Seller shall have duly executed and delivered the other Transaction Documents, if
specified to be a party thereto, and such Transaction Documents shall constitute legal,
valid and binding obligations of such Seller Enforceable against such Seller in accordance
with their terms.

     (b) Non-Contravention. The execution, delivery and performance by such Seller
of this Agreement and, if specified to be a party thereto, the other Transaction Documents
and the consummation of the transactions contemplated hereby and thereby and compliance with
the provisions hereof and thereof by such Seller do not and will not (i) if such Seller is
not an individual, conflict with or violate any of such Seller’s Constitutive Documents,
(ii) in any material respects conflict with or violate any Law or Governmental Order
applicable to such Seller or any of the assets or properties of such Seller or (iii) in any
material respects conflict with, result in any breach of, constitute a default (or event
which with the giving of notice or lapse of time, or both, would become a default) under,
require any material Consent or the giving of notice under, or rights of termination,
amendment or acceleration of, or result in the creation of any Share Security Interests on
the Mandate Membership Interests of such Seller or any Adverse Claim (other than Permitted
Liens) on the assets or properties of such Seller pursuant to, any material Contract to
which such Seller is a party or by which any of such Seller’s properties or assets is bound
or affected.

     (c) No Litigation. There is no Action pending or, to the Knowledge of such
Seller, threatened against such Seller that, individually or in the aggregate, would have a
Seller Material Adverse Effect.

     (d) Mandate Membership Interests. Such Seller owns beneficially and of record,
free and clear of any Share Security Interests, the Drake Mandate Membership Interest, the
Kahane Membership Interest, or the Goldsmith Membership Interest, as applicable, and such
Mandate Membership Interests constitute all of the Equity Interests of Mandate owned
beneficially or of record by such Seller and his or its Affiliates. Upon delivery of such
Seller’s applicable Sharing Percentage of the Base Consideration, good, marketable and valid
title to such Seller’s Mandate Membership Interests will pass to Purchaser, free and clear
of any Share Security Interests. Except for this Agreement, such Seller (i) is not party to
any, and has not granted to any other Person any, and there are no, outstanding options,
warrants, subscription rights, rights of first refusal or any other Commitments providing
for, or restricting, the acquisition or disposition of such Seller’s Mandate Membership
Interests and (ii) is not a party to any voting agreement, voting trust, proxy or other
agreement or understanding with respect to the voting of such Seller’s Mandate Membership
Interests.

     (e) No Brokers or Finders. No broker, finder or investment banker is entitled
to any brokerage, finders’ or other fee or commission from Mandate, any of its

52

 

Subsidiaries or such Seller in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of such Seller.

     (f) Additional Representations Regarding Such Seller.

     (i) Such Seller is an “accredited investor” as that term is defined in Rule 501
of Regulation D under the Securities Act.

     (ii) Such Seller agrees that the shares of LGE Common Stock to be issued to
such Seller under this Agreement (such Seller’s “LGE Stock”) may not be
sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of
without registration under the Securities Act and any applicable state securities
Laws, except pursuant to the registration statement referenced in Section
2.9 or an exemption from such registration under the Securities Act and such
Laws, and except pursuant to the Registration Rights Agreement, and in compliance
with all applicable Law and Purchaser’s trading blackout periods.

     (iii) Such Seller is able to bear the economic risks of holding such Seller’s
LGE Stock for an indefinite period, and has knowledge and experience in financial
and business matters such that it is capable of evaluating the risks and merits of
the investment in and of protecting his/its own interests in connection with such
Seller’s LGE Stock.

     (iv) Such Seller is acquiring such LGE Stock for its own account for investment
only and not with a view towards, or for resale in connection with, the public sale
or distribution thereof; provided, however, that by making this
representation, such Seller does not agree, or make any representation or warranty,
to hold any of the LGE Stock for a minimum or other specific term and reserves the
right to dispose of the LGE Stock at any time in accordance with or pursuant to a
registration statement or an exemption under the Securities Act.

     4.2 Representations and Warranties of LGE and Purchaser. Subject to the exceptions
and disclosures set forth in writing in the disclosure letter delivered by Purchaser on the date
hereof to each of the Sellers (the “Purchaser Disclosure Letter”), each of Purchaser and
LGE represents and warrants to each of the Sellers as follows:

     (a) Status, Power and Enforceability. Such Person is duly incorporated,
validly existing, and in good standing under the Laws of its jurisdiction of formation and
has all requisite corporate power and authority to execute and deliver this Agreement and,
if specified to be a party thereto, the other Transaction Documents and to perform its
obligations hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. All acts and other proceedings required to be taken by such Person to
authorize the execution, delivery and performance of this Agreement and, if specified to be
a party thereto, the other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby have been duly and properly taken. This Agreement has been
duly authorized, executed and delivered by such Person and constitutes an Enforceable
obligation of such Person in accordance with its terms. At or

53

 

prior to the Closing, such Person shall have duly executed and delivered, if specified
to be a party thereto, the other Transaction Documents, and such Transaction Documents shall
constitute Enforceable obligations of such Person in accordance with their terms.

     (b) Non-Contravention. The execution, delivery and performance by such Person
of this Agreement and, if specified to be a party thereto, the other Transaction Documents
and the consummation of the transactions contemplated hereby and thereby and compliance with
the provisions hereof and thereof by such Person do not and will not (i) conflict with or
violate any of such Person’s Constitutive Documents, (ii) in any material respect conflict
with or violate any Law or Governmental Order applicable to such Person or any of its assets
or properties or (iii) in any material respect conflict with, result in any breach of,
constitute a default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, require any material Consent or the giving of notice under or
any rights of termination, amendment or acceleration of, any material Contract to which such
Person is a party or by which any of its properties or assets is bound or affected.

     (c) No Litigation. There is no Action pending or, to the Knowledge of
Purchaser, threatened against such Person that would have a Purchaser Material Adverse
Effect.

     (d) No Brokers or Finders. No such Person has any Liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement.

     (e) Shares. All shares of LGE Common Stock issued in accordance with the terms
of this Agreement will be, upon issuance, duly and validly issued, fully paid and
nonassessable, and will be issued in accordance with all applicable security Laws, and the
Sellers will acquire good, marketable and valid title to all of such shares, free and clear
of any Share Security Interests, except as set forth in this Agreement. Subject to the
accuracy of the Sellers’ representations and warranties set forth in Section 4.1,
the offer, sale and issuance of all of such shares is exempt from the registration
requirements of the Act and is exempt from the registration, permit and qualification
requirements of all applicable state securities Laws. LGE has not directly or through any
agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect
of, any security (as defined in the Act) that is or will be integrated with the sale of such
shares in a manner that would require the registration of any such shares under the
Securities Act.

     (f) SEC Reports. LGE has filed all forms, reports and documents required to be
filed by it with the SEC since March 31, 2006 (collectively, the “Reports”). As of
their respective dates of filing, the Reports (i) complied in all material respects with the
applicable requirements of the Securities Act, the Securities and Exchange Act of 1934, as
amended, and the rules and regulations thereunder and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in the light of the circumstances under
which they were made, not misleading.

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ARTICLE 5

COVENANTS

     5.1 Tax Matters.

     (a) For federal and state income Tax purposes, (i) the Sellers shall report all
payments of the Base Consideration received pursuant to this Transaction as constituting the
amount realized by the Sellers from the sale of their respective Mandate Membership
Interests (the “Purchase Price”) and (ii) Purchaser shall report the payment of the
Purchase Price as being made in consideration of the purchase of the assets of Mandate and
its Subsidiaries, pursuant to Revenue Ruling 99-6. The tax treatment and reporting of any
and all amounts paid by Purchaser to the Sellers as Contingent Participation shall be
treated as compensation income by the Sellers and deductible expenses by the Purchaser, if
and when such payments are received by the Sellers.

     (b) Purchaser and the Sellers shall each be directly and primarily responsible for the
computation, reporting and payment of income-based and transaction-based Taxes imposed on
such party under applicable Law in connection with the Transactions contemplated by this
Agreement.

     (c) Attached as Schedule 5.1 are preliminary schedules showing (A) the various
categories of Mandate assets transferred to Purchaser, and (B) the allocation of the
Purchase Price among the assets identified in (A). If Purchaser or its outside auditors,
upon subsequent review of such schedules, and completion of valuation of such assets believe
that adjustment to the allocation shown thereon is required with respect to Purchaser’s
financial reporting of the transaction, the Purchaser and Sellers will in good faith seek to
resolve such disagreement. If they are unable to resolve the dispute, Purchaser shall be
free to make such adjustments to the allocation as are required by its final analysis and
the advice of its outside auditors for purposes of its own financial reporting of the
transaction, but the Sellers shall have no obligation to make such adjustment in connection
with their own reporting of the transaction. In such circumstances, the Sellers and Mandate
acknowledge that the Purchaser’s treatment of the transaction for all Tax purposes,
including all Tax Returns and any Tax controversies, shall be consistent with the
Purchaser’s financial reporting of the transaction. Except as provided in the preceding
sentences, unless there has been a Final Determination (as defined in Section 1313(a) of the
Code) to the contrary, Purchaser, Sellers and Mandate, severally and not jointly, covenant
and agree, for all Tax purposes, including all Tax Returns and any Tax controversies, not to
take (and to cause any Affiliate or successors to their assets or businesses not to take)
any position inconsistent with the schedules (including any revised schedules from and after
the date of revision) prepared pursuant to this Section 5.1(c) or any other
provision of this Agreement.

