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Exhibit 10.23    
    

   

   

   

   

   

   

 
 

FIRST AMENDED AND RESTATED    
    
    AGREEMENT AND PLAN OF MERGER    
    
    BY AND AMONG    
    
    DIGITAL GENERATION SYSTEMS, INC.,    
    
    DG ACQUISITION CORP. IV    
    

   AND    
    
    FASTCHANNEL NETWORK, INC.    
    
    DATED AS OF JANUARY 13, 2006    

   

   

   

   

   

   

   

  

 
 

TABLE OF CONTENTS    
    

	 
	 	 
	 	Page

	Article 1.    The Merger	 	2
	 	
 Section 1.1	
 	

The Merger	
 	

2
	 	
 Section 1.2	
 	

Effective Time	
 	

2
	 	
 Section 1.3	
 	

Effect of the Merger	
 	

2
	 	
 Section 1.4	
 	

Certificate of Incorporation; By-laws	
 	

2
	 	
 Section 1.5	
 	

Directors and Officers	
 	

2
	 	
 Section 1.6	
 	

Tax Consequences	
 	

2
	
Article 2.    Conversion of Securities; Exchange of Certificates	
 	

3
	 	
 Section 2.1	
 	

Conversion of Securities	
 	

3
	 	
 Section 2.2	
 	

Exchange of Certificates	
 	

4
	 	
 Section 2.3	
 	

Stock Transfer Books	
 	

7
	 	
 Section 2.4	
 	

Company Options, Warrants and Rights	
 	

7
	 	
 Section 2.5	
 	

Dissenters' Rights	
 	

7
	
Article 3.    Representations and Warranties of the Company	
 	

7
	 	
 Section 3.1	
 	

Organization and Good Standing	
 	

7
	 	
 Section 3.2	
 	

Corporate Records	
 	

8
	 	
 Section 3.3	
 	

Corporate Power and Authority	
 	

8
	 	
 Section 3.4	
 	

Capitalization	
 	

9
	 	
 Section 3.5	
 	

Subsidiaries	
 	

10
	 	
 Section 3.6	
 	

No Violation	
 	

11
	 	
 Section 3.7	
 	

Approvals	
 	

11
	 	
 Section 3.8	
 	

Financial Statements; No Undisclosed Liabilities	
 	

12
	 	
 Section 3.9	
 	

Ordinary Course Operations	
 	

12
	 	
 Section 3.10	
 	

Leases of Personal and Real Property; Owned Real Property; Material Contracts; No Default	
 	

12
	 	
 Section 3.11	
 	

Intellectual Property Matters	
 	

14
	 	
 Section 3.12	
 	

Litigation	
 	

16
	 	
 Section 3.13	
 	

Compliance with Laws; Permits	
 	

16
	 	
 Section 3.14	
 	

Taxes	
 	

16
	 	
 Section 3.15	
 	

Insurance	
 	

18
	 	
 Section 3.16	
 	

Employee Benefit Plans	
 	

18
	 	
 Section 3.17	
 	

Employees	
 	

20
	 	 	 	 	 

i

 

	 	
 Section 3.18	
 	

Personal Property; Assets	
 	

21
	 	
 Section 3.19	
 	

Environmental Matters	
 	

22
	 	
 Section 3.20	
 	

Fees	
 	

22
	 	
 Section 3.21	
 	

Related-Party Transactions	
 	

22
	 	
 Section 3.22	
 	

Acquisitions	
 	

22
	 	
 Section 3.23	
 	

Proxy Statement and Registration Statement	
 	

22
	 	
 Section 3.24	
 	

Tax Treatment	
 	

23
	 	
 Section 3.25	
 	

Vote Required	
 	

23
	 	
 Section 3.26	
 	

Opinion of Financial Advisor	
 	

23
	 	
 Section 3.27	
 	

Disclosure	
 	

23
	 	
 Section 3.28	
 	

Reserved	
 	

23
	 	
 Section 3.29	
 	

Releases	
 	

23
	
Article 4.    Representations and Warranties of Parent and Merger Sub	
 	

23
	 	
 Section 4.1	
 	

Organization and Good Standing	
 	

23
	 	
 Section 4.2	
 	

Certificate of Incorporation and By-laws; Corporate Books and Records	
 	

24
	 	
 Section 4.3	
 	

Corporate Power and Authority	
 	

24
	 	
 Section 4.4	
 	

Capitalization	
 	

24
	 	
 Section 4.5	
 	

Subsidiaries	
 	

25
	 	
 Section 4.6	
 	

No Conflict; Required Filings and Consents	
 	

25
	 	
 Section 4.7	
 	

SEC Filings; Financial Statements	
 	

26
	 	
 Section 4.8	
 	

Leases of Personal and Real Property; Owned Real Property; Scheduled Contracts; No Default	
 	

27
	 	
 Section 4.9	
 	

Ordinary Course Operations	
 	

28
	 	
 Section 4.10	
 	

Litigation	
 	

28
	 	
 Section 4.11	
 	

Compliance with Laws; Permits	
 	

29
	 	
 Section 4.12	
 	

Disclosure Documents	
 	

29
	 	
 Section 4.13	
 	

Intellectual Property Matters	
 	

29
	 	
 Section 4.14	
 	

Tax Treatment	
 	

31
	 	
 Section 4.15	
 	

Taxes	
 	

31
	 	
 Section 4.16	
 	

Insurance	
 	

33
	 	
 Section 4.17	
 	

Ownership of Merger Sub; No Prior Activities	
 	

33
	 	
 Section 4.18	
 	

Employee Benefit Plans	
 	

34
	 	
 Section 4.19	
 	

Employees	
 	

35
	 	 	 	 	 

ii

 

	 	
 Section 4.20	
 	

Fees	
 	

36
	 	
 Section 4.21	
 	

Personal Property; Assets	
 	

36
	 	
 Section 4.22	
 	

Environmental Matters	
 	

37
	 	
 Section 4.23	
 	

Vote Required	
 	

37
	 	
 Section 4.24	
 	

Disclosure	
 	

37
	 	
 Section 4.25	
 	

Opinion of Financial Advisor	
 	

37
	 	
 Section 4.26	
 	

Related-Party Transactions	
 	

37
	
Article 5.    Covenants	
 	

38
	 	
 Section 5.1	
 	

Conduct of Business by the Company Pending the Closing	
 	

38
	 	
 Section 5.2	
 	

Conduct of Business by Parent Pending the Closing	
 	

41
	 	
 Section 5.3	
 	

Cooperation	
 	

43
	 	
 Section 5.4	
 	

Registration Statement; Proxy Statement	
 	

44
	 	
 Section 5.5	
 	

Stockholders' Meetings	
 	

44
	 	
 Section 5.6	
 	

Access to Company Information; Confidentiality	
 	

45
	 	
 Section 5.7	
 	

Access to Parent Information; Confidentiality	
 	

45
	 	
 Section 5.8	
 	

No Solicitation of Transactions	
 	

46
	 	
 Section 5.9	
 	

Appropriate Action; Consents; Filings	
 	

47
	 	
 Section 5.10	
 	

Reserved	
 	

48
	 	
 Section 5.11	
 	

Certain Notices	
 	

48
	 	
 Section 5.12	
 	

Public Announcements	
 	

49
	 	
 Section 5.13	
 	

NASDAQ Listing	
 	

49
	 	
 Section 5.14	
 	

Employee Benefit Matters	
 	

49
	 	
 Section 5.15	
 	

Indemnification of Parent Directors and Officers	
 	

49
	 	
 Section 5.16	
 	

Indemnification of Company Directors and Officers	
 	

50
	 	
 Section 5.17	
 	

Tax Matters	
 	

50
	 	
 Section 5.18	
 	

Affiliate Letters	
 	

51
	 	
 Section 5.19	
 	

Delivery of Financial Statements	
 	

51
	 	
 Section 5.20	
 	

Transitional Matters	
 	

52
	 	
 Section 5.21	
 	

FIRPTA Certification	
 	

52
	 	
 Section 5.22	
 	

Parent Financing	
 	

52
	 	
 Section 5.23	
 	

Amendment of Parent Bylaws	
 	

52
	 	
 Section 5.24	
 	

Amendment of Company Charter and Termination of Investor's Rights Agreement	
 	

53
	 	 	 	 	 

iii

 

	 	
 Section 5.25	
 	

Roland and Series F Releases	
 	

53
	
Article 6.    Closing Conditions	
 	

53
	 	
 Section 6.1	
 	

Conditions to Obligations of Each Party Under This Agreement	
 	

53
	 	
 Section 6.2	
 	

Additional Conditions to Obligations of Parent and Merger Sub	
 	

53
	 	
 Section 6.3	
 	

Additional Conditions to Obligations of the Company	
 	

54
	
Article 7.    Termination, Amendment and Waiver	
 	

55
	 	
 Section 7.1	
 	

Termination	
 	

55
	 	
 Section 7.2	
 	

Effect of Termination	
 	

56
	 	
 Section 7.3	
 	

Amendment	
 	

57
	 	
 Section 7.4	
 	

Waiver	
 	

57
	 	
 Section 7.5	
 	

Fees and Expenses	
 	

58
	
Article 8.    General Provisions	
 	

58
	 	
 Section 8.1	
 	

General Survival	
 	

58
	 	
 Section 8.2	
 	

Notices	
 	

58
	 	
 Section 8.3	
 	

Definitions	
 	

59
	 	
 Section 8.4	
 	

Accounting Terms	
 	

64
	 	
 Section 8.5	
 	

Certain Terms	
 	

64
	 	
 Section 8.6	
 	

Terms Defined Elsewhere	
 	

64
	 	
 Section 8.7	
 	

Rules of Construction	
 	

66
	 	
 Section 8.8	
 	

Descriptive Headings	
 	

66
	 	
 Section 8.9	
 	

Severability	
 	

66
	 	
 Section 8.10	
 	

Entire Agreement	
 	

66
	 	
 Section 8.11	
 	

Assignment	
 	

66
	 	
 Section 8.12	
 	

Parties in Interest	
 	

66
	 	
 Section 8.13	
 	

Governing Law	
 	

67
	 	
 Section 8.14	
 	

Consent to Jurisdiction	
 	

67
	 	
 Section 8.15	
 	

Jury Trial Waiver	
 	

67
	 	
 Section 8.16	
 	

Disclosure	
 	

67
	 	
 Section 8.17	
 	

Counterparts	
 	

67
	 	
 Section 8.18	
 	

Specific Performance	
 	

67

iv

  

 
 

FIRST AMENDED AND RESTATED
  AGREEMENT AND PLAN OF MERGER    
    

        This FIRST AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of January 13, 2006, by and among Digital Generation Systems, Inc., a
Delaware corporation ("Parent"), DG Acquisition Corp. IV, a Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and FastChannel Network, Inc., a Delaware corporation
(the "Company"). Certain capitalized terms used herein have the meanings assigned to them in Section 8.3 or elsewhere in this Agreement as described in Section 8.6. 

        WHEREAS,
on December 15, 2005, Parent, Merger Sub, and the Company entered into that certain Agreement and Plan of Merger (the "Initial Merger Agreement"); 

        WHEREAS,
entering into this Agreement, Parent, Merger Sub, and the Company intend to amend and restate the Initial Merger Agreement in its entirety; 

        WHEREAS,
the respective Boards of Directors of Parent, Merger Sub and the Company have approved and declared advisable the merger of Merger Sub with and into the Company (the "Merger")
upon the terms and subject to the conditions of this Agreement and in accordance with the General Corporation Law of the State of Delaware (the "DGCL"); 

        WHEREAS,
the respective Boards of Directors of Parent and the Company have determined that the Merger is in furtherance of and consistent with their respective business strategies and is
in the best interest of their respective stockholders, and Parent has approved this Agreement and the Merger as the sole stockholder of Merger Sub; 

        WHEREAS,
as a condition to and inducement to the Company's willingness to enter into this Agreement, simultaneously with the execution of this Agreement, Scott Ginsburg, the Chief
Executive Officer and a stockholder of Parent is entering into a voting agreement (the "Ginsburg Voting Agreement") pursuant to which he agrees to vote all shares of Parent's capital stock held by him
in favor of the Parent Stockholder Approval at any meeting of Parent Stockholders relating to the transactions contemplated hereby; 

        WHEREAS,
as a condition to and inducement to Parent's and the Merger Sub's willingness to enter into this Agreement, simultaneously with the execution of this Agreement, certain
stockholders of the Company that together control a majority of the shares of the Company's capital stock entitled to vote on such matters are entering into a voting agreement (the "Company
Stockholder Voting Agreement") pursuant to which such stockholders agree to vote all shares of the Company's capital stock held by such stockholders in favor of approval and adoption of this Agreement
and the transactions contemplated hereby at any meeting of the Company Stockholders relating to the adoption and approval of this Agreement and the transactions contemplated hereby; 

        WHEREAS,
as a further condition to and inducement to the Company's willingness to enter into this Agreement, prior to the Effective Time Scott Ginsburg will enter into an agreement in a
form reasonably acceptable to the Company and Mr. Ginsburg (the "Standstill and Registration Rights Agreement") pursuant to which Mr. Ginsburg will, (i) subject to certain
exceptions, agree to refrain from taking certain actions intended to effect a takeover of Parent after the consummation of the Merger for a period commencing on the Closing Date and ending on the
first anniversary of the Closing Date and (ii) be granted certain registration rights with respect to sales of the Parent Common Stock held by him; and 

        WHEREAS,
as a further condition to and inducement to Parent's and the Merger Sub's willingness to enter into this Agreement, prior to the Effective Time certain stockholders of the
Company will enter into a lockup agreement in a form reasonably acceptable to Parent (the "Lockup Agreement") pursuant to which such stockholders will, subject to certain customary exceptions, agree
to 

1

 

refrain
from selling or otherwise transferring any shares of Parent Common Stock held by such stockholders after the consummation of the Merger for a period commencing on the Closing Date and ending
on the date that is 180 days after the Closing Date; and 

        NOW,
THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement and intending to be legally bound
hereby, the parties hereto agree as follows: 

 
 

Article 1.
  The Merger    
    

 
 
        Section 1.1    The Merger.     At the Effective Time and upon the terms and subject to satisfaction or waiver
of the conditions set forth in this Agreement, and in accordance with the DGCL,
Merger Sub shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation
of the Merger (the "Surviving Corporation"). 

 
 

           Section 1.2    Effective Time.     As soon as practicable after the satisfaction or, if permissible,
waiver of the conditions set forth in Article 6, the parties hereto shall cause the
Merger to be consummated by filing a certificate of merger (the "Certificate of Merger") with the Secretary of State of the State of Delaware, in such form as required by, and executed in accordance
with the relevant provisions of the DGCL (the date and time of such filing, or if another date and time is specified in such filing, such specified date and time, being the "Effective Time"). 

 
 

           Section 1.3    Effect of the Merger.     At the Effective Time, the effect of the Merger shall be as
provided in the applicable provisions of the DGCL. Without limiting the generality of the foregoing,
at the Effective Time, except as otherwise provided herein, all the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation. 

 
 

           Section 1.4    Certificate of Incorporation; By-laws.     At the Effective Time, the Certificate of
Incorporation and the By-laws of the Surviving Corporation shall automatically, and without further action,
be amended as necessary to read the same as the Certificate of Incorporation and By-laws of Merger Sub. 

 
 

           Section 1.5    Directors and Officers.     Unless otherwise designated by Parent, the directors of the
Merger Sub immediately prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of Incorporation and By-laws of the Surviving Corporation. Unless otherwise designated by Parent, the officers of the
Merger Sub immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and
By-laws of the Surviving Corporation. 

 
 

           Section 1.6    Tax Consequences.     It is intended by the parties hereto that the Merger qualify as a
"reorganization" within the meaning of Section 368(a) of the Code. The parties hereto
adopt this Agreement as a "plan of reorganization" within the meaning of Treasury Regulation Sections 1.368-2(g) and 1.368-3(a). 

2

 
 
 

Article 2.
  Conversion of Securities; Exchange of Certificates    
    

 
 
        Section 2.1    Conversion of Securities.     

        Section 2.1.1    Conversion of Preferred and Common.    At the Effective Time, by virtue of the Merger and
without any action on the part of any party or the holder of any of the following securities: (a) each share of Series A-1 Preferred Stock, par value $.01 per share (the
"Series A-1 Preferred Stock"), of the Company issued and outstanding at the Effective Time (excluding any Dissenting Shares) shall be converted into the right to receive an amount
equal to Series A-1 Per Share Amount; (b) each share of Series B-1 Preferred Stock, par value $.01 per share (the "Series B-1 Preferred
Stock"), of the Company issued and outstanding at the Effective Time (excluding any Dissenting Shares) shall be converted into the right to receive an amount equal to Series B-1 Per
Share Amount; (c) each share of Series C-1 Preferred Stock, par value $.01 per share (the "Series C-1 Preferred Stock"), of the Company issued and
outstanding at the Effective Time (excluding any Dissenting Shares) shall be converted into the right to receive an amount equal to the Series C-1 Per Share Amount; (d) each
share of Series D-1 Preferred Stock, par value $.01 per share (the "Series D-1 Preferred Stock"), of the Company issued and outstanding at the Effective Time
(excluding any Dissenting Shares) shall be converted into the right to receive an amount equal to the Series D-1 Per Share Amount; (e) each share of
Series E-1 Preferred Stock, par value $.01 per share (the "Series E-1 Preferred Stock"), of the Company issued and outstanding at the Effective Time (excluding
any Dissenting Shares) shall be converted into the right to receive an amount equal to the Series E-1 Per Share Amount; (f) each share of Series F Preferred Stock, par
value $.01 per share (the "Series F Preferred Stock", and collectively with the Series A-1 Preferred Stock, the Series B-1 Preferred Stock, the
Series C-1 Preferred Stock, the Series D-1 Preferred Stock and the Series E-1 Preferred Stock, the "Company Preferred Stock"), of the Company
issued and outstanding at the Effective Time (excluding
any Dissenting Shares) shall be converted into the right to receive an amount equal to the Series F Per Share Amount and (g) each share of Common Stock, par value $.01 per share, of the
Company (the "Company Common Stock"), issued and outstanding immediately prior to the Effective Time (excluding any Dissenting Shares and any shares of Common Stock held in the treasury of the
Company), shall be converted into the right to receive the Common Stock Per Share Amount. 

        Section 2.1.2    Per-Share Amounts.    The aggregate number of Parent Common Stock into which
Company Capital Stock shall be converted in the Merger subject to and in accordance with the terms hereof shall be 52,062,712 (subject to Section 2.1.6) (the "Merger Consideration"). For
purposes hereof, the "Series A-1 Per Share Amount" equals 1.2275 shares of Parent Common Stock; the "Series B-1 Per Share Amount" equals 1.3093 shares of Parent
Common Stock, the "Series C-1 Per Share Amount" equals 1.9520 shares of Parent Common Stock, the "Series D-1 Per Share Amount" equals 1.4975 shares of Parent
Common Stock, the "Series E-1 Per Share Amount" equals 1.4272 shares of Parent Common Stock, the "Series F Per Share Amount" equals 1.1459 shares of Parent Common Stock and
the "Common Stock Per Share Amount" equals the number of Shares of Parent Common Stock obtained by (a) subtracting (i) the aggregate number of shares of Parent Common Stock issuable to
holders of Company Preferred Stock at the Effective Time in accordance with Article II from (ii) the Merger Consideration divided by (b) the number of shares of Company Common
Stock outstanding immediately prior to the Effective Time. The Series A-1 Per Share Amount, Series B-1 Per Share Amount, Series C-1 Per Share
Amount, Series D-1 Per Share Amount, Series E-1 Per Share Amount and Series F Per Share Amount are collectively referred to as the, "Preferred Per Share
Amounts." The Preferred Per Share Amounts and Common Stock Per Share Amount are collectively referred to as the "Per Share Amounts." 

3

 

        Section 2.1.3    Cancellation Generally.    All shares of Company Preferred and Company Common Stock
(collectively, "Company Capital Stock") outstanding immediately prior to the Effective Time, other than Dissenting Shares, shall, following the Effective Time, no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each certificate previously representing any such shares shall thereafter represent the right to receive a certificate representing
the shares of Parent Common Stock into which such Company Capital Stock was converted in the Merger. Certificates previously representing shares of Company Capital Stock shall be exchanged for
certificates representing whole shares of Parent Common Stock issued in consideration therefor upon the surrender of such certificates in accordance with the provisions of Section 2.2, without
interest. No fractional share of Parent Common Stock shall be issued, and in lieu thereof, a cash payment shall be made pursuant to Section 2.2.5 hereof. 

        Section 2.1.4    Cancellation of Certain Shares.    Each share of Company Capital Stock held by Parent, Merger
Sub, any wholly owned subsidiary of Parent or Merger Sub, in the treasury of the Company or by any wholly owned subsidiary of the Company immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof and no payment shall be made with respect thereto. 

        Section 2.1.5    Merger Sub.    Each share of common stock, par value $.01 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and be exchanged for one newly and validly issued, fully paid and nonassessable share of common stock of the Surviving
Corporation. 

        Section 2.1.6    Change in Shares.    If between the date of the Initial Merger Agreement and the Effective
Time the outstanding shares of Parent Common Stock or Company Capital Stock shall have been changed into a different number of shares or a different class, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange of shares, the Per Share Amounts shall be correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares. 

 
 

           Section 2.2    Exchange of Certificates.     

        Section 2.2.1    Exchange Agent.    As of the Effective Time, Parent shall deposit, or shall cause to be
deposited, with a bank or trust company designated by Parent and reasonably satisfactory to the Company (the "Exchange Agent"), for the benefit of the holders of shares of Company Capital Stock, for
exchange in accordance with this Article 2, through the Exchange Agent, certificates representing the shares of Parent Common Stock (such certificates for shares of Parent Common Stock,
together with cash in lieu of fractional shares and any dividends or distributions with respect thereto, being hereinafter referred to as the "Exchange Fund") issuable pursuant to Section 2.1
in exchange for outstanding shares of Company Capital Stock. The Exchange Agent shall, pursuant to irrevocable instructions, deliver the shares of Parent Common Stock contemplated to be issued
pursuant to Section 2.1 out of the Exchange Fund. Except as contemplated by Section 2.2.5 hereof, the Exchange Fund shall not be used for any other purpose. 

        Section 2.2.2    Exchange Procedures.    Promptly after the Effective Time, Parent shall instruct the Exchange
Agent to mail to each holder of record of a certificate or certificates that immediately prior to the Effective Time represented outstanding shares of Company Capital Stock (the "Certificates")
(a) a letter of transmittal in customary form (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent) and (b) instructions for use in effecting the surrender of the Certificates in exchange for certificates representing shares of Parent Common Stock. Upon
surrender of a Certificate for cancellation to the Exchange Agent together with such letter of transmittal, properly completed and duly executed and such other documents as may be reasonably required
pursuant to such instructions, the holder of such Certificate shall be entitled to receive in 

4

 

exchange
therefor a certificate representing that number of whole shares of Parent Common Stock that such holder has the right to receive in respect of the shares of Company Capital Stock formerly
represented by such Certificate (after taking into account all shares of Company Capital Stock then held by such holder), cash in lieu of fractional shares of Parent Common Stock to which such holder
is entitled pursuant to Section 2.2.5, any dividends or other distributions to which such holder is entitled pursuant to Section 2.2.3, and the Certificate so surrendered shall forthwith
be canceled. No interest will be paid or accrued on any cash in lieu of fractional shares or on any unpaid dividends and distributions payable to holders of Certificates. In the event of a transfer of
ownership of shares of Company Capital Stock that is not registered in the transfer records of the Company, a certificate representing the proper number of shares of Parent Common Stock may be issued
to a transferee if the Certificate representing such shares of Company Capital Stock is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until surrendered as contemplated by this Section 2.2, each Certificate shall be deemed at any time after the Effective Time
to represent only the right to receive upon such surrender the certificate representing shares of Parent Common Stock, cash in lieu of any fractional shares of Parent Common Stock to which such holder
is entitled pursuant to Section 2.2.5, any dividends or other distributions to which such holder is entitled pursuant to Section 2.2.3. 

        Section 2.2.3    Distributions with Respect to Unexchanged Shares of Parent Common Stock.    No dividends or
other distributions declared or made after the Effective Time with respect to Parent Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Parent Common Stock represented thereby, and no cash payment in lieu of fractional shares shall be paid to any such holder pursuant to Section 2.2.5,
unless and until the holder of such Certificate shall surrender such Certificate. Subject to the effect of escheat, tax or other applicable Laws, following surrender of any such Certificate, there
shall be paid to the holder of the certificates representing whole shares of Parent Common Stock issued in exchange therefor, without interest, (a) promptly, the amount of any cash payable with
respect to a fractional share of Parent Common Stock to which such holder is entitled pursuant to Section 2.2.5 and the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent Common Stock and (b) at the appropriate payment date, the amount of dividends or other distributions, with a record
date after the Effective Time but prior to surrender and a payment date occurring after surrender, payable with respect to such whole shares of Parent Common Stock. 

        Section 2.2.4    Further Rights in Company Capital Stock.    All shares of Parent Common Stock issued upon
conversion of the shares of Company Capital Stock in accordance with the terms hereof (including any cash paid pursuant to Section 2.2.3 or Section 2.2.5) shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of Company Capital Stock. 

        Section 2.2.5    Fractional Shares.    No certificates or scrip representing fractional shares of Parent Common
Stock shall be issued upon the surrender for exchange of Certificates, no dividend or distribution with respect to Parent Common Stock shall be payable on or with respect to any fractional share and
such fractional share interests will not entitle the owner thereof to any rights of a stockholder of Parent. 

        As
promptly as practicable following the Effective Time, the Exchange Agent shall determine the difference between (A) the number of full shares of Parent Common Stock delivered
to the Exchange Agent by Parent pursuant to Section 2.2.1 and (B) the aggregate number of full shares of Parent Common Stock to be distributed to holders of Company Capital Stock
pursuant to Section 2.2.2 (such difference being the "Excess Shares"). As soon as practicable after the Effective Time, the Exchange Agent, as agent for such holders of Parent Common Stock,
shall sell 

5

 

the
Excess Shares at then prevailing prices on NASDAQ, all in the manner provided in this Section 2.2.5.2. 

        The
sale of the Excess Shares by the Exchange Agent shall be executed on NASDAQ and shall be executed in round lots to the extent practicable. Until the net proceeds of any such sale or
sales have been distributed to such holders of Company Capital Stock, the Exchange Agent will hold such proceeds in trust for such holders of Company Capital Stock as part of the Exchange Fund. Parent
shall pay all commissions, transfer taxes and other out-of-pocket transaction costs of the Exchange Agent incurred in connection with such sale or sales of Excess Shares. In
addition, Parent shall pay the Exchange Agent's compensation and expenses in connection with such sale or sales. The Exchange Agent shall determine the portion of such net proceeds to which each
holder of Company Capital Stock shall be entitled, if any, by multiplying the amount of the aggregate net proceeds by a fraction, the numerator of which is the amount of the fractional share interest
to which such holder of Company Capital Stock is entitled (after taking into account all shares of Parent Common Stock to be issued to such holder) and the denominator of which is the aggregate amount
of fractional share interests to which all holders of Company Capital Stock are entitled. 

        As
soon as practicable after the determination of the amount of cash, if any, to be paid to holders of Company Capital Stock with respect to any fractional share interests, the Exchange
Agent shall promptly pay such amounts to such holders of Company Capital Stock subject to and in accordance with the terms of Section 2.2.3. 

        Section 2.2.6    Termination of Exchange Fund.    Any portion of the Exchange Fund that remains undistributed
to the holders of Company Capital Stock on the date that is six months after the Effective Time, shall be delivered to Parent upon demand, and any holders of Company Capital Stock who have not
theretofore complied with this Article 2 shall thereafter look only to Parent for the shares of Parent Common Stock, any cash in lieu of fractional shares of Parent Common Stock to which they
are entitled pursuant to Section 2.2.5 and any dividends or other distributions with respect to Parent Common Stock to which they are entitled pursuant to Section 2.2.3, in each case,
without any interest thereon. 

        Section 2.2.7    No Liability.    Neither Parent nor the Company shall be liable to any holder of shares of
Company Capital Stock for any such shares of Parent Common Stock (or dividends or distributions with respect thereto) or cash from the Exchange Fund delivered to a public official pursuant to any
abandoned property, escheat or similar Law. 

        Section 2.2.8    Lost Certificates.    If any Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such person of a bond, in such reasonable amount
as Parent may direct, as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the shares of Parent Common Stock, any cash in lieu of fractional shares of Parent Common Stock to which the holders thereof are entitled pursuant to Section 2.2.5 and any dividends
or other distributions to which the holders thereof are entitled pursuant to Section 2.2.3, in each case, without any interest thereon. 

        Section 2.2.9    Withholding.    Parent or the Exchange Agent shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of Company Capital Stock such amounts as Parent or the Exchange Agent are required to deduct and withhold under the Code, or
any provision of state, local or foreign tax Law, with respect to the making of such payment. To the extent that amounts are so withheld by Parent or the Exchange Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of Company Capital Stock in respect of whom such deduction and withholding was made by Parent or the Exchange Agent. 

6

 

 
 

           Section 2.3    Stock Transfer Books.     At the Effective Time, the stock transfer books of the Company
shall be closed, and thereafter there shall be no further registration of transfers of shares of
Company Capital Stock theretofore outstanding on the records of the Company. From and after the Effective Time, the holders of certificates representing shares of Company Capital Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with respect to such shares of Company Capital Stock except as otherwise provided herein or by Law. 

 
 

           Section 2.4    Company Options, Warrants and Rights.     Prior to the Effective Time, the Company shall
terminate all unexercised Company Stock Options and warrants to purchase shares of Company Capital Stock and all
other rights to acquire or receive any equity securities of the Company (whether or not exercisable), in each case that are outstanding immediately prior to the Effective Time without the payment of
consideration to the holders thereof. 

 
 

           Section 2.5    Dissenters' Rights.     Shares of Company Capital Stock that have not been voted for
approval of this Agreement or consented thereto in writing and with respect to which a demand and
appraisal have been properly made in accordance with the DGCL ("Dissenting Shares") will not be converted into the right to receive the shares of Parent Common Stock otherwise owed with respect to
such shares of Company Capital Stock at or after the Effective Time, but will be converted into the right to receive from the Surviving Corporation such consideration as may be determined to be due
with respect to such Dissenting Shares pursuant to the laws of the State of Delaware. If a holder of Dissenting Shares (a "Dissenting Stockholder") withdraws his or her demand for such payment and
appraisal or become ineligible for such payment and appraisal, then, as of the Effective Time or the occurrence of such event of withdrawal or ineligibility, whichever last occurs, such holder's
Dissenting Shares will cease to be Dissenting Shares and will be converted into the right to receive, and will be exchangeable for, the shares of Parent Common Stock in accordance with this Agreement.
The Company will give Parent prompt notice of any demand received by the Company from a Dissenting Stockholder for appraisal of shares of Company Capital Stock, and Parent shall have the right to
participate in all negotiations and proceedings with respect to such demand. The Company agrees that, except with the prior written consent of Parent, or as required under the DGCL, it will not
voluntarily make any payment with respect to, or settle or offer or agree to settle, any such demand for appraisal. Each Dissenting Stockholder who, pursuant to the provisions of the DGCL, becomes
entitled to payment of the value of the Dissenting Shares will receive payment therefor but only after the value therefor has been agreed upon or finally determined pursuant to such provisions. Any
portion of the shares of Parent Common Stock that would otherwise have been owed with respect to Dissenting Shares if such shares of Company Capital stock were not Dissenting Shares will be retained
by Parent. 

 
 

Article 3.
  Representations and Warranties of the Company    
    

        The Company represents and warrants to Parent and Merger Sub that, except as set forth in the Disclosure Letter furnished by Company to Parent simultaneously with
the execution hereof (the "Company Disclosure Letter"), the statements contained in this Article 3 are true, complete and correct as of the date of the Initial Merger Agreement, except to the
extent such representations and warranties are specifically made as of a particular date (in which case such representations and warranties are true, complete and correct as of such date). 

 
 

           Section 3.1    Organization and Good Standing.     The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate
power and authority to own, operate and lease its properties and assets and to conduct its business as it is now being conducted. The Company is duly qualified or licensed to do business as a
corporation, and is in good standing as a corporation, in every jurisdiction in which its ownership of property or the character of its business requires such qualification, except for those
jurisdictions in which the failure to be so qualified or in good standing, individually or in the aggregate, has not had 

7

 

and
would not reasonably be expected to have, a Company Material Adverse Effect. Section 3.1 of the Company Disclosure Letter sets forth a true, complete and correct list of all foreign
jurisdictions in which the Company is so qualified or licensed and in good standing. 

        As
used herein, the term "Company Material Adverse Effect" shall mean: (a) any event, circumstance or occurrence that has resulted in, or would reasonably be expected to result
in, a material adverse effect on the business, results of operations, tangible assets, and financial condition of the Company and its Subsidiaries, taken as a whole; or (b) any event,
circumstance or occurrence that prevents or materially delays, or would reasonably be expected to prevent or materially delay, the ability of the Company to consummate the Merger;  provided, however, that in no event shall any of the following be a Company Material Adverse Effect, or
be taken into account in the determination of whether a Company Material Adverse Effect has occurred: (A) any change resulting from conditions affecting any of the industries in which the
Company operates or from changes in general business or economic conditions; (B) any change resulting from the announcement or pendency of the transactions contemplated by this Agreement;
(C) any change resulting from the compliance by the Company with the terms of, or the taking of any action by the Company contemplated or permitted by, this Agreement; or (D) the receipt
by the Company of notice of cancellation or non-renewal from any customer of the Company except to the extent that such customer accounted for more than the Trigger Amount of Company
revenues for the twelve months ended September 30, 2005 (in each case determined in accordance with GAAP, except that no customer of the Company shall be deemed to have cancelled or not renewed
if such customer's business is placed with Parent). The "Trigger Amount" shall equal the sum of $3.75 million plus (y) a mutually agreed upon reasonable estimate of the annual revenues
expected to be generated under any new Company customer accounts won after September 30, 2005 and (z) a mutually agreed upon reasonable estimate of the annual revenues expected to be
generated as the result of any expansions under Company customer accounts existing as of September 30, 2005. 

 
 

           Section 3.2    Corporate Records.     Copies of the certificate of incorporation (the "Company
Charter") and of the by-laws of the Company heretofore delivered to Parent are true, complete
and correct copies of such instruments as amended. The Company Charter and by-laws of the Company are in full force and effect. The Company is not in violation of any material provision of
the Company Charter or its by-laws. The books and records, minute books, stock record books and other similar records of the Company, all of which have been delivered to Parent, are true,
complete and correct in all material respects. 

 
 

           Section 3.3    Corporate Power and Authority.     The Company has the requisite corporate power and
authority to execute and deliver this Agreement and the Ancillary Agreements. Subject to the Company Stockholder
Approval, the execution and delivery by the Company of this Agreement and any Ancillary Agreement to which the Company is a party, the performance by it of its obligations hereunder and thereunder and
the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate actions on the part of the Company. This Agreement has been duly
executed and delivered by the Company and constitutes, and each Ancillary Agreement to which the Company is a party when executed will constitute, the legal, valid and binding obligations of the
Company, enforceable against it in accordance with their terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws now or hereafter in effect
relating to creditors' rights generally and subject to general principles of equity. The Board of Directors of the Company (the "Company Board") has unanimously approved this Agreement and each
Ancillary Agreement to which the Company is a party, declared advisable the transactions contemplated hereby and thereby and has directed that this Agreement and the transactions contemplated hereby
be submitted to the Company's Stockholders for approval. 

8

 

 
 

           Section 3.4    Capitalization.     

        Section 3.4.1    The authorized capital stock of the Company consists of (a) 80,404,648 shares of Company Common Stock, of which
10,376,932 shares are issued and outstanding as of the date of the Initial Merger Agreement, and 41,818,500 shares are reserved for the conversion of the Company Preferred Stock and the exercise of
Company Options and warrants; (b) 275,000 shares of Class B Common Stock (nonvoting), of which 259,293 shares are issued and outstanding as of the date of the Initial Merger Agreement;
(c) 59,320,352 shares of Company Preferred Stock, of which 33,951,937shares are issued and outstanding as of the date of the Initial Merger Agreement. Of such preferred stock,
(A) 3,931,566 shares are designated as Series A Preferred Stock, $0.01 par value per share, of which none are issued and outstanding as of the date of the Initial Merger Agreement;
(B) 3,931,566 shares are designated as
Series A-1 preferred stock, $0.01 par value per share, of which 2,553,849 shares are issued and outstanding as of the date of the Initial Merger Agreement; (C) 4,876,820 are
designated as shares of Series B Preferred Stock, $0.01 par value per share, of which none are issued and outstanding as of the date of the Initial Merger Agreement; (D) 4,876,820 are
designated as shares of Series B-1 Preferred Stock, $0.01 par value per share, of which 2,989,188 shares are issued and outstanding as of the date of the Initial Merger Agreement;
(E) 2,486,338 are designated as shares of Series C Preferred Stock, $0.01 par value per share, of which none are issued and outstanding as of the date of the Initial Merger Agreement;
(F) 2,486,338 are designated as shares of Series C-1 Preferred Stock, $0.01 par value per share, of which 2,404,371 are issued and outstanding as of the date of the Initial
Merger Agreement; (G) 886,183 shares of Series D Preferred Stock, $0.01 par value per share, of which none are issued and outstanding as of the date of the Initial Merger Agreement;
(H) 886,183 shares of Series D-1 Preferred Stock, $0.01 par value per share, of which 539,381 are issued and outstanding as of the date of the Initial Merger Agreement;
(I) 8,962,631 shares of Series E Preferred Stock, $0.01 par value per share, of which none are issued and outstanding as of the date of the Initial Merger Agreement; (J) 8,962,631
shares of Series E-1 Preferred Stock, $0.01 par value per share, of which 8,539,503 are issued and outstanding as of the date of the Initial Merger Agreement; and
(K) 17,033,276 shares of Series F Preferred Stock, $0.01 par value per share, of which 16,925,645 are issued and outstanding as of the date of the Initial Merger Agreement. The capital
stock of the Company is held as of the date of the Initial Merger Agreementby the Persons and in the amount of shares as set forth in Section 3.4.1(a) of the Company Disclosure Letter. All
outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable and have been issued in compliance with applicable Laws and all requirements set
forth in contracts. There are no declared or accrued but unpaid dividends or distributions with respect to any shares of the capital stock of the Company. 

        Section 3.4.2    There are no Company Options other than those granted pursuant to the Company Stock Option Plans. Section 3.4.2
of the
Company Disclosure Letter sets forth for each outstanding Company Option, (a) the name of the holder of such option, (b) the number of shares of Company Common Stock issuable upon the
exercise of such option, (c) the exercise price of such option and (d) the plan under which such option was issued and if it is an "incentive stock option" within the meaning of
Section 422 of the Code. Section 3.4.2 of the Company Disclosure Letter sets forth for each outstanding Company warrant to purchase shares of capital stock of the Company, (i) the
name of the holder of such warrant, (ii) the number of shares of Company Common Stock issuable upon exercise of such warrant and (iii) the exercise price of such warrant. As of the date
of the Initial Merger Agreement, there are Company Options to acquire 3,317,623 shares of Common Stock pursuant to the Company Stock Option Plans outstanding and unexercised. Section 3.4.2 of
the Company Disclosure Letter accurately sets forth with respect to each share of Company Common Stock that are subject to repurchase rights or vesting or similar restrictions as of the date of the
Initial Merger Agreement ("Restricted Stock"): (A) the name of the holder of such shares of Restricted Stock; (B) the total number of shares of Restricted Stock 

9

 

that
remain subject to such repurchase rights or vesting or similar restrictions; (C) the date on which such shares of Restricted Stock were granted; (D) the vesting schedule and vesting
commencement date for such shares of Restricted Stock; (E) the purchase price per share of Restricted Stock; and (F) whether an election under Section 83(b) of the Code was timely
and accurately filed with respect to such shares of Restricted Stock. There are no options, warrants, calls, rights, phantom rights, commitments or agreements of any character to which the Company or
any of its Subsidiaries is a party or by which it is bound, relating to the issued or unissued capital stock of the Company or obligating the Company or any of its Subsidiaries to issue, deliver,
sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of capital stock of the Company or obligating the Company or any of its Subsidiaries to grant,
extend, accelerate the vesting of, change the price of, otherwise amend or enter into any such option, warrant, call, right, commitment or agreement. True, complete and correct copies of the plans
pursuant to which such Company Options, shares of Restricted Stock and warrants to purchase shares of capital stock of the Company have been issued have been provided to the Parent. The Company is not
a party to, and as of the date of the Initial Merger Agreement, to the Knowledge of the Company, there are no other voting trusts, proxies or other agreements or understandings with respect to the
voting interests of the Company. There are no agreements or arrangements pursuant to which the Company is or could be required to register shares of Company Common Stock or other securities under the
Securities Act. All shares of capital stock of the Company to be issued pursuant to the Company Options and warrants described in Section 3.4.2 of the Company Disclosure Letter will be granted
and issued, in compliance with all applicable Laws and all requirements set forth in applicable contracts. 

         Section 3.4.3    There are no preemptive rights or agreements, arrangements or understandings to issue preemptive rights with respect
to the
issuance or sale of shares of Company Common Stock to which the Company is a party or to which it is bound. 

 
 

           Section 3.5    Subsidiaries.     

         Section 3.5.1    Section 3.5.1 of the Company Disclosure Letter sets forth a true, complete and correct list of (a) all of
the
Company's Subsidiaries. All outstanding capital stock, membership or partnership interests or other equity based or equity-linked securities ("Capital Securities") of each such Subsidiary or other
voting securities of each Subsidiary of the Company are validly issued, fully paid and nonassessable and owned by the Company or a Subsidiary of the Company free and clear of any Lien with respect
thereto. No Subsidiary of the Company has issued any securities in violation of any options, warrants, calls, rights, convertible securities or other agreements or commitments of any character
obligating each Subsidiary to issue, transfer or sell any Capital Securities and there are no options, warrants, calls, rights or other securities, agreements or commitments of any character
obligating or committing either a Subsidiary of the Company or the Company to issue, deliver or sell shares of such Subsidiary's capital stock or debt securities, or obligating either a Subsidiary of
the Company or the Company to grant, extend or enter into any such option, warrant, call or other such right, agreement or commitment. 

        Section 3.5.2    Each Subsidiary of the Company (a) is duly incorporated or organized, validly existing and in good standing
under the
Laws of its jurisdiction of incorporation or organization, (b) is duly qualified or licensed as a foreign corporation, and is in good standing, in every jurisdiction in which its ownership of
property or the character of its business requires such qualification, except for those jurisdictions in which the failure to be so qualified or in good standing, individually or in the aggregate, has
not had and would not reasonably be expected to have, a Company Material Adverse Effect and (c) has the requisite corporate power and authority to own, operate and lease its property and assets
and conduct its business as it is now being conducted. The minute books, stock record books and other similar books and records of each 

10

 

such
Subsidiary are true, complete and correct in all material respects. No such Subsidiary is in violation of any material provision of its organizational documents. 

         Section 3.5.3    Other than those of the Subsidiaries of the Company described on Section 3.5.1 of the Company Disclosure Letter,
 the
Company does not hold or own, directly or indirectly, any securities, equity interests or rights in any other corporation, partnership, joint venture or other Person, and there are no outstanding
contractual obligations of the Company or any of its Subsidiaries to make any investment (in the form of a loan, capital contribution or otherwise) in, any other Person. 

 
 

           Section 3.6    No Violation.     Neither the execution and delivery of this Agreement by the Company
and of each Ancillary Agreement to which it is a party, the performance by the Company of its
obligations hereunder and thereunder, nor the consummation by the Company of the transactions contemplated hereby and thereby, will (a) assuming receipt of the Company Stockholder Approval,
contravene any provision of the certificate of incorporation or by-laws of the Company or any organizational documents or agreements of any of its Subsidiaries, (b) assuming
compliance with the matters referred to in Section 3.7, violate any Law or judgment applicable to the Company or any of its Subsidiaries, (c) result in the creation or imposition of any
Lien (other than Permitted Liens) on any of the property held by the Company or any of its Subsidiaries, or (d) assuming compliance with the matters referred to in Section 3.7, require
any consent or other action by any Person under, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or give rise to any right of
termination, change of control rights, cancellation, modification, enhancement of rights of third parties, revocation of grant of rights or assets, placement into or release from escrow of any assets
of the Company or any of its Subsidiaries or acceleration of any right or obligation of the Company or any of its Subsidiaries or a loss of any benefit to which the Company or any of its Subsidiaries
is entitled under any note, bond, mortgage, indenture, deed of trust, license, contract, lease, permit, franchise or other instrument or obligation to which the Company or any of its Subsidiaries is a
party or by which the Company any of its Subsidiaries or their respective properties or assets are bound or affected (including under any outstanding debt), except for as would not, individually or in
the aggregate, be reasonably expected to have a Company Material Adverse Effect or any notice or other action the absence of which, individually or in the aggregate, would not be reasonably expected
to have a Company Material Adverse Effect. As used herein, "Permitted Liens" means with respect to any Person (A) such imperfections of title, easements, encumbrances or restrictions which do
not materially impair the current use of such Person's or any of its Subsidiary's assets, (B) materialmen's, mechanics', carriers', workmen's, warehousemen's, repairmen's and other like Liens
arising in the ordinary course of business, or deposits to obtain the release of such Liens, (C) Liens for Taxes not yet due and payable, or being contested in good faith, and
(D) purchase money Liens incurred in the ordinary course of business. 

 
 

           Section 3.7    Approvals.     No consent, waiver, approval, order, authorization or declaration of,
filing or registration with, or notice to, any Governmental Authority or other Person is
required to be made, obtained or given by or with respect to the Company or any of its Subsidiaries in connection with the execution and delivery by the Company of this Agreement, the performance by
the Company of its obligations hereunder or the consummation by the Company of the transactions contemplated hereby, except for (a) such consents, waivers, approvals, orders, authorizations,
declarations, filings, registrations and notices, which if not obtained or made would not reasonably be expected to have have a Company Material Adverse Effect, (b) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware and (c) the Company Stockholder Approval. 

11

  

 
 

           Section 3.8    Financial Statements; No Undisclosed Liabilities.     

        Section 3.8.1    The Company has delivered to Parent true, complete and correct copies of the Company's (i) audited consolidated
balance
sheets as of December 31, 2003 and December 31, 2004, and audited consolidated statements of income and cash flows for the years ended December 31, 2002, 2003 and 2004 (the
"Annual Financial Statements") and (ii) an unaudited consolidated balance sheet of the Company (the "Balance Sheet") as of September 30, 2005 (the "Balance Sheet Date") and the related
unaudited consolidated statements of income and cash flows for the nine-month period then ended (together with the Balance Sheet, the "Unaudited Financial Information"). The Unaudited
Financial Information and the Annual Financial Statements are collectively referred to herein as the "Financial Statements." The Financial Statements have been prepared from, and in accordance with,
the information contained in the books and records of the Company, which have been regularly kept and maintained in accordance with the Company's normal and customary practices and applicable
accounting practices and fairly present, in all material respects, the financial condition of the Company as of the dates thereof and results of operations and cash flows for the periods referred to
therein, and have been prepared in accordance with GAAP, consistently applied throughout the periods indicated, except as otherwise stated therein or in the notes thereto and with respect to the
Unaudited Financial Information, which are subject to normal year-end adjustment (which will not be material) and do not include notes as required by GAAP. 

        Section 3.8.2    The Interim Unaudited Financial Information and the Annual Audited Financial Information delivered to Parent after
the date of
the Initial Merger Agreement pursuant to Section 5.19 will be prepared from, and in accordance with, the information contained in the books and records of the Company, which have been regularly
kept and maintained in accordance with the Company's normal and customary practices and applicable accounting practices and will fairly present, in all material respects, the consolidated financial
condition of the Company as of the dates thereof and results of operations and cash flows for the periods referred to therein, and will be prepared in accordance with GAAP, consistently applied
throughout the periods indicated, except that the Monthly Unaudited Financial Information is subject to normal year-end adjustment (which will not be material) and will not include notes
as required by GAAP. 

         Section 3.8.3    Since the Balance Sheet Date, neither the Company nor any of its Subsidiaries has incurred any material Liabilities
or
obligations (whether direct, indirect, accrued or contingent), except for Liabilities or obligations (a) incurred in the ordinary course of business and consistent with past practice, or
(b) shown, accrued or reserved against in the Financial Statements. 

        Section 3.8.4    The Company maintains internal control over financial reporting as that term is defined in Section 13a-15(f)
of the Exchange Act. 

 
 

           Section 3.9    Ordinary Course Operations.     Since the Balance Sheet Date, the Company has conducted
its business in the ordinary course, consistent with past practice, and the Company has not taken any of
the actions described in subparagraphs (a) through (v) of Section 5.1 except as permitted pursuant to Section 5.1. 

 
 

           Section 3.10    Leases of Personal and Real Property; Owned Real Property; Material Contracts; No Default.     

         Section 3.10.1    Section 3.10.1 of the Company Disclosure Letter sets forth a true, complete and correct list of each lease,
sublease,
license and other agreement, including all amendments, modifications or supplements with respect thereto, of personal property and equipment to which the Company or any of its Subsidiaries is a party
or by which the Company or any of its Subsidiaries or their respective properties or assets are bound that (a) provides for payments in excess of $100,000 per annum or (b) provides for
payments in excess of $75,000 per annum and 

12

 

has
a term remaining after the date of the Initial Merger Agreement in excess of three years that may not be terminated by the Company or any of its Subsidiaries within 90 days after notice
thereof (collectively, the "Personal Property Leases"). The Company has delivered to the Parent a true, complete and correct copy of each of the Personal Property Leases. 

         Section 3.10.2    Section 3.10.2 of the Company Disclosure Letter sets forth a true, complete and correct list of all leases,
subleases,
licenses and other agreements, including all amendments, modifications or supplements with respect thereto (collectively, the "Real Property Leases"), under which the Company or any Subsidiary uses or
occupies or has the right to use or occupy any real property that (a) provides for payments in excess of $100,000 per annum or (b) provides for payments in excess of $75,000 per annum
and has a term remaining after the date of the Initial Merger Agreement in excess of one year and that may not be terminated by the Company or any of its Subsidiaries within 90 days after
notice thereof (the land, buildings and other improvements covered by the Real Property Leases and any other rights of the tenant thereunder being herein called the "Leased Real Property"), including
the address of the premises demised under each Real Property Lease, the landlord, rent and use thereof. Neither the Company nor any Subsidiary has subleased any of the Leased Real Property or given
any third party any license or other right to occupy any portion of the Leased Real Property. Neither the operations of the Company and its Subsidiaries on the Leased Real Property nor, to the
Knowledge of
the Company, such Leased Real Property, including the improvements thereon, violate in any material respect any applicable building code, zoning requirement, or classification or statute relating to
the particular property or such operations. The Company has delivered to the Parent a true, complete and correct copy of each of the Real Property Leases, and (i) neither the Company nor any
Subsidiary has waived any term or condition thereof, and all material covenants to be performed by the Company or any Subsidiary thereunder prior to the Closing Date, or, to the Knowledge of the
Company, any other party to any Real Property Lease, have been performed in all material respects, (ii) the Company and any Subsidiary are current (and not late) with respect to all rental
payments due under any Real Property Lease, (iii) no security deposit or portion thereof deposited with respect to any Real Property Lease has been applied in respect of a breach or default
under any Real Property Lease which has not been redeposited in full and (iv) the Company and any Subsidiary have not collaterally assigned or granted any security interest in any Real Property
Lease or any interest therein. 

         Section 3.10.3    Neither the Company nor any Subsidiary (a) currently owns or ground leases any real property or (b) has
ever
owned or ground leased any real property. 

         Section 3.10.4    Section 3.10.4 of the Company Disclosure Letter sets forth a true, complete and correct list of all agreements
to which
the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective properties or assets are bound, of the following types: (a) any
contract involving an investment by the Company or any of its Subsidiaries in any partnership, limited liability company or joint venture; (b) any contract of the Company or any of its
Subsidiaries which involves a financing arrangement in excess of $100,000, other than purchase orders entered into in the ordinary course of business which contain customary terms and conditions;
(c) employment agreements with any Key Employee; (d) loan agreements, notes, mortgages, indentures, security agreements and other agreements and instruments relating to the borrowing of
money in excess of $100,000; (e) agreements with any Affiliate of the Company or its Subsidiaries; (f) any contract that places any material non-competition, exclusivity or
similar restriction relating to the geographical area of operations or scope or type of business of the Company or any of its Subsidiaries or any of their respective Affiliates; (g) any
contract relating to any acquisition or disposition of any capital stock or equity interest of the Company or any of its Subsidiaries; (h) contracts that require stated payments in excess of
$50,000 per annum; (i) contracts which as of the date of the Initial Merger Agreement, would constitute "material contracts" as such term is defined in Item 601(b)(10) of
Regulation S-K 

13

 

under
the Securities Act; and (j) contracts that would prohibit or materially delay the consummation of the Merger or any of the transactions contemplated by this Agreement or any Ancillary
Agreement to which the Company is a party (such contracts described in (a)-(j) above, the "Material Contracts"). The Company has delivered to the Parent
a true, complete and correct copy of each of the Material Contracts. 

         Section 3.10.5    Each Material Contract is in full force and effect and is legal, valid, binding and enforceable against the Company
or any of
its Subsidiaries party thereto, except as the same may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws now or hereafter in effect relating to creditors' rights generally and subject to general principles of equity. Neither
the Company or any of its Subsidiaries nor, to the Knowledge of the Company, any other party to any Material Contract is in material violation or default under any such agreement and, to the Knowledge
of the Company, no condition exists that with the passage of time or the giving of notice would cause such a violation of or default under any Material Contract. 

 
 

          Section 3.11    Intellectual Property Matters.     

         Section 3.11.1    Section 3.11 of the Company Disclosure Letter sets forth, for all of the following included in (or in the case
of
Software, covered by) the Company Owned Intellectual Property, a true, complete and correct list of all United States, state, foreign and international: (i) Patents (including, without
limitation, Patent applications) and any material invention disclosures for patent applications to be filed or under consideration for filing; (ii) Trademark registrations, applications and
material unregistered or common law Trademarks; (iii) Copyright registrations, applications and material unregistered copyrights; and (iv) material Software. In addition,
Section 3.11 of the Company Disclosure Letter sets forth, where applicable, (a) the jurisdiction in which each item of such Intellectual Property has been registered or issued or in
which an application for registration or issuance has been filed; (b) the named owner of such Intellectual Property (if other than the Company); and (c) the registrar or equivalent party
with whom such Intellectual Property is registered or by whom it was issued. 

         Section 3.11.2    Section 3.11 of the Company Disclosure Letter sets forth a true, complete and correct list of all License
Agreements
that are reasonably necessary for the conduct of the Company's business as it is currently conducted. The Company and its Subsidiaries are in material compliance with and have not materially breached
any term of any such License Agreements. To the Knowledge of the Company, all third Persons that are parties to such License Agreements are in material compliance with and have not materially breached
any material term of any such License Agreements. To the Knowledge of the Company, there are no disputes regarding the scope of such License Agreements, performance under such License Agreements, or
with respect to payments under such License Agreements. To the Knowledge of the Company, no third Person has possession of the Software that is reasonably necessary for the conduct of the Company's
business as it is currently conducted without a License Agreement. The Merger will not result in the termination or breach of any of such License Agreements or any material loss or change in the
rights or obligations of the Company, its Subsidiaries or any third Person that is a party to such License Agreements. 

         Section 3.11.3    The Company Owned Intellectual Property has been duly maintained, is valid and subsisting, in full force and effect,
 has not
been cancelled or abandoned, and has not expired. The Company has not granted to any third Person any exclusive right with respect to any of the Company Owned Intellectual Property. 

        Section 3.11.4    There is no pending or threatened claim against the Company or any Subsidiary (i) alleging that the Company,
any
Subsidiary, or Technology, infringes, misappropriates, dilutes or otherwise violates any Intellectual Property rights of any third Person, or (ii) challenging 

14

 

the
Company's rights relating to the Company Owned Intellectual Property and, to the Knowledge of the Company, there is no reasonable basis for a claim regarding any of the foregoing. 

        Section 3.11.5    Neither the Company nor any Subsidiary has brought or threatened a claim against any Person (i) alleging
infringement,
misappropriation, dilution or any other violation of the Company Owned Intellectual Property that is the subject of any License Agreement, or (ii) challenging any Person's ownership or use of,
or the validity, enforceability or registrability of the Company Owned Intellectual Property and, to the Knowledge of the Company, there is no reasonable basis for a claim regarding any of the
foregoing. 

         Section 3.11.6    The Company and all Subsidiaries have taken all reasonable and necessary measures to protect the Company Owned
Intellectual
Property and their rights therein. Such measures include but are not limited to, requiring its employees and third Persons having access to Trade Secrets included in such Company Owned Intellectual
Property to execute written agreements containing obligations of non-disclosure with respect to such Trade Secrets. To the Knowledge of the Company, none of the Company's or any
Subsidiaries' rights in any Company Owned Intellectual Property has been lost or is in jeopardy of being lost through failure to act by the Company or any of its Subsidiaries except where the Company
has made a reasonable business judgment not to protect such Intellectual Property. 

         Section 3.11.7    All Software that is reasonably necessary for the conduct of the Company's business as it is currently conducted
was developed
by either (i) employees of the Company within the scope of their employment or under obligation to assign all of their rights to the Company pursuant to a written agreement, or
(ii) agents, consultants, or independent contractors who have assigned or are obligated to assign all of their rights in such Software to the Company pursuant to a written agreement. Without
limiting the foregoing, all former and current employees, agents, consultants and independent contractors of the Company or any of its Subsidiaries who were or are members of management or who have
contributed or participated in the conception or development of Company Owned Intellectual Property or Technology that is reasonably necessary for the conduct of the Company's business as it is
currently conducted, or are or will be contributing to or participating in such conception or development, have assigned or otherwise transferred, or are obligated to assign or otherwise transfer
pursuant to a written agreement, to the Company all of their rights in any Company Owned Intellectual Property or such Technology. 

         Section 3.11.8    No Software or other material that is distributed as "free software," "open source software," or under a similar
licensing or
distribution model is incorporated into, combined with, or distributed in conjunction with any product of the Company or any of its Subsidiaries ("Incorporated Open Source Materials"). None of the
Incorporated Open Source Materials are licensed under terms that create, or purport to create, obligations for the Company or any of its Subsidiaries with respect to Company Owned Intellectual
Property or its or their Technology that is reasonably necessary for the conduct of the Company's business as it is currently conducted or that grant, or purport to grant, to any third Person, any
rights to such Intellectual Property or Technology or any immunities under such Intellectual Property (including but not limited to using any Incorporated Open Source Materials that require, as a
condition of use, modification and/or distribution, that other Software incorporated into, derived from or distributed with such Incorporated Open Source Materials be (i) disclosed or
distributed in source code form, (ii) disclosed for the purpose of making derivative works, or (iii) redistributable at no charge). 

        Section 3.11.9    No government funding, facilities of a university, college or other educational institution or research center was
used in the
development of any Company Owned Intellectual Property or Technology that is reasonably necessary for the conduct of the Company's business as it is currently conducted. 

15

 

 
 

           Section 3.12    Litigation.     Except with respect to matters relating to routine employment or the
provision of goods and services in the ordinary course of business where the amounts at issue
do not exceed $50,000 individually, (a) there is no Action pending or, to the Knowledge of the Company, threatened in writing against the Company, any of its Subsidiaries, or their respective
properties (tangible or intangible) or their respective Directors or corporate officers in their respective capacities as such or for which the Company or any Subsidiary is obligated to indemnify a
third party, (b) there is no investigation or other proceeding pending or, to the Knowledge of the Company, threatened in writing, against the Company, its Subsidiaries, their properties
(tangible or intangible) or their officers or Directors in their respective capacities as such or for which the Company or any Subsidiary is obligated to indemnify a third party, and (c) no
Governmental Authority has provided the Company with written notice challenging or questioning in any material respect the legal right of the Company or any Subsidiary to conduct its operations as
conducted at that time or as presently conducted. Neither the Company nor any of its Subsidiaries is subject to (i) any outstanding judgment, order, arbitration ruling or other finding or
decree of any Governmental Authority (or arbitral body) or (ii) any settlement or similar agreement or written arrangement with ongoing obligations relating to a dispute with any third party,
in each case other than matters relating to routine employment and the provisions of goods and services in the ordinary course of business where the amounts at issue do not exceed $100,000
individually or $1,000,000 in the aggregate. 

 
 
        Section 3.13    Compliance with Laws; Permits.     

         Section 3.13.1    The Company and each of its Subsidiaries is, and since January 1, 2002 has been, in compliance in all material
respects
with all Laws (other than Environmental Laws, which are addressed under Section 3.19) applicable thereto, including those applicable by virtue of a contractual relationship with a third party.
Neither the Company nor its Subsidiaries is in material violation of or in default under, and to the Knowledge of the Company, no event has occurred which, with the lapse of time or the giving of
notice or both, would result in the material violation of or default under, the terms of any judgment, order, settlement or decree of any Governmental Authority. None of the Company nor any of its
Subsidiaries is subject to reporting or registration requirements under the Exchange Act. 

         Section 3.13.2    Each of the Company and each Subsidiary is in possession of all material authorizations, licenses, permits,
certificates,
approvals and clearances of any Governmental Authority (other than Company Permits required under Environmental Laws, which are addressed under Section 3.19) necessary for the Company and each
Subsidiary to own, lease and operate its properties or to carry on its respective businesses substantially as it is being conducted as of the date of the Initial Merger Agreement (the "Company
Permits"), and, to the Knowledge of the Company, all such Company Permits are valid and in full force and effect. 

 
 
        Section 3.14    Taxes     

         Section 3.14.1    The Company and its Subsidiaries have duly and timely filed (or there has been filed on their behalf) with the
appropriate
Governmental Authorities all Tax Returns (including all relevant elections associated with those Tax Returns) required to be filed by them or with respect to their income, properties or operations,
and all such Tax Returns are true, complete and correct in all material respects. All Taxes of the Company and its Subsidiaries, whether or not shown to be due on such Tax Returns, have been timely
paid in full. 

         Section 3.14.2    The Company and its Subsidiaries have each, in accordance with all applicable Laws, withheld and timely paid to the
appropriate
Governmental Authority all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, shareholder or other Person. 

        Section 3.14.3    There are no Liens for Taxes upon the assets or properties of the Company or any of its Subsidiaries except for
(a) statutory Liens for current Taxes not yet due and (b) Liens for 

16

 

Taxes
being contested in good faith (to the extent that such Liens are set forth on Section 3.14.3 of the Company Disclosure Letter); 

        Section 3.14.4    Neither the Company nor any of its Subsidiaries has requested any extension of time within which to file any Tax
Return in
respect of any taxable year which has not since been filed, and no outstanding waivers or comparable consents regarding the application of the statute of limitations with respect to any Taxes or Tax
Returns has been given by or on behalf of the Company or any of its Subsidiaries that are still in effect other than those that arise by filing a Tax Return by the extended due date; 

         Section 3.14.5    There is no audit, action, suit, proceeding or investigation now pending, or to the Knowledge of the Company or its
Subsidiaries, threatened with regard to any Tax or Tax Returns of the Company or it Subsidiaries; nor has the Company or any of its Subsidiaries received written notice to the effect that, and neither
the Company nor its Subsidiaries has Knowledge that, any Governmental Authority intends to conduct such an audit or investigation; 

         Section 3.14.6    All Tax deficiencies which have been claimed, proposed or asserted against the Company or any of its Subsidiaries
by any
Governmental Authority have been fully paid or are being contested in good faith by appropriate proceedings, are adequately reserved for on the Financial Statements and are described on
Section 3.14.6 of the Company Disclosure Letter; 

        Section 3.14.7    Neither the Company nor any of its Subsidiaries (a) has agreed, has proposed or is required to make any
adjustments
under Section 481(a) of the Code, by reason of any voluntary or involuntary change in accounting method (nor has any Governmental Authority proposed any such adjustment or change of accounting
method); (b) has made an election, or is required, to treat any of its assets as tax-exempt bond financed property or tax-exempt use property under Section 168 of
the Code (c) has filed a consent pursuant to former Section 341(f) of the Code for or agreed to have former Section 341(f) of the Code applied to the disposition of any asset;
(d) has any assets that secures any debt the interest on which is tax exempt under Section 103(a) of the Code; or (d) made any of the foregoing elections or is required to apply
any of the foregoing rules under any comparable foreign, state or local Tax provision; 

         Section 3.14.8    No power of attorney has been granted by or with respect to the Company or any of its Subsidiaries with respect to
any matter
relating to Taxes that is still in effect; 

         Section 3.14.9    Neither the Company nor any of its Subsidiaries is a party to any advance pricing agreement or closing agreement
with any
Governmental Authority that would be binding on the Company or any of its Subsidiaries after Closing. Neither the Company nor any of its Subsidiaries is subject to any private letter ruling of the
Internal Revenue Service or comparable rulings of other Governmental Authorities that would be binding on the Company or any of its Subsidiaries after Closing and there are no outstanding requests for
such rulings from a Governmental Authority. 

         Section 3.14.10    Neither the Company nor any of its Subsidiaries is a party to, is bound by, or has any obligation under, any Tax
sharing, Tax
indemnification or tax allocation or other similar contract or arrangement; 

        Section 3.14.11    The Company has previously delivered or made available to the Parent true, complete and correct copies of
(a) all audit
reports, letter rulings, technical advice memoranda and similar documents issued by a Governmental Authority relating to the United States federal, state, local or foreign income Taxes due from or
with respect to the Company or any of its Subsidiaries and (b) all United States federal income Tax Returns, and state income Tax Returns filed by the Company or any of its Subsidiaries (or, in
each case, on its behalf) for tax periods ending on or after December 31, 2001; 

17

 

         Section 3.14.12    Neither the Company nor any Subsidiary (i) has ever been a member of an affiliated group of corporations
within the
meaning of Section 1504 of the Code other than the group of which the common parent is the Company and (ii) has any liability for the Taxes of any person as defined in
Section 7701(a)(1) of the Code (other than the Company or any Subsidiary), under Treas. Reg § 1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract or otherwise. 

         Section 3.14.13    No written claim has been made within the past five years in a jurisdiction where the Company or any Subsidiary
does not file
Tax Returns to the effect that the Company or any Subsidiary is or may be subject to taxation by that jurisdiction; 

         Section 3.14.14    The Company has not been a United States real property holding corporation within the meaning of Section 897
(c)(2) of
the Code during the applicable period described in Section 897(c)(1)(A)(ii) of the Code. 

         Section 3.14.15    Neither the Company nor any of its Subsidiaries has distributed the stock of any corporation in a transaction
intending to
satisfy the requirements of Section 355 of the Code, and no stock of the Company or any of its Subsidiaries has been distributed in a transaction intending to satisfy the requirements of
Section 355 of the Code. 

         Section 3.14.16    Neither the Company nor any of its Subsidiaries shall be required to include in a taxable period ending after the
Closing Date
taxable income attributable to income of the Company or any Subsidiary that accrued in a prior taxable period but was not recognized in such prior taxable period as a result of (i) the
installment method of accounting, (ii) the long-term contract method of accounting, (iii) a "closing agreement" as described in Section 7121 of the Code (or any
provision of any foreign, state or local Tax law having similar effect), or (iv) Section 481 of the Code (or any provision of any foreign, state or local Tax law having similar effect). 

         Section 3.14.17    Neither the Company nor any of its Subsidiaries has entered into any transaction that is a "reportable
transaction" (as
defined in Treas. Reg. § 1.6011-4, as modified by Rev. Proc. 2004-68, Rev. Proc. 2004-67, Rev. Proc. 2004-66, Rev. Proc. 2004-65
and Rev. Proc. 2004-45). 

 
 

           Section 3.15    Insurance.     Section 3.15 of the Company Disclosure Letter sets forth a true,
complete and correct list of all material insurance policies or binders maintained by or
for the benefit of the Company, its Subsidiaries and its Directors, officers, employees or agents. The Company has delivered or made available to the Parent true, complete and correct copies of such
policies and binders. (a) All such policies or binders are in full force and effect and no premiums due and payable thereon are delinquent, (b) there are no pending material claims
against such insurance policies or binders by the Company or any Subsidiary as to which the insurers have denied Liability, (c) the Company and its Subsidiaries have complied in all material
respects with the provisions of such policies and (d) there exist no material claims under such insurance policies or binders that have not been properly and timely submitted by the Company or
any Subsidiary to its insurers. The insurance coverage provided by such policies or insurance will not terminate or lapse by reason of the transactions contemplated by this Agreement and, following
the Closing Date, the Company and its Subsidiaries will continue to be covered under such policies for events occurring prior to the Closing Date. No such policy provides for or is subject to any
currently enforceable retroactive rate or premium adjustment or loss sharing arrangement arising wholly or partially out of events arising prior to the date of the Initial Merger Agreement.
Section 3.15 of the Company Disclosure Letter sets forth a list of all claims (other than insurance claims made by or for the benefit of employees) in excess of $25,000 individually submitted
to insurers during the past 18-month period ending September 30, 2005. 

 
 

           Section 3.16    Employee Benefit Plans.     

         Section 3.16.1    Section 3.16.1 of the Company Disclosure Letter hereto contains a true, complete and correct list of each
deferred
compensation and each bonus or other incentive compensation, stock purchase, stock option and other equity or equity-based compensation plan, 

18

 

program,
agreement or arrangement; each severance or termination pay, medical, surgical, hospitalization, life insurance and other "welfare plan," fund or program (within the meaning of
Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")); each profit-sharing, stock bonus or other "pension plan," fund or program (within the meaning of
Section 3(2) of ERISA); each employment, "change in control", termination or severance agreement; and each other employee benefit plan, fund, program, agreement or arrangement, in each case,
that is, or was within the past six years, sponsored, maintained or contributed to or required to be contributed to by the Company or by any trade or business, whether or not incorporated (an "ERISA
Affiliate"), that together with the Company would be deemed a "single employer" within the meaning of Section 414(b), (c), (m) or (o) of the Code, or to which the Company or an
ERISA Affiliate is party, whether written or oral, for the benefit of any current or former employee, officer, director or consultant of the Company or any Subsidiary (the "Employee Plans"). Neither
the Company nor any Subsidiary or ERISA Affiliate has any commitment or formal plan, whether legally binding or not, to create any additional material employee benefit plan or modify or change, in any
material way, any existing Employee Plan that would affect any current or former employee, officer, director or consultant of the Company or any Subsidiary and no condition exists which would prevent
the Company or a Subsidiary from terminating any Employee Plan (other than an Employee Plan required to be maintained under applicable Law) without Liability to the Company or a Subsidiary (other than
for benefits accrued at the time of such termination), except to the extent limited by Law. 