     (d) All Parties shall file their Tax Returns consistent with all provisions of this
Agreement. The Sellers shall file or cause to be filed when due all income and franchise
Tax Returns with respect to Taxes that are required to be filed by or with respect to
Mandate and its Subsidiaries for Tax years or periods ending on or before the Closing Date
and shall pay any Taxes (other than Accrued Taxes) due in respect of such Tax

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Returns. Purchaser shall file or cause to be filed when due all other Tax Returns with
respect to Taxes that are required to be filed by or with respect to Mandate and its
Subsidiaries after the Closing Date; provided that a copy of each such return that covers a
taxable period or portion thereof ending on or before the Closing Date shall be provided to
the Mandate Representative at least thirty (30) days prior to the filing date for its review
and approval, not to be unreasonably withheld. In addition, without limiting the foregoing,
the Sellers and Purchaser hereby agree to the following with respect to the 2006 and 2007
federal and California state income and franchise Tax Returns that are required to be filed
by or with respect to Mandate and its Subsidiaries:

     (i) 2006 Tax Returns. The Mandate Representative shall cause to be
prepared the 2006 Tax Year federal and California state income Tax Returns of
Mandate (the “2006 Tax Returns”). The Mandate Representative shall deliver
drafts of the 2006 Tax Returns to Purchaser. Purchaser shall have the right to
review and comment on such 2006 Tax Returns for a period of ten (10) days from the
initial receipt of such 2006 Tax Returns. The Mandate Representative will consider
such comments in good faith.

     (ii) 2007 Stub Period Tax Returns. To the extent that the Sellers’
sale of the Mandate Interests causes a termination of Mandate and any of its
Subsidiaries that are classified as partnerships under Section 708(b)(1)(B) of the
Code as of the Closing Date (the “2007 Stub Tax Period”), the Mandate
Representative shall cause to be prepared and submitted to the Purchaser all federal
and California state income Tax Returns of such entities showing the taxable income
of Mandate (the “2007 Stub Period Tax Returns”), if any, for the 2007 Stub
Tax Period. It shall be the Sellers’ sole responsibility, at the Sellers’ sole
expense, to collect the information necessary for preparation of the 2007 Stub
Period Tax Returns in accordance with the customary accounting procedures of the
partnerships and the requirements of the Code and Treasury Regulations thereunder.
The Mandate Representative shall deliver drafts of the 2007 Stub Period Tax Returns
to Purchaser at least sixty (60) days prior to the due date for filing thereof.
Purchaser shall have the right to review and comment on such 2007 Stub Period Tax
Returns for a period of thirty (30) days from the initial receipt of such 2007 Stub
Period Tax Returns. The Mandate Representative will consider such comments in good
faith and shall have sole responsibility, subject to the assistance and cooperation
described below, for the preparation and timely filing of the 2007 Stub Period Tax
Returns with the applicable Governmental Body.

     (e) Assistance and Cooperation. From and after the Closing Date, the Purchaser
and the Mandate Representative shall:

     (i) assist (and cause its respective assigns to assist) the other party in
preparing any Tax Returns which such other party is responsible for preparing and
filing in accordance with this Section 5.1(b), and in obtaining any claims
for refund to which the Sellers or the Purchaser are entitled, as applicable;

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     (ii) cooperate fully in preparing for and conducting any audits of, or disputes
with any Governmental Body regarding, any Tax Returns of the Sellers or Purchaser,
or Mandate and its Subsidiaries;

     (iii) make available to the other party and to any Governmental Body as
reasonably requested all records, documents, accounting data and other information
relating or relevant to, the Taxes of the Sellers, Purchaser or Mandate and its
Subsidiaries;

     (iv) furnish the other party with copies of all correspondence received from
any Governmental Body in connection with any Tax audit or information request with
respect to any such taxable period for which the other party may have a Liability
under this Section 5.1; and

     (v) execute and deliver such powers of attorney and other documents as are
necessary to carry out the intent of this Section 5.1.

     (f) Tax Refunds. Any refunds (including interests thereon) of Taxes paid or
indemnified by the Sellers pursuant to Article 8 shall be for the account of the
Sellers. Any refunds (including interests thereon) of Taxes paid or indemnified by Purchaser
shall be for the account of Purchaser. The Sellers hereby agree to assign and promptly
remit to Purchaser all refunds (including interests thereon) of Taxes which Purchasers are
entitled to hereunder and which are received by the Sellers and vice versa.

     (g) Contests.

     (i) Promptly after receipt by any Party or any of their Affiliates of a written
notice of the assertion or commencement of any claim, assessment, deficiency, audit,
review, examination or other proposed change or adjustment by any Governmental Body
or any judicial or administrative proceeding (each, a “Tax Claim”) relating
to a Pre-Closing Tax Period of Mandate (or any other Tax Claim for which the Sellers
may be liable under this Agreement), the recipient shall notify in writing Purchaser
and/or the Mandate Representative of the Tax Claim, as applicable. Such notice must
be sent in a timely manner and must contain factual information (to the extent
known) describing the Tax Claim in reasonable detail and must include copies of the
notice and any or other document received from any Governmental Body in respect of
any such Tax Claim.

     (ii) Except as provided in subparagraph (iv) below, the Mandate Representative
shall have the right to control and direct the conduct, defense, prosecution,
settlement and compromise of such Tax Claim and to file amended Tax Returns or
claims for Tax refunds or credits with respect to Tax periods ending on or before
the Closing Date, and to employ counsel of its choice at its expense in connection
therewith; provided, however, that Purchaser and its representatives
will be permitted, at their expense, to be present at all proceedings and to review
all correspondence and submissions related to any such Tax Claim, amended Tax Return
or claim for Tax refund or credit. Notwithstanding the

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foregoing, the Mandate Representative shall not have the right to settle,
concede or compromise, either administratively or after the commencement of
litigation, any such Tax Claim or file any amended Tax Return or claim for Tax
refund or Tax credit, that would result in an aggregate increased Tax liability for
Purchaser or its Affiliates (excluding Taxes covered by the Sellers’ indemnification
obligations) of more than Thirty-Five Thousand Dollars ($35,000), excluding interest
and penalties, without the prior written consent of Purchaser. Such consent shall
not be unreasonably withheld, and shall not be necessary to the extent that the
Sellers or Mandate have agreed to indemnify Purchaser or its Affiliates against such
increased Tax liability.

     (iii) Except as provided in subparagraph (iv) below, Purchaser shall have the
right to control and direct the conduct, defense, prosecution, settlement and
compromise of any Tax Claim to the extent that such Tax Claim pertains to a taxable
period beginning after the Closing Date; provided, however, that the
Mandate Representative and its representatives will be permitted, at their expense,
to be present at all proceedings and review all correspondence and submissions
related to any such Tax Claim if it is reasonably foreseeable that the disposition
thereof could affect the Sellers’ liability for Taxes to any Governmental Body or to
Purchaser under this Agreement. Neither Purchaser nor any of its Affiliates
(including Mandate) shall have the right to settle, concede or compromise, either
administratively or after the commencement of litigation, any Tax Claim or file any
amended Tax Return or claim for Tax refund or Tax credit, if such action would
adversely affect the aggregate liability for Taxes of any Seller or their
indemnification obligations to Purchaser under this agreement of more than
Thirty-Five Thousand Dollars ($35,000), excluding penalties and interest, without
the prior written consent of the Mandate Representative. Such consent shall not be
unreasonably withheld, and shall not be necessary to the extent that Purchaser has
agreed to indemnify the Sellers against the effects of any such settlement.

     (iv) In the case of a Tax Claim involving a Tax liability or potential Tax
liability of Mandate relating to a period beginning before and ending after the
Closing Date (a “Straddle Period”), then the conduct of such Tax Claim shall
be tendered to the Mandate Representative provided (1) the Tax Claim pertains solely
to Taxes for which the Sellers are financially responsible under this Agreement and
(2) the resolution of such Tax Claim shall not adversely affect the Purchaser’s tax
reporting positions for items of income, gain, deductions and losses arising after
the Closing Date. In all other cases relating to a Straddle Period, the Mandate
Representative and the Purchaser will jointly conduct the Tax Claim using legal
counsel or other tax advisors reasonably acceptable to both parties. Regardless of
which party controls a Tax Claim under this subparagraph (iv), both the Purchaser
and the Mandate Representative and their representatives will be permitted, at their
expense, to be present at all proceedings and to review all correspondence and
submissions related to such Tax Claim, and neither party shall, or cause or permit
any of its Affiliates or Mandate to, settle, concede or compromise a Tax Claim
relating to a Straddle Period without the prior written consent of the Mandate
Representative (if the Sellers may be adversely affected

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thereby) or the prior written consent of LGE (if Purchaser or LGE maybe
adversely affected thereby), which consent shall not be unreasonably withheld.
Except as provided in the preceding sentence, all of the costs of the conduct of a
Tax Claim relating to a Straddle Period that can be directly allocated to the
portions of the Tax Claim for which the Sellers or Purchaser are financially
responsible, as applicable, shall be so allocated to such parties and any costs that
cannot be so allocated will be shared between Purchaser and the Sellers based on
their proportionate amounts of the Tax that is ultimately assessed (or, if such Tax
is not ultimately assessed, the proportionate amount of such Tax that was contested
in such Tax Claim) that relates to the portion of such Straddle Period ending on the
Closing Date and the portion thereof beginning after the Closing Date.