         Section 3.16.2    With respect to each Employee Plan, the Company has heretofore provided to the Parent a current, true, complete and
correct
copy (or, to the extent no such copy exists, an accurate written description) thereof (including any amendments thereto) and, to the extent applicable: (i) any related trust agreement or other
funding instrument; (ii) the most recent IRS determination opinion or letter and any pending request for such determination letter; (iii) any summary plan descriptions or other reports
and summaries required under ERISA or the Code; (iv) any material written communication (or a description of any material oral communications) to participants concerning the Employee Plans;
(v) for the two most recent years for which such documents are available, the Form 5500 and attached schedules, audited financial statements, actuarial valuation reports and any
attorney's response to any auditor's request for information; and (vi) copies of all material documents and correspondence relating to any Employee Plan received from or provided to the IRS;
(vii) the most recent annual 401(k) and 401(m) nondiscrimination tests performed under the Code; (vii) all summaries furnished employees, officers and directors of the Company and its
Subsidiaries of all incentive compensation, other plans and fringe benefits for which a summary plan description is not required. Each Employee Plan intended to be "qualified" within the meaning of
Section 401(a), Section 401(k), Section 401(m) or Section 4975(e)(7) of the Code has been determined to be "qualified" by the Internal Revenue Service
and has received a favorable determination letter or opinion letters, as applicable, as to its tax qualified status and the trusts maintained thereunder are exempt from taxation under
Section 501(a) of the Code and no event has occurred or circumstance exists that would reasonably be expected to affect such qualified status. No Employee Plan is a voluntary employees'
beneficiary association under Section 501(c)(9) of the Code. 

         Section 3.16.3    Neither the Company nor any ERISA Affiliate sponsors, maintains, contributes to or has an obligation to contribute
to, or has
at any time within the last six years sponsored, maintained, contributed to or had an obligation to contribute to, any "multiemployer plan," as such term is defined in Section 3(37) or
Section 4001(a)(3) of ERISA or comparable provisions of any other applicable Law or any pension plan (as defined in Section 3(2) of ERISA) subject to Section 302 or Title IV of
ERISA or Section 412 of the Code. 

         Section 3.16.4    Each Employee Plan has been operated and administered in all material respects in accordance with its terms and
applicable Law,
including, but not limited to, ERISA and the Code, and all contributions required to be made under the terms of any of the Employee Plans as of the date of the Initial Merger Agreement have been
timely made or, if not yet due, have been properly reflected on the Financial Statements except for any failure to do so which would not result in any material Liability to the Company or an ERISA
Affiliate. 

19

  

         Section 3.16.5    No Employee Plan provides medical, surgical, hospitalization, death or similar benefits (whether or not insured)
for employees
or former employees of the Company or any Subsidiary for periods extending beyond their retirement or other termination of service, other than coverage mandated by applicable statute. 

         Section 3.16.6    The consummation of the transactions contemplated by this Agreement will not, either alone or in combination with
another
event, (a) entitle any current or former employee, director, officer or consultant of the Company or any Subsidiary to severance pay, unemployment compensation, loan forgiveness or any other
payment, (b) accelerate the time of payment or vesting, or increase the amount of compensation or benefits due any such employee, director, officer or consultant, including under Employee Plan
or (c) prevent the Company or any Subsidiary from amending or terminating any Employee Plan. 

         Section 3.16.7    There are no pending or, to the Knowledge of the Company, threatened or anticipated claims by or on behalf of any
Employee Plan
or against any ERISA Affiliate, by any employee or beneficiary covered under any such Employee Plan with respect to such plan, or otherwise involving any such Employee Plan, including any audit or
inquiry by the IRS or United States Department of Labor (other than routine claims for benefits). 

        Section 3.16.8    Each Employee Plan that is subject to Section 409A of the Code has been administered, in all material respects,
in good
faith compliance with Section 409A of the Code and Internal Revenue Service Notice 2005-1. 

         Section 3.16.9    Neither the Company nor any of its Subsidiaries sponsors, contributes to or has any liability with respect to any
employee
benefit plan, program or arrangement that provides or provided benefits to employees who perform or performed services for the Company or any of its Subsidiaries outside of the United States. 

        Section 3.16.10    There is no stock bonus, pension, profit sharing, annuity or deferred compensation agreement, contract, plan or
arrangement to
which the Company or any of its Subsidiaries is a party
that may result, separately or in the aggregate, in the payment of any amount by the Company or its Subsidiaries that is not deductible under Section 404 of the Code. There is no agreement,
contract, plan or arrangement to which the Company or any of its Subsidiaries is a party or that may be an "excess parachute payment" within the meaning of Section 280G of the Code and no
action by the Company or any Subsidiary, whether pursuant to this Agreement or otherwise shall result in the making of any such payment. 

 
 

          Section 3.17    Employees     

         Section 3.17.1    There is no, nor has there been at any time during the last five (5) years: 

        (a)   collective
bargaining agreement or any other agreement, whether in writing or otherwise, with any labor organization, union, group or association applicable to the
employees of the Company or any of its Subsidiaries; 

        (b)   unfair
labor practice complaint pending or, to the Knowledge of the Company, threatened against the Company or its Subsidiaries before the National Labor Relations Board
or any other federal, state local or foreign agency; 

        (c)   pending
or, to the Knowledge of the Company, threatened or affecting the Company or its Subsidiaries, strike, slow-down, work stoppage, lockout or other
collective labor Action or dispute by or with respect to any employees of the Company or any Subsidiary; or 

        (d)   pending
or, to the Knowledge of the Company, threatened representation question or union or labor organizing activities with respect to employees of the Company or any 

20

 

Subsidiary
nor is the Company or its Subsidiaries subject to any legal duty to bargain with any labor organization on behalf of any employee of the Company or any Subsidiary. 

        Section 3.17.2    During the past three years, neither the Company nor any of its Subsidiaries have effectuated (i) a "plant
closing" (as
defined in the Worker Adjustment and Retraining Notification Act, the "WARN Act") affecting any site of employment or one or more facilities or operating units within
any site of employment or facility of the Company or its Subsidiaries; or (ii) a "mass layoff" (as defined in the WARN Act) affecting any site of employment or facility of the Company or its
Subsidiaries; nor has the Company or its Subsidiaries engaged in layoffs or employment terminations sufficient in number to trigger application of any similar state, local or foreign law. The
employees of the Company or its Subsidiaries have not suffered an "employment loss" (as defined in the WARN Act) since three months prior to, and including the date of the Initial Merger Agreement. 

         Section 3.17.3    The Company and its Subsidiaries do not, formally or informally, have a custom or practice of paying ex-gratia
severance payments to employees. 

         Section 3.17.4    Each of the Company and each of its Subsidiaries is in compliance in all material respects with all applicable Laws
respecting
labor, employment, payment and termination of labor, fair employment practices, terms and conditions of employment, workers' compensation, nondiscrimination, immigration, benefits, collective
bargaining, occupational safety, plant closings, wages and hours and the payment of social security and similar taxes. To the Company's Knowledge, no present or former employee, director, consultant
or officer of the Company or any of its Subsidiaries is in any material respect in violation of any term of any employment contract, non-disclosure agreement, non-competition
agreement, or any restrictive covenant to a former employer relating to the right of any such employee to be employed by the Company or such Subsidiary because of the nature of the business conducted
or presently proposed to be conducted by it or to the use of trade secrets or proprietary information of others. 

        Section 3.17.5    The Company has identified in Section 3.17 of the Company Disclosure Letter and has made available to Parent
true and
complete copies of (a) all agreements (including amendments thereto) with directors, officers or employees of or consultants to the Company or any of its Subsidiaries committing the Company or
any of its Subsidiaries to make severance payments in the event of termination or additional bonus payments upon the completion of the Merger and (b) all written severance programs and policies
of the Company and each of its Subsidiaries with or relating to its employees. 

 
 

           Section 3.18    Personal Property; Assets.     Section 3.18 of the Company Disclosure Letter sets
forth a true, complete and correct list of all equipment and fixtures having a book value in excess of
$25,000 (a) purchased by the Company and its Subsidiaries since the Balance Sheet Date, or (b) owned by third Persons, including any customers of the Company and its Subsidiaries, and
used by the Company and its Subsidiaries in their business other than pursuant to Personal Property Leases. The Company and its Subsidiaries have good and marketable title to, or a valid leasehold
interest in or right to use by license or otherwise, the properties and assets used by it on or immediately prior to the date of the Initial Merger Agreement (collectively, the "Assets"), free and
clear of all Liens, except for Permitted Liens. The Assets include or will include as of the Closing Date, without limitation, all personal property, both tangible and intangible (including all
Company Owned Intellectual Property and all Intellectual Property used by the Company and its Subsidiaries pursuant to License Agreements), necessary to conduct the business of the Company and its
Subsidiaries in all material respects as it is now being conducted. 

21

 

 
 

           Section 3.19    Environmental Matters.     

        Section 3.19.1    The Company and its Subsidiaries are, and at all times have been, in material compliance with all applicable
Environmental Laws
(which compliance includes, but is not limited to, the possession by the Company and its Subsidiaries of all permits and other governmental authorizations required under applicable Environmental Laws,
and compliance with the terms and conditions thereof). Neither the Company nor its Subsidiaries has received any written communication alleging that the Company or its Subsidiaries is not in such
material compliance, and there are no past or present Actions, activities, circumstances conditions, events or incidents that may prevent or interfere with such material compliance in the future. All
material permits and other governmental authorizations currently held by the Company and its Subsidiaries pursuant to applicable Environmental Laws are identified in Section 3.19.1 of the
Company Disclosure Letter. 

         Section 3.19.2    There is no material Environmental Claim pending or, to the Knowledge of the Company, threatened against the
Company or its
Subsidiaries or, to the Knowledge of the Company, against any Person whose Liability for any Environmental Claim the Company or its Subsidiaries has or may have retained or assumed either
contractually or by operation of Law. 

        Section 3.19.3    There are no past or present Actions, activities, circumstances, conditions, events or incidents, including, without
limitation, the Release, threatened Release or presence of any Hazardous
Material that reasonably would be expected to form the basis of a material Environmental Claim against the Company, or to the Knowledge of the Company, against any Person whose Liability for any
Environmental Claim the Company has or may have retained or assumed either contractually or by operation of Law. 

 
 

           Section 3.20    Fees.     There is no investment banker, broker, finder, intermediary or other Person
(other than lawyers and accountants) entitled to any brokerage, finder's or any other
fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company or any of its Subsidiaries. 

 
 

           Section 3.21    Related-Party Transactions.     Other than advances to employees in the ordinary course
for travel and similar reimbursable expenses consistent with Company policy, no Key Employee, officer or
Director of the Company or any Subsidiary of the Company or member of his or her immediate family is currently indebted to the Company or any Subsidiary of the Company. To the Knowledge of the
Company, as of the date of the Initial Merger Agreement none of such Persons has any direct or indirect ownership interest in any firm or corporation with which the Company or any Subsidiary of the
Company is affiliated or with which the Company or any Subsidiary of the Company has a business relationship, or any firm or corporation that competes with the Company or any Subsidiary of the
Company. No Key Employee, officer or Director of the Company or any Subsidiary and no member of the immediate family of any Key Employee, officer or Director of the Company or any Subsidiary of the
Company is directly or indirectly interested in any Material Contract with the Company or any Subsidiary of the Company or has or claims to have any interest in the Intellectual Property of the
Company and its Subsidiaries. 

 
 

          Section 3.22    Acquisitions.     Section 3.22 of the Company Disclosure Letter sets forth each
acquisition, by means of asset purchase, merger, consolidation or other similar transaction,
of a Person or business by any of the Company or its Subsidiaries (each, an "Acquisition") since January 1, 2002. 

 
 

           Section 3.23    Proxy Statement and Registration Statement.     The Proxy Statement and Registration
Statement, and any amendments or supplements thereto, will not, at (a) the time the Registration Statement is declared
effective, (b) the time the Proxy Statement (or any amendment thereof or supplement thereto) is first mailed to the stockholders of the Parent, (c) the time of the Parent Stockholders'
Meeting, and (d) the Effective Time, contain any untrue statement of a material fact based upon information furnished to the Parent by the Company or omit to state any material fact regarding
the Company required to be stated therein or necessary in order to make the statements 

22

 

made
therein, in light of the circumstances under which they were made, not misleading due to the Company's failure to disclose such material fact to Parent. 

 
 

          Section 3.24    Tax Treatment.     None of the Company nor any of its Subsidiaries has taken or agreed
to take any action that is reasonably likely to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code. Neither the Company, nor any of its Subsidiaries is aware of any fact, agreement, plan or other circumstance that is reasonably
likely to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code. 

 
 

           Section 3.25    Vote Required.     The Company Stockholder Approval is the only vote of the holders of
any class or series of capital stock or other equity interests of the Company necessary to
approve the Merger. 

 
 

           Section 3.26    Opinion of Financial Advisor.     The Company has received the opinion of Revolution
Partners, dated December 14, 2007, to the effect that, as of such date, the Merger Consideration is fair
from a financial point of view to the stockholders of the Company. 

 
 

           Section 3.27    Disclosure.     No representation or warranty by the Company contained in this
Agreement, and no statement of the Company contained in the Company Disclosure Letter or any other
document, certificate or other instrument delivered or to be delivered by or on behalf of the Company hereunder, contains or will contain any untrue statement of a material fact or omits or will omit
to state any material fact necessary, in light of the circumstances under which it was or will be made, in order to make the statements herein or therein, not misleading. 

 
 

           Section 3.28    Reserved     

 
 

           Section 3.29    Releases.     The Company has received the Company Releases and has provided executed
copies thereof to Parent. The Company Releases are in full force and effect and are legal,
valid, binding and enforceable by the Company and, as of and after the Effective Time, by Parent, against the signatories thereof. 

 
 

Article 4.
  Representations and Warranties of Parent and Merger Sub    
    

        Parent and Merger Sub hereby jointly and severally represent and warrant to the Company that, except as set forth in the Disclosure Letter furnished by Parent to
the Company simultaneously with the execution hereof (the "Parent Disclosure Letter"), the statements contained in this Article 4 are true, complete and correct as of the date of the Initial
Merger Agreement, except to the extent such representations and warranties are specifically made as of a particular date (in which case such representations and warranties are true, complete and
correct as of such date). 

 
 

           Section 4.1    Organization and Good Standing.     Each of Parent and Merger Sub is a corporation duly
incorporated, validly existing and in good standing under the laws of the State of Delaware and has the
requisite corporate power and authority to own, operate and lease its properties and assets and to conduct its business as it is now being conducted. Each of Parent and Merger Sub is duly qualified or
licensed to do business as a corporation, and is in good standing as a corporation, in every jurisdiction in which its ownership of property or the character of its business requires such
qualification, except for those jurisdictions in which the failure to be so qualified or in good standing, individually or in the aggregate, has not had and would not reasonably be expected to have, a
Parent Material Adverse Effect. Section 4.1 of the Parent Disclosure Letter sets forth a true, complete and correct list of all foreign jurisdictions in which each of Parent and Merger Sub is
so qualified or licensed and in good standing. 

        As
used herein, the term "Parent Material Adverse Effect" shall mean: (a) any event, circumstance or occurrence that has resulted in, or would reasonably be expected to result in,
a material adverse 

23

 

effect
on the business, results of operations, tangible assets, and financial condition of Parent and its Subsidiaries, taken as a whole; or (b) any event, circumstance or occurrence that
prevents or materially delays, or would reasonably be expected to prevent or materially delay, the ability of Parent to consummate the Merger; provided,  however, that in no event shall any of the following be a Parent Material Adverse Effect, or be taken into account in the determination of whether a
Parent Material Adverse Effect has occurred: (A) any change resulting from conditions affecting any of the industries in which Parent operates or from changes in general business or economic
conditions; (B) any change resulting from the announcement or pendency of the transactions contemplated by this Agreement; (C) any change resulting from the compliance by Parent with the
terms of, or the taking of any action by Parent contemplated or permitted by, this Agreement; or (D) the receipt by Parent of notice of cancellation or non-renewal from any Parent
customer except to the extent that such customer accounted for more than the Trigger Amount of Parent revenues for the twelve months ended September 30, 2005 (in each case determined in
accordance with GAAP, except that no Parent customer shall be deemed to have cancelled or not renewed if such customer's business is placed with the Company). The "Trigger Amount" shall equal the sum
of $7 million plus (y) a mutually agreed upon reasonable estimate of the annual revenues expected to be generated under any new Parent customer accounts won after September 30,
2005 and (z) a mutually agreed upon reasonable estimate of the annual revenues expected to be generated as the result of any expansions under Parent customer accounts existing as of
September 30, 2005. 

 
 

           Section 4.2    Certificate of Incorporation and By-laws; Corporate Books and Records.     The copies of
Parent's Restated Certificate of Incorporation, as amended (the "Parent Certificate") and Restated By-laws, as amended (the "Parent
By-laws") that are listed as exhibits to Parent's Form 10-K for the year ended December 31, 2004 are complete and correct copies thereof as in effect on the date
of the Initial Merger Agreement, and as of the date of the Initial Merger Agreement, there has been no amendment thereto since such date. Parent is not in violation of any of the provisions of the
Parent Certificate or Parent By-laws. The certificate of incorporation and by-laws of Merger Sub are in full force and effect. Merger Sub is not in violation of any material
provision of its certificate of incorporation or by-laws. 

 
 

           Section 4.3    Corporate Power and Authority.     Each of Parent and Merger Sub has all necessary
corporate power and authority to execute and deliver this Agreement and each Ancillary Agreement to which it is
party. Subject to obtaining the Parent Stockholder Approval, the execution and delivery of this Agreement and each Ancillary Agreement to which it is a party by each of Parent and Merger Sub, the
performance of its respective obligations hereunder and thereunder and the consummation by Parent and Merger Sub, as applicable, of the transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action (including approval by Parent as sole stockholder of Merger Sub), and no other corporate proceedings on the part of Parent and Merger Sub and no
other stockholder votes are necessary to authorize this Agreement or any such Ancillary Agreement or to consummate the transactions contemplated hereby or thereby. This Agreement has been duly
executed and delivered by Parent and Merger Sub and constitutes, and each Ancillary Agreement to which Parent or Merger Sub is a party when executed will constitute, the legal, valid and binding
obligations of Parent and Merger Sub, as applicable, enforceable against it in accordance with their terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar Laws now or hereafter in effect relating to creditors' rights generally and subject to general principles of equity. The Parent Board has unanimously approved this Agreement and each Ancillary
Agreement to which Parent is a party, declared advisable the transactions contemplated hereby and thereby and has directed that the Parent Stockholder Meeting be called to obtain the Parent
Stockholder Approval. 

 
 

          Section 4.4    Capitalization.     The authorized capital stock of Parent consists of 200,000,000 shares
of Parent Common Stock and 15,000,000 shares of Parent Preferred Stock. As of
(a) November 30, 2005, 74,219,397 shares of Parent Common Stock (other than treasury shares) were issued and 

24

 

outstanding,
all of which shares of Parent Common Stock were, and all shares of Parent Common Stock issued and outstanding as of the date of the Initial Merger Agreement are, duly authorized, validly
issued and fully paid, nonassessable and free of preemptive rights, and have been issued in compliance with applicable Laws and all requirements set forth in contracts, (b) as of the date of
the Initial Merger Agreement, no shares of Parent Common Stock were held in the treasury of Parent or any of its Subsidiaries, (c) as of the date of the Initial Merger Agreement, 3,261,001
shares of Parent Common Stock were issuable (and such number was reserved for issuance) upon exercise of options to purchase Parent Common Stock ("Parent Options") outstanding, and (d) as of
the date of the Initial Merger Agreement, no shares of Parent Preferred Stock were issued and outstanding. As of the date of the Initial Merger Agreement, except for (i) Parent Options to
purchase not more than 3,261,001 shares of Parent Common Stock pursuant to Parent Stock Option Plans outstanding and unexercised, and (ii) warrants to purchase 7,075,808 shares of Parent Common
Stock, there were no options, warrants or other rights to purchase capital stock of Parent, or securities convertible into or exchangeable for such capital stock or obligating Parent to issue or sell
any shares of capital stock, or securities convertible into or exchangeable for such capital stock of Parent. There are no Parent Options other than those issued pursuant to Parent Stock Option Plans.
True, correct, and complete copies of the plans pursuant to which Parent Options, shares of Parent Restricted Stock and warrants to purchase shares of capital stock of Parent have been issued have
been provided or made available to the Company. The shares of Parent Common Stock to be issued in connection with the Merger, when issued as contemplated herein, will be duly authorized, validly
issued, fully paid and nonassessable and will not be issued in violation of any applicable Laws or requirements set forth in applicable contracts. 

 
 

           Section 4.5    Subsidiaries.     

         Section 4.5.1    Section 4.5.1 of the Parent Disclosure Letter sets forth a true, complete and correct list of all of Parent's
Subsidiaries. Each Subsidiary of Parent is (a) duly organized, validly existing and in good standing under the laws of its jurisdiction of formation and is qualified to do business as a foreign
entity in each jurisdiction in which qualification is required, except where failure to so qualify would not have a Parent Material Adverse Effect, and (b) has the requisite corporate power and
authority to own, operate and lease its property and assets and conduct its business as it is now being conducted. With respect to each Subsidiary of Parent, (i) Parent owns 100% of the
Subsidiary's capital stock free and clear of any Lien with respect thereto, (ii) all the issued and outstanding shares of such Subsidiary's capital stock have been duly authorized and validly
issued, are fully paid and nonassessable, have been issued in compliance with applicable federal and state securities laws, and were not issued in violation of or subject to any preemptive rights or
other rights to subscribe for or purchase securities, and (iii) there are no outstanding options to purchase, or any preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, or any contracts or commitments to issue or sell, shares of any such Subsidiary's capital stock. 

         Section 4.5.2    Parent does not hold or own, directly or indirectly, any securities, equity interests or rights in any other
corporation,
partnership, joint venture or other Person, and there are no outstanding contractual obligations of Parent or any Subsidiary of Parent to make any investment (in the form of a loan, capital
contribution or otherwise) in, any Subsidiary or other Person. 

 
 

          Section 4.6    No Conflict; Required Filings and Consents.     

         Section 4.6.1    Neither the execution and delivery of this Agreement and each Ancillary Agreement to which Parent or Merger Sub is a
party, the
performance thereof by Parent and Merger Sub, nor the consummation by Parent and Merger Sub of the transactions contemplated hereby and thereby will (a) assuming receipt of the Parent
Stockholder Approval, contravene any provision of the Certificate of Incorporation or By-laws of Parent or Merger Sub, (b) assuming compliance with the matters referred to in
Section 4.6.2, violate any Law or judgment applicable to 

25

 

Parent
or Merger Sub or any other Subsidiary of Parent or by which any property or asset of Parent, Merger Sub or any of Parent's Subsidiaries is bound or affected, (c) result in the creation
or imposition of any Lien (other than Permitted Liens) on any of the property held by Parent or any of its Subsidiaries, or (d) assuming compliance with the matters referred to in
Section 4.6.2, require any consent or other action by any Person under, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or
give rise to any right of termination, change of control rights, cancellation, modification, enhancement of rights of third parties, revocation of grant of rights or assets, placement into or release
from escrow of any assets of Parent or any of its Subsidiaries or acceleration of any right or obligation of Parent or any of its Subsidiaries or a loss of any benefit to which Parent or any of its
Subsidiaries is entitled under any note, bond, mortgage, indenture, deed of trust, license, contract, lease, permit, franchise or other instrument or obligation to which Parent or any of its
Subsidiaries is a party or by which Parent any of its Subsidiaries or their respective properties or assets are bound or affected (including under any outstanding debt), except for as would not,
individually or in the aggregate, be reasonably expected to have a Parent Material Adverse Effect or any notice or other action the absence of which, individually or in the aggregate, would not be
reasonably expected to have a Parent Material Adverse Effect. 

         Section 4.6.2    No consent, waiver, approval, order, authorization or declaration of, filing or registration with, or notice to, any
Governmental Authority or other Person is required to be made, obtained or given by or with respect to Parent or Merger Sub in connection with the execution and delivery by Parent or Merger Sub, and,
after the Parent Stockholder Approval has been obtained, the performance by Parent or Merger Sub of their respective obligations hereunder or the consummation by Parent or Merger Sub of the
transactions contemplated hereby, except for (a) such consents, waivers, approvals, orders, authorizations, declarations, filings, registrations and notices, which if not obtained or made would
not have a Parent Material Adverse Effect, (b) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, (c) the Parent Stockholder Approval,
(d) as is required under the Exchange Act, the Securities Act, any applicable Blue Sky Laws, the rules and regulations of NASDAQ, and (e) the consent of JPMorgan Chase Bank N.A.,
Parent's senior lender. 

 
 

          Section 4.7    SEC Filings; Financial Statements.     

         Section 4.7.1    Parent has timely filed all registration statements, prospectuses, forms, reports and documents required to be filed
by it under
the Securities Act or the Exchange Act, as the case may be, during the past three years (collectively, the "Parent SEC Filings"). Each Parent SEC Filing (a) as of its
date complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and (b) did not, at the time they were filed, contain any untrue
statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which
they were made, not misleading. 

         Section 4.7.2    Each of the consolidated financial statements (including, in each case, any notes thereto) contained in the Parent
SEC Filings
was prepared in accordance with GAAP applied (except as may be indicated in the notes thereto and, in the case of unaudited quarterly financial statements, as permitted by Form 10-Q
under the Exchange Act) on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto), and each presented fairly the consolidated financial position of
Parent as of the respective dates thereof and for the respective periods indicated therein (subject, in the case of unaudited statements, to normal and recurring year-end adjustments,
which will not be material). The books and records of Parent have been, and are being, maintained in accordance with applicable legal and accounting requirements. 

         Section 4.7.3    The Interim Unaudited Financial Information and the Annual Audited Financial Information delivered to the Company
after the date
of the Initial Merger Agreement 

26

 

pursuant
to Section 5.19 will be prepared from, and in accordance with, the information contained in the books and records of Parent, which have been regularly kept and maintained in accordance
with Parent's normal and customary practices and applicable accounting practices and will fairly present, in all material respects, the consolidated financial condition of Parent as of the dates
thereof and results of operations and cash flows for the periods referred to therein, and will be prepared in accordance with GAAP, consistently applied throughout the periods indicated, except that
the Monthly Unaudited Financial Information is subject to normal year-end adjustment (which will not be material) and will not include notes as required by GAAP. 

        Section 4.7.4    Since the Parent's quarterly report on Form 10-Q for the quarter ended September 30, 2005, neither
Parent nor any of its Subsidiaries has incurred any material Liabilities or obligations (whether direct, indirect, accrued or contingent), except for Liabilities or obligations (a) incurred in
the ordinary course of business and consistent with past practice, or (b) shown, accrued or reserved against in the Parent SEC Filings. 

         Section 4.7.5    Parent is in compliance with Rule 13a-15 under the Exchange Act. 

 
 

          Section 4.8    Leases of Personal and Real Property; Owned Real Property; Scheduled Contracts; No Default.     

         Section 4.8.1    Section 4.8 of the Parent Disclosure Letter sets forth a true, complete and correct list of each lease,
sublease, license
and other agreement, including all amendments, modifications or supplements with respect thereto, of personal property and equipment to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries or their respective properties or assets are bound that (a) provides for payments in excess of $140,000 per annum or (ii) provides for
payments in excess of $100,000 per annum and has a term remaining after the date of the Initial Merger Agreement in excess of three years that may not be terminated by Parent or any of its
Subsidiaries within 90 days after notice thereof (collectively, the "Parent Personal Property Leases"). Parent has delivered to the Company a true, complete and correct copy of each of the
Parent Personal Property Leases. 

         Section 4.8.2    Section 4.8 of the Parent Disclosure Letter sets forth a true, complete and correct list of all leases,
subleases,
licenses and other agreements, including all amendments, modifications or supplements with respect thereto (collectively, the "Parent Real Property Leases"), under which Parent or any Subsidiary uses
or occupies or has the right to use or occupy any real property that (a) provides for payments in excess of $140,000 per annum or (b) provides for payments in excess of $100,000 per
annum and has a term remaining after the date of the Initial Merger Agreement in excess of one year and that may not be terminated by Parent or any of its Subsidiaries within 90 days after
notice thereof (the land, buildings and other improvements covered by the Parent Real Property Leases and any other rights of the tenant thereunder being herein called the "Parent Leased Real
Property"), including the address of the premises demised under each Parent Real Property Lease, the landlord, rent and use thereof. Neither Parent nor any Subsidiary has subleased any of the Parent
Leased Real Property or given any third party any license or other right to occupy any portion of the Parent Leased Real Property. Neither the operations of Parent and its Subsidiaries on the Parent
Leased Real Property nor, to the Knowledge of Parent, such Parent Leased Real Property, including the improvements thereon, violate in any material respect any applicable building code, zoning
requirement, or classification or statute relating to the particular property or such operations. Parent has delivered to the Company a true, complete and correct copy of each of the Parent Real
Property Leases, and (i) neither Parent nor any Subsidiary has waived any term or condition thereof, and all material covenants to be performed by Parent or any Subsidiary thereunder prior to
the Closing Date, or, to the Knowledge of Parent, any other party to any Parent Real Property Lease, have been performed in all material respects, (ii) Parent and any Subsidiary are current
(and not late) with respect to all rental payments due under any Parent Real Property Lease, (iii) no security deposit 

27

 

or
portion thereof deposited with respect to any Parent Real Property Lease has been applied in respect of a breach or default under any Parent Real Property Lease which has not been redeposited in
full and (iv) Parent and any Subsidiary have not collaterally assigned or granted any security interest in any Parent Real Property Lease or any interest therein. 

         Section 4.8.3    Neither Parent nor any Subsidiary (a) currently owns or ground leases any real property or (b) has ever
owned or
ground leased any real property. 

         Section 4.8.4    Section 4.8 of the Parent Disclosure Letter sets forth a true, complete and correct list of all agreements to
which
Parent or any of its Subsidiaries is a party or by which Parent or any of its Subsidiaries or any of their respective properties or assets are bound, of the following types: (a) any contract
involving an investment by Parent or any of its Subsidiaries in any partnership, limited liability company or joint venture; (b) any contract of Parent or any of its Subsidiaries which involves
a financing arrangement in excess of $140,000, other than purchase orders entered into in the ordinary course of business which contain customary terms and conditions; (c) employment agreements
with any Key Employee; (d) loan agreements, notes, mortgages, indentures, security agreements and other agreements and instruments relating to the borrowing of money in excess of $140,000;
(e) agreements with any Affiliate of Parent or its Subsidiaries; (f) any contract that places any material non-competition, exclusivity or similar restriction relating to the
geographical area of operations or scope or type of business of Parent or any of its Subsidiaries or any of their respective Affiliates; (g) any contract relating to any acquisition or
disposition of any capital stock or equity interest of Parent or any of its Subsidiaries; (h) contracts that require stated payments in excess of $70,000 per annum; (i) contracts which
as of the date of the Initial Merger Agreement, would constitute "material contracts" as such term is defined in Item 601(b)(10) of Regulation S-K under the Securities Act; and
(j) contracts that would prohibit or materially delay the consummation of the Merger or any of the transactions contemplated by this Agreement or any Ancillary Agreement to which Parent is a
party (such contracts described in (a)-(j) above, the "Scheduled Contracts"). Parent has delivered to the Company a true, complete and correct copy of
each of the Scheduled Contracts. 

        Section 4.8.5    Each Scheduled Contract is in full force and effect and is legal, valid, binding and enforceable against Parent or
any of its
Subsidiaries party thereto, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws now or hereafter in effect relating to creditors' rights generally
and subject to general principles of equity. Neither Parent or any of its Subsidiaries nor, to the Knowledge of Parent, any other party to any Scheduled Contract is in material violation or default
under any such agreement and, to the Knowledge of Parent, no condition exists that with the passage of time or the giving of notice would cause such a violation of or default under any Scheduled
Contract. 

 
 

           Section 4.9    Ordinary Course Operations.     Except as set forth in the Parent SEC Filings filed
through the date of the Initial Merger Agreement, since December 31, 2004, Parent has conducted its
business in the ordinary course, consistent with past practice, and Parent has not taken any of the actions set forth in subparagraphs (a) through (v) of Section 5.2 except as
permitted pursuant to Section 5.2. 

 
 

           Section 4.10    Litigation.     Except with respect to matters relating to routine employment or the
provision of goods and services in the ordinary course of business where the amounts at issue
do not exceed $50,000 individually, (a) there is no Action pending or, to the Knowledge of Parent, threatened in writing against Parent, any of its Subsidiaries, or their respective properties
(tangible or intangible) or their respective Directors or corporate officers in their respective capacities as such or for which Parent or any Subsidiary is obligated to indemnify a third party,
(b) there is no investigation or other proceeding pending or, to the Knowledge of Parent, threatened in writing, against Parent, its Subsidiaries, their properties (tangible or intangible) or
their officers or Directors in their respective capacities as such or for which Parent or any Subsidiary is obligated to indemnify a third party, and 

28

 

(c) no
Governmental Authority has provided Parent with written notice challenging or questioning in any material respect the legal right of Parent or any Subsidiary to conduct its operations as
conducted at that time or as presently conducted. Neither Parent nor any of its Subsidiaries is subject to (i) any outstanding judgment, order, arbitration ruling or other finding or decree of
any Governmental Authority (or arbitral body) or (ii) any settlement or similar agreement or written arrangement with ongoing obligations relating to a dispute with any third party, in each
case other than matters relating to routine employment and the provisions of goods and services in the ordinary course of business where the amounts at issue do not exceed $100,000 individually or
$1,000,000 in the aggregate. 

 
 

           Section 4.11    Compliance with Laws; Permits.     

        Section 4.11.1    Parent and each of its Subsidiaries is, and since January 1, 2002 has been, in compliance in all material
respects with
all Laws (other than Environmental Laws, which are addressed under Section 4.22) applicable thereto, including those applicable by virtue of a contractual relationship with a third party.
Neither Parent nor its Subsidiaries is in material violation of or in default under, and to the Knowledge of Parent, no event has occurred which, with the lapse of time or the giving of notice or
both, would result in the material violation of or default under, the terms of any judgment, order, settlement or decree of any Governmental Authority. 