     (v) If the Parties are unable to resolve any dispute relating to the settlement
of a Tax Claim, the matter shall be submitted to a mutually acceptable nationally
recognized accounting firm for resolution, which accounting firm shall be instructed
to resolve such dispute in accordance with the standards contained in this
Section 5.1.

     5.2 Noncompetition Agreement Related to the Acquisition of Goodwill. In consideration
for the transactions hereunder, each of J. Drake (it being acknowledged by J. Drake that he is a
beneficiary of the Drake Family Trust) and Kahane, but not Goldsmith, severally and not jointly,
covenants and agrees to the following:

     (a) Noncompetition Covenants. Such Mandate Individual agrees that during the
Restrictive Term such Mandate Individual will not, without the prior written consent of
Purchaser, which consent may be withheld in its sole and absolute discretion, directly or
indirectly, either alone or in association or in connection with or on behalf of any Person
now existing or hereafter created: (i) be or become engaged in, directly or indirectly, any
Competitive Business, including being or becoming an organizer, investor, lender, partner,
joint venturer, stockholder, officer, director, employee, manager, independent sales
representative, associate, consultant, or agent of, to or from any Competitive Business
(including by virtue of holding any beneficial interest, or serving as a trustee or in a
similar capacity, in any Person that is, directly or indirectly, an investor or stockholder
in any Competitive Business); or (ii) use or authorize the use of his name or any part
thereof to be used or employed in connection with any Competitive Business (collectively and
severally, the “Noncompetition Covenants”).

     (b) Antisolicitation. Such Mandate Individual agrees that during the
Restrictive Term, such Mandate Individual will not, directly or indirectly, solicit for hire
any salaried employee of LGE or any of its present or future Subsidiaries or Affiliates, or
either directly or indirectly, solicit for hire on behalf of any third party any salaried
employee of LGE or any such Subsidiary or Affiliate, without the prior written consent of
LGE, excluding such Mandate Individual’s executive assistant.

     (c) Antihiring. Such Mandate Individual agrees that during the Restrictive
Term, such Mandate Individual will not, directly or indirectly, hire any salaried employee

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of LGE or any of its present or future Subsidiaries or Affiliates, or either directly
or indirectly, hire on behalf of any third party any salaried employee of LGE or any such
Subsidiary or Affiliate, without the prior written consent of LGE, excluding such Mandate
Individual’s executive assistant.

     (d) Exception. Nothing in this Section 5.2 will prevent such Mandate
Individual from (i) beneficially holding a passive investment up to five percent (5%) of any
class of Equity Interests of a Competitive Business, (ii) serving as an employee or
consultant to, or in any other capacity with, LGE or any of its present or future
Subsidiaries or Affiliates or (iii) soliciting or hiring, in connection with an activity
that does not constitute a Competitive Business, any Person who has previously provided
services to LGE or any present or future Subsidiary or Affiliate of LGE solely in connection
with a specific production, and nothing in this Section 5.2 shall apply to Ghost
House Mobile.

     (e) Separate Covenants. The Noncompetition Covenants will be construed to be
divided into separate and distinct Noncompetition Covenants with respect to (i) each
jurisdiction of the territory and (ii) each matter or type of conduct described therein.
Each such divided Noncompetition Covenant will be separate and distinct from all such other
Noncompetition Covenants with respect to the same or any other aspect of the business of LGE
and its Subsidiaries.

     (f) Acknowledgements. Such Mandate Individual acknowledges and agrees that:
(i) the covenants and the restrictions applicable to it contained in the Noncompetition
Covenants are necessary, fundamental and required for the protection of the business of LGE
and its Subsidiaries (including Mandate and its Subsidiaries after Closing); (ii) the
Noncompetition Covenants relate to matters that are of a special, unique and extraordinary
value; (iii) a breach by such Mandate Individual of any of the Noncompetition Covenants
applicable to him will result in irreparable harm and damages that cannot be adequately
compensated by a monetary award, and accordingly LGE and its Subsidiaries will be entitled
to injunctive or other equitable relief to prevent or redress any such breach; (iv) such
Mandate Individual is a holder of an Equity Interest in Mandate and at the Closing is
selling all of such Equity Interests pursuant to this Agreement; (v) in connection with such
sale of equity, LGE and Purchaser have required and such Mandate Individual has agreed, as a
condition to the purchase by Purchaser of the Mandate Membership Interests, that such
Mandate Individual enter into these Noncompetition Covenants; (vi) such Mandate Individual
understands that Purchaser would not acquire any of the Mandate Membership Interests if such
Mandate Individual did not enter into this Agreement and these Noncompetition Covenants; and
(vii) such Mandate Individual is entering into these Noncompetition Covenants in connection
with the transactions contemplated under this Agreement.

     (g) Judicial Limitation. Notwithstanding the foregoing provisions of this
Section 5.2, if at any time a court of competent jurisdiction or arbitrator holds
that any portion of any Noncompetition Covenant is unenforceable by reason of its extending
for too great of a period of time or over too great of a geographical area or by reason of
its being too extensive in any other respect, such Noncompetition Covenant will be

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interpreted to extend only over the maximum period of time, maximum geographical area,
or maximum extent in all other respects, as the case may be, as to which it may be
enforceable all as determined by such court or arbitrator in such action.

     5.3 Nondisclosure. Subject to Section 5.4, Sellers and LGE agree to hold, and
will cause their respective controlled Affiliates, directors, officers, employees, agents and
advisors (including attorneys, accountants, consultants, bankers and financial advisors) to hold,
any information regarding the other Parties, the existence of this Agreement or any of the terms
and conditions of this Agreement or any other agreement or transaction contemplated by this
Agreement confidential, except: (i) to the extent necessary to comply with the Law or the valid
order of a court of competent jurisdiction, in which event(s) the party making such disclosure
shall so notify the other as promptly as practicable (if possible, prior to making such disclosure)
and shall seek confidential treatment of such information, (ii) to the extent necessary to comply
with SEC, NASDAQ or similar disclosure requirements, (iii) to its parent and affiliated companies,
their lenders (and their respective advisors and attorneys), prospective financiers and investors
(and such persons’ investment bankers, agents, attorneys, accountants and necessary experts),
auditors, investment bankers, attorneys and similar professionals, provided that such companies,
banks, advisors, financiers, investors, investment bankers, experts, auditors, accountants,
attorneys and similar professionals agree to be bound by the provisions of this subparagraph, and
(iv) in order to enforce its rights pursuant to this Agreement.

     5.4 Public Announcements. Purchaser and the Mandate Representative, on behalf of the
Sellers, shall mutually approve any press releases or otherwise making any public statements with
respect to this Agreement or the transactions contemplated hereby, and no Party shall issue any
press release or make any public statement regarding the transactions contemplated hereby prior to
obtaining such Party’s prior written approval (as applicable).

     5.5 Additional Tax Matters.

     (a) Mandate can make Tax Distributions to each Seller prior to the Closing in an
aggregate amount that does not exceed such Seller’s estimated federal and California state
income tax liability attributable to such Seller’s distributable share of Estimated 2007
Stub Period Taxable Income (the “2007 Tax Distributions”). There shall be a
post-Closing adjustment to the Base Consideration in order to reconcile (i) the 2007 Tax
Distributions made to each Seller with (ii) the federal and California state income tax
liability of such Seller with respect to such Seller’s distributable share of the Actual
2007 Stub Period Taxable Income reported in the Actual 2007 Stub Period Tax Return. The
amount of such adjustment shall be calculated as follows: within thirty (30) days after the
Mandate Representative has filed or caused to be filed the 2007 Stub Period Tax Returns in
accordance with Section 5.1(e), the Mandate Representative shall calculate the
federal and California state income tax liability of each Seller, in each case, based on
such Seller’s distributive share of Actual 2007 Stub Period Taxable Income. The federal and
California state income taxes of each Seller shall be calculated based on such Seller’s
distributable share of the Actual 2007 Stub Period Taxable Income reflected on the K-1
issued to such Seller for the 2007 Stub Period, multiplied by the highest federal and
California state tax rate (or rates) applicable to an individual resident in the State of
California with respect to the Actual 2007 Stub Period Taxable Income (with the

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California state tax treated as a deduction against federal income). If the aggregate
federal and California state income tax payable by the Sellers, as so computed, exceeds the
2007 Tax Distributions, Purchaser shall make an aggregate cash payment to the Sellers equal
to such excess. If the aggregate federal and California state income tax payable by the
Sellers, as so computed, is less than the 2007 Tax Distributions, the Sellers shall pay the
difference to Purchaser based on the differential between each Seller’s actual marginal tax
liability for the Actual 2007 Stub Period Taxable Income and the estimated 2007 Tax
Distribution made to each Seller in the form of a cash payment to be remitted directly to
Purchaser without any offsets for any other amounts that Purchaser may owe to the Sellers
under other provisions of this Agreement or otherwise.

     (b) For purposes of this Section 5.5:

“2007
Tax Distributions” shall have the meaning ascribed to such
term in Section 5.5 of this Agreement; provided, however,
that in no event shall any amount distributed to the Sellers prior to August 17,
2007 be treated as a 2007 Tax Distribution.

“Actual 2007 Stub Period Taxable Income” means (A) for federal income tax
purposes, Mandate’s actual federal taxable income reported for the 2007 Stub Period
(as set forth in the applicable 2007 Stub Period Tax Return) and (B) for California
income tax purposes, Mandate’s actual California state taxable income reported for
the 2007 Stub Period (as set forth in the applicable 2007 Stub Period Tax Return);
provided, however, that the Actual 2007 Stub Period Taxable Income shall not include
any taxable income incurred by Mandate as a result of the sale of the Mandate
Membership Interests pursuant to this Agreement.

“Estimated 2007 Stub Period Taxable Income” means (A) for federal income tax
purposes, Mandate’s estimated federal taxable income for the 2007 Stub Period, and
(B) for California state income tax purposes, Mandate’s estimated California state
taxable income for the 2007 Stub Period; provided, however, that the Estimated 2007
Stub Period Taxable Income shall not include any taxable income incurred by Mandate
as a result of the sale of the Mandate Membership Interests pursuant to this
Agreement.

     (c) Schedule 5.5(c) attached hereto sets forth 2007 Tax Distributions through
the date hereof.

     5.6 Release.

     (a) Each of the Sellers, J. Drake and M. Drake (each, a “Seller Releasor”)
hereby irrevocably releases and forever discharges LGE, Mandate and each of their respective
Subsidiaries and Affiliates (other than Ghost House Mobile), whether direct or indirect, and
their present and former directors, officers, employees, members, partners and shareholders
and the respective successors, agents and assigns of any of the foregoing (such Persons are
collectively referred to as the “Purchaser Covered Persons”) from any and all
obligations, Liabilities, damages, costs, claims, complaints, charges or

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causes of action in law or equity that such Seller Releasor or such Seller Releasor’s
heirs, administrators, successors or assigns may now have or may ever have against any of
the Purchaser Covered Persons, whether accrued, absolute, contingent, unliquidated or
otherwise, and whether known or unknown, and which have or may have arisen out of any act or
omission occurring prior to the Closing arising out of or relating to, or in connection with
any facts or circumstances relating to Mandate or any of its Affiliates which existed on or
prior to the Closing Date; provided, however, that the foregoing shall in no
way modify or otherwise limit the rights of the Seller Releasors under this Agreement or the
other agreements entered into in connection herewith or therewith; provided,
further, however, that the foregoing release shall not apply to any
obligation or Liability (i) to reimburse Kahane, Goldsmith or J. Drake for any bona fide
business expenses incurred in the Ordinary Course of Business prior to Closing in accordance
with Mandate’s reimbursement policies, (ii) to Kahane, Goldsmith or J. Drake for unpaid
salary or bonuses earned prior to Closing or vacation accrued prior to Closing or (iii) for
bona fide benefits relating to the period prior to Closing owing to Kahane, Goldsmith or J.
Drake or any of their beneficiaries under any Plans.

     (b) Mandate and each of its Subsidiaries (each, a “Mandate Releasor”) hereby
irrevocably releases and forever discharges each Seller, J. Drake and M. Drake and their
respective Affiliates (it being understood that Purchaser, Mandate and their respective
Subsidiaries shall not be deemed Affiliates of the Sellers, J. Drake or M. Drake for
purposes of determining the releasees under this clause (b)), whether direct or indirect,
and their present and former directors, officers, employees, members, partners and
shareholders and the respective successors, agents and assigns of any of the foregoing (such
Persons are collectively referred to as the “Seller Covered Persons”), from any and
all obligations, Liabilities, damages, costs, claims, complaints, charges or causes of
action in law or equity that such Mandate Releasor or such Mandate Releasor’s heirs,
administrators, successors or assigns may now have or may ever have against any of the
Seller Covered Persons, whether accrued, absolute, contingent, unliquidated or otherwise,
and whether known or unknown, and which have or may have arisen out of any act or omission
occurring prior to the Closing arising out of, relating to, or in connection with any facts
or circumstances relating to Mandate or any of its Subsidiaries which existed on or prior to
the Closing Date; provided, however, that the foregoing shall in no way
modify or otherwise limit the rights of the Mandate Releasors under this Agreement or the
other agreements entered into in connection herewith; provided, further,
that the foregoing release shall not release the Seller Covered Persons from any
obligations, Liabilities, damage, costs, claims, complaints, charges or causes of action in
law or in equity that the Mandate Releasor or such Mandate Releasor’s heirs, administrators,
successors or assigns may now have or may ever have against any of the Seller Covered
Persons whether accrued, absolute, contingent, unliquidated or otherwise, and whether known
or unknown, which have or may have arisen out of, or relating to, fraud, intentional
misconduct or recklessness on the part of the Seller Covered Persons.

     (c) Each of the Seller Releasors and the Mandate Releasors (collectively, the
“Releasors”) acknowledges and agrees that the releases set forth in this Section
5.5 are not to be construed in any way as (i) an admission of any Liability whatsoever
by any Releasor under any Law or (ii) any such Liability having been expressly denied.

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     (d) Each of the Releasors expressly waives and releases any and all rights and benefits
under Section 1542 of the Civil Code of the State of California (or any analogous Law of any
other state), which reads as follows:

“A general release does not extend to claims which the
creditor does not know or suspect to exist in his or her
favor at the time of executing the release, which if known
by him or her must have materially affected his settlement
with the debtor.”

     5.7 Indemnity. Purchaser shall, to the fullest extent permitted by Law, cause Mandate
and its Subsidiaries to honor all of their obligations to indemnify, defend and hold harmless
(including any obligations to advance funds for expenses) each Covered Person for any and all acts
or omissions by such Covered Persons occurring prior to the Closing Date to the extent that such
obligations of Mandate or a Subsidiary exist on the date of this Agreement pursuant to the
Constitutive Documents of Mandate or a Subsidiary, and such obligations shall survive the Closing
and shall continue in full force and effect in accordance with the terms thereof as currently in
effect until the expiration of the applicable statute of limitations with respect to any claims
against such Covered Persons arising out of such acts or omissions.

     5.8 D&O and EPLI Insurance. Purchaser shall cause Mandate and its Subsidiaries to
maintain in effect for a period of not less than six (6) years from and after the Closing Date an
insurance policy providing tail coverage with respect to events occurring prior to the Closing Date
continuing Mandate’s existing director and officer insurance coverage and EPLI coverage on
substantially the same terms and conditions as of the date hereof; provided,
however, that the cost of such tail coverage shall not exceed Seventy Thousand Dollars
($70,000).

     5.9 Payroll and Bonus Adjustments to Purchase Price. Purchaser shall pay, and shall
cause each of its Affiliates responsible for payroll for employees of subsidiaries of LGE to pay,
on the first payroll date on or following the Closing Date, salaries for all employees of Mandate
and its Subsidiaries in such amounts as would be paid if they had been employed by a Subsidiary of
LGE for the entire payroll period applicable to such payroll date. To the extent bonuses payable
to employees of Mandate and its Subsidiaries in connection with the Closing have reduced the
Purchase Price (and it is agreed that the Purchase Price reflects a reduction for the maximum
amount described on Section 3.16(h) of the Mandate Disclosure Schedule), Purchaser shall
cause all such bonuses that remain unpaid after Closing to be paid on or prior to the payroll date
referred to in the previous sentence.

     5.10 Additional Services.

     (a) After the expiration of the Term (as defined in the J. Drake Employment Agreement),
upon request of LGE, J. Drake will agree to furnish non-exclusive services as a senior
executive or senior manager of Mandate Holdings LLC (“Mandate Holdings”) on a year
to year basis for a period of up to seven (7) years. J. Drake’s other personal or
professional obligations shall have first priority over any obligations to Mandate Holdings.
J. Drake’s services for Mandate Holdings will be rendered at such times and locations as
shall be mutually agreed upon by them.

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     (b) Mandate Holdings will have no assets or operations other than a specified, limited
range of activities related solely to derivative rights for the Motion Pictures “Bodyguard,”
“The Grudge” and “Harold and Kumar.”