        Section 4.11.2    Each of Parent and each Subsidiary is in possession of all material authorizations, licenses, permits, certificates,
approvals
and clearances of any Governmental Authority (other than Parent Permits required under Environmental Laws, which are addressed under Section 4.22) necessary for Parent and each Subsidiary to
own, lease and operate its properties or to carry on its respective businesses substantially as it is being conducted as of the date of the Initial Merger Agreement (the "Parent Permits"), and to the
Knowledge of Parent, all such Parent Permits are valid and in full force and effect. 

 
 

           Section 4.12    Disclosure Documents.     The Proxy Statement, the Registration Statement, and any
Other Filings, and any amendments or supplements thereto, do not, and will not, at (a) the time
the Registration Statement is declared effective, (b) the time the Proxy Statement (or any amendment thereof or supplement thereto) is first mailed to the stockholders of Parent, (c) the
time of the Parent Stockholders' Meeting and (d) the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The representations and warranties contained in this
Section 4.10 will not apply to statements or omissions included in the Proxy Statement or the Registration Statement, or any Other Filings based upon information furnished in writing to the
Parent or Merger Sub by the Company specifically for use therein. 

 
 

          Section 4.13    Intellectual Property Matters.     

         Section 4.13.1    Section 4.13 of the Parent Disclosure Letter sets forth, for all of the following included in (or in the case
of
Software, covered by) the Parent Owned Intellectual Property, a true, complete and correct list of all United States, state, foreign and international: (i) Patents (including, without
limitation, Patent applications) and any material invention disclosures for patent applications to be filed or under consideration for filing; (ii) Trademark registrations, applications and
material unregistered or common law Trademarks; (iii) Copyright registrations, applications and material unregistered copyrights; and (iv) material Software. In addition,
Section 4.12 of the Parent Disclosure Letter sets forth, where applicable, (a) the jurisdiction in which each item of such Intellectual Property has been registered or issued or in which
an application for registration or issuance has been filed; (b) the named owner of such Intellectual Property (if other than Parent); and (c) the registrar or equivalent party with whom
such Intellectual Property is registered or by whom it was issued. 

29

 

         Section 4.13.2    Section 4.13 of the Parent Disclosure Letter sets forth a true, complete and correct list of all License
Agreements that
are reasonably necessary for the conduct of the Parent's business as it is currently conducted. Parent and its Subsidiaries are in material compliance with and have not materially breached any term of
any such License Agreements. To the Knowledge of Parent, all third Persons that are parties to such License Agreements are in material compliance with and have not materially breached any material
term of any such License Agreements. To the Knowledge of Parent, there are no disputes regarding the scope of such License Agreements, performance under such License Agreements, or with respect to
payments under such License Agreements. To the Knowledge of Parent, no third Person has possession of the Software that is reasonably necessary for the conduct of the Parent's business as it is
currently conducted without a License Agreement. The Merger will not result in the termination or breach of any of such License Agreements or any material loss or change
in the rights or obligations of Parent, its Subsidiaries or any third Person that is a party to such License Agreements. 

         Section 4.13.3    The Parent Owned Intellectual Property has been duly maintained, is valid and subsisting, in full force and effect,
has not
been cancelled or abandoned, and has not expired. Parent has not granted to any third Person any exclusive right with respect to any of the Parent Owned Intellectual Property. 

         Section 4.13.4    There is no pending or threatened claim against Parent or any Subsidiary (i) alleging that Parent, any
Subsidiary, or
Technology, infringes, misappropriates, dilutes or otherwise violates any Intellectual Property rights of any third Person, or (ii) challenging the Parent's rights relating to the Parent Owned
Intellectual Property and, to the Knowledge of Parent, there is no reasonable basis for a claim regarding any of the foregoing. 

        Section 4.13.5    Neither Parent nor any Subsidiary has brought or threatened a claim against any Person (i) alleging
infringement,
misappropriation, dilution or any other violation of the Parent Owned Intellectual Property that is the subject of any License Agreement, or (ii) challenging any Person's ownership or use of,
or the validity, enforceability or registrability of the Parent Owned Intellectual Property and, to the Knowledge of Parent, there is no reasonable basis for a claim regarding any of the foregoing. 

         Section 4.13.6    Parent and all Subsidiaries have taken all reasonable and necessary measures to protect the Parent Owned
Intellectual Property
and their rights therein. Such measures include but are not limited to, requiring its employees and third Persons having access to Trade Secrets included in such Parent Owned Intellectual Property to
execute written agreements containing obligations of non-disclosure with respect to such Trade Secrets. To the Knowledge of Parent, none of Parent's or any Subsidiaries' rights in any
Parent Owned Intellectual Property has been lost or is in jeopardy of being lost through failure to act by Parent or any of its Subsidiaries except where Parent has made a reasonable business judgment
not to protect such Intellectual Property. 

         Section 4.13.7    All Software that is reasonably necessary for the conduct of the Parent's business as it is currently conducted was
developed
by either (i) employees of Parent within the scope of their employment or under obligation to assign all of their rights to Parent pursuant to a written agreement, or (ii) agents,
consultants, or independent contractors who have assigned or are obligated to assign all of their rights in such Software to Parent pursuant to a written agreement. Without limiting the foregoing, all
former and current employees, agents, consultants and independent contractors of Parent or any of its Subsidiaries who were or are members of management or who have contributed or participated in the
conception or development of Parent Owned Intellectual Property or Technology that is reasonably necessary for the conduct of the Parent's business as it is currently conducted, or are or will be
contributing to or participating in such conception or development, have assigned or
otherwise transferred, or are obligated to assign or otherwise transfer pursuant to a written agreement, to Parent all of their rights in any Parent Owned Intellectual Property or such Technology. 

30

  

         Section 4.13.8    No Software or other material that is distributed as "free software," "open source software," or under a similar
licensing or
distribution model is incorporated into, combined with, or distributed in conjunction with any product of Parent or any of its Subsidiaries ("Incorporated Open Source Materials"). None of the
Incorporated Open Source Materials are licensed under terms that create, or purport to create, obligations for Parent or any of its Subsidiaries with respect to Parent Owned Intellectual Property or
its or their Technology that is reasonably necessary for the conduct of the Parent's business as it is currently conducted or that grant, or purport to grant, to any third Person, any rights to such
Intellectual Property or Technology or any immunities under such Intellectual Property (including but not limited to using any Incorporated Open Source Materials that require, as a condition of use,
modification and/or distribution, that other Software incorporated into, derived from or distributed with such Incorporated Open Source Materials be (i) disclosed or distributed in source code
form, (ii) disclosed for the purpose of making derivative works, or (iii) redistributable at no charge). 

         Section 4.13.9    No government funding, facilities of a university, college or other educational institution or research center was
used in the
development of any Parent Owned Intellectual Property or Technology that is reasonably necessary for the conduct of the Parent's business as it is currently conducted. 

 
 

          Section 4.14    Tax Treatment     None of Parent or any Subsidiary of Parent has taken or has agreed to
take any action that is reasonably likely to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code. Neither Parent nor any of its Subsidiaries is aware of any fact, agreement, plan or other circumstance that is reasonably likely
to prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code. 

 
 

          Section 4.15    Taxes.     

         Section 4.15.1    Parent and its Subsidiaries have duly and timely filed (or there has been filed on their behalf) with the
appropriate
Governmental Authorities all Tax Returns (including all relevant elections associated with those Tax Returns) required to be filed by them or with respect to their income, properties or operations,
and all such Tax Returns are true, complete and correct in all material
respects. All Taxes of Parent and its Subsidiaries whether or not shown to be due on such Tax Returns have been timely paid in full. 

         Section 4.15.2    Parent and its Subsidiaries have each, in accordance with all applicable Laws, withheld and timely paid to the
appropriate
Governmental Authority all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, shareholder or other Person. 

         Section 4.15.3    There are no Liens for Taxes upon the assets or properties of Parent or any of its Subsidiaries except for
(a) statutory
Liens for current Taxes not yet due and (b) Liens for Taxes being contested in good faith (to the extent that such Liens are set forth on Section 4.15.3 of the Parent Disclosure Letter). 

         Section 4.15.4    Neither Parent nor any of its Subsidiaries has requested any extension of time within which to file any Tax Return
in respect
of any taxable year which has not since been filed, and no outstanding waivers or comparable consents regarding the application of the statute of limitations with respect to any Taxes or Tax Returns
has been given by or on behalf of Parent or any of its Subsidiaries that are still in effect other than those that arise by filing a Tax Return by the extended due date. 

        Section 4.15.5    There is no audit, action, suit, proceeding or investigation now pending, or to the Knowledge of Parent or its
Subsidiaries,
threatened with regard to any Tax or Tax Returns of Parent or it Subsidiaries; nor has Parent or any of its Subsidiaries received written notice to the 

31

 

effect
that, and neither Parent nor its Subsidiaries has Knowledge that, any Governmental Authority intends to conduct such an audit or investigation;  provided, however, that solely for the purposes of this Section 4.15.5, Parent Key Employees
shall mean Omar Choucair. 

         Section 4.15.6    All Tax deficiencies which have been claimed, proposed or asserted against Parent or any of its Subsidiaries by any
Governmental Authority have been fully paid or are being contested in good faith by appropriate proceedings, are adequately reserved for on the Financial Statements and are described in
Section 4.15.6 of the Parent Disclosure Letter. 

         Section 4.15.7    Neither Parent nor any of its Subsidiaries (a) has agreed, has proposed or is required to make any adjustments
under
Section 481(a) of the Code, by reason of any voluntary or involuntary change in accounting method (nor has any Governmental Authority proposed any such adjustment or change of accounting
method); (b) has made an election, or is required, to treat any of its assets as tax-exempt bond financed property or tax-exempt use property under Section 168 of
the Code (c) has filed a consent pursuant to former Section 341(f) of the Code for or agreed to have former Section 341(f) of the Code applied to the disposition of any asset;
(d) has any assets that secures any debt the interest on which is tax exempt under Section 103(a) of the Code; or (d) made any of the foregoing elections or is required to apply
any of the foregoing rules under any comparable foreign, state or local Tax provision. 

        Section 4.15.8    Neither Parent nor any of its Subsidiaries is a party to any advance pricing agreement or closing agreement with any
Governmental Authority that would be binding on Parent or any of its Subsidiaries after Closing. Neither Parent nor any of its Subsidiaries is subject to any private letter ruling of the Internal
Revenue Service or comparable rulings of other Governmental Authorities that would be binding on Parent or any of its Subsidiaries after Closing and there are no outstanding requests for such rulings
from a Governmental Authority. 

         Section 4.15.9    Neither the Parent nor any of its Subsidiaries is a party to, is bound by, or has any obligation under, any Tax
sharing, Tax
indemnification or tax allocation or other similar contract or arrangement. 

         Section 4.15.10    The Parent has previously delivered or made available to the Company true, complete and correct copies of
(a) all audit
reports, letter rulings, technical advice memoranda and similar documents issued by a Governmental Authority relating to the United States federal, state, local or foreign income Taxes due from or
with respect to the Parent or any of its Subsidiaries and (b) all United States federal income Tax Returns, and state income Tax Returns filed by the Parent or any of its Subsidiaries (or, in
each case, on its behalf) for tax periods ending on or after December 31, 2001. 

        Section 4.15.11    Neither Parent nor any Subsidiary (i) has ever been a member of an affiliated group of corporations within the
meaning
of Section 1504 of the Code other than the group of which the common parent is Parent and (ii) has any liability for the Taxes of any person as defined in Section 7701(a)(1) of
the Code (other than Parent or any Subsidiary), under Treas. Reg § 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or
successor, by contract or otherwise. 

         Section 4.15.12    No written claim has been made within the past five years in a jurisdiction where Parent or any Subsidiary does
not file Tax
Returns to the effect that Parent or any Subsidiary is subject to taxation by that jurisdiction; 

         Section 4.15.13    Parent has not been a United States real property holding corporation within the meaning of Section 897(c)(2)
of the
Code during the applicable period described in Section 897(c)(1)(A)(ii) of the Code. 

32

 

        Section 4.15.14    Neither Parent nor any of its Subsidiaries has distributed the stock of any corporation in a transaction intending
to satisfy
the requirements of Section 355 of the Code, and no stock of Parent or any of its Subsidiaries has been distributed in a transaction intending to satisfy the requirements of Section 355
of the Code. 

         Section 4.15.15    Neither Parent nor any of its Subsidiaries shall be required to include in a taxable period ending after the
Closing Date
taxable income attributable to income of Parent or any Subsidiary that accrued in a prior taxable period but was not recognized in such prior taxable period as a result of (i) the installment
method of accounting, (ii) the long-term contract method of accounting, (iii) a "closing agreement" as described in Section 7121 of the Code (or any provision of any
foreign, state or local Tax law having similar effect), or (iv) Section 481 of the Code (or any provision of any foreign, state or local Tax law having similar effect). 

         Section 4.15.16    Neither Parent nor any of its Subsidiaries has entered into any transaction that is a "reportable transaction" (as
defined in
Treas. Reg. § 1.6011-4, as modified by Rev. Proc. 2004-68, Rev. Proc. 2004-67, Rev. Proc. 2004-66, Rev.
Proc. 2004-65 and Rev. Proc. 2004-45). 

 
 

          Section 4.16    Insurance.     (a) All material insurance policies or binders maintained by or for
the benefit of Parent, its Subsidiaries and its Directors, officers, employees or
agents are in full force and effect and no premiums due and payable thereon are delinquent, (b) there are no pending material claims against such insurance policies or binders by Parent or any
Subsidiary as to which the insurers have denied Liability, (c) Parent and its Subsidiaries have complied in all material respects with the provisions of such policies and (d) there exist
no material claims under such insurance policies or binders that have not been properly and timely submitted by Parent or any Subsidiary to its insurers. The insurance coverage provided by such
policies or insurance will not terminate or lapse by reason of the transactions contemplated by this Agreement and, following the Closing Date, Parent and its Subsidiaries will continue to be covered
under such policies for events occurring prior to the Closing Date. No such policy provides for or is subject to any currently enforceable retroactive rate or premium adjustment or loss sharing
arrangement arising wholly or partially out of events arising prior to the date of the Initial Merger Agreement. Section 4.15 of the Parent Disclosure Letter sets forth a list of all claims
(other than insurance claims made by or for the benefit of employees) in excess of $25,000 individually submitted to insurers during the past 18-month period ending September 30,
2005. 

 
 

           Section 4.17    Ownership of Merger Sub; No Prior Activities.     

         Section 4.17.1    Merger Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement.

        Section 4.17.2    All of the outstanding capital stock of Merger Sub is owned directly by Parent. There are no options, warrants or
other rights
(including registration rights), agreements, arrangements or commitments to which Merger Sub is a party of any character relating to the issued or unissued capital stock of, or other equity interests
in, Merger Sub or obligating Merger Sub to grant, issue or sell any shares of the capital stock of, or other equity interests in, Merger Sub, by sale, lease, license or otherwise. There are no
obligations, contingent or otherwise, of Merger Sub to repurchase, redeem or otherwise acquire any shares of the capital stock of Merger Sub. 

        Section 4.17.3    Except for obligations or liabilities incurred in connection with its incorporation or organization and the
transactions
contemplated by this Agreement or any Ancillary Agreement, Merger Sub has not and will not have incurred, directly or indirectly, through any subsidiary or affiliate, any obligations or liabilities or
engaged in any business activities of any type or kind whatsoever or entered into any agreements or arrangements with any person. 

33

 

 
 

          Section 4.18    Employee Benefit Plans.     

         Section 4.18.1    Section 4.18 of the Parent Disclosure Letter contains a true, complete and correct list of each deferred
compensation
and each bonus or other incentive compensation, stock purchase, stock option and other equity or equity-based compensation plan, program, agreement or arrangement; each severance or termination pay,
medical, surgical, hospitalization, life insurance and other "welfare plan," fund or program (within the meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")); each profit-sharing, stock bonus or other "pension plan," fund or program (within the meaning of Section 3(2) of ERISA); each employment, "change in control", termination or
severance agreement; and each other material employee benefit plan, fund, program, agreement or arrangement, in each case, that is, or was within the past six years, sponsored, maintained or
contributed to or required to be contributed to by Parent or by any ERISA Affiliate of Parent, or to which Parent or an ERISA Affiliate is party, whether written or oral, for the benefit of any
current or former employee, officer, director or consultant of Parent or any Subsidiary of Parent (the "Parent Employee Plans"). Neither Parent nor any Subsidiary or ERISA Affiliate has any commitment
or formal plan, whether legally binding or not, to create any additional material employee benefit plan or modify or change, in any material way, any existing Parent Employee Plan that would affect
any current or former employee, officer, director or consultant of Parent or any Subsidiary and no condition exists which would prevent Parent or a Subsidiary from terminating any Parent Employee Plan
(other than a Parent Employee Plan required to be maintained under applicable Law) without Liability to Parent or a Subsidiary (other than for benefits accrued at the time of such termination), except
to the extent limited by Law. 

         Section 4.18.2    With respect to each Parent Employee Plan, Parent has heretofore delivered or made specifically available to the
Company a
current, true, complete and correct copy (or, to the extent no such copy exists, an accurate written description) thereof (including any amendments thereto) and, to the extent applicable:
(i) any related trust agreement or other funding instrument; (ii) the most recent IRS determination opinion or letter and any pending request for such determination letter;
(iii) any summary plan descriptions or other reports and summaries required under ERISA or the Code; (iv) any material written communication (or a description of any material oral
communications) to participants concerning the Parent Employee Plans; (v) for the two most recent years for which such documents are available, the Form 5500 and attached schedules,
audited financial statements, actuarial valuation reports and any attorney's response to any auditor's request for information; and (vi) copies of all
material documents and correspondence relating to any Parent Employee Plan received from or provided to the IRS; (vii) the most recent annual 401(k) and 401(m) nondiscrimination tests performed
under the Code; (vii) all summaries furnished employees, officers and directors of Parent and its Subsidiaries of all incentive compensation, other plans and fringe benefits for which a summary
plan description is not required. Each Parent Employee Plan intended to be "qualified" within the meaning of Section 401(a), Section 401(k), Section 401(m) or
Section 4975(e)(7) of the Code has been determined to be "qualified" by the Internal Revenue Service and has received a favorable determination letter or opinion letters, as applicable, as to
its tax qualified status and the trusts maintained thereunder are exempt from taxation under Section 501(a) of the Code and no event has occurred or circumstance exists that would reasonably be
expected to affect such qualified status. No Parent Employee Plan is a voluntary employees' beneficiary association under Section 501(c)(9) of the Code. 

         Section 4.18.3    Neither Parent nor any ERISA Affiliate sponsors, maintains, contributes to or has an obligation to contribute to,
or has at any
time within the last six years sponsored, maintained, contributed to or had an obligation to contribute to, any "multiemployer plan," as such term is defined in Section 3(37) or
Section 4001(a)(3) of ERISA or comparable provisions of 

34

 

any
other applicable Law or any pension plan (as defined in Section 3(2) of ERISA) subject to Section 302 or Title IV of ERISA or Section 412 of the Code. 

         Section 4.18.4    Each Parent Employee Plan has been operated and administered in all material respects in accordance with its terms
and
applicable Law, including but not limited to ERISA and the Code, and all contributions required to be made under the terms of any of the Parent Employee Plans as of the date of the Initial Merger
Agreement have been timely made or, if not yet due, have been properly reflected on the Financial Statements except for any failure to do so which would not result in any material Liability to Parent. 

        Section 4.18.5    No Parent Employee Plan provides medical, surgical, hospitalization, death or similar benefits (whether or not
insured) for
employees or former employees of Parent or any Subsidiary of Parent for periods extending beyond their retirement or other termination of service, other than coverage mandated by applicable statute. 

         Section 4.18.6    The consummation of the transactions contemplated by this Agreement will not, either alone or in combination with
another
event, (i) entitle any current or former employee, director, officer or consultant of Parent or any Subsidiary of Parent to severance pay, unemployment compensation, loan forgiveness or any
other payment, (ii) accelerate the time of payment or vesting, or increase the amount of compensation or benefits due any such employee, director, officer or consultant, including
under Parent Employee Plan or (iii) prevent Parent or any Subsidiary from amending or terminating any Parent Employee Plan. 

         Section 4.18.7    There are no pending or, to the Knowledge of Parent, threatened or anticipated claims by or on behalf of any Parent
Employee
Plan or against any ERISA Affiliate, by any employee or beneficiary covered under any such Parent Employee Plan with respect to such plan, or otherwise involving any such Parent Employee Plan,
including any audit or inquiry by the IRS or United States Department of Labor (other than routine claims for benefits). 

        Section 4.18.8    Each Parent Employee Plan that is subject to Section 409A of the Code has been administered, in all material
respects,
in good faith compliance with Section 409A of the Code and Internal Revenue Service Notice 2005-1. 

         Section 4.18.9    Neither Parent nor any of its Subsidiaries sponsors, contributes to or has any liability with respect to any
employee benefit
plan, program or arrangement that provides or provided benefits to employees who perform or performed services for Parent or any of its Subsidiaries outside of the United States. 

        Section 4.18.10    There is no agreement, contract, plan or arrangement to which Parent or any of its Subsidiaries is a party that may
result,
separately or in the aggregate, in the payment of any amount by Parent or its Subsidiaries that is not deductible under Section 404 of the Code or that may be an "excess parachute payment"
within the meaning of Section 280G of the Code and no action by Parent or any Subsidiary, whether pursuant to this Agreement or otherwise shall result in the making of any such payment. 

 
 

          Section 4.19    Employees.     

         Section 4.19.1    There is no, nor has there been at any time during the last five (5) years: 

        (a)   collective
bargaining agreement or any other agreement, whether in writing or otherwise, with any labor organization, union, group or association applicable to the
employees of Parent or any of its Subsidiaries; 

35

 

        (b)   unfair
labor practice complaint pending or, to the Knowledge of Parent, threatened against Parent or its Subsidiaries before the National Labor Relations Board or any
other federal, state local or foreign agency; 

        (c)   pending
or, to the Knowledge of Parent, threatened or affecting Parent or its Subsidiaries, strike, slow-down, work stoppage, lockout or other collective
labor Action or dispute by or with respect to any employees of Parent or any of its Subsidiaries; or 

        (d)   pending
or, to the Knowledge of Parent, threatened representation question or union or labor organizing activities with respect to employees of Parent or any of its
Subsidiaries nor is Parent or its Subsidiaries subject to any legal duty to bargain with any labor organization on behalf of any employee of Parent or its Subsidiaries. 

        Section 4.19.2    During the past three years, neither Parent nor any of its Subsidiaries have effectuated (i) a "plant closing"
(as
defined in the WARN Act) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of Parent or its Subsidiaries; or (ii) a "mass
layoff" (as defined in the WARN Act) affecting any site of employment or facility of Parent or its Subsidiaries; nor has Parent or its Subsidiaries been affected by any transaction or engaged in
layoffs or employment terminations sufficient in number to trigger application of any similar state, local or foreign law. The employees of Parent or its Subsidiaries have not suffered an "employment
loss" (as defined in the WARN Act) since three months prior to, and including the date of the Initial Merger Agreement. 

         Section 4.19.3    Parent and its Subsidiaries do not, formally or informally, have a custom or practice of paying ex-gratia severance
payments to employees. 

         Section 4.19.4    Each of Parent and each of its Subsidiaries is in compliance in all material respects with all applicable Laws
respecting
labor, employment, payment and termination of labor, fair employment practices, terms and conditions of employment, workers' compensation, nondiscrimination, immigration, benefits, collective
bargaining, occupational safety, plant closings, wages and hours and the payment of
social security and similar taxes. To the Parent's Knowledge, no present or former employee, director, consultant or officer of Parent or any of its Subsidiaries is in any material respect in
violation of any term of any employment contract, non-disclosure agreement, non-competition agreement, or any restrictive covenant to a former employer relating to the right of
any such employee to be employed by Parent or such Subsidiary because of the nature of the business conducted or presently proposed to be conducted by it or to the use of trade secrets or proprietary
information of others. 

         Section 4.19.5    Parent has identified in Section 4.19 of the Parent Disclosure Letter and has made available to Company true
and
complete copies of (a) all agreements (including amendments thereto) with directors, officers or employees of or consultants to Parent or any of its Subsidiaries committing Parent or any of its
Subsidiaries to make severance payments in the event of termination or additional bonus payments upon the completion of the Merger and (b) all written severance programs and policies of Parent
and each of its Subsidiaries with or relating to its employees. 

 
 

           Section 4.20    Fees.     Except for such advisory fees as will be paid to John Harris and such fees to
be paid to Southwest Securities, Inc. in connection with the Parent Fairness
Opinion, no broker, finder or investment banker, intermediary or other Person (other than lawyers and accountants) is entitled to any brokerage, finder's or other fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent or any of its Subsidiaries. 

 
 

           Section 4.21    Personal Property; Assets.     Section 4.21 of the Parent Disclosure Letter sets
forth a true, complete and correct list of all equipment and fixtures having a book value in excess of
$30,000 

36

 

(a) purchased
by Parent and its Subsidiaries since September 30, 2005, or (b) owned by third Persons, including any customers of Parent and its Subsidiaries, and used by Parent
and its Subsidiaries in their business other than pursuant to Parent Personal Property Leases. Parent and its Subsidiaries have good and marketable title to, or a valid leasehold interest in or right
to use by license or otherwise, the properties and assets used by it on or immediately prior to the date of the Initial Merger Agreement (collectively, the "Parent Assets"), free and clear of all
Liens, except for Permitted Liens. The Parent Assets include or will include as of the Closing Date, without limitation, all personal property, both tangible and intangible (including all Parent Owned
Intellectual Property and all Intellectual Property used by Parent and its Subsidiaries pursuant to their License Agreements), necessary to conduct the business of Parent and its Subsidiaries in all
material respects as it is now being conducted. 

 
 

           Section 4.22    Environmental Matters.     

        Section 4.22.1    Parent and its Subsidiaries are, and at all times have been, in material compliance with all applicable
Environmental Laws
(which compliance includes, but is not limited to, the possession by the Company and its Subsidiaries of all permits and other governmental authorizations required under applicable Environmental Laws,
and compliance with the terms and conditions thereof). Neither Parent nor its Subsidiaries has received any written communication alleging that Parent or its Subsidiaries is not in such material
compliance, and there are no past or present Actions, activities, circumstances conditions, events or incidents that may prevent or interfere with such material compliance in the future. All material
permits and other governmental authorizations currently held by Parent and its Subsidiaries pursuant to applicable Environmental Laws are identified in Section 4.22 of the Parent Disclosure
Letter. 

         Section 4.22.2    There is no material Environmental Claim pending or, to the Knowledge of Parent, threatened against Parent or its
Subsidiaries
or, to the Knowledge of Parent, against any Person whose Liability for any Environmental Claim Parent or its Subsidiaries has or may have retained or assumed either contractually or by operation of
Law. 

         Section 4.22.3    There are no past or present Actions, activities, circumstances, conditions, events or incidents, including,
without
limitation, the Release, threatened Release or presence of any Hazardous Material that reasonably would be expected to form the basis of a material Environmental Claim against Parent, or to the
Knowledge of Parent, against any Person whose Liability for any Environmental Claim Parent has or may have retained or assumed either contractually or by operation of Law. 

 
 

           Section 4.23    Vote Required.     The Parent Stockholder Approval is the only vote of the holders of
any class or series of capital stock or other equity interests of Parent necessary to approve
the Merger. 

 
 

          Section 4.24    Disclosure.     No representation or warranty by Parent contained in this Agreement, and
no statement of Parent contained in the Parent Disclosure Letter or any other document,
certificate or other instrument delivered or to be delivered by or on behalf of Parent hereunder, contains or will contain any untrue statement of a material fact or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was or will be made, in order to make the statements herein or therein not misleading. 

 
 

          Section 4.25    Opinion of Financial Advisor.     Parent has received the opinion of Southwest
Securities, Inc., dated the date of the Initial Merger Agreement, to the effect that, as of such date, the
Merger is fair from a financial point of view to the Parent Stockholders. 

 
 

           Section 4.26    Related-Party Transactions.     Other than advances to employees in the ordinary course
for travel and similar reimbursable expenses consistent with Parent policy, no Key Employee, officer or
Director of Parent or any Subsidiary of Parent or member of his or her immediate family is currently indebted to Parent or any Subsidiary of the Company. To the Knowledge of Parent, as of the date of 

37

 

the
Initial Merger Agreement none of such Persons has any direct or indirect ownership interest in any firm or corporation with which Parent or any Subsidiary of Parent is affiliated or with which the
Company or any Subsidiary of Parent has a business relationship, or any firm or corporation that competes with Parent or any Subsidiary of Parent. No Key Employee, officer or Director of Parent or any
Subsidiary and no member of the immediate family of any Key Employee, officer or Director of Parent or any Subsidiary of Parent is directly or indirectly interested in any Scheduled Contract with
Parent or any Subsidiary of Parent or has or claims to have any interest in the Intellectual Property of Parent and its Subsidiaries. 

 
 

Article 5.
  Covenants    
    

 
 
        Section 5.1    Conduct of Business by the Company Pending the Closing.     The Company agrees that, between
the date of the Initial Merger Agreement and the earlier of the termination of this Agreement and the Effective Time (the
"Interim Period"), except as set forth in Section 5.1 of the Company Disclosure Letter or as specifically permitted or required by any other provision of this Agreement, unless Parent shall
otherwise agree in writing, the Company will, and will cause each of its Subsidiaries to, conduct its operations only in the ordinary and usual course of business consistent with past practice and use
commercially reasonable efforts to keep available the services of the current officers and Key Employees of the Company and each of its Subsidiaries and to preserve the current relationships of the
Company and each of its Subsidiaries with such of the customers, suppliers and other Persons with which the Company or any of its Subsidiaries has significant business relations as is reasonably
necessary to preserve substantially intact its business organization. Without limiting the foregoing, and as an extension thereof, except as set forth in Section 5.1 of the Company Disclosure
Letter or as specifically permitted or required by any other provision of this Agreement, the Company shall not (unless required by applicable Law), and shall not permit any Subsidiary of the Company
to, during the Interim Period, directly or indirectly, do, or agree to do, any of the following without the prior written consent of Parent: 

        (a)   amend
or otherwise change its certificate of incorporation or by-laws or equivalent organizational documents; 

        (b) (i)    issue,
sell, pledge, dispose of, grant, transfer, encumber, or authorize the issuance, sale, pledge, disposition, grant, transfer, or encumbrance of any
shares of capital stock of, or other Capital Securities in, the Company or any of its Subsidiaries (whether by merger, consolidation or otherwise) of any class, or securities convertible or
exchangeable or exercisable for any shares of such capital stock or other Capital Securities, or any options, warrants or other rights of any kind to acquire any shares of such capital stock or other
Capital Securities or such convertible or exchangeable securities, or any other ownership interest (including, without limitation, any such interest represented by contract right), of the Company or
any of its Subsidiaries, other than shares of Company Common Stock issuable upon conversion of Company Preferred Stock, the exercise of Company Options, or warrants to purchase shares of Company
Capital Stock, in each case outstanding as of the date of the Initial Merger Agreement and in accordance with their respective terms, (ii) accelerate, amend or change the period of
exercisability of options or other equity incentive awards granted under any Company Stock Option Plan or authorize cash payments in exchange for any options or other equity incentive award granted
under any Company Stock Option Plan; or (iii) sell, pledge, dispose of, transfer, lease, license, guarantee or encumber, or authorize the sale, pledge, disposition, transfer, lease, license,
guarantee or encumbrance of, any property or assets (including Intellectual Property) of the Company or any of its Subsidiaries, including through merger, consolidation or otherwise, with a value in
excess of $75,000, except pursuant to existing contracts or commitments or the sale or purchase of goods or services in the ordinary course of business consistent with past practice. 

38

 

        (c)   declare,
set aside, make or pay any dividend or other distribution (whether payable in cash, stock, property or a combination thereof) with respect to any of its capital
stock (other than dividends paid by a wholly owned Subsidiary of the Company to the Company or to any other wholly owned Subsidiary of the Company or issuance of additional warrants to purchase shares
of Company Common Stock contemplated by agreements existing as of the date of the Initial Merger Agreement) or enter into any agreement with respect to the voting of its capital stock; 

        (d)   reclassify,
combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock, other Capital Securities or other
securities; 

        (e) (i)    acquire
(including, without limitation, by merger, consolidation, or acquisition of stock or assets) any interest in any person or any division thereof or any
assets; (ii) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of
any Person (other than a wholly owned Subsidiary of the Company) for borrowed money, except to the extent that the aggregate indebtedness for borrowed money of the Company and its Subsidiaries at any
time outstanding does not exceed $10,000,000; (iii) refinance or otherwise replace any of the Existing Company Indebtedness, except with the consent of Parent, which consent shall not be
unreasonably witheld, (iv) terminate, cancel or request any material change in, or agree to any material change in, any Company Material Contract other than in the ordinary course of business
consistent with past practice; (v) make or authorize any capital expenditure in excess of the 2005 Budget, other than capital expenditures that are not individually in excess of $15,000, or in
the aggregate in excess of $50,000 per month, for the Company and its Subsidiaries taken as a whole; or (vi) with respect to clauses (i) and (ii) above, enter into or amend any contract,
agreement, commitment or arrangement that, if fully performed, would not be permitted under this Section 5.1.5; 

        (f)    except
as disclosed in Section 3.17 or Section 5.1 of the Company Disclosure Letter: (i) increase the compensation or benefits payable or to become
payable to its directors, officers, employees or consultants except in connection with annual adjustments consistent with past practices; (ii) grant any rights to severance or termination pay
to, or enter into any agreement to provide severance benefits with, any director, officer or other employee or consultant of the Company or any of its Subsidiaries, or establish, adopt, enter into or
amend any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of any director, officer, employee or consultant, except as required by applicable Law; or (iii) take any affirmative action
to amend or waive any performance or vesting criteria or accelerate vesting, exercisability or funding under any Employee Plans. 

        (g) (i)    pre-pay
any long-term debt in an amount not to exceed $10,000 in the aggregate for the Company and its Subsidiaries taken as a whole,
or pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, contingent or otherwise), except for borrowings under revolving credit lines existing as of the date of the
Initial Merger Agreement in the ordinary course of business consistent with past practice and in accordance with their terms; (ii) fail to collect notes or accounts receivable in the ordinary
course of business consistent with past practice or enter into a factoring or discounting arrangement with a third party with respect to accounts receivable;
(iii) fail to pay any account payable in the ordinary course of business consistent with past practice, or (iv) vary the Company's inventory practices in any material respect from the
Company's past practices; 

        (h)   make
any change in accounting policies or procedures, other than in the ordinary course of business consistent with past practice or except as required by GAAP or by a
Governmental Authority; 

39

 

        (i)    waive,
release, assign, settle or compromise any material claims, or any material litigation or arbitration; 

        (j)    file
any amended Tax Return, make any Tax election or enter into any agreement in respect of Taxes, including the settlement of any Tax controversy, claim or assessment,
adopt or change of any accounting method in respect of Taxes, surrender any right to claim a refund of Taxes if such action would have the effect of increasing by a material amount the Tax liability
of the Company or any of its Subsidiaries, or would give rise to a Tax lien (other than statutory Liens for current Taxes not yet due) on any of the Company's or its Subsidiaries' assets; 

        (k)   take,
or agree to take, any action that would prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code; 

        (l)    adopt
or implement any stockholder rights plan; 

        (m)  modify,
amend or terminate, or waive, release or assign any material rights or claims with respect to any confidentiality or standstill agreement to which the Company is
a party; 

        (n)   write
up, write down or write off the book value of any assets, individually or in the aggregate, for the Company and its Subsidiaries taken as a whole, except for
depreciation and amortization in accordance with GAAP consistently applied and any write-offs of inventory or accounts receivable that do not exceed $25,000 individually or $50,000 in the
aggregate. 