     (c) LGE and Mandate Holdings hereby acknowledge and agree that there are no, and have
been no, express or implied representations or warranties made by any party hereto that any
of the arrangements described in this Section 5.10 can or will preserve or protect
any of the rights that Mandate or any of its Affiliates may have under any agreements that
condition such rights on any particular facts or conditions relating to J. Drake’s ownership
of, management of or services for Mandate or any of its Affiliates.

     (d) LGE will indemnify, defend and hold harmless J. Drake from any and all claims,
suits, losses, damages, liabilities, obligations, fines, penalties, costs and expenses
arising from, relating to, or in connection with the arrangements described in this
Section 5.10 other than as a result of J. Drake’s willful misconduct.

     (e) J. Drake will use good faith efforts to negotiate with a subsequent employer to
permit him to render such services. If J. Drake owns or controls his subsequent employer,
such subsequent employer will not prohibit J. Drake from rendering such services.

     (f) J. Drake agrees that neither J. Drake nor any Affiliate of J. Drake will acquire
the derivative rights specified in clause (b) of this Section 5.10 if LGE and/or
Mandate loses them. J. Drake also agrees not to initiate any efforts on behalf of, or take
affirmative acts to facilitate any efforts of, any subsequent employer to acquire such
rights if LGE and/or Mandate loses them.

ARTICLE 6

INTENTIONALLY OMITTED

ARTICLE 7

INTENTIONALLY OMITTED

ARTICLE 8

INDEMNIFICATION

     8.1 Survival of Representations and Warranties. Each representation and warranty
contained in this Agreement will survive the Closing and continue in full force and effect until
the twelve (12)-month anniversary of the Closing Date, except the representations and warranties
set forth in Section 3.2 (Status, Power and Enforceability), Section 3.3(a),
Section 3.3(b), Section 3.8 (Tax Matters), Section 3.16(d)(i), Section
3.20 (No Brokers or Finders), Section 4.1(a) (Status and Enforceability), Section
4.1(d) (Mandate Membership Interests), Section 4.1(e) (No Brokers or Finders),
Section 4.2(a) (Status, Power and Enforceability), and Section 4.2(d) (No Brokers
or Finders) (the representations and warranties specifically referenced are collectively referred
to herein as the “Fundamental Representations”), which will survive the Closing and will
continue in full force and effect indefinitely, subject to any applicable statute of limitations,
and the representations and warranties set forth in Section 4.2(e) (Shares) and Section
4.2(f) (SEC Reports), which shall survive the Closing and continue in full

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force and effect until the thirty (30)-month anniversary of the Closing. The covenants
contained in this Agreement shall survive in accordance with their respective terms, subject to any
applicable statute of limitations.

     The expiration of covenants, representations and warranties provided herein shall not affect
the right of any Indemnified Party in respect of any claim made by such Indemnified Party in an
Indemnification Notice or a notice of a Third Party Claim that is delivered pursuant to and in
compliance with the provisions of this Article 8 prior to the expiration date(s) specified
above. However, no claim for indemnification pursuant to this Article 8 may or shall be
made unless written notice pursuant to this Article 8 is delivered to the Indemnifying
Party and such notice is received before the expiration of the applicable survival period set forth
in Section 8.1.

     8.2 Indemnification Provisions for Purchaser’s Benefit. (a) Subject to the other
provisions of this Article 8, Sellers, jointly and severally, shall indemnify, defend and
hold harmless each of the Purchaser Indemnified Parties against, and reimburse any Purchaser
Indemnified Party for, all Damages that such Purchaser Indemnified Party may suffer or incur, or
become subject to, as a result of or in connection with any of the following:

     (i) any breach of a representation or warranty made by Mandate in this
Agreement;

     (ii) any breach of a covenant made by Mandate in this Agreement;

     (iii) any and all liabilities and obligations, whenever arising, related to or
arising from Ghost House Mobile;

     (iv) the Excluded Tax Liabilities;

     (v) any Liability incurred by LGE pursuant to Section 1 of the Indemnification
Agreement with respect to Guaranty Obligations (as defined in the Indemnification
Agreement) to the extent incurred, arising from or relating to the period prior to
the date hereof to the extent that such Liability is in excess of $275,000 in the
aggregate; provided, however, that the Sellers’ obligation to
indemnify, defend, reimburse and hold harmless the Purchaser Indemnified Parties
under this clause (v) shall terminate on the twelve (12)-month anniversary of the
Closing; and

     (vi) claims relating to the matters set forth in Section 3.14(a) of the
Mandate Disclosure Letter (the “Potential Claims”); provided,
however, that the Sellers’ obligation to indemnify, defend, reimburse and
hold harmless the Purchaser Indemnified Parties with respect to Item 2 in
Section 3.10(e) and Section 3.10(f) of the Mandate Disclosure Letter
that is incorporated into Section 3.14(a) of the Mandate Disclosure Letter
shall terminate on the twelve (12)-month anniversary of the Closing.

     (b) Subject to the other provisions of this Article 8, each Seller, severally and not
jointly, shall indemnify, defend and hold harmless each of the Purchaser Indemnified Parties
against, and reimburse any Purchaser Indemnified Party for, all Damages that such Purchaser

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Indemnified Party may suffer or incur, or become subject to, as a result of or in connection with
any of the following:

     (i) any breach of a representation or warranty made by such Seller in this
Agreement; and

     (ii) any breach of a covenant made by such Seller in this Agreement.

     8.3 Indemnification Provisions for the Sellers’ Benefit. Subject to the other
provisions of this Article 8, Purchaser shall indemnify, defend and hold harmless each of
the Seller Indemnified Parties against and reimburse any Seller Indemnified Party for all Damages,
that such Seller Indemnified Party may at any time suffer or incur, or become subject to, as a
result of or in connection with any breach of representation or warranty or covenant by LGE or
Purchaser set forth in this Agreement.

     8.4 Indemnification Notice; Holdback Shares Offset.

     (a) Subject to the additional requirements of Section 8.5 in the event of a
Third Party Claim, if any Purchaser Indemnified Party wishes to make any indemnification
claim under Section 8.2, such Purchaser Indemnified Party shall first provide to the
Mandate Representative a written notice of such claim (an “Indemnification Notice”)
setting forth in reasonable detail the basis for the claim and Purchaser’s best estimate of
the amount of the claim and attaching thereto all notices, complaints or materials related
thereto. Thereafter, the Mandate Representative shall have fifteen (15) Business Days
following such party’s receipt of the Indemnification Notice in which to deliver notice of
objection to such claim to the Purchaser Indemnified Party. If no objection notice is
given, then the claim in the amount (the “Unobjected Amount”) alleged by the
Purchaser Indemnified Party in the Indemnification Notice shall be deemed to be valid and
indemnifiable pursuant hereto. If a notice of objection is timely given or if the claim
involves a Third Party Claim, then the claim shall be resolved pursuant to Section
8.5 or 9.15, as applicable, and any amount determined to be owed by the Sellers
to the Purchaser Indemnified Parties shall be referred to as a “Resolved Amount.”
If there is an Unobjected Amount or Resolved Amount, the Purchaser Indemnified Party shall
promptly after the determination thereof provide written notice thereof (the “Resolved
Claim Notice”) to the Mandate Representative.

     (b) If a Resolved Claim Notice is given by a Purchaser Indemnified Party at a time when
there are Holdback Shares still to be issued by LGE, LGE shall offset on behalf of such
Purchaser Indemnified Party either the Resolved Amount or Unobjected Amount, as applicable,
against such Holdback Shares as follows (subject to Section 8.4(c) and without
limiting Section 8.6):

     (i) If and to the extent that the Sellers’ Indemnification Cap has not then
been reached or exceeded by prior or concurrent offsets, LGE shall use the Indemnity
Holdback Shares to offset the Resolved Amount or Unobjected Amount, as applicable,
against each Seller’s Indemnity Holdback Shares (based on the same price used to
determine the number of Indemnity Holdback Shares to

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be issued to such Seller pursuant to Section 2.2(b)) pursuant to such
Seller’s respective Indemnity Holdback Sharing Percentage, in accordance with this
Article 8. For purposes hereof, the “Indemnity Holdback Sharing
Percentage” for each Seller shall be the total number of Indemnity Holdback
Shares to be issued to such Seller under Section 2.2 (without regard to
offsets or holdbacks) divided by the total number of Indemnity Holdback Shares to be
issued to all Sellers under Section 2.2.

     (ii) If the Sellers’ Indemnification Cap has then been or is reached or
exceeded by prior or concurrent offsets, and if the Resolved Amount or Unobjected
Amount results from the indemnity contemplated by Section 8.2(a)(v) (the
“Special Indemnity”), LGE shall instead use a portion of Regular Holdback
Shares to offset such Resolved Amount or Unobjected Amount, as applicable, against
each Seller’s Regular Holdback Shares (based on the same price used to determine the
number of such shares to be issued to such Seller pursuant to Section
2.2(b)) pursuant to such Seller’s respective Indemnity Holdback Sharing
Percentage, in accordance with this Article 8; provided that in no event
shall the aggregate amount of offsets pursuant to this Section 8.4(b)(ii)
exceed the Sellers’ Special Indemnification Cap.

     (iii) If the Sellers’ Indemnification Cap has then been or is reached or
exceeded by prior or concurrent offsets, and if the Resolved Amount or Unobjected
Amount relates to a Fundamental Claim or instances of fraud or willful misconduct,
then the Regular Holdback Shares shall be used by the Purchaser Indemnified Party as
first recourse to satisfy such Resolved Amount or Unobjected Amount to the extent of
such remaining portion in excess of the Indemnification Cap as follows: LGE shall
offset against each Seller’s Regular Holdback Shares a number of shares equal to the
product of (x) the Resolved Amount or Unobjected Amount, as applicable, and (y) such
Seller’s Sharing Percentage, divided by (z) the then current Average Price in
accordance with this Article 8.

     (c) Notwithstanding anything else contained in this Agreement, Purchaser acknowledges
and agrees, on behalf of itself and on behalf of the other Purchaser Indemnified Parties,
that (i) offset pursuant to and in accordance with Section 8.4(b) against the
Holdback Shares shall be used by the Purchaser Indemnified Party as first recourse to
satisfy any and all amounts owed to a Purchaser Indemnified Party pursuant to Article
8, and (ii) except with respect to (A) claims relating to Fundamental Representations
(“Fundamental Claims”) and (B) instances of fraud or willful misconduct, it is
agreed that (1) offset pursuant to and in accordance with Section 8.4(b)(i) for up
to and not in excess of Five Million Dollars ($5,000,000) worth of shares of LGE Common
Stock (i.e. the Indemnity Holdback Shares) together with (2) offset pursuant to and in
accordance with Section 8.4(b)(ii) for up to and not in excess of an additional Two
Million Five Hundred Thousand Dollars ($2,500,000) worth of shares of LGE Common Stock that
are Regular Holdback Shares (the “Additional Offset Shares”) but solely with respect
to the Special Indemnity if the Sellers’ Indemnification Cap has first been exceeded, shall
be the Purchaser Indemnified Party’s sole and exclusive

68

 

recourse to satisfy any amounts owed to a Purchaser Indemnified Party pursuant to
Article 8. Once the Indemnity Holdback Shares and Additional Offset Shares are so
depleted, the Purchaser Indemnified Parties shall have no right or remedy against any Seller
with respect to any amounts that may be owed by a Seller to a Purchaser Indemnified Party,
except with respect to a Fundamental Claim or instances of fraud or willful misconduct.
Notwithstanding the foregoing, if an offset is made hereunder in satisfaction of a Resolved
Amount or Unobjected Amount pursuant to the Special Indemnity that serves to deplete or is
credited towards the Sellers’ Indemnification Cap, the Sellers’ Indemnification Cap will be
increased dollar-for-dollar (and the Sellers’ Special Indemnification Cap will be decreased
dollar-for-dollar) to the extent of such Resolved Amount or Unobjected Amount, up to but not
in excess of Two Million Five Hundred Thousand Dollars ($2,500,000). For purposes of
clarity, the intention of the preceding sentence is to ensure that the Purchaser Indemnified
Parties are not prejudiced by the timing in which claims are made (i.e. whether claims for
the Special Indemnity are made, settled or resolved before or after other claims under this
Article 8), not to increase the overall caps on indemnification obligations contemplated by
the Sellers’ Indemnification Cap and the Sellers’ Special Indemnification Cap.

     (d) If there is then outstanding a pending bona fide claim pursuant to an
Indemnification Notice at a time when Indemnity Holdback Shares or Additional Offset Shares
are to be delivered pursuant to Section 2.8, LGE shall be entitled to hold back from
such delivery Indemnity Holdback Shares or Additional Offset Shares on the same basis as set
forth in Sections 8.4(b)(i) and 8.4(b)(ii) with respect to Resolved Claim
Notice (substituting the amount of the bona fide claim in such Indemnification Notice for
the Resolved Amount or Unobjected Amount) until the resolution thereof, and, upon such
resolution, LGE shall promptly deliver such shares to the Sellers or offset such shares
pursuant to this Section 8.4 in accordance with the resolution of such claim and
this Article 8. The parties acknowledge that the Potential Claims will not be
treated as bona fide claims solely for purposes of this Section 8.4(d) until such
time as further developments occur beyond those described in the Mandate Disclosure Letter.

     8.5 Third Party Claim Procedures. In order for any Indemnified Party to be entitled
to any indemnification provided for under Section 8.2 or Section 8.3 hereof in
respect of, arising out of or involving a claim made by any Person (other than a Party) against the
Indemnified Party (a “Third Party Claim”), such Indemnified Party must give an
Indemnification Notice to the Party or Parties liable for such indemnification (the
“Indemnifying Party”) in writing of the Third Party Claim promptly following receipt by
such Indemnified Party of written notice of the Third Party Claim; provided,
however, that failure to give such notification shall not affect the indemnification
provided hereunder except to the extent the Indemnifying Party shall have been materially
prejudiced as a result of such failure. Upon receipt of a written notice of a Third Party Claim,
the Indemnifying Party will have the right to promptly assume the defense and control of such Third
Party Claim; provided, however, that such right shall be conditioned upon the
Indemnified Party receiving written notice of such assumption by the Indemnifying Party within
fifteen (15) days of its receipt of notice of such Third Party Claim from the Indemnified Party.
Purchaser shall be deemed to have given notice with respect to the Potential Claims on the date
hereof and the Mandate Representative shall be deemed to have provided notice of assumption of the
defense and control of the Potential Claims. If the Indemnifying Party does not assume the

69

 

defense and control of such Third Party Claim but the Indemnified Party does assume such
defense, then the Indemnified Party shall keep the Indemnifying Party reasonably informed on the
progress of such defense. If the Indemnifying Party timely assumes the defense and control of such
Third Party Claim, the Indemnified Party shall be allowed an opportunity to participate in the
defense of such Third Party Claim with its own counsel and at its own expense; provided, however,
that the Indemnifying Party shall bear the reasonable fees and expenses of such separate counsel
for the Indemnified Party if both the Indemnifying Party and the Indemnified Party are named in the
Third Party Claim and if the Indemnified Party has been advised in writing by outside counsel that
there may be one or more bona fide legal defenses available to the Indemnified Party that are
different from or additional to those available to the Indemnifying Party such that the
representation by one counsel of both the Indemnifying Party and the Indemnified Party in any such
Third Party Claim would be inappropriate due to a conflict of interest. Each of the Sellers or
Purchaser, as the case may be, shall, and shall cause each of its respective Affiliates to,
cooperate fully with the Indemnifying Party in the defense of any Third Party Claim. Neither the
Indemnifying Party nor the Indemnified Party may consent to a settlement of, or the entry of any
judgment arising from, any Third Party Claim, without the prior written consent of the other,
provided that such consent will not be unreasonably withheld; provided further that no such consent
of the Indemnified Party will be needed if any such settlement effected by the Indemnifying Party
obligates the Indemnifying Party to pay the full amount of Damages in connection with such Third
Party Claim and releases the Indemnified Party completely in connection with such Third Party
Claim. Notwithstanding the foregoing, any Purchaser Indemnified Party shall have the right to
control (subject to the limitations set forth above) the defense of any Third Party Claim against
such Purchaser Indemnified Party in the event Purchaser reasonably in good faith believes based on
the advice of outside counsel that the Damages with respect to such Third Party Claim, when
aggregated with all other satisfied or pending Damages subject to indemnification pursuant to
Section 8.2, will exceed the Sellers’ Indemnification Cap by more than Five Hundred
Thousand Dollars ($500,000), provided that the foregoing right to control shall not apply with
respect to a Third Party Claim that involves a Fundamental Representation or instances of fraud or
willful misconduct.

     8.6 Other Indemnification Provisions. Regardless of anything else contained in this
Agreement:

     (a) The Sellers’ indemnification obligations to the Purchaser Indemnified Parties under
this Agreement shall not exceed in the collective aggregate Five Million Dollars
($5,000,000) (i.e., the Indemnity Holdback Shares) (the “Sellers’ Indemnification
Cap”) and, with respect to the Special Indemnity if the Sellers’ Indemnification Cap has
first been exceeded, an additional Two Million Five Hundred Thousand Dollars ($2,500,000)
(i.e. the Additional Offset Shares) (the “Sellers’ Special Indemnification Cap”);
provided, however, that the Sellers’ Indemnification Cap and the Sellers’
Special Indemnification Cap shall not be applicable to (i) any breach of any of the
Fundamental Representations, or (ii) instances of fraud or willful misconduct; with respect
to which, in each case, the Purchaser Indemnified Parties shall have the right to proceed
against the Sellers jointly and severally, except with respect to a breach of Fundamental
Representations in Article 4 and instances of fraud or willful misconduct relating
to a representation and warranty in Article 4, in which case the Purchaser
Indemnified Parties shall have the right to proceed against the Seller in breach of such
Fundamental

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Representations in Article 4. Regardless of the foregoing proviso and
regardless of anything else contained in this Agreement, in absolutely no event shall any
Seller be liable in the aggregate to the Purchaser Indemnified Parties for more than the
total net proceeds received or to be received by such Seller under
this Agreement. For purposes of clarity, subject to the terms and conditions of this Agreement, if there are no
claims made by Purchaser Indemnified Parties other than pursuant to Section 8.2(a)(v), then the
aggregate indemnification obligations under Section 8.2(a)(v) therefor shall be an amount not to
exceed Seven Million Five Hundred Thousand Dollars ($7,500,000).