        (o)   take
any action to exempt the Company from (i) the provisions of Section 203 of the DGCL, or (ii) any other state takeover law or state law that
purports to limit or restrict business combinations or the ability to acquire or vote shares any person or entity (other than Parent, Merger Sub or any of
Parent's Subsidiaries) or any action taken thereby, which person, entity or action would have otherwise been subject to the restrictive provisions thereof and not exempt therefrom; 

        (p)   open
or close, or enter into an agreement to open or close, any facility or office except as disclosed in Section 5.1 of the Company Disclosure Letter; 

        (q)   take
any action that is intended or would reasonably be expected to result in any of the conditions to the Merger set forth in Article 6 not being satisfied; 

        (r)   fail
to be in material compliance with the terms of instruments evidencing indebtedness incurred by the Company other than any such failure that is waived by the party
to whom such indebtedness is owed within a reasonable time after the commencement of such material non-compliance and provided Parent with a copy of such waiver; 

        (s)   allow
any insurance policy relating to the Company's business to lapse without obtaining replacement insurance coverage of comparable amount at similar cost; 

        (t)    enter
into any contract that contains any non-compete or exclusivity provisions with respect to any customer, line of business or geographic area with
respect to the Company, any of its Subsidiaries or any of the Company's current or future affiliates, or which restricts the conduct with respect to any customer, of any line of business by the
Company, any of its Subsidiaries or any of the Company's current or future affiliates or any geographic area in which the Company, any of its Subsidiaries or any of the Company's current or future
affiliates may conduct business, or which otherwise restricts operation of the Company's business, in each case in any material respect, in each case other than non-compete agreements
signed by employees incident to their employment by the Company or any of its Subsidiaries; 

        (u)   take
any formal action or grant any consent or approval concerning any joint venture outside the ordinary course of business consistent with past practice; or 

40

 

        (v)   authorize
or enter into any agreement or otherwise make any commitment to do any of the foregoing. 

 
 

           Section 5.2    Conduct of Business by Parent Pending the Closing.     Parent agrees that, during the
Interim Period, except as set forth in Section 5.2 of the Parent Disclosure Letter or as specifically permitted or required
by any other provision of this Agreement, unless Company shall otherwise agree in writing, Parent will, and will cause each of its Subsidiaries to, (a) conduct its operations only in the
ordinary and usual course of business consistent with past practice and (b) use commercially reasonable efforts to keep available the services of the current officers and Key Employees of
Parent and to preserve the current relationships of Parent and each of its Subsidiaries with such of the customers, suppliers and other persons with which Parent or any of its Subsidiaries has
significant business relations as is reasonably necessary to preserve substantially intact its business organization. Except as specifically permitted or required by any other provision of this
Agreement, Parent shall not (unless required by applicable Law or any NASDAQ regulations applicable to the Parent), between the date of the Initial Merger Agreement and the Effective Time, directly or
indirectly, do, or agree to do, any of the following, without the prior written consent of the Company: 

        (a)   amend
or otherwise change its certificate of incorporation or by-laws or equivalent organizational documents; 

        (b) (i)    issue,
sell, pledge, dispose of, grant, transfer, encumber, or authorize the issuance, sale, pledge, disposition, grant, transfer, or encumbrance of any
shares of capital stock of, or other Capital Securities in, Parent or any of its Subsidiaries (whether by merger, consolidation or otherwise) of any class, or securities convertible or exchangeable or
exercisable for any shares of such capital stock or other Capital Securities, or any options, warrants or other rights of any kind to acquire any shares of such capital stock or other Capital
Securities or such convertible or exchangeable securities, or any other ownership interest (including, without limitation, any such interest represented by contract right), of the Parent or any of its
Subsidiaries, other than the issuance of additional (A) options granted to non-executive employees pursuant to any equity incentive plan of Parent, or any other plan, agreement, or
arrangement of Parent in existence on the date of the Initial Merger Agreement (the "Parent Stock Option Plans") in a manner consistent with past practice, (B) warrants to purchase shares of
Parent Common Stock contemplated by agreements existing as of the date of the Initial Merger Agreement, and (C) shares of Parent Common Stock issuable upon the exercise of options to purchase
Parent Common Stock and/or warrants to purchase shares of capital stock of Parent outstanding as of the date of the Initial Merger Agreement in accordance with their terms, (ii) except as set
forth in Section 5.2 of the Parent Disclosure Letter accelerate, amend or change the period of exercisability of options or other equity incentive awards granted under any Parent Stock Plan or
authorize cash payments in exchange for any options or other equity incentive award granted under any Parent Stock Plan; or (iii) sell, pledge, dispose of, transfer, lease, license, guarantee
or encumber, or authorize the sale, pledge, disposition, transfer, lease, license, guarantee or encumbrance of, any property or assets (including Intellectual Property) of the Parent or any of its
Subsidiaries, including through merger, consolidation or otherwise, with a value in excess of $100,000, except pursuant to existing contracts or commitments or the sale or purchase of goods or
services in the ordinary course of business consistent with past practice. 

        (c)   declare,
set aside, make or pay any dividend or other distribution (whether payable in cash, stock, property or a combination thereof) with respect to any of its capital
stock (other than (i) dividends paid by a wholly owned Subsidiary of the Parent to the Parent or to any other wholly owned Subsidiary of the Parent, (ii) issuance of additional warrants
to purchase shares of Parent Common Stock contemplated by agreements existing as of the date of the Initial Merger Agreement or (iii) to effect a reverse stock split upon the determination of
the Parent Board to do so) or enter into any agreement with respect to the voting of its capital stock; 

41

 

        (d)   reclassify,
combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock, other Capital Securities or other
securities (other than to effect a reverse stock split upon the determination of the Parent Board to do so); 

        (e) (i)    acquire
(including, without limitation, by merger, consolidation, or acquisition of stock or assets) any interest in any person or any division thereof or any
assets; (ii) incur any indebtedness for borrowed money or issue any debt securities or assume, guarantee or endorse, or otherwise as an accommodation become responsible for, the obligations of
any person (other than a wholly owned Subsidiary of Parent) for borrowed money, except to the extent that the aggregate indebtedness for borrowed money of Parent and its Subsidiaries at any time
outstanding does not exceed $26,500,000; (iii) refinance or otherwise replace the Existing Parent Indebtedness except in connection with the Parent Financing or with the consent of the Company,
which consent shall not be unreasonably withheld, (iv) terminate, cancel or request any material change in, or agree to any material change in, any contract that is reasonably necessary for the
conduct of Parent's business as it is currently conducted other than in the ordinary course of business consistent with past practice; (v) make or authorize any capital expenditure in excess of
the Parent 2005 Budget, other than capital expenditures that are not individually in excess of $60,000, or in the aggregate in excess of $200,000 per month, in the aggregate, for the Parent and its
Subsidiaries taken as a whole; or (vi) with respect to clauses (i) and (ii) above, enter into or amend any contract, agreement, commitment or arrangement that, if fully performed, would
not be permitted under this Section 5.2.5; 

        (f)    except
as disclosed in Section 5.2 of the Parent Disclosure Letter: (i) increase the compensation or benefits payable or to become payable to its
directors, officers, employees or consultants except in connection with annual adjustments consistent with past practices; (ii) grant any rights to severance or termination pay to, or enter
into any agreement to provide severance benefits with, any director, officer or other employee or consultant of the Parent or any of its Subsidiaries, or establish, adopt, enter into or amend any
collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any director, officer, employee or consultant, except as required by applicable Law; or (iii) take any affirmative action to
amend or waive any performance or vesting criteria or accelerate vesting, exercisability or funding under any Employee Plans. 

        (g) (i)    pre-pay
any long-term debt in an amount not to exceed $100,000 in the aggregate for the Parent and its Subsidiaries taken as a whole,
or pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, contingent or otherwise), except for borrowings under revolving credit lines existing as of the date of the
Initial Merger Agreement in the ordinary course of business consistent with past practice and in accordance with their terms, (ii) fail to collect notes or accounts receivable in the ordinary
course of business consistent with past practice or enter into a factoring or discounting arrangement with a third party with respect to accounts receivable, (iii) fail to pay any account
payable in the ordinary course of business consistent with past practice or (iv) vary the Parent's inventory practices in any material respect from the Parent's past practices; 

        (h)   make
any change in accounting policies or procedures, other than in the ordinary course of business consistent with past practice or except as required by GAAP or by a
Governmental Authority; 

        (i)    waive,
release, assign, settle or compromise any material claims, or any material litigation or arbitration; 

        (j)    file
any amended Tax Return, make any Tax election or enter into any agreement in respect of Taxes, including the settlement of any Tax controversy, claim or assessment,
adopt or 

42

 

change
of any accounting method in respect of Taxes, or surrender any right to claim a refund of Taxes if such action would have the effect of increasing by a material amount the present or future Tax
liability of the Parent or any of its Subsidiaries, or would give rise to a Tax lien (other than statutory Liens for current Taxes not yet due) on any of the Parent's or its Subsidiaries' assets; 

        (k)   take,
or agree to take, any action that would prevent the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code; 

        (l)    adopt
or implement any stockholder rights plan; 

        (m)  modify,
amend or terminate, or waive, release or assign any material rights or claims with respect to any confidentiality or standstill agreement to which the Parent is
a party; 

        (n)   write
up, write down or write off the book value of any assets, individually or in the aggregate, for the Parent and its Subsidiaries taken as a whole, except for
depreciation and amortization and any write-down of goodwill in accordance with GAAP consistently applied and any
write-offs of inventory or accounts receivable that do not exceed $50,000 individually or $300,000 in the aggregate. 

        (o)   take
any action to exempt the Parent from (i) the provisions of Section 203 of the DGCL, or (ii) any other state takeover law or state law that
purports to limit or restrict business combinations or the ability to acquire or vote shares any person or entity (other than the Company or any of Company's Subsidiaries) or any action taken thereby,
which person, entity or action would have otherwise been subject to the restrictive provisions thereof and not exempt therefrom; 

        (p)   open
or close, or enter into an agreement to open or close, any facility or office except as disclosed in Section 5.2 of the Parent Disclosure Letter; 

        (q)   take
any action that is intended or would reasonably be expected to result in any of the conditions to the Merger set forth in Article 6 not being satisfied; 

        (r)   fail
to be in material compliance with the terms of instruments evidencing indebtedness incurred by the Parent, other than any such failure that is waived by the party
to whom such indebtedness is owed within a reasonable time after the commencement of such material non-compliance and provided the Company with a copy of such waiver; 

        (s)   allow
any insurance policy relating to the Parent's business to lapse without obtaining replacement insurance coverage of comparable amount at similar cost; 

        (t)    enter
into any contract that contains any non-compete or exclusivity provisions with respect to any customer, line of business or geographic area with
respect to the Parent, any of its Subsidiaries or any of the Parent's current or future affiliates, or which restricts the conduct with respect to any customer, of any line of business by the Parent,
any of its Subsidiaries or any of the Parent's current or future affiliates or any geographic area in which the Parent, any of its Subsidiaries or any of the Parent's current or future affiliates may
conduct business, or which otherwise restricts operation of the Parent's business, in each case in any material respect, in each case other than non-compete agreements signed by employees
incident to their employment by the Parent or any of its Subsidiaries; 

        (u)   take
any formal action or grant any consent or approval concerning any joint venture outside the ordinary course of business consistent with past practice; or 

        (v)   authorize
or enter into any agreement or otherwise make any commitment to do any of the foregoing. 

 
 

           Section 5.3    Cooperation.     The Company and Parent shall coordinate and cooperate in connection
with (a) the preparation of the Registration Statement, the Proxy Statement and any
Other Filings; 

43

 

(b) determining
whether any action by or in respect of, or filing with, any Governmental Authority is required, or any actions, consents, approvals or waivers are required to be obtained from
parties to any Company Material Contracts, in connection with the consummation of the Merger; and (c) seeking any such actions, consents, approvals or waivers or making any such filings,
furnishing information required in connection therewith or with the Registration Statement, the Proxy Statement or any Other Filings and timely seeking to obtain any such actions, consents, approvals
or waivers and (d) seeking all necessary consents, waivers or approvals and taking such action as may be reasonably required for continued quotation of Parent Common Stock on NASDAQ for at
least 180 days after the Effective Time. 

 
 

           Section 5.4    Registration Statement; Proxy Statement.     

         Section 5.4.1    As promptly as reasonably practicable after the execution of this Agreement, Parent and the Company shall prepare
and file with
the SEC a proxy statement relating to the meeting of Parent's stockholders to be held in connection with obtaining the Parent Stockholder Approval (together with any amendments thereof or supplements
thereof, the "Proxy Statement") and Parent shall prepare and file as promptly as reasonably practicable with the SEC a registration statement on Form S-4 (together with all
amendments thereto, the "Registration Statement") in connection with the registration under the Securities Act of the shares of Parent Common Stock to be issued to the stockholders of the Company
pursuant to the Merger. Each of Parent and the Company shall prepare and file with the SEC any Other Filings as and when required or requested by the SEC. Each of Parent and the Company will use
commercially reasonable efforts to respond to any comments made by the SEC with respect to the Proxy Statement and the Registration Statement and any Other Filings, and to cause the Registration
Statement to become effective as promptly as reasonably practicable. Prior to the effective date of the Registration Statement, Parent shall take all or any action required under any applicable
federal or state securities laws in connection with the issuance of shares of Parent Common Stock in the Merger. The Company shall furnish all information concerning it and the holders of its capital
stock as the Parent may reasonably request in connection with such actions and the preparation of the Registration Statement, the Proxy Statement and any Other Filings, and shall, as promptly as
practicable after the date of the Initial Merger Agreement, or after the date requested by Parent, as the case may be, deliver to Parent all financial statements and other financial data of the
Company, and cause to be delivered to Parent the consents of the Company's independent public accountants, required to be included in the Proxy Statement, Registration Statement or any Other Filings,
in each case in a form reasonably satisfactory to Parent and in any event in a form that is in all respects compliant with GAAP, the Securities Act and the Exchange Act and the rules and regulations
of the SEC promulgated thereunder, including Regulations S-K and
S-X. As promptly as reasonably practicable after the Registration Statement shall have become effective, the Parent shall mail the Proxy Statement (and a copy of the prospectus contained
within the Registration Statement if the Proxy Statement is not included in the Registration Statement) to the Parent Stockholders and Company Stockholders. 

         Section 5.4.2    If at any time prior to the Effective Time, any event or other information relating to the Company or Parent or any
of their
respective Subsidiaries, officers, directors of affiliates should be discovered by the Company or Parent, which event or other information should be set forth in an amendment or a supplement to the
Registration Statement, the Proxy Statement or any Other Filing, such party shall promptly inform the other party. 

 
 

           Section 5.5    Stockholders' Meetings.     

         Section 5.5.1    Parent shall take all actions in accordance with applicable Laws, its organizational documents and the rules of
NASDAQ to duly
call and hold a meeting of its stockholders (the "Parent Stockholders' Meeting") as promptly as reasonably practicable (but not before 21 days after the effectiveness of the Registration
Statement) for the purpose of obtaining the Parent Stockholder Approval. 

44

  

         Section 5.5.2    Unless the Company Stockholder Approval is obtained by majority written consent of the Company's stockholders in
compliance with
applicable Laws, the Company shall take all actions in accordance with applicable law and its organizational documents to duly call and hold a meeting of its stockholders (the "Company Stockholders'
Meeting") as promptly as practicable for the purpose of obtaining the Company Stockholder Approval. 

 
 

           Section 5.6    Access to Company Information; Confidentiality.     

         Section 5.6.1    From the date of the Initial Merger Agreement to the Effective Time, the Company shall, and shall cause each of its
Subsidiaries
and each of their respective officers, employees, accountants and legal counsel (collectively, the "Company Representatives") to (i) provide to Parent and Merger Sub and their respective
officers, employees, accountants and legal counsel (collectively, the "Parent Representatives") access, at reasonable times with reasonable prior notice to, and with coordination through, any of the
Key Employees, to the officers, employees, properties, offices and other facilities of such party and its subsidiaries and to the books and records thereof and (ii) furnish promptly such
information concerning the business, properties, contracts, assets, liabilities, personnel and other aspects of such party and its subsidiaries as the other party or its representatives may reasonably
request; provided, however, that all access and investigation made pursuant to this Section 5.6.1
shall be conducted in such a way as to minimize interference with the operations and business of the Company; and provided further that in no case shall the Company be required to provide or otherwise
disclose or make available to the Parent any confidential customer information. No investigation conducted pursuant to this Section 5.6.1 shall affect or be deemed to modify or limit any
representation or warranty made in this Agreement. 

         Section 5.6.2    With respect to the information disclosed pursuant to Section 5.6.1, the parties shall comply with, and shall
cause their
respective Representatives to comply with, all of their respective obligations under the Confidentiality Agreement previously executed by the Company and Parent (the "Confidentiality Agreement"). 

 
 

           Section 5.7    Access to Parent Information; Confidentiality     

         Section 5.7.1    From the date of the Initial Merger Agreement to the Effective Time, Parent shall, and shall cause each of its
Subsidiaries and
each of their respective officers, employees, accountants and legal counsel (collectively, the "Parent Representatives") to (i) provide to Company, its Subsidiaries and their respective
officers, employees, accountants and legal counsel (collectively, the "Company Representatives") access, at reasonable times with reasonable prior notice to, and with coordination through, the Chief
Executive Officer or Chief Financial Officer of Parent, to the officers, employees, properties, offices and other facilities of such party and its subsidiaries and to the books and records thereof and
(ii) furnish promptly such information concerning the business, properties, contracts, assets, liabilities, personnel and other aspects of such party and its subsidiaries as the other party or
its representatives may reasonably request; provided, however, that all access and investigation made pursuant to this Section 5.7.1 shall be
conducted in such a way as to minimize interference with the operations and business of the Company; and provided further that in no case shall the
Parent be required to provide or otherwise disclose or make available to the Company any confidential customer information. No investigation conducted pursuant to this Section 5.7.1 shall
affect or be deemed to modify or limit any representation or warranty made in this Agreement. 

         Section 5.7.2    With respect to the information disclosed pursuant to Section 5.7.1, the parties shall comply with, and shall
cause their
respective Representatives to comply with, all of their respective obligations under the Confidentiality Agreement. 

45

 

 
 

           Section 5.8    No Solicitation of Transactions.     

        Section 5.8.1    None of the Company or any of its Subsidiaries shall, directly or indirectly, take (and the Company shall not
authorize or
permit the Company Representatives or other affiliates to take) any action to (a) encourage (including by way of furnishing non-public information), solicit, initiate or facilitate
any Acquisition Proposal, (b) enter into any agreement with respect to any Acquisition Proposal or enter into any agreement, arrangement or understanding requiring it to abandon, terminate or
fail to consummate the Merger or any other transaction contemplated by this Agreement or (c) participate in any way in discussions or negotiations with, or furnish any information to, any
person in connection with, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or could reasonably be expected to lead to, any Acquisition Proposal;  provided,
however, that if, at any time prior to the obtaining of the Company Stockholder Approval, the Company Board determines in good faith, after
consultation with outside counsel and its financial advisors, that it would otherwise be reasonably likely to constitute a breach of the directors' fiduciary duties to the Company Stockholders, the
Company may, in response to a Superior Proposal and subject to the Company's compliance with Section 5.8.2 (x) furnish information with respect to the Company and its Subsidiaries to the
person making such Superior Proposal pursuant to a customary confidentiality agreement the benefits of the terms of which are no more favorable to the other party to such
confidentiality agreement than those in place with Parent and (y) participate in discussions or negotiations with respect to such Superior Proposal. Upon execution of this Agreement, the
Company shall cease immediately and cause to be terminated any and all existing discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal and promptly
request that all confidential information with respect thereto furnished on behalf of the Company be returned. 

         Section 5.8.2    The Company shall, as promptly as practicable (and in no event later than 24 hours after receipt thereof),
advise Parent
of any inquiry received by it relating to any potential Acquisition Proposal and of the material terms of any proposal or inquiry, including the identity of the Person and its affiliates making the
same, that it may receive in respect of any such potential Acquisition Proposal, or of any information requested from it or of any negotiations or discussions being sought to be initiated with it,
shall furnish to Parent a copy of any such proposal or inquiry, if it is in writing and shall keep Parent fully informed on a prompt basis with respect to any developments with respect to the
foregoing. 

         Section 5.8.3    Neither the Company Board nor any committee thereof shall (a) withdraw or modify, or propose publicly to
withdraw or
modify, in a manner adverse to Parent, the approval or recommendation by the Company Board or such committee of the adoption and approval of the Merger (the "Company Recommendation") and the matters
to be considered at the Company Stockholders' Meeting, (b) other than the Merger, approve or recommend, or propose publicly or to its stockholders to approve or recommend, any Acquisition
Proposal or (c) other than the Merger, cause the Company to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement related to any Acquisition
Proposal. If the Company Board determines in good faith, after consultation with outside counsel and its financial advisors, that it would otherwise be reasonably likely to constitute a breach of its
fiduciary duty to the Company Stockholders, then nothing contained in this Section 5.8 shall prohibit the Company from withdrawing or modifying its recommendation of the Merger no earlier than
the second business day following the day of delivery of written notice to Parent of its intention to do so, so long as the Company continues to comply with all other provisions of this Agreement. 

         Section 5.8.4    None of Parent or any of its Subsidiaries shall, directly or indirectly, take (and Parent shall not authorize or
permit the
Parent Representatives or other affiliates to take) any action to (a) encourage (including by way of furnishing non-public information), solicit, initiate or facilitate any
Acquisition Proposal, (b) enter into any agreement with respect to any Acquisition 

46

 

Proposal
or enter into any agreement, arrangement or understanding requiring it to abandon, terminate or fail to consummate the Merger or any other transaction contemplated by this Agreement or
(c) participate in any way in discussions or negotiations with, or furnish any information to, any person in connection with, or take any other action to facilitate any inquiries or the making
of any proposal that constitutes, or could reasonably be expected to lead to, any Acquisition Proposal; provided, however, that if, at any time the
Parent Board determines in good faith, after consultation with outside counsel and its financial advisors, that it would otherwise be reasonably likely to constitute a breach of the directors'
fiduciary duties to the Parent Stockholders, Parent may, in response to an Acquisition Proposal furnish information with respect to Parent and its Subsidiaries to the Person making such Acquisition
Proposal pursuant to a customary confidentiality agreement and (y) participate in discussions or negotiations with respect to such Acquisition Proposal. Upon execution of this Agreement, Parent
shall cease immediately and cause to be terminated any and all existing discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal and promptly request
that all confidential information with respect thereto furnished on behalf of Parent be returned. 

        Section 5.8.5    Parent shall, as promptly as practicable (and in no event later than 24 hours after receipt thereof), advise the
Company
of any inquiry received by it relating to any potential Acquisition Proposal and of the material terms of any proposal or inquiry, including the identity of the Person and its affiliates making the
same, that it may receive in respect of any such potential Acquisition Proposal, or of any information requested from it or of any negotiations or discussions being sought to be initiated with it,
shall furnish to the Company a copy of any such proposal or inquiry, if it is in writing and shall keep the Company fully informed on a prompt basis with respect to any developments with respect to
the foregoing. 

        Section 5.8.6    Neither the Parent Board nor any committee thereof shall (a) withdraw or modify, or propose publicly to withdraw
or
modify, in a manner adverse to the Company, the approval or recommendation by the Parent Board or such committee of the Parent Stockholder Approval (the "Parent Recommendation") and the matters
related thereto to be considered at the Parent Stockholders' Meeting, (b) approve or recommend, or propose publicly or to its stockholders to approve or recommend, any Acquisition Proposal or
(c) cause Parent to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement related to any Acquisition Proposal. If the Parent Board determines
in good faith, after consultation with outside counsel and its financial advisors, that it would otherwise be reasonably likely to constitute a breach of its fiduciary duty to the Parent Stockholders,
then nothing contained in this Section 5.8 shall prohibit the Parent Board from taking the actions described in subsections (a), (b) and (c) of the preceding sentence of this
Section 5.8.6, in each case no earlier than the second business day following the day of delivery of written notice to the Company of its intention to do so, so long as Parent continues to
comply with all other provisions of this Agreement. 

 
 

          Section 5.9    Appropriate Action; Consents; Filings.     

         Section 5.9.1    The Company and Parent shall use their reasonable best efforts to (a) take, or cause to be taken, all
appropriate action,
and do, or cause to be done, all things necessary, proper or advisable under applicable Law or otherwise to consummate and make effective the transactions contemplated by this Agreement and each
Ancillary Agreement as promptly as practicable, (b) obtain from any Governmental Authority any consents, licenses, permits, waivers, approvals, authorizations or orders required to be obtained
or made by Parent or the Company or any of their respective Subsidiaries, or to avoid any action or proceeding by any Governmental Authority, in connection with the authorization, execution and
delivery of this Agreement and each Ancillary Agreement and the consummation of the transactions contemplated herein and therein, including, without limitation, the Merger, and (c) make all
necessary filings, and thereafter make any other 

47

 

required
submissions, with respect to this Agreement and each Ancillary Agreement and the Merger required under (i) the Securities Act and the Exchange Act, and any other applicable federal or
state securities Laws, (ii) any applicable Antitrust Laws and (iii) any other applicable Law; provided, that Parent and the Company shall
cooperate with each other in connection with the making of all such filings, including providing copies of all such documents to the non-filing party and its advisors prior to filing and,
if requested, to accept all reasonable additions, deletions or changes suggested in connection therewith and, provided,  however, that nothing in this
Section 5.9.1 shall require Parent to agree to the imposition of conditions or the requirement of divestiture of
assets or property. The Company and Parent shall furnish to each other all information required for any application or other filing under the rules and regulations of any applicable Law (including all
information required to be included in the Proxy Statement and the Registration Statement) in connection with the transactions contemplated by this Agreement and each Ancillary Agreement. 

         Section 5.9.2    The Company and Parent shall give (or shall cause their respective Subsidiaries to give) any notices to third
parties, and use,
and cause their respective Subsidiaries to use, all reasonable efforts to obtain any third party consents (a) necessary to consummate the transactions contemplated in this Agreement and each
Ancillary Agreement, (b) required to be disclosed in the Company Disclosure Letter or Parent Disclosure Letter, (c) reasonably requested by Parent or the Company, or (d) otherwise
referenced in Section 6.2.4 or Section 6.3.4, in each case other than customer contracts that do not contain minimum purchase obligations. In the event that either party shall fail to
obtain any third party consent described in the first sentence of this Section 5.9.2, such party shall use reasonable efforts, and shall take reasonable actions to minimize any adverse effect
upon the Company and Parent, their respective Subsidiaries, and their respective businesses resulting, or which could reasonably be expected to result after the Effective Time, from the failure to
obtain such consent. 

         Section 5.9.3    From the date of the Initial Merger Agreement until the Effective Time, each of the Company and Parent shall
promptly notify the
other in writing (a) of any pending or, to the Knowledge of the Company and Parent, threatened action, suit, arbitration or other proceeding or investigation by any Governmental Authority or
any other person (i) challenging or seeking material damages in connection with the Merger or the conversion of Company Capital Stock into Parent Common Stock pursuant to the Merger or
(ii) seeking to restrain or prohibit the consummation of the Merger or otherwise limit the right of Parent or any of its Subsidiaries to own or operate all or any portion of the businesses or
assets of the Company or any of its Subsidiaries, which in either case would reasonably be expected to result in a Company Material Adverse Effect or Parent Material Adverse Effect or (b) at
least seventy-two (72) hours prior to the filing by either party for protection under federal bankruptcy laws or similar state laws relating to bankruptcy, insolvency,
reorganization, moratorium or conveyance. 

 
 

           Section 5.10    Reserved.     

 
 

           Section 5.11    Certain Notices.     From and after the date of the Initial Merger Agreement until the
Effective Time, each party hereto shall promptly notify the other party hereto of (a) the
occurrence, or non-occurrence, of any event that would reasonably be expected to cause any condition to the obligations of any party to effect the Merger and the other transactions
contemplated by this Agreement or any Ancillary Agreement not to be satisfied, or (b) the failure of the Company or Parent, as the case may be, to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it pursuant to this Agreement or any Ancillary Agreement that would reasonably be expected to result in any condition to the obligations of any party
to effect the Merger and the other transactions contemplated by this Agreement or any Ancillary Agreement not to be satisfied; provided,  however, that the
delivery of any notice pursuant to this Section 5.11 shall not cure any breach of any representation or warranty requiring
disclosure of such matter prior to the date of 

48

 

the
Initial Merger Agreement or otherwise limit or affect the remedies available hereunder to the party receiving such notice. 

 
 

           Section 5.12    Public Announcements.     Parent and the Company shall consult with each other before
issuing any press release or otherwise making any public statements with respect to the Merger and
shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable Law or any listing agreement with NASDAQ. 

 
 

           Section 5.13    NASDAQ Listing.     Parent shall promptly prepare and submit to NASDAQ and any other
applicable stock exchange a listing application covering the shares of Parent Common Stock to be
issued in the Merger and shall use its reasonable best efforts to cause such shares to be approved for listing on NASDAQ, subject to official notice of issuance, prior to the Effective Time. 

 
 

          Section 5.14    Employee Benefit Matters.     With respect to any Parent Benefit Plan in which any
director, officer or employee of the Company or any of its Subsidiaries (the "Company Employees") may be
eligible to participate after the Effective Time, Parent shall, or shall cause the Surviving Corporation to, recognize, to the extent recognized under the applicable Employee Plan, the length of
service of the Company Employees with the Company or any of its Subsidiaries, as the case may be, for purposes of vesting, eligibility and accrual of benefits, in such Parent Benefit Plans;  provided,
however, that no service shall be recognized to the extent that such recognition would result
in a duplication of benefits. 

 
 

           Section 5.15    Indemnification of Parent Directors and Officers.     

         Section 5.15.1    For not less than six years from and after the Effective Time, Parent agrees to indemnify and hold harmless all
past and
present directors, officers and employees of Parent to the same or greater extent such persons are indemnified as of the date of the Initial Merger Agreement by Parent pursuant to the Parent
Certificate of Incorporation, the Parent By-laws and indemnification agreements, if any, in existence on the date of the Initial Merger Agreement, for acts or omissions occurring at or
prior to the Effective Time; provided, however, that Parent agrees to indemnify and hold harmless such
persons to the fullest extent permitted by Law for acts or omissions occurring in connection with the approval of this Agreement and the consummation of the transactions contemplated hereby. 

         Section 5.15.2    For six years from the Effective Time, Parent shall provide to Parent's current directors and officers an insurance
and
indemnification policy that provides coverage for claims arising from facts or events that occurred on or before the Effective Time, including, without limitation, in respect of the transactions
contemplated by this Agreement (the "D&O Insurance Policy") that is no less favorable than the Parent's existing policy or, if substantially equivalent insurance coverage is unavailable, the best
available coverage. The provisions of the immediately preceding sentence shall be deemed to have been satisfied if a prepaid D&O Insurance Policy has been obtained prior to the Effective Time for
purposes of this Section 5.14, which D&O Insurance Policy provides such directors and officers with coverage for an aggregate period of six years with respect to claims arising from facts or
events that occurred on or before the Effective Time, including, without limitation, in respect of the transactions contemplated by this Agreement. If such prepaid D&O Insurance Policy has been
obtained prior to the Effective Time, Parent shall maintain such D&O Insurance Policy in full force and effect, and continue to honor the obligations thereunder. 

         Section 5.15.3    In the event Parent (a) consolidates with or merges into any other person and shall not be the continuing or
surviving
corporation or entity of such consolidation or merger or (b) transfers all or substantially all of its properties and assets to any person, then, and in each such case, proper provisions shall
be made so that such continuing or surviving corporation or entity or transferee of such assets, as the case may be, shall assume the obligations set forth in this Section 5.15. 

49

 

         Section 5.15.4    The obligations under this Section 5.15 shall not be terminated or modified in such a manner as to adversely
affect any
indemnitee to whom this Section 5.15 applies without the consent of such affected indemnitee (it being expressly agreed that the indemnitees to whom this Section 5.15 applies shall be
third party beneficiaries of this Section 5.14) 

 
 

          Section 5.16    Indemnification of Company Directors and Officers.     

         Section 5.16.1    For not less than six years from and after the Effective Time, Parent agrees to indemnify and hold harmless all
past and
present directors, officers and employees of Company to the same or greater extent such persons are indemnified as of the date of the Initial Merger Agreement by Company pursuant to the Company
Certificate of Incorporation, the Company By-laws and indemnification agreements, if any, in existence on the date of the Initial Merger Agreement, for acts or omissions occurring at or
prior to the Effective Time; provided, however, that Parent agrees to indemnify and hold harmless such
persons to the fullest extent permitted by Law for acts or omissions occurring in connection with the approval of this Agreement and the consummation of the transactions contemplated hereby. 

         Section 5.16.2    For six years from the Effective Time, Parent shall provide to Company's current directors and officers an
insurance and
indemnification policy that provides coverage for claims arising from facts or events that occurred on or before the Effective Time, including, without limitation, in respect of the transactions
contemplated by this Agreement (the "D&O Insurance Policy") that is no less favorable than the Company's existing policy or, if substantially equivalent insurance coverage is unavailable, the best
available coverage. The provisions of the immediately preceding sentence shall be deemed to have been satisfied if a prepaid D&O Insurance Policy has been obtained prior to the Effective Time for
purposes of this Section 5.16, which D&O Insurance Policy provides such directors and officers with coverage for an aggregate period of six years with respect to claims arising from facts or
events that occurred on or before the Effective Time, including, without limitation, in respect of the transactions contemplated by this Agreement. If such prepaid D&O Insurance Policy has been
obtained prior to the
Effective Time, Parent shall maintain such D&O Insurance Policy in full force and effect, and continue to honor the obligations thereunder. 

         Section 5.16.3    In the event Parent (a) consolidates with or merges into any other person and shall not be the continuing or
surviving
corporation or entity of such consolidation or merger or (b) transfers all or substantially all of its properties and assets to any person, then, and in each such case, proper provisions shall
be made so that such continuing or surviving corporation or entity or transferee of such assets, as the case may be, shall assume the obligations set forth in this Section 5.16. 

        Section 5.16.4    The obligations under this Section 5.16 shall not be terminated or modified in such a manner as to adversely
affect any
indemnitee to whom this Section applies without the consent of such affected indemnitee (it being expressly agreed that the indemnitees to whom this Section applies shall be third party beneficiaries
of this Section 5.16) 

 
 

           Section 5.17    Tax Matters.     Each party hereto shall use its reasonable best efforts to cause the
Merger to qualify, and will not knowingly take any actions or cause any actions to be taken
which could reasonably be expected to prevent the Merger from qualifying, as a reorganization within the meaning of Section 368(a) of the Code. Parent and the Company shall each cause all Tax
Returns relating to the Merger to be filed on the basis of treating the Merger as a reorganization under section 368(a) of the Code. In connection with the filing of the Registration Statement
and the Proxy Statement and immediately prior to the Effective Time, Parent, Merger Sub and the Company shall execute and deliver to Latham & Watkins, LLP, counsel to Parent, and to Nutter
McClennen & Fish, LLP, counsel to the Company, tax representation letters in customary form and upon which Latham & Watkins, LLP 

50

 

and
Nutter McClennen & Fish, LLP will rely to determine and describe, including expertising, the tax consequences of the Merger in the Registration Statement and/or Proxy Statement. 