     (b) Excluding any instances of fraud or willful misconduct by any of the Parties, in no
event shall any Party be liable to another Party under this Agreement for special or
punitive damages. In addition, in no event shall any Party be liable to another Party under
this Agreement for consequential, incidental or indirect damages, loss of business
reputation, lost opportunity, diminution in value or (other than in connection with a breach
of Section 3.10(d)(i) and/or in connection with a breach of a representation or
warranty set forth in Section 3.12(b) with respect to the Specified Rights) lost
profits.

     (c) Solely for purposes of determining the amount of any Damages arising out of,
relating to or resulting from any breach of any representation or warranty in this
Agreement, but not for purposes of determining whether or not a breach of any such
representations and warranties has occurred, such breached representations and warranties
shall be considered without giving effect to any limitation or qualifications as to
“materiality,” “Material Adverse Effect” or any other derivation of the word “material.”
The Sellers shall have no obligation to indemnify the Purchaser Indemnified Parties against
Damages pursuant to this Agreement with respect to inaccuracies or breaches of
representations and warranties made by Mandate or the Sellers unless the Damages related to
any such individual inaccuracy or breach are greater than Fifteen Thousand Dollars
($15,000). Furthermore, the Sellers shall have no obligation to indemnify the Purchaser
Indemnified Parties against Damages pursuant to this Agreement with respect to inaccuracies
or breaches of representations and warranties made by Mandate or the Sellers unless the
aggregate of all Damages suffered or incurred by the Purchaser Indemnified Parties with
respect to inaccuracies or breaches of representations and warranties exceeds Four Hundred
Thousand Dollars ($400,000) in the aggregate (the “Indemnity Basket”) (in which
event the Purchaser Indemnified Parties shall be entitled to indemnification only for
Damages in excess of Two Hundred Thousand Dollars ($200,000) (the “Indemnity
Deductible”)). For purposes of determining the amount of any Damages to be counted or
credited against the Indemnity Basket and the Indemnity Deductible (but not for determining
whether a breach has occurred), the representation and warranty contained in the first
sentence of Section 3.14 shall be considered without giving effect to the Fifty
Thousand Dollar ($50,000) threshold contained therein.

     (d) To the extent permitted by Law, any indemnification payment made by a Party
hereunder will be treated as an adjustment to the Base Consideration received by such Party,
without double-counting.

     (e) The amount of any Damages for which indemnification is provided under this
Article 8 shall be net of any amounts recovered or recoverable by such Indemnified
Party under insurance policies or other collateral sources with respect to such Damages.
The Purchaser Indemnified Parties shall use reasonable efforts to pursue such insurance
policies or collateral sources, and in the event the Purchaser Indemnified Parties receive

71

 

any recovery, the amount of such recovery shall be applied first, to refund any
payments made by the Indemnifying Parties in respect of indemnification claims pursuant to
this Article 8 which would not have been so paid had such recovery been obtained
prior to such payment, and second, any excess to the Purchaser Indemnified Parties.

     (f) Except as provided in Section 9.13, Purchaser acknowledges and agrees, on
behalf of itself and on behalf of the other Purchaser Indemnified Parties that, except in
the case of fraud, their sole and exclusive remedy with respect to the subject matter of
this Agreement (including any claims of breach, violation, or non-performance or otherwise)
shall be pursuant to the indemnification provisions set forth in this Article 8.

ARTICLE 9

MISCELLANEOUS

     9.1 Entire Agreement. This Agreement, together with the Exhibits, Schedules and
Disclosure Letters hereto, and the certificates, documents, instruments and writings that are
delivered pursuant hereto and thereto, constitutes the entire agreement and understanding of the
Parties in respect of its subject matters and supersedes all prior or other understandings,
agreements, or representations by or among the Parties, written or oral, to the extent they relate
in any way to the subject matter hereof or the Transactions. Except as expressly contemplated by
Article 8, there are no third party beneficiaries having rights under or with respect to
this Agreement.

     9.2 Successors. All of the terms, agreements, covenants, representations, warranties,
and conditions of this Agreement are binding upon, and inure to the benefit of and are enforceable
by, the Parties and their respective successors and permitted assigns.

     9.3 Assignments. No Party may assign either this Agreement or any of its rights,
interests or obligations hereunder without the prior written approval of the other Parties, and any
attempted assignment in derogation of this sentence shall be null and void.

     9.4 Notices. All notices, requests, demands, claims and other communications
hereunder will be in writing. Any notice, request, demand, claim or other communication hereunder
will be deemed duly given if (and then three (3) Business Days after) it is sent by registered or
certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient
as set forth below:

If to the Sellers:

To the Mandate Representative as set forth below.

If to Mandate:

Mandate Pictures, LLC

c/o Lions Gate Entertainment, Inc.

2700 Colorado Avenue, Suite 200

Santa Monica, California 90404

Attention: Wayne Levin

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Tel: (310) 255-3853

Fax: (310) 255-3860

With a copy to (which will not constitute notice
pursuant to this Section 9.4):

Liner Yankelevitz Sunshine & Regenstreif LLP

1100 Glendon Avenue, 14th Floor

Los Angeles, California 90024-3503

Attention: Joshua B. Grode

Tel: (310) 500-3500

Fax: (310) 500-3501

If to the Mandate Representative:

Joseph Drake, as the Mandate Representative

2795 McConnell Drive

Los Angeles, California 90064

Tel: (310) 837-1992

Fax: (310) 837-1983

With a copy to (which will not constitute notice
pursuant to this Section 9.4):

O’Melveny & Myers LLP

1999 Avenue of the Stars, 7th Floor

Los Angeles, California 90067-6035

Attention: Steven Grossman

Tel: (310) 553-6700

Fax: (310) 246-6779

If to Purchaser or LGE:

Lions Gate Entertainment, Inc.

2700 Colorado Avenue, Suite 200

Santa Monica, California 90404

Attention: Wayne Levin

Tel: (310) 255-3853

Fax: (310) 255-3860

With a copy to (which will not constitute notice
pursuant to this Section 9.4):

Liner Yankelevitz Sunshine & Regenstreif LLP

1100 Glendon Avenue, 14th Floor

Los Angeles, California 90024-3503

Attention: Joshua B. Grode

73

 

Tel: (310) 500-3500

Fax: (310) 500-3501

     Any Party may send any notice, request, demand, claim or other communication hereunder to the
intended recipient at the address set forth above using any other means (including personal
delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim or other communication will be deemed to have
been duly given unless and until it actually is received by the intended recipient. Any Party may
change the address to which notices, requests, demands, claims and other communications hereunder
are to be delivered by giving the other Parties notice in the manner herein set forth.

     9.5 Ownership of Purchaser Equity. For purposes of this Agreement and the other
Transaction Documents, all LGE Common Stock issued in connection with this Agreement shall be
deemed to be owned exclusively by the owner of record, and any transfer by gift, will, operation of
law, dissolution of marriage or otherwise to such owner’s present or prospective spouse or present
or prospective domestic partner or cohabitant (each of which being referred to as a “spouse” for
purposes of this Section 9.5) shall be subject to all of the terms and conditions of this
Agreement.

     9.6 Counterparts. This Agreement may be executed in two (2) or more counterparts,
each of which, when executed and delivered, will be deemed an original but all of which together
will constitute one and the same instrument. A PDF or fax signature page shall be deemed an
original signature page.

     9.7 Headings. The article and section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the meaning or interpretation of this
Agreement.

     9.8 Amendments and Waivers. No amendment, modification, replacement, termination or
cancellation of any provision of this Agreement will be valid, unless the same will be in writing
and signed by the Parties (except that the Mandate Representative may act for the Sellers, to the
extent provided in Section 2.10).

     9.9 Expenses. Except as otherwise expressly provided in this Agreement, each Party
will bear its own costs and expenses incurred in connection with the preparation, execution and
performance of this Agreement and the other Transaction Documents, including all fees and expenses
of agents, representatives, financial advisors, legal counsel and accountants.

     9.10 Construction. The Parties have participated jointly in the negotiation and
drafting of this Agreement. If an ambiguity or question of intent or interpretation arises, this
Agreement will be construed as if drafted jointly by the Parties and no presumption or burden of
proof will arise favoring or disfavoring any Party because of the authorship of any provision of
this Agreement. Any reference to any federal, state, local, or foreign Law will be deemed also to
refer to such Law as amended and all rules and regulations promulgated thereunder, unless the
context requires otherwise. Except with respect to Tax representations and warranties (which are
solely covered by Section 3.8), environmental representations and warranties (which are
solely

74

 

covered by Section 3.17), ERISA, labor, employee and employee benefit representations
and warranties (which are solely covered by Sections 3.15 and 3.16), and
Intellectual Property and Motion Picture representations and warranties (which are solely covered
by Sections 3.10 and 3.11) (provided that the foregoing limitations or exclusions
will not apply with respect to Section 3.12), the Parties intend that each representation,
warranty and covenant contained herein will have independent significance and if any Party has
breached any representation, warranty or covenant contained herein in any respect, the fact that
there exists another representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not breached will not
detract from or mitigate the fact that the Party is in breach of the first representation, warranty
or covenant.

     9.11 Incorporation of Exhibits, Schedules and Disclosure Letters. The Exhibits,
Schedules, Disclosure Letters and other attachments identified in this Agreement are incorporated
herein by reference and made a part hereof.

     9.12 Remedies. Except as expressly provided herein, the rights, obligations and
remedies created by this Agreement are cumulative and in addition to any other rights, obligations,
or remedies otherwise available at Law or in equity. Except as expressly provided herein, nothing
herein will be considered an election of remedies.

     9.13 Specific Performance. Each Party acknowledges and agrees that the other Parties
would be damaged irreparably if any provision of this Agreement is not performed in accordance with
its specific terms or is otherwise breached. Accordingly, each Party agrees that the other Parties
will be entitled to seek an injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and its terms and provisions in any Action
instituted in any court of the United States or any state thereof having jurisdiction over the
Parties and the matter, in addition to any other remedy to which they may be entitled at Law.

     9.14 Submission to Jurisdiction. Each Party submits to the jurisdiction of any state
or federal court sitting in Los Angeles County, California. Each Party agrees that a final
judgment in any Action so brought may be enforced by Action on the judgment or in any other manner
provided at Law or in equity. Each Party waives any defense of inconvenient forum to the
maintenance of any Action so brought and waives any bond, surety or other security that might be
required of any other party with respect thereto. Each Party agrees that service of process on it
by notice as provided in Section 9.4 shall be deemed effective service of process.

     9.15 Dispute Resolution.

          Any dispute, controversy or claim (each a “Dispute”) arising out of or relating to
this Agreement (including its application, interpretation, or any alleged breach hereunder) will be
resolved in accordance with the procedures specified in this Section 9.15. The Parties
intend that these provisions will be valid, binding, enforceable, irrevocable, will survive any
termination of this Agreement and will be the sole and exclusive set of procedures for the
resolution of any Disputes.

     (a) Negotiations. The Party raising the Dispute will give written notice to
the other Parties to the Dispute describing the nature of the Dispute, and the Parties to
such

75

 

Dispute will thereafter attempt for a period of ten (10) Business Days to resolve such
Dispute by negotiation between executives designated by each of the Parties with authority
to settle such Dispute. All such negotiations will be confidential and treated as
compromise and settlement negotiations for purposes of any applicable Laws. The statute of
limitations applicable to the commencement of a lawsuit will apply to the commencement of an
arbitration hereunder, except that no defenses will be available based upon the passage of
time during any such negotiation period. Regardless of the foregoing, a Party will have the
right to seek immediate injunctive relief pursuant to Section 9.15(c) without regard
to any such negotiation period.

     (b) Arbitration. If such Dispute cannot be resolved pursuant to Section
9.15(a), any Party may submit such Dispute to arbitration by giving a written notice of
arbitration to the other Parties hereto (the “Arbitration Notice”). The Dispute
will be finally settled by binding arbitration in Los Angeles County, California before the
Judicial Arbitration and Mediation Services, Inc. (“JAMS”) under the JAMS Rules of
Practice and Procedure as in effect at the time of the delivery of the Arbitration Notice.
However, if such rules conflict with the provisions of this Section 9.15, including
the provisions concerning the appointment of arbitrators, the provisions of this Section
9.15 will prevail. The arbitrator will be a former judge of a court of California
appointed in accordance with JAMS rules. The Parties stipulate that a JAMS employee may be
appointed as a judge pro tempore of the Superior Court of Los Angeles County if required to
carry out the terms of this provision. Discovery and other procedural matters will be
governed as though the proceeding were an arbitration. The arbitrators will decide any
Dispute strictly in accordance with the substantive law of the State of California and will
not apply any other substantive law. When any Dispute occurs and when any Dispute is under
arbitration, except for the matters in dispute, the Parties will continue to fulfill their
respective obligations, and will be entitled to exercise their respective rights, under this
Agreement. The arbitrator may award the prevailing Party the costs of arbitration,
including reasonable attorneys’ fees and expenses. Any judgment upon the award may be
confirmed and entered in any court having jurisdiction thereof.

     (c) Temporary or Preliminary Relief. Notwithstanding Section 9.15(a)
and Section 9.15(b), each Party will have the right to seek and obtain temporary or
preliminary injunctive relief in any court of competent jurisdiction. Such courts will have
authority to, among other things, grant temporary or provisional injunctive relief (with
such relief effective until the arbitrators have rendered similar relief or a final award)
in order to protect any Party’s rights under or in connection with this Agreement.

     (d) Confidentiality. Except as may be necessary to enter judgment upon the
award or to the extent required by applicable Law, all claims, defenses and proceedings
(including, without limiting the generality of the foregoing, the existence of the Dispute
and the fact that there is an arbitration proceeding) will be treated in a confidential
manner by the Parties and their counsel, and each of their agents, employees and all others
acting on behalf of or in concert with them. Without limiting the generality of the
foregoing, no one will divulge to any Person not directly involved in the arbitration the
contents of the pleadings, papers, orders, hearings, trials, or awards in the arbitration,
except as may be necessary to enter judgment upon an award or as
required by applicable Law.

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     9.16 Severability. Any provision of this Agreement which is invalid, illegal or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity, illegality or unenforceability without invalidating the remaining provisions
hereof, and any such invalidity, illegality or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.

     9.17 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CALIFORNIA, EXCLUSIVE OF ITS CONFLICTS OF LAW PROVISIONS.

     9.18 Further Assurances. Each Party agrees to cooperate with the other Parties, to
take such additional and further actions, to execute such additional and further instruments,
documents and agreements, and to give such further written assurances, each as may be reasonably
requested by any other Party, in order to evidence and reflect the transactions described herein
and contemplated hereby and to carry into effect the intents and purposes of this Agreement.

[Remainder of page intentionally left blank]

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     IN WITNESS WHEREOF, the Parties have executed this Membership Interest Purchase Agreement on
the date first above written.

	 	 	 	 	 	 	 	 	 	 	 
	SELLERS:	 	 	 	PURCHASER:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	DRAKE FAMILY TRUST	 	 	 	LIONS GATE ENTERTAINMENT, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Joseph Drake
	 	 	 	By:
	 	/s/ Wayne Levin	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	Name: Joseph Drake	 	 	 	Name: Wayne Levin	 	 
	Its: Trustee	 	 	 	Its: General Counsel	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Margaret Drake	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	Name: Margaret Drake	 	 	 	 	 	 	 	 
	Its: Trustee	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	/s/ Nathan Kahane	 	 	 	MANDATE:	 	 
	 	 	 	 	 	 	 	 	 
	NATHAN KAHANE, an individual	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	/s/ Brian Goldsmith	 	 	 	MANDATE PICTURES, LLC	 	 
	 	 	 	 	 	 	 	 	 
	BRIAN GOLDSMITH, an individual	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Joseph Drake	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Name: Joseph Drake	 	 
	 	 	 	 	 	 	Its: Manager	 	 

Joseph Drake is executing this Membership Interest Purchase Agreement for purposes of Section
5.2, 5.6 and 5.10 and in his capacity as Mandate Representative:

	 	 	 
	/s/ Joseph Drake
	 	 
	 

JOSEPH DRAKE, an individual

	 	 

LGE is executing this Membership Interest Purchase Agreement for purposes of Sections 2.2,
2.6(b), 2.8, 2.9, 4.2, 5.1, 5.3, 5.4,
5.5, 5.6, 5.7, 5.8 and 5.10 only:

	 	 	 	 	 
	LGE:	 	 
	 
	 	 	 	 
	LIONS GATE ENTERTAINMENT CORP.	 	 
	 
	 	 	 	 
	By:
	 	/s/ Wayne Levin	 	 
	 

	 	 	 	 
	Name: Wayne Levin	 	 
	Its: General Counsel	 	 

78

 

ALL SCHEDULES AND EXHIBITS HAVE BEEN OMITTED IN RELIANCE UPON 

ITEM 601(B)(2) OF REGULATION S-K. THE
COMPANY AGREES TO FURNISH THE 

SEC, SUPPLEMENTALLY, WITH A COPY OF ANY OMITTED SCHEDULE OR EXHIBIT
UPON REQUEST.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}]]