 
 

           Section 5.18    Affiliate Letters.     The Company shall, within ten business days of the date of the
Initial Merger Agreement, deliver to Parent a list of names and addresses of those Persons, that to
the Knowledge of the Company, are or may be deemed to be as of the time of the Company Stockholders' Meeting "affiliates" of the Company within the meaning of Rule 145 under the Securities Act
and who own Company Capital Stock. There shall be added to such list the names and addresses of any other Person subsequently identified by either Parent or the Company, as the case may be (unless, in
the case of Parent, an opinion of outside counsel to the Company reasonably acceptable to Parent is provided to Parent that such Person is not an affiliate), as a Person who may be deemed to be such
an affiliate; provided, however, that no such Person identified by Parent or the Company, as the case
may be, shall remain on such list of affiliates if Parent or the Company, as the case may be, shall receive from the other party, on or before the date of the Company Stockholders' Meeting, an opinion
of outside counsel reasonably satisfactory to Parent to the effect that such Person is not such an affiliate. The Company shall use reasonable best efforts to deliver or cause to be delivered to the
other party, prior to the date of the Company Stockholders' Meeting, from each such affiliate identified in the foregoing list a letter dated as of the Company Stockholders' Meeting in a form
reasonably acceptable to Parent (collectively, the "Affiliate Letter"). Parent shall not be required to maintain the effectiveness of the Registration Statement or any other registration statement
under the Securities Act for the purposes of resale of Parent Common Stock by such affiliates received in the Merger except to the extent provided in Section 5.4.3. 

 
 

           Section 5.19    Delivery of Financial Statements.     

        Section 5.19.1    Interim Unaudited Financial Statements.    Each party shall cause to be delivered to the
other the unaudited consolidated balance sheets and the related unaudited consolidated statements of income and cash flows for (a) each monthly period completed subsequent to the date of the
Initial Merger Agreement (the "Monthly Unaudited Financial Information") and (b) each quarterly period completed subsequent to the date of the Initial Merger Agreement (the "Quarterly Unaudited
Financial Information" and, together with the Monthly Unaudited Financial Information, the "Interim Unaudited Financial Information"). The Interim Unaudited Financial Information shall be so delivered
on or before the date that is 30 days following the end of the relevant month in the case of the Monthly Unaudited Financial Information and 40 days following the end of the relevant
quarter in the case of the Unaudited Quarterly Financial Information, and shall be delivered together with (a) in the case of the Unaudited Quarterly Financial Information, an associated review
report under SAS 100 without exception or qualification of such party's independent accountants with respect thereto and (b) a certificate, duly executed by the chief financial officer, chief
accounting officer or other senior financial officer of such party in such person's capacity as an officer, restating with respect to such Interim Unaudited Financial Information, the representations
and warranties set forth in Sections 3.8.2 and 4.7.3. 

        Section 5.19.2    Annual Audited Financial Statements.    Each party shall cause to be delivered to the other
the audited consolidated balance sheets and the related audited consolidated statements of income and cash flows for each annual period completed subsequent to the date of the Initial Merger Agreement
(the "Annual Audited Financial Information"). The Annual Audited Financial Information shall be so delivered on or before the date that is 75 days following the end of the relevant annual
period and shall be delivered together with (a) an unqualified audit opinion of the delivering party's independent public accountants and (b) a certificate, duly executed by the chief
financial officer, chief accounting officer or other senior financial officer of such party in such person's capacity as an officer, restating with respect to such Annual Audited Financial
Information, the representations and warranties set forth in Sections 3.8.2 and 4.7.3. 

51

 

 
 

           Section 5.20    Transitional Matters.     Each of Parent and the Company shall use their reasonable
best efforts to effectuate the following transitional matters. 

        Section 5.20.1    Directors of Surviving Corporation.    At the Effective Time, the Parent Board shall be
constituted as follows: 

         (a)  Three
persons designated by the Company; 

         (b)  Three
persons designated by Parent, one of whom shall be Scott Ginsburg who shall serve as the Chairman of the Parent Board; and 

         (c)  Anthony
J. LeVecchio, who shall serve as the Chairman of the Parent Board Audit Committee and shall be the "audit committee financial expert" within the meaning of rules
of the SEC and the applicable NASDAQ rules (Mr. Ginsburg, Mr. LeVecchio and any other current member of the Parent Board who is designated by Parent to the Parent Board pursuant to
Section 5.20.1(b), the "Continuing Directors"). 

        The
members of the Parent Board who are not Continuing Directors shall tender their resignations from the Parent Board effective as of the Effective Time. The members of Parent Board
remaining on the Parent Board immediately after such resignations shall fill the vacancies on the Parent Board resulting from such resignations so that the board is constituted as set forth in this
Section 5.20.1. 

        Section 5.20.2    Officers of Parent.    Immediately following the Effective Time, Parent shall take all action
necessary to appoint the following persons as officers of Parent effective as of the Effective Time: Scott Ginsburg as Chief Executive Officer, John Roland as the President and Chief Operating
Officer, and Omar Choucair as the Chief Financial Officer. The employment of Scott Ginsburg as Chief Executive Officer after the Effective Time shall be governed by an employment agreement (the
"Ginsburg Employment Agreement") that shall provide for a term of one year and such other terms as shall be determined by the Parent Board and its Compensation Committee. The employment of John Roland
as the President and Chief Operating Officer shall be governed by an employment agreement (the "Roland Employment Agreement") that shall provide for a term of three years and such other terms as shall
be determined by the Parent Board and its Compensation Committee. The employment of Omar Choucair as the Chief Financial Officer shall be governed by an amendment to his current employment agreement
(the "Choucair Employment Agreement") on such terms as shall be determined by the Parent Board and its Compensation Committee. 

 
 

           Section 5.21    FIRPTA Certification.     Prior to the Closing Date, the Company shall deliver to
Parent an executed affidavit from the Company, also delivered to the Internal Revenue Service, that the
Company Common Stock is not a "U.S. real property interest" in accordance with the Treasury Regulations issued under Sections 897 and 1445 of the Code. If Parent does not receive the documents
described above on or before the Closing Date, Parent shall be permitted to withhold from the consideration otherwise payable pursuant to this Agreement any required withholding tax under
Section 1445 of the Code. 

 
 

           Section 5.22    Parent Financing.     Prior to the Closing Date, Parent and the Company shall work
together to arrange debt or equity financing on terms and conditions acceptable to Parent (which
terms and conditions shall be subject to the approval of the Company, which shall not be unreasonably withheld), sufficient to (i) permit the full repayment or other extinguishment of the
Combined Indebtedness and (ii) provide Parent with not less than $5 million of additional cash working capital on the Closing Date (such financing, the "Parent Financing"). 

 
 

           Section 5.23    Amendment of Parent Bylaws.     No later than the first anniversary of the Closing Date,
 the Parent Board shall have taken such action as is reasonably necessary to amend the Bylaws of 

52

 

the
Parent to prohibit a single Person from simultaneously being Chairman of the Parent Board and Chief Executive Officer of the Parent. 

 
 

           Section 5.24    Amendment of Company Charter and Termination of Investor's Rights Agreement.     At or
prior to the Effective Time, the Company Board and Company Stockholders shall have taken such action as is necessary to terminate the Company Investor's
Rights Agreement and to amend the Company Charter to the extent necessary to provide for the conversion of the Company Capital Stock into shares of the Parent Common Stock pursuant to the Per Share
Amounts contemplated hereby. Such amendment of the Company Charter shall be reasonably acceptable to Parent. 

 
 

           Section 5.25    Roland and Series F Releases.     The Company shall use its reasonable best
efforts to obtain the Roland Release and the Series F Releases. 

 
 

Article 6.
  Closing Conditions    
    

 
 
        Section 6.1    Conditions to Obligations of Each Party Under This Agreement.     The respective obligations of
each party to effect the Merger and the other transactions contemplated herein shall be subject to the satisfaction at or prior to
the Effective Time of the following conditions, any or all of which may be waived, in whole or in part, to the extent permitted by applicable Law: 

        Section 6.1.1    Effectiveness of the Registration Statement.    The Registration Statement shall have been
declared effective by the SEC under the Securities Act. No stop order suspending the effectiveness of the Registration Statement shall have been issued by the SEC and no proceedings for that purpose
shall have been initiated or, to the Knowledge of Parent or the Company, threatened by the SEC. 

        Section 6.1.2    Stockholder Approval.    The Company Stockholder Approval and the Parent Stockholder Approval
shall have been obtained. 

        Section 6.1.3    No Order.    No Governmental Authority, nor any federal or state court of competent
jurisdiction or arbitrator shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, judgment, injunction or arbitration award or finding or
other order (whether temporary, preliminary or permanent), in any case which is in effect and which prevents or prohibits consummation of the Merger or any other transactions contemplated in this
Agreement or any Ancillary Agreement. 

        Section 6.1.4    Exchange Listing.    The shares of Parent Common Stock issuable to the stockholders of the
Company in the Merger shall have been approved for listing on NASDAQ, subject to official notice of issuance. 

        Section 6.1.5    Parent Financing.    The Parent Financing shall have been obtained. 

 
 

           Section 6.2    Additional Conditions to Obligations of Parent and Merger Sub.     The obligations of
Parent and Merger Sub to effect the Merger and the other transactions contemplated herein are also subject to the following conditions:
 

        Section 6.2.1    Representations and Warranties.    Each of the representations and warranties of the Company
contained in this Agreement and each Ancillary Agreement shall be true and correct in all respects (without regard to any materiality qualifications contained therein) as of the date of the Initial
Merger Agreement and as of the Closing Date as though made on and as of the Closing Date (except that those representations and warranties that address matters only as of a particular date need only
speak to that date), unless the failure to be true and correct would not constitute a Company Material Adverse Effect. Parent shall have received a certificate of the of the Chief Operating Officer or
other authorized executive officer of the Company to that effect. 

53

 

        Section 6.2.2    Agreements and Covenants.    The Company shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement and each Ancillary Agreement to be performed or complied with by it on or prior to the Effective Time. Parent shall have received
a certificate of the Chief Operating Officer or other authorized executive officer of the Company to that effect. 

        Section 6.2.3    Company Material Adverse Effect.    Since the date of the Initial Merger Agreement, there
shall not have occurred a Company Material Adverse Effect. 

        Section 6.2.4    Consents and Approvals.    All consents, approvals and authorizations listed on
Section 6.2.4 of the Company Disclosure Letter shall have been obtained. 

        Section 6.2.5    Court Proceedings.    No action or claim shall be pending or threatened before any court or
quasi-judicial or administrative agency of any federal, state, local or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling or charge would
(a) prevent consummation of any of the transactions contemplated by this Agreement or any Ancillary Agreement, (b) cause any of the transactions contemplated by this Agreement or any
Ancillary Agreement to be rescinded following consummation thereof or (c) affect adversely the right or powers of Parent to own, operate or control the Company, and no such injunction,
judgment, order, decree, ruling or charge shall be in effect. 

        Section 6.2.6    Dissenting Stockholders.    The Dissenting Shares shall not represent shares of Company
Capital Stock that would be entitled to receive in excess of 5% of the aggregate merger Consideration if such shares were not Dissenting Shares. 

        Section 6.2.7    Reserved.    

        Section 6.2.8    Company Releases.    The Company Releases shall be in full force and effect and be legal,
valid, binding and enforceable by the Company and, as of and after the Effective Time, by the Surviving Corporation, against the signatories thereof. 

        Section 6.2.9    Ancillary Agreements.    The Lockup Agreement shall have been executed and delivered to Parent
by CrossPoint Venture Partners and its affiliates who are Company Stockholders. 

        Section 6.2.10    Merger Consideration.    The number of shares of Parent Common Stock into which the Company
Capital Stock will be converted in the Merger will not exceed 52,062,712 (subject to Section 2.1.6). 

 
 

           Section 6.3    Additional Conditions to Obligations of the Company.     The obligation of the Company
to effect the Merger and the other transactions contemplated herein are also subject to the following conditions: 

        Section 6.3.1    Representations and Warranties.    Each of the representations and warranties of Parent and
Merger Sub contained in this Agreement and each Ancillary Agreement shall be true and correct in all respects (without regard to any materiality qualifications contained therein) as of the date of the
Initial Merger Agreement and as of the Closing Date as though made on and as of the Closing Date (except that those representations and warranties that address matters only as of a particular date
need only be true and correct as of such date), unless the failure to be true and correct would not constitute a Parent Material Adverse Effect. The Company shall have received a certificate of the
Chief Executive Officer or Chief Financial Officer of Parent to that effect. 

        Section 6.3.2    Agreements and Covenants.    Parent shall have performed or complied in all material respects
with all agreements and covenants required by this Agreement and each Ancillary Agreement to be
performed or complied with by it on or prior to the Effective Time. The Company shall have received a certificate of a responsible officer of Parent to that effect. 

        Section 6.3.3    No Parent Material Adverse Effect.    Since the date of the Initial Merger Agreement, there
shall not have occurred any Parent Material Adverse Effect. 

        Section 6.3.4    Consents and Approvals.    All consents, approvals and authorizations listed on
Section 6.3.4 of the Parent Disclosure Letter shall have been obtained. 

54

  

        Section 6.3.5    Court Proceedings.    No action or claim shall be pending or threatened before any court or
quasi-judicial or administrative agency of any federal, state, local or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling or charge would
(a) prevent consummation of any of the transactions contemplated by this Agreement or any Ancillary Agreement or (b) cause any of the transactions contemplated by this Agreement or any
Ancillary Agreement to be rescinded following consummation thereof and no such injunction, judgment, order, decree, ruling or charge shall be in effect. 

        Section 6.3.6    Resignation or Removal of Parent Directors and Officers; Election of New Directors and
Officers.    Each of Parent's directors that is not a Continuing Director shall have tendered their resignation to the Parent Board or have been otherwise removed and
the persons identified in Section 5.20 shall be or have been appointed as the directors and officers of Parent (and, if applicable, its Subsidiaries) effective as of the Effective Time. 

        Section 6.3.7    Ancillary Agreements.    The Standstill and Registration Rights Agreement shall have been
executed and delivered by Scott Ginsburg to the Company. 

Article 7.

Termination, Amendment and Waiver  

 
 
        Section 7.1    Termination.     This Agreement may be terminated, and the Merger contemplated hereby may be
abandoned, at any time prior to the Effective Time, by action taken or authorized by
the Board of Directors of the terminating party or parties: 

         Section 7.1.1    By mutual written consent of Parent and the Company; 

         Section 7.1.2    By either the Company or Parent if the Merger shall not have been consummated prior to June 30, 2006; 
provided, however, that the right to terminate this Agreement under this Section 7.1.2 shall not
be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Merger to occur on or before such date; 

         Section 7.1.3    By either the Company or Parent if either party receives notice from the other pursuant to Section 5.9.3 that
such other
party intends to file for protection under federal bankruptcy laws or similar state laws relating to bankruptcy, insolvency, reorganization, moratorium or similar laws or if any Governmental Authority
shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement or any Ancillary
Agreement, and such order, decree, ruling or other action shall have become final and nonappealable (which order, decree, ruling or other action the parties shall have used their reasonable best
efforts to resist, resolve or lift, as applicable, subject to the provisions of Section 5.8); 

         Section 7.1.4    By either Parent or the Company if the Company Stockholder Approval shall not have been obtained by reason of the
failure to
obtain the required vote at a duly held meeting of stockholders or at any adjournment thereof; provided that if this Agreement is then terminable
pursuant to Section 7.1.6 by Parent, Company shall not have a right to terminate under this Section 7.1.4; 

        Section 7.1.5    By the Company if the Parent Stockholder Approval shall not have been obtained by reason of the failure to obtain the
required
vote at a duly held meeting of stockholders or at any adjournment thereof; 

         Section 7.1.6    By Parent if (a) the Company Board shall have withdrawn, or adversely modified, its recommendation of the
Merger or this
Agreement (or determined to do so); (b) the Company Board shall have failed upon Parent's request, in response to notification by the 

55

 

Company
pursuant to Section 5.8.2 that it has received an Acquisition Proposal containing a proposed acquisition price, to reconfirm its recommendation of the Merger or this Agreement (or
determined to do so) within ten days after such request (or such shorter period of time as may exist between such request and the second business day preceding the Company Stockholders' Meeting);
(c) the Company Board shall have determined to recommend to the Company Stockholders that they approve an Acquisition Proposal other than that contemplated by this Agreement or shall have
determined to accept a Superior Proposal; (d) any person (other than Parent or an affiliate of Parent) or group becomes after the date of the Initial Merger Agreement the beneficial owner of
20% or more of the outstanding shares of Company Common Stock; or (e) for any reason within its control the Company fails to call or hold the Company Stockholders' Meeting on or before the date
of the Parent Stockholder Meeting; 

         Section 7.1.7    By Parent, if a Company Material Adverse Effect has occurred and has not been cured within a reasonable period of
time or
(a)(i) there shall be breached any covenant or agreement of the Company set forth in this Agreement or any Ancillary Agreement and such breach is not the result of Parent's failure to fulfill
any of its covenants or agreements under this Agreement, (ii) any representation or warranty of the Company set forth in this Agreement or any Ancillary Agreement that is qualified as to
materiality shall have become untrue, or (iii) any representation or warranty of the Company set forth in this Agreement or any Ancillary Agreement that is not so qualified shall have become
untrue in any material respect, (b) such breach or misrepresentation is not cured within 10 days after written notice thereof, and (c) such breach or misrepresentation would cause
the conditions set forth in Section 6.2.1 or Section 6.2.2 not to be satisfied; 

         Section 7.1.8    By the Company, if a Parent Material Adverse Effect has occurred and has not been cured within a reasonable period
of time or if
(a)(i) there shall be breached any covenant or agreement of Parent or Merger Sub set forth in this Agreement or any Ancillary Agreement and such breach is not the result of the Company's
failure to fulfill any of its covenants or agreements under this Agreement, (ii) any representation or warranty of Parent or Merger Sub that is qualified as to materiality shall have become
untrue, or (iii) any representation or warranty of Parent or Merger Sub that is not so qualified shall have become untrue in any material respect, (b) such breach or misrepresentation is
not cured within 10 days after written notice thereof, and (c) such breach of misrepresentation would cause the conditions set forth in Section 6.3.1 or Section 6.3.2 or
not to be satisfied; or 

         Section 7.1.9    By the Company if (a) the Parent Board shall have withdrawn, or adversely modified, its recommendation in favor
of the
Parent Stockholder Approval (or determined to do so); (b) the Parent Board shall have failed upon the Company's request, in response to notification by the Parent pursuant to
Section 5.8.5 that it has received an Acquisition Proposal containing a proposed acquisition price, to reconfirm its recommendation in favor of the Parent Stockholder Approval (or determined to
do so) within ten days after such request (or such shorter period of time as may exist between such request and the second business day preceding the Parent Stockholders' Meeting); (c) the
Parent Board shall have determined to recommend to the Parent Stockholders that they approve an Acquisition Proposal; (d) the Parent Board shall have caused the Parent to enter into any letter
of intent, agreement in principle, acquisition agreement or similar agreement related to any Acquisition Proposal; or (e) for any reason within its control the Parent fails to call or hold the
Parent Stockholders' Meeting as contemplated hereby. 

 
 

           Section 7.2    Effect of Termination.     

        Section 7.2.1    Limitation on Liability.    In the event of termination of this Agreement by either the
Company or Parent as provided in Section 7.1, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Parent or the Company or their 

56

 

respective
Subsidiaries, officers or directors except with respect to Section 5.6, Section 5.7, Section 5.12, this Section 7.2 and Article 8. 

        Section 7.2.2    Parent Expenses.    Parent and the Company agree that if this Agreement is terminated pursuant
to Section 7.1.6 or 7.1.7, then the Company shall pay Parent an amount equal to the sum of Parent's Expenses up to an amount equal to $1,000,000. 

        Section 7.2.3    Company Expenses.    Parent and the Company agree that if this Agreement is terminated
pursuant to Section 7.1.8 or Section 7.1.9, then Parent shall pay to the Company an amount equal to the sum of the Company's Expenses up to an amount equal to $1,000,000. 

        Section 7.2.4    Payment of Expenses.    Payment of Expenses pursuant to Section 7.2.2 or
Section 7.2.3 shall be made not later than two business days after delivery to the other party of notice of demand for payment and a documented itemization setting forth in reasonable detail
all Expenses of the party entitled to receive payment (which itemization may be supplemented and updated from time to time by such party until the 60th day after such party delivers such notice of
demand for payment, but only for amounts incurred prior to the date of termination). In any proceedings concerning payment of amounts due under this Section 7.2, the party prevailing in such
proceeding shall be entitled to recover its Expenses from the other party incurred in connection therewith. 

        Section 7.2.5    Termination Fee.    In addition to any payment required by the foregoing provisions of this
Section 7.2, (i) in the event that this Agreement is terminated pursuant to Section 7.1.6 or Section 7.1.7, then the Company shall pay to Parent immediately upon such
termination, in the case of a termination by the Company, or within two business days thereafter, in the case of a termination by Parent, a termination fee of $2,000,000, and (ii) in the event
that this Agreement is terminated pursuant to Section 7.1.8 or Section 7.1.9, then Parent shall pay to the Company immediately upon such termination, a termination fee of $2,000,000. 

        Section 7.2.6    All Payments.    All payments under Section 7.2 shall be made by wire transfer of
immediately available funds to an account designated by the party entitled to receive payment. Each of the Parent and the Company acknowledges that the payment covenants provided for in this
Section 7.2 are an integral part of this Agreement and constitute liquidated damages and not a penalty, and that, without these covenants, neither party would have entered into this Agreement.
In the event that either party is required to pay amounts pursuant to this section 7.2, such payments (made in compliance with the terms hereof) shall be the recipient's exclusive remedy for
termination and/or breach of this Agreement. 

 
 

           Section 7.3    Amendment.     This Agreement may be amended by the parties hereto by action taken by or
on behalf of their respective Boards of Directors at any time prior to the Effective
Time; provided, however, that, after approval of the Merger by the Company Stockholders or obtaining the
Parent Stockholder Approval, no amendment may be made without further stockholder approval, which, by Law or in accordance with the rules of any relevant stock exchange, requires further approval by
such stockholders. This Agreement may not be amended except by an instrument in writing signed by the parties hereto. 

 
 

           Section 7.4    Waiver.     At any time prior to the Effective Time, any party hereto may
(a) extend the time for the performance of any of the obligations or other acts of the other
party hereto, (b) waive any inaccuracies in the representations and warranties of the other party contained herein or in any document delivered pursuant hereto, and (c) waive compliance
by the other party with any of the agreements or conditions contained herein; provided, however, that
after any approval of the transactions contemplated by this Agreement by the stockholders of the Company or obtaining the Parent Stockholder Approval, there may not be, without further approval of
such stockholders, any extension or waiver of this Agreement or any portion thereof which, by Law or in accordance with the rules of any relevant stock exchange, requires further approval by the
Company Stockholders or the 

57

 

Parent
Stockholders. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby, but such extension or waiver or
failure to insist on strict compliance with an obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. 

 
 

           Section 7.5    Fees and Expenses.     Subject to Section 7.2.1, Section 7.2.2 and
Section 7.2.3 hereof, all expenses incurred by the parties hereto shall be borne solely and
entirely by the party which has incurred the same; provided, however, that Parent shall pay the expenses
related to printing, filing and mailing the Registration Statement and the Proxy Statement and all SEC and other regulatory filing fees incurred in connection with the Registration Statement and the
Proxy Statement. 

Article 8.

General Provisions  

 
 
        Section 8.1    General Survival.     The parties agree that, regardless of any investigation made by the
parties, the representations and warranties of the parties contained in this Agreement shall
survive the execution and delivery of this Agreement for a period beginning on the date of the Initial Merger Agreement and ending at the Effective Time. All of the covenants, agreements and
obligations of the parties contained in this Agreement or any other document, certificate, schedule or instrument delivered or executed in connection herewith shall survive (a) until fully
performed or fulfilled, unless non-compliance with such covenants, agreements or obligations is waived in writing by the party or parties entitled to such performance or (b) if not
fully performed or fulfilled, until the expiration of the relevant statute of limitations. 

 
 

           Section 8.2    Notices.     Any notices or other communications required or permitted under, or
otherwise in connection with this Agreement, shall be in writing and shall be deemed to have
been duly given when delivered in person or upon confirmation of receipt when transmitted by facsimile transmission, or on receipt after dispatch by registered or certified mail, postage prepaid,
addressed, or on the next business day if transmitted by national overnight courier, in each case as follows: 

        If
to Parent or Merger Sub, addressed to it at: 

Digital
Generation Systems, Inc.

750 West John Carpenter Freeway

Suite 700

Irving, TX 75039

Attn: Chief Financial Officer

Facsimile: (972) 581-2100 

        with
a mandated copy to: 

Latham &
Watkins LLP

555 Eleventh Street, N.W.

Tenth Floor

Washington, D.C. 20004

Attention: Raymond B. Grochowski

Facsimile: (202) 637-2201 

        If
to the Company, addressed to it at: 

FastChannel
Network, Inc.

250 First Avenue

Suite 201

Needham, MA 02494

Attn: Chief Financial Officer

Facsimile: (781) 898-6501 

58

 

        with
a mandated copy to: 

Nutter,
McClennen & Fish, LLP

155 Seaport Boulevard

Boston, MA 02210

Attn: Joseph E. Mullaney III

Facsimile: (617) 310-9299 

 
 

          Section 8.3    Definitions.     The following terms, as used herein, shall have the following meanings:

        "Acquisition
Proposal" means, with respect to a Person, any offer or proposal concerning any (A) merger, consolidation, business combination, or similar transaction involving such
Person or any of its Subsidiaries, (B) sale, lease or other disposition directly or indirectly by merger, consolidation, business combination or share exchange, joint venture or otherwise of
assets of such Person or any of its Subsidiaries representing 20% or more of the consolidated assets of such Person and its Subsidiaries, (C) issuance, sale or other disposition of (including
by way of merger, consolidation, business combination, share exchange, joint venture or any similar transaction) securities (or options, rights or warrants to purchase, or securities convertible into
or exchangeable for such securities) representing 20% or more of the voting power of such Person or any of its Subsidiaries, (D) transaction in which any person shall acquire beneficial
ownership, or the right to acquire beneficial ownership, or any group shall have been formed which beneficially owns or has the right to acquire beneficial ownership of 20% or more of the outstanding
voting capital stock of such Person or any of its
Subsidiaries or (E) any combination of the foregoing, provided, however, that any proposal or
transaction involving the refinancing of the existing debt of such Person otherwise permitted by this Agreement. 

        "Acquisition"
has the meaning assigned to it in Section 3.25. 

        "Action"
means any action, charge, claim, dispute, proceeding, suit, hearing, litigation, audit or investigation (whether civil, criminal, administrative, judicial or investigative), or
any appeal therefrom. 

        "Affiliate"
means, with respect to any Person, (i) if such Person is a natural Person, a spouse of such Person, or any child or parent of such Person, (ii) if such Person
is not a natural Person, any Director or officer of such Person and any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. 

        "Agreement"
means this Agreement and Plan of Merger and shall include the Company Disclosure Letter and Parent Disclosure Letter and the Exhibits attached hereto. 

        "Ancillary
Agreements" means the Ginsburg Voting Agreement, the Standstill and Registration Rights Agreement, the Company Stockholder Voting Agreement, the Lockup Agreement, the Ginsburg
Employment Agreement, the Roland Employment Agreement and the Choucair Employment Agreement. 

        "Antitrust
Law" means and includes the Sherman Act, the Clayton Act, the HSR Act, the Federal Trade Commission Act and the EC Merger Regulations, in each case as amended, and all other
federal, state or foreign statutes, rules, regulations, orders, decrees, administrative and judicial doctrines and other laws that are designed or intended to regulate competition or investment
(foreign or otherwise) or to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade. 

        "Approval"
means any approval, authorization, consent, license, franchise, order, registration, permit or other confirmation of or by, or filing with, a Person. 

59

 

        "Cleanup"
means all actions required to: (a) cleanup, remove, treat or remediate Hazardous Materials in the environment; (b) prevent the Release of Hazardous Materials so
that they do not migrate,
endanger or threaten to endanger public health or welfare or the environment; (c) perform pre-remedial studies and investigations and post-remedial monitoring and care;
or (d) respond to any government requests for information or documents in any way relating to cleanup, removal, treatment or remediation or potential cleanup, removal, treatment or remediation
of Hazardous Materials in the environment. 

        "Closing
Date" means the date on which the Effective Time occurs. 

        "Combined
Indebtedness" means the Existing Company Indebtedness, and any indebtedness incurred by the Company pursuant to Section 5.1(e)(ii) and the Existing Parent
Indebtedness, and any indebtedness incurred by Parent pursuant to Section 5.2(e)(ii). 

        "Common
Stock" means the common stock, par value $0.01 per share, of the Company. 

        "Company
Common Stock" means the Common Stock and Class B Common Stock (nonvoting), collectively. 

        "Company
Investor's Rights Agreement" means that certain Fourth Amended and Restated Investor's Rights Agreement, dated September 9, 2004, by and among the Company and certain
holders of the Company Preferred Stock and the holders of other equity instruments of the Company. 

        "Company
Owned Intellectual Property" means all Intellectual Property owned by the Company or any Subsidiary and the rights of the Company or any Subsidiary under any License Agreement
granting rights in Intellectual Property owned by third Persons, in each case to the extent that such Intellectual Property is reasonably necessary for the conduct of the Company's business as it is
currently conducted. 

        "Company
Releases" means general, full and complete releases and waivers of liability with respect to the Company to be executed by Michael Greenlees and Dean McCausland and delivered to
the Company prior to or upon the execution hereof, it being understood that the Company Releases contain non-competition and confidentiality provisions. 

        "Company
Stock Option Plan" means the FastChannel 2000 Stock Option and Incentive Plan, the adDIRECT 1995 Plan, the adDIRECT 2000 Plan and the 1999 Stock Option Plan of CMI. 

        "Company
Stockholder Approval" means the vote by the requisite vote of Company Stockholders to approve and adopt this Agreement, the Merger and the transactions contemplated hereby, any
other
actions to be taken hereunder in connection with the Merger and such other matters as the Company may otherwise deem necessary or advisable in connection therewith. 

        "Company
Stockholder" means a holder of Company Common Stock. 

        "Copyrights"
means all copyrights, whether or not registered, including, but not limited to, any moral rights and rights of attribution and integrity, the content contained on any World
Wide Web site, registrations and applications for any of the foregoing, and the right to sue for past infringement thereof. 

        "Director"
means, as to a Person that is a corporate entity, a member of the Board of Directors of such entity. 

        "Environmental
Claim" means any Action, investigation or notice (written or oral) by any Person alleging potential Liability (including potential Liability for investigatory costs,
Cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from (a) the presence, Release or
threatened 

60

 

Release
of any Hazardous Materials at any location, whether or not owned or operated by the Company, or (b) circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law. 

        "Environmental
Laws" means all federal, state, local and foreign Laws and regulations relating to pollution or protection of human health or the environment, including Laws relating to
Releases or threatened Releases of Hazardous Materials or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, transport or handling of Hazardous Materials and all
Laws with regard to recordkeeping, notification, disclosure and reporting requirements respecting Hazardous Materials, and all Laws relating to endangered or threatened species of fish, wildlife and
plants and the management or use of natural resources. 

        "Exchange
Act" means The Securities Exchange Act of 1934, as amended, and the rules and regulations thereto. 

        "Existing
Company Indebtedness" means the indebtedness of the Company under those agreements identified under the caption "Financing Arrangements" in Section 3.10.4 of the Company
Disclosure Letter (the "Existing Company Indebtedness"). 

        "Existing
Parent Indebtedness" means the indebtedness of Parent under that certain Third Amended and Restated Credit Agreement between Parent, and JPMorgan Chase Bank N.A., dated
April 15, 2004 (as amended). 

        "Expenses"
includes all reasonable out of pocket expenses (including, without limitation, all fees and expenses of counsel, accountants, investment bankers, experts and consultants to a
party hereto and its affiliates) incurred by a party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement and the
transactions contemplated hereby, including the preparation, printing, filing and mailing of the Registration Statement and the solicitation of shareholder approvals and all other matters related to
the transaction contemplated hereto. 

        "GAAP"
means United States generally accepted accounting principles. 

        "Governmental
Authority" means any United States or non-U.S. federal, state, local or other governmental, administrative or regulatory authority, body, agency, court,
tribunal or similar entity. 

        "Hazardous
Materials" means all substances defined as "Hazardous Substances", "Oils", "Pollutants" or "Contaminants" in the National Oil and Hazardous Substances Pollution Contingency
Plan, 40 C.F.R. $300.5, all substances defined as such by, or regulated as such under, any Environmental Law and toxic mold. 

        "HSR
Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereto. 

        "Intellectual
Property" means all Copyrights, Patents, Trademarks, Trade Secrets and Rights of Publicity, including all of the foregoing rights in Software. 

        "Key
Employees" with respect to the Company means John Roland and Lyn Braz and with respect to Parent means Scott Ginsburg and Omar Choucair. 

        "Knowledge"
with respect to a Person means the facts or other information that are actually known, after reasonable due investigation of the relevant facts and circumstances in question
by the Key Employees of such Person. 

        "Law"
means any non-U.S. or United States federal, state or local law, statute, rule, regulation, ordinance, standard, requirement, administrative ruling, order or process
(including any zoning or land use law or ordinance, building code, Environmental Law, securities, stock exchange, 

61

 

blue
sky, civil rights, employment, labor or occupational health and safety law or regulation or any law, order, rule or regulation applicable to federal contractors) or administrative interpretation
thereof, and any court, or arbitrator's order or process. 

        "Liability"
means any debt, liability, commitment or obligation of any kind, character or nature whatsoever, whether known or unknown, secured or unsecured, fixed, absolute, contingent
or otherwise, and whether due or to become due. 

        "License
Agreements" means all agreements (including any licenses, outstanding decrees, orders, judgments, covenants not to sue, settlement agreements or stipulations) to which a Person
or any Subsidiary of such Person is a party or otherwise bound (whether between such Person or any of its Subsidiaries and an independent Person or intercompany), which contain provisions
(a) granting to such Person or any of its Subsidiaries rights in any Intellectual Property, (b) granting to third Persons any rights in any Intellectual Property owned by such Person or
its Subsidiary, or (c) restricting such Person's or its Subsidiary's right to use any Intellectual Property. 

        "Lien"
means any lien, statutory lien, pledge, mortgage, security interest, charge, encumbrance, easement, right of way, covenant, claim, restriction, right, option, conditional sale or
other title retention agreement of any kind or nature. 

        "Merger"
has the meaning assigned to it in the Preamble. 

        "NASDAQ"
means the NASDAQ National Market. 

        "Other
Filings" means any filings, other than the Registration Statement or the Proxy Statement, with any Governmental Authority, necessary to effectuate the Merger or otherwise
necessary to comply with securities Laws. 

        "Parent
Board" means the Board of Directors of Parent. 

        "Parent
Common Stock" means the common stock, par value $0.001 per share, of Parent. 

        "Parent
Owned Intellectual Property" means all Intellectual Property owned by Parent or any Subsidiary and the rights of Parent or any Subsidiary under any License Agreement granting
rights in Intellectual Property owned by third Persons, in each case to the extent that such Intellectual Property is reasonably necessary for the conduct of the Parent's business as it is currently
conducted. 

        "Parent
Stockholder Approval" means the vote by the requisite vote of Parent Stockholders to approve and adopt this Agreement, the Merger and the transactions contemplated hereby, any
other actions to be taken hereunder in connection with the Merger and such other matters as Parent may otherwise deem necessary or advisable in connection therewith. 

        "Parent
Stockholder" means a holder of Parent Common Stock. 

        "Patents"
means all patents and industrial designs, including any continuations, divisionals, continuations-in-part, renewals, reissues and applications for any
of the foregoing, and the right to sue for past infringement thereof. 

        "Person"
means any individual, partnership, corporation, limited liability company, association, business trust, joint venture, governmental entity, business entity or other entity of
any kind or nature, including any business unit of such Person. 

        "Release"
means any release, spill, emission, discharge, leaking, pumping, injection, deposit, disposal, dispersal, leaching or migration into the environment (including ambient air,
surface water, groundwater and surface or subsurface strata) or into or out of any property, including the movement of Hazardous Materials through or in the air, soil, surface water, groundwater or
property. 

62

 

        "Rights
of Publicity" means rights of publicity and privacy relating to the use of the names, likenesses, voices, signatures and biographical information of real persons. 

        "Roland
Release" means the releases and waivers of any liability with respect to the Company in respect of the cancellation of certain shares of restricted Company Common Stock issued to
John
Roland to be executed by John Roland in a form reasonably acceptable to Parent and delivered to the Company. 

        "SEC"
means the Securities and Exchange Commission. 

        "Securities
Act" means the Securities Act of 1933, as amended, and the rules and regulations thereto. 

        "Series B
Common Stock" means the Class B Common Stock, par value $0.01 per share, of the Company. 

        "Series F
Release" means the releases and waivers of any liability with respect to the Company in respect of liability related to the sale and issuance of the Series F
Preferred Stock to be executed by the holders of the Series F Preferred Stock in a form reasonably acceptable to Parent and delivered to the Company. 

        "Software"
means all (a) computer programs, including, but not limited to, any and all software implementation of algorithms, models and methodologies, whether in source code or
object code form, (b) databases and compilations, including, but not limited to, any and all data and collections of data, and (c) all documentation, including, but not limited to, user
manuals and training materials, whether in hardcopy, electronic, or other form relating to any of the foregoing. 

        "Subsidiary"
when used with respect to any Person means any other Person, whether incorporated or unincorporated, of which (a) more than fifty percent of the securities or other
ownership interests, (b) securities or other interests having by their terms ordinary voting power to elect more than fifty percent of the board of directors or others performing similar
functions with respect to such corporation or other organization, is directly owned or controlled by such Person or by any one or more of its Subsidiaries, or (c) such person or any other
Subsidiary of such person is the general partner (excluding partnerships, the general partnership interests of which held by such party and/or one or more of its Subsidiaries do not have a majority of
the voting interest in such partnership). 

        "Superior
Proposal" means a bona fide Acquisition Proposal for at least 50% of the voting power of the Company's capital stock or 50% of the Company's consolidated assets, made by a
third party that was not solicited by the Company, any Company Subsidiary, any Company Representatives or any other affiliates, that contains no financing contingency and for which financing is
reasonably determined to be available by the Company Board, after consultation with the Company's financial advisor, taking into account, to the extent deemed appropriate by the Company Board, the
various legal, financial and regulatory aspects of the proposal and the person making such proposal (A) if accepted, is reasonably likely to be consummated, and (B) if consummated would
result in a transaction that is more favorable to the Company Stockholders, from a financial point of view, than the transactions contemplated by this Agreement. 

        "Tax
Period" means with respect to any Tax, the period for which the Tax is reported as provided under the applicable Tax Law. 

        "Tax
Return" means any U.S. federal, state, local or foreign return, declaration, report, claim for refund, amended return, declaration of estimated Tax or information return or
statement relating to Taxes, and any schedule, exhibit, attachment or other materials submitted with any of the foregoing, and any amendment thereto. 

63

 

        "Tax"
or "Taxes" means any federal, state, local or foreign net or gross income, gross receipts, sales, use, ad valorem, transfer, franchise, license, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, personal property, real property, capital stock, profits, social security (or similar), unemployment, disability, registration, value added, estimated,
alternative or add-on minimum taxes, customs duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any governmental authority, whether as a primary obligor or as a result of being a "transferee" (within the meaning of Section 6901 of the Code or any other
applicable law) of another person or a member of an affiliated, consolidated, unitary or combined group. "Tax Law" means the Law (including any applicable regulations or any administrative
pronouncement) of any Governmental Authority relating to any Tax. 

        "Technology"
means all tangible embodiments or instantiations of any of the following, in any format or medium: (a) Software; (b) works of authorship other than Software;
(c) inventions and improvements, whether or not patentable; (d) Trade Secrets; (e) tools, methods and processes. 

        "Trade
Secrets" means any and all forms and types of technology, trade secrets and other confidential information, know-how, inventions, proprietary processes, formulae,
algorithms, source code, models, and methodologies, in each case which are not publicly known. 

        "Trademarks"
means all trademarks, service marks, trade names, Internet domain names, designs, logos, emblems, signs or insignia, slogans, and other similar designations of source or
origin general intangibles of like nature, together with all goodwill of the Company or any Subsidiary symbolized by any of the foregoing, registrations and applications for any of the foregoing, and
the right to sue for past infringement thereof. 

 
 

          Section 8.4    Accounting Terms.     All accounting terms not specifically defined in this Agreement
shall be construed in accordance with GAAP consistently applied. 

 
 

           Section 8.5    Certain Terms.     The terms "hereof," "herein" and "hereunder" and terms of similar
import are references to this Agreement as a whole and not to any particular provision of this
Agreement. The term "including" as used in this Agreement is used to list items by way of example and shall not be deemed to constitute a limitation of any term or provision contained herein. As used
in this Agreement, the singular or plural number shall be deemed to include the other whenever the context so requires. Article, Section, clause and Schedule references contained in this Agreement are
references to Articles, Sections, clauses and Schedules in or to this Agreement, unless otherwise specified. 

 
 

          Section 8.6    Terms Defined Elsewhere.     The following terms are defined elsewhere in this Agreement,
as indicated below: 

	"Annual Financial Statement"	 	Section 3.8.
	"Assets"	 	Section 3.18
	"Audits"	 	Section 3.14.5
	"Budget"	 	Section 5.1.5
	"Capital Securities"	 	Section 3.5.1
	"Certificate of Merger"	 	Section 1.2
	"Certificates"	 	Section 2.2.2
	"Choucair Employment Agreement"	 	Section 5.21
	"Closing Notice"	 	Section 2.1.1
	"Closing Parent Common Stock Price"	 	Section 2.1.1
	"Code"	 	Recitals
	"Company"	 	Preamble
	"Company Board"	 	Section 3.3
	 	 	 

64

 

	"Company Capital Stock"	 	Section 2.1.3
	"Company Charter"	 	Section 3.2
	"Company Common Stock	 	Section 2.1.1
	"Company Designees"	 	Section 5.20.1
	"Company Disclosure Letter"	 	Article 3
	"Company Employees"	 	Section 5.13
	"Company Options"	 	Section 3.4.2
	"Company Permits"	 	Section 3.13.2
	"Company Recommendation"	 	Section 5.7.3
	"Company Representatives"	 	Section 5.6.1
	"Company Stockholders' Meeting"	 	Section 5.5
	"Company Stockholder Voting Agreement"	 	Recitals
	"Confidentiality Agreement"	 	Section 5.6.2
	"Continuing Directors"	 	Section 5.20.1
	"Covered Persons"	 	Section 5.4.4
	"D&O Insurance"	 	Section 5.14.2
	"DGCL"	 	Recitals
	"Effective Time"	 	Section 1.2
	"Employee Plans"	 	Section 3.16.1
	"ERISA"	 	Section 3.16.1
	"ERISA Affiliate"	 	Section 3.16.1
	"Excess Shares"	 	Section 2.2.5.1
	"Exchange Agent"	 	Section 2.2.1
	"Exchange Fund"	 	Section 2.2.1
	"Exchange Ratio"	 	Section 2.1.1
	"Financial Statements"	 	Section 3.8.1
	"Foreign Benefit Plan"	 	Section 3.16.9
	"Former Employee Plans"	 	Section 3.16.1
	"Ginsburg Employment Agreement"	 	Section 5.21
	"Ginsburg Voting Agreement"	 	Recitals
	"Initial Merger Agreement"	 	Recitals
	"Interim Period"	 	Section 5.1
	"Interim Unaudited Financial Information"	 	Section 5.19
	"Leased Real Property"	 	Section 3.10.2
	"Lockup Agreement"	 	Recitals
	"Material Contracts"	 	Section 3.10.2
	"Merger"	 	Recitals
	"Merger Consideration"	 	Section 2.1.2
	"Merger Sub"	 	Preamble
	"Monthly Unaudited Financial Information"	 	Section 5.19
	"Multiemployer Plan"	 	Section 3.16.3
	"Parent"	 	Preamble
	"Parent Benefit Plans"	 	Section 5.13
	"Parent By-laws"	 	Section 4.2
	"Parent Certificate"	 	Section 4.2
	"Parent Common Stock"	 	Section 2.1
	"Parent Disclosure Letter"	 	Article 4
	"Parent Options"	 	Section 4.3
	"Parent Personal Property Leases"	 	Section 4.8.1
	"Preferred Per Share Amounts"	 	Section 2.1.2
	"Personal Real Property Leases"	 	Section 4.8.2
	 	 	 

65

 

	"Parent Representatives"	 	Section 5.6.1
	"Parent Stockholder Approval"	 	Section 4.4
	"Parent Stock Option Plans"	 	Section 5.2(b)
	"Parent SEC Filings"	 	Section 4.7.1
	"Personal Property Leases"	 	Section 3.10.2
	"Preferred Conversion"	 	Recitals
	"Pro Rata Portion"	 	Section 2.2.10
	"Proxy Statement"	 	Section 5.4.1
	"Purchase Price"	 	Section 2.1.1
	"Quarterly Unaudited Financial Information"	 	Section 5.19
	"Real Property Leases"	 	Section 3.10.2
	"Releases"	 	Section 3.29
	"Registration Statement"	 	Section 5.4.1
	"Roland Employment Agreement"	 	Section 5.21
	"Scheduled Contracts"	 	Section 4.8.4
	"Substitute Option Shares"	 	Section 5.19
	"Surviving Corporation"	 	Section 1.1
	"Tax Indemnification Agreement"	 	Section 3.14.11
	"Transfer Agreement"	 	Recitals
	"Treasury Regulations"	 	Section 3.14.13

 
 

           Section 8.7    Rules of Construction.     The parties agree that they have been represented by counsel
during the negotiation and execution of this Agreement and, therefore, waive the application of any
law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document. 

 
 

           Section 8.8    Descriptive Headings.     Titles and headings to Articles and Sections in this Agreement
are inserted for convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement. 

 
 

           Section 8.9    Severability.     If any term or other provision of this Agreement is invalid, illegal
or incapable of being enforced by any rule of Law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible. 

 
 

           Section 8.10    Entire Agreement.     This Agreement (together with the Exhibits, Parent Disclosure
Letter and Company Disclosure Letter and the other documents delivered pursuant hereto), each
Ancillary Agreement and the Confidentiality Agreement constitute the entire agreement of the parties and supersede all prior agreements and undertakings, both written and oral, between the parties, or
any of them, with respect to the subject matter hereof, including the Initial Merger Agreement, and, except as otherwise expressly provided herein, are not intended to confer upon any other person any
rights or remedies hereunder. 

 
 

           Section 8.11    Assignment.     No party may assign this Agreement without the prior written consent of
the other parties, and any such prohibited assignment shall be void. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the respective legal representatives, successors, assigns, heirs, and devisees of the parties. 

 
 

          Section 8.12    Parties in Interest.     This Agreement shall be binding upon and inure solely to the
benefit of each party hereto and their respective successors and assigns, and nothing in this
Agreement, 

66

 

express
or implied, other than pursuant to Section 5.14 or Section 8.7 is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or
by reason of this Agreement. 

 
 

           Section 8.13    Governing Law.     This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable conflicts of laws principles thereof. 

 
 

          Section 8.14    Consent to Jurisdiction.     Each of the parties hereto (i) consents to submit
itself to the personal jurisdiction of any Federal court located in the State of Delaware or any Delaware
state court in the event any dispute arises out of this Agreement or any of the transactions contemplated hereby, (ii) agrees that it will not attempt to defeat or deny such personal
jurisdiction by motion or other request for leave from any such court and (iii) agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated
hereby in any court other than a Federal or State court sitting in the State of Delaware. 

 
 

           Section 8.15    Jury Trial Waiver.     The parties hereby agree to waive any right to trial by jury
with respect to any action or proceeding brought by any party relating to (i) this Agreement
and/or any understandings or prior dealings between the parties hereto, or (ii) the Property or any part thereof. The parties hereby acknowledge and agree that this Agreement constitutes a
written consent to waiver of trial by jury pursuant to any applicable state statutes. 

 
 

           Section 8.16    Disclosure.     The Disclosure Letter of each party shall be arranged in sections and
subsections corresponding to the sections and subsections with respect to which they provide
disclosure. Any matter disclosed in any section of a party's Disclosure Letter shall be considered disclosed for other sections of such Disclosure Letter, but only to the extent it is reasonably
apparent from a reading of the disclosure that such disclosure is applicable to such other sections and subsections. The provision of monetary or other quantitative thresholds for disclosure does not
and shall not be deemed to create or imply a standard of materiality hereunder. 

 
 

           Section 8.17    Counterparts.     To facilitate execution, this Agreement may be executed in as many
counterparts as may be required. It shall not be necessary that the signatures on behalf of all
Parties appear on each counterpart of this Agreement. All counterparts of this Agreement shall collectively constitute a single agreement. Signatures to this Agreement may be transmitted by facsimile
and such signatures shall be deemed to be originals. 

 
 

           Section 8.18    Specific Performance.     The parties hereto agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. 

[signature
pages follow] 

67

        IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly
authorized. 

	 	 	DIGITAL GENERATION SYSTEMS, INC.
	

 	
 	

By:	

/s/  SCOTT K. GINSBURG      
 Name: Scott K. Ginsburg

Title:  Chairman and Chief Executive Officer
	

 	
 	

DG ACQUISITION CORP. IV
	

 	
 	

By:	

/s/  SCOTT K. GINSBURG      
 Name: Scott K. Ginsburg

Title:  Chairman and Chief Executive Officer
	

 	
 	

FASTCHANNEL NETWORK, INC.
	

 	
 	

By:	

/s/  JOHN ROLAND      
 Name: John Roland

Title:  President and Chief Executive Officer

QuickLinks

Exhibit 10.23

FIRST AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER BY AND AMONG DIGITAL GENERATION SYSTEMS, INC., DG ACQUISITION CORP. IV AND FASTCHANNEL NETWORK, INC. DATED AS OF JANUARY 13, 2006

TABLE OF CONTENTS

FIRST AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER

Article 1. The Merger

Section 1.1 The Merger.

Section 1.2 Effective Time.

Section 1.3 Effect of the Merger.

Section 1.4 Certificate of Incorporation; By-laws.

Section 1.5 Directors and Officers.

Section 1.6 Tax Consequences.

Article 2. Conversion of Securities; Exchange of Certificates

Section 2.1 Conversion of Securities.

Section 2.2 Exchange of Certificates.

Section 2.3 Stock Transfer Books.

Section 2.4 Company Options, Warrants and Rights.

Section 2.5 Dissenters' Rights.

Article 3. Representations and Warranties of the Company

Section 3.1 Organization and Good Standing.

Section 3.2 Corporate Records.

Section 3.3 Corporate Power and Authority.

Section 3.4 Capitalization.

Section 3.5 Subsidiaries.

Section 3.6 No Violation.

Section 3.7 Approvals.

Section 3.8 Financial Statements; No Undisclosed Liabilities.

Section 3.9 Ordinary Course Operations.

Section 3.10 Leases of Personal and Real Property; Owned Real Property; Material Contracts; No Default.

Section 3.11 Intellectual Property Matters.

Section 3.12 Litigation.

Section 3.13 Compliance with Laws; Permits.

Section 3.14 Taxes

Section 3.15 Insurance.

Section 3.16 Employee Benefit Plans.

Section 3.17 Employees

Section 3.18 Personal Property; Assets.

Section 3.19 Environmental Matters.

Section 3.20 Fees.

Section 3.21 Related-Party Transactions.

Section 3.22 Acquisitions.

Section 3.23 Proxy Statement and Registration Statement.

Section 3.24 Tax Treatment.

Section 3.25 Vote Required.

Section 3.26 Opinion of Financial Advisor.

Section 3.27 Disclosure.

Section 3.28 Reserved

Section 3.29 Releases.

Article 4. Representations and Warranties of Parent and Merger Sub

Section 4.1 Organization and Good Standing.

Section 4.2 Certificate of Incorporation and By-laws; Corporate Books and Records.

Section 4.3 Corporate Power and Authority.

Section 4.4 Capitalization.

Section 4.5 Subsidiaries.

Section 4.6 No Conflict; Required Filings and Consents.

Section 4.7 SEC Filings; Financial Statements.

Section 4.8 Leases of Personal and Real Property; Owned Real Property; Scheduled Contracts; No Default.

Section 4.9 Ordinary Course Operations.

Section 4.10 Litigation.

Section 4.11 Compliance with Laws; Permits.

Section 4.12 Disclosure Documents.

Section 4.13 Intellectual Property Matters.

Section 4.14 Tax Treatment

Section 4.15 Taxes.

Section 4.16 Insurance.

Section 4.17 Ownership of Merger Sub; No Prior Activities.

Section 4.18 Employee Benefit Plans.

Section 4.19 Employees.

Section 4.20 Fees.

Section 4.21 Personal Property; Assets.

Section 4.22 Environmental Matters.

Section 4.23 Vote Required.

Section 4.24 Disclosure.

Section 4.25 Opinion of Financial Advisor.

Section 4.26 Related-Party Transactions.

Article 5. Covenants

Section 5.1 Conduct of Business by the Company Pending the Closing.

Section 5.2 Conduct of Business by Parent Pending the Closing.

Section 5.3 Cooperation.

Section 5.4 Registration Statement; Proxy Statement.

Section 5.5 Stockholders' Meetings.

Section 5.6 Access to Company Information; Confidentiality.

Section 5.7 Access to Parent Information; Confidentiality

Section 5.8 No Solicitation of Transactions.

Section 5.9 Appropriate Action; Consents; Filings.

Section 5.10 Reserved.

Section 5.11 Certain Notices.

Section 5.12 Public Announcements.

Section 5.13 NASDAQ Listing.

Section 5.14 Employee Benefit Matters.

Section 5.15 Indemnification of Parent Directors and Officers.

Section 5.16 Indemnification of Company Directors and Officers.

Section 5.17 Tax Matters.

Section 5.18 Affiliate Letters.

Section 5.19 Delivery of Financial Statements.

Section 5.20 Transitional Matters.

Section 5.21 FIRPTA Certification.

Section 5.22 Parent Financing.

Section 5.23 Amendment of Parent Bylaws.

Section 5.24 Amendment of Company Charter and Termination of Investor's Rights Agreement.

Section 5.25 Roland and Series F Releases.

Article 6. Closing Conditions

Section 6.1 Conditions to Obligations of Each Party Under This Agreement.

Section 6.2 Additional Conditions to Obligations of Parent and Merger Sub.

Section 6.3 Additional Conditions to Obligations of the Company.

Section 7.1 Termination.

Section 7.2 Effect of Termination.

Section 7.3 Amendment.

Section 7.4 Waiver.

Section 7.5 Fees and Expenses.

Section 8.1 General Survival.

Section 8.2 Notices.

Section 8.3 Definitions.

Section 8.4 Accounting Terms.

Section 8.5 Certain Terms.

Section 8.6 Terms Defined Elsewhere.

Section 8.7 Rules of Construction.

Section 8.8 Descriptive Headings.

Section 8.9 Severability.

Section 8.10 Entire Agreement.

Section 8.11 Assignment.

Section 8.12 Parties in Interest.

Section 8.13 Governing Law.

Section 8.14 Consent to Jurisdiction.

Section 8.15 Jury Trial Waiver.

Section 8.16 Disclosure.

Section 8.17 Counterparts.

Section 8.18 Specific Performance.QuickLinks
 -- Click here to rapidly navigate through this document

 
 

Exhibit 10.24    
    

Execution Copy  

$25,000,000

CREDIT AGREEMENT  

dated as of February 10, 2006 

by
and among 

DIGITAL GENERATION SYSTEMS, INC.,  

as Borrower, 

the
Lenders referred to herein, 

and

WACHOVIA BANK, NATIONAL ASSOCIATION,  

as Administrative Agent

and Issuing Lender 

 

	ARTICLE I	DEFINITIONS	 	1
	 	SECTION 1.1	Definitions.']	 	1
	 	SECTION 1.2	Other Definitions and Provisions	 	17
	 	SECTION 1.3	Accounting Terms	 	17
	 	SECTION 1.4	UCC Terms	 	17
	 	SECTION 1.5	Rounding	 	17
	 	SECTION 1.6	References to Agreement and Laws	 	17
	 	SECTION 1.7	Times of Day	 	17
	 	SECTION 1.8	Letter of Credit Amounts	 	18
	ARTICLE II	REVOLVING CREDIT FACILITY	 	18
	 	SECTION 2.1	Revolving Credit Loans	 	18
	 	SECTION 2.2	Procedure for Advances of Revolving Credit Loans	 	18
	 	SECTION 2.3	Repayment and Prepayment of Revolving Credit Loans	 	19
	 	SECTION 2.4	Permanent Reduction of the Revolving Credit Commitment	 	19
	 	SECTION 2.5	Termination of Revolving Credit Facility	 	20
	ARTICLE III	LETTER OF CREDIT FACILITY	 	20
	 	SECTION 3.1	L/C Commitment	 	20
	 	SECTION 3.2	Procedure for Issuance of Letters of Credit	 	20
	 	SECTION 3.3	Commissions and Other Charges	 	21
	 	SECTION 3.4	L/C Participations	 	21
	 	SECTION 3.5	Reimbursement Obligation of the Borrower	 	22
	 	SECTION 3.6	Obligations Absolute	 	23
	 	SECTION 3.7	Effect of Letter of Credit Application	 	23
	ARTICLE IV	INTENTIONALLY DELETED	 	23
	ARTICLE V	GENERAL LOAN PROVISIONS	 	23
	 	SECTION 5.1	Interest	 	23
	 	SECTION 5.2	Notice and Manner of Conversion or Continuation of Loans	 	24
	 	SECTION 5.3	Fees	 	25
	 	SECTION 5.4	Manner of Payment	 	25
	 	SECTION 5.5	Evidence of Indebtedness	 	26
	 	SECTION 5.6	Adjustments	 	26
	 	SECTION 5.7	Nature of Obligations of Lenders Regarding Extensions of Credit; Assumption by the Administrative Agent	 	27
	 	SECTION 5.8	Changed Circumstances	 	27
	 	SECTION 5.9	Indemnity	 	28
	 	SECTION 5.10	Increased Costs	 	28
	 	SECTION 5.11	Taxes	 	29
	 	SECTION 5.12	Mitigation Obligations; Replacement of Lenders	 	31
	 	SECTION 5.13	Security	 	32
	ARTICLE VI	CLOSING; CONDITIONS OF CLOSING AND BORROWING	 	32
	 	SECTION 6.1	Closing	 	32
	 	SECTION 6.2	Conditions to Closing and Initial Extensions of Credit	 	32
	 	SECTION 6.3	Conditions to All Extensions of Credit	 	35
	ARTICLE VII	REPRESENTATIONS AND WARRANTIES OF THE BORROWER	 	36
	 	SECTION 7.1	Representations and Warranties	 	36
	 	SECTION 7.2	Survival of Representations and Warranties, Etc	 	42
	 	 	 	 

i

 

	ARTICLE VIII	FINANCIAL INFORMATION AND NOTICES	 	42
	 	SECTION 8.1	Financial Statements and Projections	 	42
	 	SECTION 8.2	Officer's Compliance Certificate	 	43
	 	SECTION 8.3	Accountants' Certificate	 	43
	 	SECTION 8.4	Other Reports	 	43
	 	SECTION 8.5	Notice of Litigation and Other Matters	 	44
	 	SECTION 8.6	Accuracy of Information	 	44
	ARTICLE IX	AFFIRMATIVE COVENANTS	 	45
	 	SECTION 9.1	Preservation of Corporate Existence and Related Matters	 	45
	 	SECTION 9.2	Maintenance of Property	 	45
	 	SECTION 9.3	Insurance	 	45
	 	SECTION 9.4	Accounting Methods and Financial Records	 	45
	 	SECTION 9.5	Payment and Performance of Obligations	 	45
	 	SECTION 9.6	Compliance With Laws and Approvals	 	45
	 	SECTION 9.7	Environmental Laws	 	45
	 	SECTION 9.8	Compliance with ERISA	 	46
	 	SECTION 9.9	Compliance With Agreements	 	46
	 	SECTION 9.10	Visits and Inspections	 	46
	 	SECTION 9.11	Additional Subsidiaries	 	46
	 	SECTION 9.12	DG III as Grantor	 	47
	 	SECTION 9.13	Real Property Collateral	 	47
	 	SECTION 9.14	Use of Proceeds	 	47
	 	SECTION 9.15	Further Assurances	 	47
	ARTICLE X	FINANCIAL COVENANTS	 	48
	 	SECTION 10.1	Consolidated Leverage Ratio	 	48
	 	SECTION 10.2	Minimum EBITDA	 	48
	ARTICLE XI	NEGATIVE COVENANTS	 	48
	 	SECTION 11.1	Limitations on Indebtedness	 	48
	 	SECTION 11.2	Limitations on Liens	 	49
	 	SECTION 11.3	Limitations on Loans, Advances, Investments and Acquisitions	 	49
	 	SECTION 11.4	Limitations on Mergers and Liquidation	 	50
	 	SECTION 11.5	Limitations on Asset Dispositions	 	51
	 	SECTION 11.6	Limitations on Dividends and Distributions	 	51
	 	SECTION 11.7	Limitations on Exchange and Issuance of Capital Stock	 	51
	 	SECTION 11.8	Transactions with Affiliates	 	51
	 	SECTION 11.9	Certain Accounting Changes; Organizational Documents	 	52
	 	SECTION 11.10	Amendments; Payments and Prepayments of Subordinated Indebtedness	 	52
	 	SECTION 11.11	Restrictive Agreements	 	52
	 	SECTION 11.12	Nature of Business	 	52
	 	SECTION 11.13	Impairment of Security Interests	 	52
	 	SECTION 11.14	Prepayments of MDVX Indebtedness	 	52
	ARTICLE XII	DEFAULT AND REMEDIES	 	52
	 	SECTION 12.1	Events of Default	 	52
	 	SECTION 12.2	Remedies	 	55
	 	SECTION 12.3	Rights and Remedies Cumulative; Non-Waiver; etc	 	55
	 	SECTION 12.4	Crediting of Payments and Proceeds	 	56
	 	SECTION 12.5	Administrative Agent May File Proofs of Claim	 	56
	 	 	 	 

ii

 

	ARTICLE XIII	THE ADMINISTRATIVE AGENT	 	57
	 	SECTION 13.1	Appointment and Authority	 	57
	 	SECTION 13.2	Rights as a Lender	 	57
	 	SECTION 13.3	Exculpatory Provisions	 	57
	 	SECTION 13.4	Reliance by the Administrative Agent	 	58
	 	SECTION 13.5	Delegation of Duties	 	58
	 	SECTION 13.6	Resignation of Administrative Agent	 	58
	 	SECTION 13.7	Non-Reliance on Administrative Agent and Other Lenders	 	59
	 	SECTION 13.8	Collateral and Guarantee Matters	 	59
	ARTICLE XIV	MISCELLANEOUS	 	60
	 	SECTION 14.1	Notices	 	60
	 	SECTION 14.2	Amendments, Waivers and Consents	 	61
	 	SECTION 14.3	Expenses; Indemnity	 	62
	 	SECTION 14.4	Right of Set-off	 	64
	 	SECTION 14.5	Governing Law	 	65
	 	SECTION 14.6	Waiver of Jury Trial	 	66
	 	SECTION 14.7	Reversal of Payments	 	66
	 	SECTION 14.8	Injunctive Relief; Punitive Damages	 	66
	 	SECTION 14.9	Accounting Matters	 	67
	 	SECTION 14.10	Successors and Assigns; Participations	 	67
	 	SECTION 14.11	Confidentiality	 	69
	 	SECTION 14.12	Performance of Duties	 	70
	 	SECTION 14.13	All Powers Coupled with Interest	 	70
	 	SECTION 14.14	Survival of Indemnities	 	70
	 	SECTION 14.15	Titles and Captions	 	70
	 	SECTION 14.16	Severability of Provisions	 	70
	 	SECTION 14.17	Counterparts	 	70
	 	SECTION 14.18	Integration	 	70
	 	SECTION 14.19	Term of Agreement	 	71
	 	SECTION 14.20	Advice of Counsel, No Strict Construction	 	71
	 	SECTION 14.21	USA Patriot Act	 	71
	 	SECTION 14.22	Inconsistencies with Other Documents; Independent Effect of Covenants	 	71
	 	SECTION 14.23	Interest Rate Limitation	 	71
	 	SECTION 14.24	Time of the Essence	 	72
	 	SECTION 14.25	Entire Agreement	 	72

	EXHIBITS	 	 
	

Exhibit A	

—	

Form of Revolving Credit Note
	Exhibit B	—	Form of Notice of Borrowing
	Exhibit C	—	Form of Notice of Account Designation
	Exhibit D	—	Form of Notice of Prepayment
	Exhibit E	—	Form of Notice of Conversion/Continuation
	Exhibit F	—	Form of Officer's Compliance Certificate
	Exhibit G	—	Form of Assignment and Assumption
	Exhibit H	—	Form of Guarantee and Collateral Agreement
	Exhibit J	—	Form of Landlord Waiver
	Exhibit K	—	Reserved
	Exhibit L	—	Form of Closing Certificate
	Exhibit M	—	Form of Opinion of Legal Counsel
	Exhibit N	—	Form of Financial Condition Certificate
	Exhibit O	—	Form of Guaranty Agreement
	 	 	 

iii

 

	

SCHEDULES	

 	

 
	

Schedule 1.1	

—	

Lenders and Commitments
	Schedule 7.1(a)	—	Jurisdictions of Organization and Qualification
	Schedule 7.1(b)	—	Subsidiaries and Capitalization
	Schedule 7.1(i)	—	ERISA Plans
	Schedule 7.1(l)	—	Material Contracts
	Schedule 7.1(m)	—	Labor and Collective Bargaining Agreements
	Schedule 7.1(r)	—	Real Property
	Schedule 7.1(u)	—	Indebtedness and Guaranty Obligations
	Schedule 7.1(v)	—	Litigation
	Schedule 11.2	—	Existing Liens
	Schedule 11.3	—	Existing Loans, Advances and Investments
	Schedule 11.8	—	Transactions with Affiliates

iv

        CREDIT AGREEMENT, dated as of February 10, 2006, by and among DIGITAL GENERATION SYSTEMS, INC., a Delaware corporation (the
"Borrower"), the lenders who are or may become a party to this Agreement (collectively, the "Lenders")
and WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, as Administrative Agent for the Lenders. 

STATEMENT OF PURPOSE 

        The
Borrower has requested, and the Lenders have agreed, to extend certain credit facilities to the Borrower on the terms and conditions of this Agreement. 

        NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, such parties hereby agree as follows: 

 
 

ARTICLE I
  DEFINITIONS    

        SECTION
1.1    Definitions.    The following terms when used in this Agreement shall have the meanings assigned to
them below: 

 
 

        "Administrative Agent" means Wachovia, in its capacity as Administrative Agent hereunder, and any successor thereto appointed pursuant to  Section 13.6. 

        "Administrative Agent's Office" means the office of the Administrative Agent specified in or determined in accordance with the provisions
of Section 14.1(c). 

        "Administrative Questionnaire" means an administrative questionnaire in a form supplied by the Administrative Agent. 

        "Affiliate" means, with respect to any Person, any other Person which directly or indirectly through one or more intermediaries, controls,
or is controlled by, or is under common control with, such first Person or any of its Subsidiaries. As used in this definition, the term "control" means (a) the power to vote five percent (5%)
or more of the securities or other equity interests of a Person having ordinary voting power, or (b) the possession, directly or indirectly, of any other power to direct or cause the direction
of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. 

        "Aggregate Commitment" means the aggregate amount of the Lenders' Commitments hereunder, as such amount may be reduced or otherwise
modified at any time or from time to time pursuant to the terms hereof. On the Closing Date, the Aggregate Commitment shall be Twenty-Five Million and No/100 Dollars ($25,000,000). 

        "Agreement" means this Credit Agreement, as amended, restated, supplemented or otherwise modified from time to time. 

        "Applicable Law" means all applicable provisions of constitutions, laws, statutes, ordinances, rules, treaties, regulations, permits,
licenses, approvals, interpretations and orders of courts or Governmental Authorities and all orders and decrees of all courts and arbitrators. 

 

        "Applicable Margin" means the corresponding percentages per annum as set forth below based on the Consolidated Leverage Ratio: 

	 
	 	 
	 	 
	 	Revolving Credit Loans

	Pricing

Level
	 	Consolidated Leverage Ratio
	 	Commitment Fee
	 	LIBOR +
	 	Base Rate +

	I	 	Less than 2.25 to 1.00	 	0.25%	 	1.75%	 	0.00%
	II	 	Greater than or equal to 2.25 to 1.00, but less than 2.50 to 1.00	 	0.325%	 	2.00%	 	0.25%
	III	 	Greater than or equal to 2.50 to 1.00, but less than 2.75 to 1.00	 	0.50%	 	2.25%	 	0.50%
	IV	 	Greater than or equal to 2.75 to 1.00, but less then 3.00 to 1.00	 	0.625%	 	2.50%	 	0.75%
	V	 	Greater than or equal to 3.00 to 1.00	 	0.75%	 	2.75%	 	1.00%

The
Applicable Margin shall be determined and adjusted quarterly on the date (each a "Calculation Date") ten (10) Business Days after receipt by
the Administrative Agent of the Officer's Compliance Certificate pursuant to Section 8.2 for the most recently ended fiscal quarter of the
Borrower; provided that (a) the Applicable Margin shall be based on Pricing Level V until the first Calculation Date occurring after the Closing
Date and, thereafter the Pricing Level shall be determined by reference to the Consolidated Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Borrower preceding the
applicable Calculation Date, and (b) if the Borrower fails to provide the Officer's Compliance Certificate as required by Section 8.2 for
the most recently ended fiscal quarter of the Borrower preceding the applicable Calculation Date, the Applicable Margin from such Calculation Date shall be based on Pricing Level V until such time as
an appropriate Officer's Compliance Certificate is provided, at which time the Pricing Level shall be determined by reference to the Consolidated Leverage Ratio as of the last day of the most recently
ended fiscal quarter of the Borrower preceding such Calculation Date. The Applicable Margin shall be effective from one Calculation Date until the next Calculation Date. Any adjustment in the
Applicable Margin shall be applicable to all Extensions of Credit then existing or subsequently made or issued. 

        "Approved Fund" means any Person (other than a natural Person), including, without limitation, any special purpose entity, that is (or
will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business;  provided,
that such Approved Fund must be administered, managed or underwritten 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. 

        "Asset Disposition" means the disposition of any or all of the assets (including, without limitation, the Capital Stock of a Subsidiary or
any ownership interest in a joint venture) of any Credit Party or any Subsidiary thereof whether by sale, lease, transfer or otherwise. The term "Asset Disposition" shall not include any Equity
Issuance. 

        "Assignment and Assumption" means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any
party whose consent is required by Section 14.10), and accepted by the Administrative Agent, in substantially the form of  Exhibit G or any
other form approved by the Administrative Agent. 

        "Attributable Indebtedness" means, on any date, (a) in respect of any Capital Lease of any Person, the capitalized amount thereof
that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease, the capitalized amount or principal amount of
the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a Capital
Lease. 

2

 

        "Banking Services" means each and any of the following bank services provided to any Credit Party by a Lender or any of its Affiliates:
(a) commercial credit cards, (b) stored value cards and (c) treasury management services (including, without limitation, cash management services, electronic funds transfer,
controlled disbursement, automated clearinghouse transactions, return items, overdrafts and interstate depository network services). 

        "Banking Services Obligations" of the Credit Parties means any and all obligations of the Credit Parties, whether absolute or contingent
and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor) in connection with Banking Services. 

        "Base Rate" means, at any time, the higher of (a) the Prime Rate and (b) the Federal Funds Rate  plus 1/2 of 1%; each change in the
Base Rate shall take effect simultaneously with the corresponding change or changes in the Prime Rate
or the Federal Funds Rate. 

        "Base Rate Loan" means any Loan bearing interest at a rate based upon the Base Rate as provided in  Section 5.1(a). 

        "Borrower" has the meaning assigned thereto in the introductory paragraph hereto. 

        "Business Day" means (a) for all purposes other than as set forth in clause (b) below, any day other than a Saturday, Sunday
or legal holiday on which banks in Charlotte, North Carolina and New York, New York, are open for the conduct of their commercial banking business, and (b) with respect to all notices and
determinations in connection with, and payments of principal and interest on, any LIBOR Rate Loan, any day that is a Business Day described in clause (a) and that is also a day for trading by
and between banks in Dollar deposits in the London interbank market. 

        "Calculation Date" has the meaning assigned thereto in the definition of Applicable Margin. 

        "Capital Lease" means, with respect to any Person, any lease of any property by such Person, as lessee, that should, in accordance with
GAAP, be classified and accounted for as a capital lease on a Consolidated balance sheet of such Person. 

        "Capital Stock" means (a) in the case of a corporation, capital stock, (b) in the case of an association or business entity,
any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock, (c) in the case of a partnership, partnership interests (whether general or
limited), (d) in the case of a limited liability company, membership interests and (e) any other interest or participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person. 

        "Change in Control" means an event or series of events by which (a) any person or group of persons (within the meaning of
Section 13(d) of the Securities Exchange Act of 1934, as amended), shall obtain ownership or control in one or more series of transactions of more than thirty percent (30%) of the Capital Stock
or of the voting power of the Borrower entitled to vote in the election of members of the board of directors of the Borrower, (b) there shall have occurred under any indenture or other
instrument evidencing any Indebtedness in excess of $100,000 any "change in control" or similar provision (as set forth in the indenture, agreement or other evidence of such Indebtedness) obligating
the Borrower to repurchase, redeem or repay all or any part of the Indebtedness or Capital Stock provided for therein or (c) Scott K. Ginsburg shall at any time for any reason cease to be
active in the management of the Borrower. 

        "Change in Law" means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect
of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or
(c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority. 

3

 

        "Closing Date" means the date of this Agreement or such later Business Day upon which each condition described in  Section 6.2 shall be satisfied or waived in all
respects in a manner acceptable to the Administrative Agent, in its sole discretion.
 

        "Code" means the Internal Revenue Code of 1986, and the rules and regulations thereunder, each as amended or modified from time to time. 

        "Collateral" means the collateral security for the Obligations pledged or granted pursuant to the Security Documents. 

        "Commitment" means, as to any Lender, such Lender's Revolving Credit Commitment. 

        "Commitment Percentage" means, as to any Lender, such Lender's Revolving Credit Commitment Percentage. 

        "Consolidated" means, when used with reference to financial statements or financial statement items of any Person, such statements or
items on a consolidated basis in accordance with applicable principles of consolidation under GAAP. 

        "Consolidated EBITDA" means, for any period, the sum of the following determined on a Consolidated basis, without duplication, for the
Borrower and its Subsidiaries in accordance with GAAP: (a) Consolidated Net Income for such period plus (b) the sum of the following to
the extent deducted in determining Consolidated Net Income: (i) income and franchise taxes, (ii) Consolidated Interest Expense, (iii) amortization, depreciation and other
non-cash charges (except to the extent that such non-cash charges are reserved for cash charges to be taken in the future), (iv) extraordinary losses (other than from
discontinued operations), (v) Transaction Costs and (vi) any non-recurring costs and any extraordinary expenses identified on a separate line item on the consolidated
statements of income of the Borrower and its Subsidiaries delivered to the Administrative Agent pursuant to Section 8.1,  provided, that the amounts
referred to in this clause (vi)
shall not, in the aggregate, exceed $500,000 for such period less (c) interest income and any extraordinary gains. For purposes of this
Agreement, Consolidated EBITDA shall be adjusted, in a manner reasonably acceptable to the Administrative Agent, on a pro forma basis to include, as of
the first day of any applicable period, any Permitted Acquisitions and any Asset Dispositions closed during such period, including, without limitation, adjustments reflecting any
non-recurring costs and any extraordinary expenses of any Permitted Acquisitions and any Asset Dispositions closed during such period calculated on a basis consistent with GAAP and
Regulation S-X of the Securities Exchange Act of 1934, as amended, or as approved by the Administrative Agent. 

        "Consolidated Interest Expense" means, with respect to the Borrower and its Subsidiaries for any period, the gross interest expense
(including, without limitation, interest expense attributable to Capital Leases, Synthetic Leases and all net payment obligations pursuant to Hedging Agreements) of the Borrower and its Subsidiaries,
all determined for such period on a Consolidated basis, without duplication, in accordance with GAAP. 

        "Consolidated Leverage Ratio" means, as of any date of determination, the ratio of (a) Consolidated Total Indebtedness on such date
to (b) Consolidated EBITDA for the period of four (4) consecutive fiscal quarters ending on or immediately prior to such date. 

        "Consolidated Net Income" means, with respect to the Borrower and its Subsidiaries, for any period of determination, the net income (or
loss) of the Borrower and its Subsidiaries for such period, determined on a Consolidated basis in accordance with GAAP; provided that there shall be
excluded from Consolidated Net Income (a) the net income (or loss) of any Person (other than a Subsidiary which shall be subject to clause (c) below), in which the Borrower or any of its
Subsidiaries has a joint interest with a third party, except to the extent such net income is actually paid in cash to the Borrower or any of its Subsidiaries by dividend or other distribution during
such period, (b) the net income (or 

4

 

loss)
of any Person accrued prior to the date it becomes a Subsidiary of such Person or is merged into or consolidated with such Person or any of its Subsidiaries or that Person's assets are acquired
by such Person or any of its Subsidiaries except to the extent included pursuant to the foregoing clause (a), and (c) the net income (if positive) of any Subsidiary to the extent that
the declaration or payment of dividends or similar distributions by such Subsidiary to the Borrower or any of its Subsidiaries of such net income (i) is not at the time permitted by operation
of the terms of its charter or any agreement, instrument, judgment, decree, order, statute rule or governmental regulation applicable to such Subsidiary or (ii) would be subject to any taxes
payable on such dividends or distributions. 

        "Consolidated Total Indebtedness" means, as of any date of determination with respect to the Borrower and its Subsidiaries on a
Consolidated basis without duplication, the sum of all Indebtedness of the Borrower and its Subsidiaries. 

        "Credit Facility" means, collectively, the Revolving Credit Facility and the L/C Facility. 

        "Credit Parties" means, collectively, the Borrower and each Subsidiary of the Borrower (other than DG III). 

        "Default" means any of the events specified in Section 12.1 which with the passage
of time, the giving of notice or any other condition, would constitute an Event of Default. 

        "Defaulting Lender" means any Lender that (a) has failed to fund any portion of the Revolving Credit Loans or participations in L/C
Obligations to be funded by it hereunder within one Business Day of the date required to be funded by it hereunder, (b) has otherwise failed to pay over to the Administrative Agent or any other
Lender any other amount required to be paid by it hereunder within one Business Day of the date when due, unless such amount is the subject of a good faith dispute, or (c) has been deemed
insolvent or become the subject of a bankruptcy or insolvency proceeding. 

        "DG III" means DG Systems Acquisition III Corporation, a Delaware corporation. 

        "DG III Guaranty" means the Guaranty Agreement substantially in the form of  Exhibit O made by DG III in favor of the Administrative Agent, as amended,
restated, supplemented or otherwise modified from time to time. 

        "Disputes" means any dispute, claim or controversy arising out of, connected with or relating to this Agreement or any other Loan
Document, between or among parties hereto and to the other Loan Documents. 

        "Dollars" or "$" means, unless otherwise qualified, dollars in lawful currency of the United States. 

        "Domestic Subsidiary" means any Subsidiary organized under the laws of any political subdivision of the United States. 

        "Eligible Assignee" means (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund, and (d) any other
Person (other than a natural person) approved by (i) the Administrative Agent, (ii) in the case of any assignment of a Revolving Credit Commitment, the Issuing Lender, and
(iii) unless a Default or Event of Default has occurred and is continuing, the Borrower (each such approval not to be unreasonably withheld or delayed);  provided that notwithstanding the foregoing,
"Eligible Assignee" shall not include the Borrower or any of the Borrower's Affiliates or Subsidiaries.
 

        "Employee Benefit Plan" means any employee benefit plan within the meaning of Section 3(3) of ERISA which (a) is maintained
for employees of any Credit Party, DG III, or any ERISA Affiliate or (b) has at any time within the preceding six (6) years been maintained for the employees of any Credit Party, DG III
or any current or former ERISA Affiliate. 

        "Environmental Claims" means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens,
accusations, allegations, notices of noncompliance or violation, 

5

 

investigations
(other than internal reports prepared by any Person in the ordinary course of business and not in response to any third party action or request of any kind) or proceedings relating in
any way to any actual or alleged violation of or liability under any Environmental Law or relating to any permit issued, or any approval given, under any such Environmental Law, including, without
limitation, any and all claims by Governmental Authorities for enforcement, cleanup, removal, response, remedial or other actions or damages, contribution, indemnification cost recovery, compensation
or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to human health or the environment. 

        "Environmental Laws" means any and all federal, foreign, state, provincial and local laws, statutes, ordinances, codes, rules, standards
and regulations, permits, licenses, approvals, interpretations and orders of courts or Governmental Authorities, relating to the protection of human health or the environment, including, but not
limited to, requirements pertaining to the manufacture, processing, distribution, use, treatment, storage, disposal, transportation, handling, reporting, licensing, permitting, investigation or
remediation of Hazardous Materials. 

        "Equity Issuance" means any issuance by the Borrower or any Subsidiary to any Person which is not a Credit Party or a Subsidiary of a
Credit Party of (a) shares of its Capital Stock, (b) any shares of its Capital Stock pursuant to the exercise of options or warrants or (c) any shares of its Capital Stock
pursuant to the conversion of any debt securities to equity. The term "Equity Issuance" shall not include any Asset Disposition. 

        "ERISA" means the Employee Retirement Income Security Act of 1974, and the rules and regulations thereunder, each as amended or modified
from time to time. 

        "ERISA Affiliate" means any Person who together with any Credit Party or DG III is treated as a single employer within the meaning of
Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA. 

        "Eurodollar Reserve Percentage" means, for any day, the percentage (expressed as a decimal and rounded upwards, if necessary, to the next
higher 1/100th of 1%) which is in effect for such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement
(including, without limitation, any basic, supplemental or emergency reserves) in respect of eurocurrency liabilities or any similar category of liabilities for a member bank of the Federal Reserve
System in New York City. 

        "Event of Default" means any of the events specified in Section 12.1;  provided that any requirement for passage of
time, giving of notice, or any other condition, has been satisfied. 

        "Excluded Taxes" means, with respect to the Administrative Agent, any Lender, the Issuing Lender or any other recipient of any payment to
be made by or on account of any obligation of the Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in
lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) 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 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 5.12(b)), any withholding tax that is imposed on amounts
payable to such Foreign Lender at the time such Foreign Lender becomes a party
hereto (or designates a new Lending Office) or is attributable to such Foreign Lender's failure or inability (other than as a result of a Change in Law) to comply with  Section 5.11(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 5.11(a). 

6

 

        "Existing Facility" means the Third Amended and Restated Credit Agreement dated as of April 15, 2005 among the Borrower, the
lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent and issuing bank, as amended to date. 

        "Extensions of Credit" means, as to any Lender at any time, (a) an amount equal to the sum of (i) the aggregate principal
amount of all Revolving Credit Loans made by such Lender then outstanding and (ii) such Lender's Revolving Credit Commitment Percentage of the L/C Obligations then outstanding, or
(b) the making of any Loan or participation in any Letter of Credit by such Lender, as the context requires. 

        "FDIC" means the Federal Deposit Insurance Corporation or any successor thereto. 

        "Federal Funds Rate" means, the rate per annum (rounded upwards, if necessary, to the next higher 1/100th of 1%) representing the daily
effective federal funds rate as quoted by the Administrative Agent and confirmed in Federal Reserve Board Statistical Release H.15 (519) or any successor or substitute publication selected by
the Administrative Agent. If, for any reason, such rate is not available, then "Federal Funds Rate" means a daily rate which is determined, in the opinion of the Administrative Agent, to be the rate
at which federal funds are being offered for sale in the national federal funds market at 9:00 a.m. Rates for weekends or holidays shall be the same as the rate for the most immediately
preceding Business Day. 

        "Fee Letter" means the separate fee letter agreement executed by the Borrower and the Administrative Agent and/or certain of its
affiliates dated as of January 19, 2006. 

        "Fiscal Year" means the fiscal year of the Borrower and its Subsidiaries ending on December 31st. 

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

        "Foreign Subsidiary" means any Subsidiary that is not a Domestic Subsidiary. 

        "GAAP" means generally accepted accounting principles, as recognized by the American Institute of Certified Public Accountants and the
Financial Accounting Standards Board, consistently applied and maintained on a consistent basis for the Borrower and its Subsidiaries throughout the period indicated and (subject to  Section 14.9)
consistent with the prior financial practice of the Borrower and its Subsidiaries. 

        "Governmental Approvals" means all authorizations, consents, approvals, permits, licenses and exemptions of, registrations and filings
with, and reports to, all Governmental Authorities. 

        "Governmental Authority" means the government of the United States or any other nation, or of 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 (including any supra-national bodies such as the European Union or the European Central Bank). 

        "Guarantee and Collateral Agreement" means the Guarantee and Collateral Agreement dated of even date executed by the Credit Parties in
favor of the Administrative Agent for the benefit of itself and
the Secured Parties, substantially in the form of Exhibit H, as amended, restated, supplemented or otherwise modified from time to time. 

        "Guaranty Obligation" means, with respect to any Person, without duplication, any obligation, contingent or otherwise, of such Person
pursuant to which such Person has directly or indirectly guaranteed any Indebtedness, leases, dividends or other obligations (the "primary obligations")
of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, 

7

 

contingent
or otherwise, of any such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) any such primary obligation (whether arising by virtue of
partnership arrangements, by agreement to keep well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement condition or
otherwise) or (b) entered into for the purpose of assuring in any other manner the obligee of any such primary obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided, that the term Guaranty Obligation shall not include endorsements for collection or deposit in the
ordinary course of business. 

        "Hazardous Materials" means any substances or materials (a) which are or become defined as hazardous wastes, hazardous substances,
pollutants, contaminants, chemical substances or mixtures or toxic substances under any Environmental Law, (b) which are toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic or otherwise harmful to human health or the environment and are or become regulated by any Governmental Authority, (c) the presence of which require investigation or
remediation under any Environmental Law or common law, (d) the discharge or emission or release of which requires a permit or license under any Environmental Law or other Governmental Approval,
(e) which are deemed to constitute a nuisance or a trespass which pose a health or safety hazard to Persons or neighboring properties, (f) which consist of underground or aboveground
storage tanks, whether empty, filled or partially filled with any substance, or (g) which contain, without limitation, asbestos, polychlorinated biphenyls, urea formaldehyde foam insulation,
petroleum hydrocarbons, petroleum derived substances or waste, crude oil, nuclear fuel, natural gas or synthetic gas. 

        "Hedge Lender" means any Person that, at the time it enters into a Hedging Agreement with the Borrower, is a Lender or an Affiliate of a
Lender, in its capacity as a party to such Hedging Agreement. 

        "Hedging Agreement" means (a) any agreement (including terms and conditions incorporated by reference therein) which is a rate swap
agreement, basis swap, forward rate agreement, commodity swap, interest rate option, forward foreign exchange agreement, spot foreign exchange agreement, rate cap agreement, rate floor agreement, rate
collar agreement, currency swap agreement, cross-currency rate swap agreement, currency option, any other similar agreement or arrangement (including any option to enter into any of the foregoing)
designed to alter the risks of any Person arising from fluctuations in interest rates, currency values or commodity prices, (b) any combination of the foregoing,
and (c) a master agreement for any of the foregoing together with all supplements, all as amended, restated, supplemented or otherwise modified from time to time. 

        "Hedging Obligations" means all existing or future payment and other obligations, including obligations arising from early termination, of
the Borrower arising under or in connection with any Hedging Agreement (which such Hedging Agreement is permitted under Section 11.1(b)) with any
Hedge Lender. 

        "Highest Lawful Rate" means, with respect to the Administrative Agent, the Issuing Lender or any Lender, the maximum nonusurious interest
rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the Obligations under laws applicable to such Administrative Agent, the Issuing
Lender or such Lender which are currently in effect or, to the extent allowed by Applicable Law, under such Applicable Laws which may hereafter be in effect and which allow a higher maximum
nonusurious interest rate than Applicable Laws now allow. On each day, if any, that Texas law establishes the Highest Lawful Rate, the Highest Lawful Rate shall be the "weekly ceiling" (as defined in
Section 303 of the Texas Finance Code) for that day. 

8

 

        "Indebtedness" means, with respect to the Borrower and its Subsidiaries, without duplication, the sum of the following calculated in
accordance with GAAP: 

        (a)   all
liabilities, obligations and indebtedness for borrowed money of such Person including, but not limited to, obligations evidenced by bonds, debentures, notes or other
similar instruments of such Person; 

        (b)   all
obligations for the deferred purchase price of property or services of any such Person (including, without limitation, all obligations under
non-competition, earn-out or similar agreements), except trade payables arising in the ordinary course of business not more than ninety (90) days past due; 

        (c)   the
Attributable Indebtedness of such Person with respect to such Person's obligations in respect of Capital Leases and Synthetic Leases (regardless of whether accounted
for as indebtedness under GAAP); 

        (d)   all
indebtedness created under or arising under any conditional sale or other title retention agreement with respect to property acquired, whether or not such
indebtedness shall have been assumed by such Person or is limited in recourse; 

        (e)   all
Guaranty Obligations of such Person; 

        (f)    all
obligations, contingent or otherwise, of such Person relative to the face amount of letters of credit, whether or not drawn, including, without limitation, any
Reimbursement Obligation, and banker's acceptances issued for the account of such Person; 

        (g)   all
obligations of such Person to redeem, repurchase, exchange, defease or otherwise make payments in respect of Capital Stock of such Person; and 

        (h)   all
Net Hedging Obligations. 

        For
all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or
limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person. 

        "Indemnified Taxes" means Taxes and Other Taxes other than Excluded Taxes. 

        "Interest Period" has the meaning assigned thereto in Section 5.1(b). 

        "Investment" has the meaning assigned thereto in Section 11.3. 

        "ISP98" means the International Standby Practices (1998 Revision, effective January 1, 1999), International Chamber of Commerce
Publication No. 590. 

        "Issuing Lender" means Wachovia, in its capacity as issuer of any Letter of Credit, or any successor thereto. 

        "L/C Commitment" means the lesser of (a) Two Million-Five Hundred Thousand and No/100 Dollars ($2,500,000) and
(b) the Revolving Credit Commitment. 

        "L/C Facility" means the letter of credit facility established pursuant to  Article III. 

        "L/C Obligations" means at any time, an amount equal to the sum of (a) the aggregate undrawn and unexpired amount of the then
outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit which have not then been reimbursed pursuant to  Section 3.5. 

        "L/C Participants" means the collective reference to all the Lenders other than the Issuing Lender. 

9

 

        "Lender" means each Person executing this Agreement as a Lender (including, without limitation, the Issuing Lender unless the context
otherwise requires) set forth on the signature pages hereto and each Person that hereafter becomes a party to this Agreement as a Lender pursuant to  Section 14.10. 

        "Lending Office" means, with respect to any Lender, the office of such Lender maintaining such Lender's Extensions of Credit. 

        "Letter of Credit Application" means an application, in the form specified by the Issuing Lender from time to time, requesting the Issuing
Lender to issue a Letter of Credit. 

        "Letters of Credit" has the meaning assigned thereto in Section 3.1. 

        "LIBOR" means the rate of interest per annum determined on the basis of the rate for deposits in Dollars for a period equal to the
applicable Interest Period which appears on the Telerate Page 3750 at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of the applicable Interest
Period (rounded upward, if necessary, to the nearest 1/100th of 1%). If, for any reason, such rate does not appear on Telerate Page 3750, then "LIBOR" shall be determined by the
Administrative Agent to be the arithmetic average of the rate per annum at which deposits in Dollars would be offered by first class banks in the London interbank market to the Administrative Agent at
approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of the applicable Interest Period for a period equal to such Interest Period. Each calculation by the
Administrative Agent of LIBOR shall be conclusive and binding for all purposes, absent manifest error. 

        "LIBOR Rate" means a rate per annum (rounded upwards, if necessary, to the next higher 1/100th of 1%) determined by the Administrative
Agent pursuant to the following formula: 

	LIBOR Rate =	 	LIBOR	 	 
	 	 	
	 	 
	 	 	1.00-Eurodollar Reserve Percentage	 	 

        "LIBOR Rate Loan" means any Loan bearing interest at a rate based upon the LIBOR Rate as provided in  Section 5.1(a). 

        "Lien" means, with respect to any asset, any mortgage, leasehold mortgage, lien, pledge, charge, security interest, hypothecation or
encumbrance of any kind in respect of such asset. For the purposes of this Agreement, a Person shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest
of a vendor or lessor under any conditional sale agreement, Capital Lease or other title retention agreement relating to such asset. 

        "Loan Documents" means, collectively, this Agreement, each Note, the Letter of Credit Applications, the Security Documents, the DG III
Guaranty and each other document, instrument, certificate and agreement executed and delivered by the Borrower or any Subsidiary in connection with this Agreement or otherwise referred to herein or
contemplated hereby (excluding any Hedging Agreement and any agreement, arrangement, document or other instrument pertaining to Banking Services), all as may be amended, restated, supplemented or
otherwise modified from time to time. 

        "Loans" means the reference to the Revolving Credit Loans and "Loan" means any of such Loans. 

        "Material Adverse Effect" means, with respect to the Borrower or any of its Subsidiaries, a material adverse effect on (a) the
properties, business, prospects, operations or condition (financial or otherwise) of any such Person, (b) the ability of any such Person to perform its obligations under the Loan Documents to
which it is a party or (c) the rights and remedies of the Administrative Agent or the Lenders under the Loan Documents. 

        "Material Contract" means (a) any contract or other agreement, written or oral, of the Borrower or any of its Subsidiaries
involving monetary liability of or to any such Person in an amount in excess of $500,000 per annum, or (b) any other contract or agreement, written or oral, of the Borrower or any of 

10

 

its
Subsidiaries the failure to comply with which could reasonably be expected to have a Material Adverse Effect. 

        "MDVX" means MDVX, Inc., a Delaware corporation. 

        "MDVX Indebtedness" means all obligations of DG III to MDVX pursuant to the MDVX Loan Documents. 

        "MDVX Loan Agreement" means the Loan Agreement dated as of April 15, 2005 between DG III and MDVX. 

        "MDVX Loan Documents" means the MDVX Loan Agreement, the MDVX Note and the MDVX Security Agreement. 

        "MDVX Note" means the Promissory Note dated April 15, 2005 made by DG III to MDVX in the original principal amount of $6,500,000. 

        "MDVX Security Agreement" means the Pledge and Security Agreement dated April 15, 2005 by and among DG III, the Borrower and MDVX. 

        "Mortgages" means the collective reference to each mortgage, deed of trust or other real property security document, encumbering all real
property now or hereafter owned or leased by the Borrower or any other Credit Party, in each case, in form and substance reasonably satisfactory to the Administrative Agent and executed by the
Borrower or such Credit Party in favor of the Administrative Agent, for the benefit of itself and the Secured Parties, as any such document may be amended, restated, supplemented or otherwise modified
from time to time. 

        "Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA
Affiliate is making, or is accruing an obligation to make, or has accrued an obligation to make contributions within the preceding six (6) years. 

        "Net Hedging Obligations" means, as of any date, the Termination Value of any such Hedging Agreement on such date. 

        "Notes" means the reference to the Revolving Credit Notes. 

        "Notice of Account Designation" has the meaning assigned thereto in Section 2.2(b). 

        "Notice of Borrowing" has the meaning assigned thereto in Section 2.2(a). 

        "Notice of Conversion/Continuation" has the meaning assigned thereto in  Section 5.2. 

        "Notice of Prepayment" has the meaning assigned thereto in Section 2.3(c). 

        "Obligations" means, in each case, whether now in existence or hereafter arising: (a) the unpaid principal of and interest on
(including interest accruing after the maturity of the Loans and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to any Credit Party, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans, (b) the L/C
Obligations, (c) all Hedging Obligations, (d) all Banking Services Obligations and (e) all other fees and commissions (including attorneys' fees), charges, indebtedness, loans,
liabilities, financial accommodations, obligations, covenants and duties owing by the Borrower or any of its Subsidiaries to the Lenders or the Administrative Agent, in each case under any Loan
Document or otherwise, with respect to any Loan or Letter of Credit of every kind, nature and description, direct or indirect, absolute or contingent, due or to become due, contractual or tortious,
liquidated or unliquidated, and whether or not evidenced by any note. 

        "OFAC" means the U.S. Department of the Treasury's Office of Foreign Assets Control. 

11

 

        "Officer's Compliance Certificate" means a certificate of the chief financial officer or the treasurer of the Borrower substantially in
the form of Exhibit F. 

        "Operating Lease" means, as to any Person as determined in accordance with GAAP, any lease of property (whether real, personal or mixed)
by such Person as lessee which is not a Capital Lease. 

        "Other Taxes" means 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 under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document. 

        "Participant" has the meaning assigned thereto in Section 14.10(d). 

        "PBGC" means the Pension Benefit Guaranty Corporation or any successor agency. 

        "Pension Plan" means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to the provisions of Title IV of ERISA
or Section 412 of the Code and which (a) is maintained for the employees of the Borrower or any ERISA Affiliates or (b) has at any time within the preceding six (6) years
been maintained for the employees of the Borrower or any of its current or former ERISA Affiliates. 

        "Permitted Acquisition" means any investment by the Borrower or any other Credit Party in the form of acquisitions of all or substantially
all of the business or a line of business (whether by the acquisition of Capital Stock, assets or any combination thereof) of any other Person if each such acquisition meets all of the following
requirements: 

        (a)   no
less than fifteen (15) Business Days prior to the proposed closing date of such acquisition, the Borrower shall have delivered written notice of such
acquisition to the Administrative Agent and the Lenders, which notice shall include the proposed closing date of such acquisition; 

        (b)   the
Borrower shall have certified on or before the closing date of such acquisition, in writing and in a form reasonably acceptable to the Administrative Agent, that
such acquisition has been approved by the board of directors or equivalent governing body of the Person to be acquired; 

        (c)   the
Person or business to be acquired shall be in a substantially similar line of business as the Borrower and its Subsidiaries; 

        (d)   if
such transaction is a merger or consolidation, the Borrower or such Credit Party shall be the surviving Person and no Change of Control shall have been effected
thereby; 

        (e)   the
Borrower shall have delivered to the Administrative Agent such documents reasonably requested by the Administrative Agent or the Required Lenders (through the
Administrative Agent) pursuant to Section 9.11 to be delivered at the time required pursuant to  Section 9.11; 

        (f)    no
later than five (5) Business Days prior to the proposed closing date of such acquisition, the Borrower shall have delivered to the Administrative Agent and the
Lenders an Officer's Compliance Certificate for the most recent fiscal quarter end preceding such acquisition demonstrating, in form and substance reasonably satisfactory thereto, (A) pro forma
compliance (as of the date of the acquisition and after giving effect thereto and any Extensions of Credit made or to be made in connection therewith) with each covenant contained in  Article X and
(B) a pro forma Consolidated Leverage Ratio (as of the proposed closing date of the acquisition and after giving effect
thereto and any Extensions of Credit made or to be made in connection therewith) at least 0.25 below the applicable ratio set forth in  Section 10.1; 

12

 

        (g)   no
later than five (5) Business Days prior to the proposed closing date of such acquisition, the Borrower, to the extent requested by the Administrative Agent,
(A) shall have delivered to the Administrative Agent promptly upon the finalization thereof copies of substantially final Permitted Acquisition Documents, which shall be in form and substance
reasonably satisfactory to the Administrative Agent, and (B) shall have delivered to, or made available for inspection by, the Administrative Agent substantially complete Permitted Acquisition
Diligence Information, which shall be in form and substance reasonably satisfactory to the Administrative Agent; 

        (h)   no
Event of Default or Default shall have occurred and be continuing both before and after giving effect to such acquisition; 

        (i)    the
Borrower shall have obtained the prior written consent of the Administrative Agent and the Required Lenders prior to the consummation of such acquisition if
(A) the Permitted Acquisition Consideration for any such acquisition (or series of related acquisitions), together with all other acquisitions consummated during the previous twelve
(12) month period, and (B) the Permitted Acquisition Consideration for all acquisitions (or series of related acquisitions), together with all other acquisitions consummated during the
term of this Agreement exceeds $1,000,000 in the aggregate; 

        (j)    the
Borrower shall demonstrate, in form and substance reasonably satisfactory to the Administrative Agent, that the entity to be acquired had positive Consolidated
EBITDA for the four (4) fiscal quarter period ended prior to the proposed closing date of such acquisition; and 

        (k)   the
Borrower shall provide such other documents and other information as may be reasonably requested by the Administrative Agent or the Required Lenders (through the
Administrative Agent) in connection with the acquisition. 

        "Permitted Acquisition Consideration" means the aggregate amount of the purchase price (including, but not limited to, any assumed debt,
earn-outs (valued at the maximum amount payable thereunder), deferred payments, or Capital Stock of the Borrower, net of the applicable acquired company's cash balance as shown on its most
recent financial statements delivered in connection with the applicable Permitted Acquisition) to be paid on a singular basis in connection with any applicable Permitted Acquisition as set forth in
the applicable Permitted Acquisition Documents executed by the Borrower or any of its Subsidiaries in order to consummate the applicable Permitted Acquisition. 

        "Permitted Acquisition Diligence Information" means with respect to any acquisition proposed by the Borrower or any other Credit Party, to
the extent applicable, all material financial information, all material contracts, all material customer lists, all material supply agreements, and all other material information, in each case,
reasonably requested to be delivered to the Administrative Agent in connection with such acquisition (except to the extent that any such information is (a) subject to any confidentiality
agreement, unless mutually agreeable arrangements can be made to preserve such information as confidential, (b) classified or (c) subject to any attorney-client privilege). 

        "Permitted Acquisition Documents" means with respect to any acquisition proposed by the Borrower or any other Credit Party, final copies
or substantially final drafts if not executed at the required time of delivery of the purchase agreement, sale agreement, merger agreement or other agreement evidencing such acquisition, including,
without limitation, all legal opinions and each other document executed, delivered, contemplated by or prepared in connection therewith and any amendment, modification or supplement to any of the
foregoing. 

        "Permitted Liens" means the Liens permitted pursuant to Section 11.2. 

        "Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership,
governmental authority or other entity. 

13

 

        "Prime Rate" means, at any time, the rate of interest per annum publicly announced from time to time by Wachovia as its prime rate. Each
change in the Prime Rate shall be effective as of the opening of business on the day such change in such prime rate occurs. The parties hereto acknowledge that the rate announced publicly by Wachovia
as its prime rate is an index or base rate and shall not necessarily be its lowest or best rate charged to its customers or other banks. 

        "Register" has the meaning assigned thereto in Section 14.10(c). 

        "Reimbursement Obligation" means the obligation of the Borrower to reimburse the Issuing Lender pursuant to  Section 3.5 for amounts drawn under Letters of Credit.

        "Related Parties" means, with respect to any Person, such Person's Affiliates and the directors, officers, employees, agents and advisors
of such Person and of such Person's Affiliates. 

        "Required Lenders" means, at any date, any combination of Lenders whose Commitments aggregate more than 50 percent (50%) of the
Aggregate Commitment or, if the Commitments have been terminated pursuant to Section 12.2, any combination of Lenders holding more than fifty
percent (50%) of the aggregate Extensions of Credit; provided that the Commitment of, and the portion of the Extensions of Credit, as applicable, held
or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders. 

        "Responsible Officer" means, with respect to the Borrower and its Subsidiaries, the chief executive officer, president, chief financial
officer, controller, treasurer or assistant treasurer of such Person or any other officer of such Person reasonably acceptable to the Administrative Agent. Any document delivered hereunder that is
signed by a Responsible Officer of the Borrower or any Subsidiary shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such
Person and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Person. 

        "Revolving Credit Commitment" means (a) as to any Revolving Credit Lender, the obligation of such Revolving Credit Lender to issue
or participate in Letters of Credit and make Revolving Credit Loans to the account of the Borrower hereunder in an aggregate principal amount at any time outstanding not to exceed the amount set forth
opposite such Revolving Credit Lender's name on Schedule 1.1 or in the Assignment and Assumption pursuant to which such Revolving Credit Lender
became a party hereto, as such amounts may be reduced or modified at any time or from time to time pursuant to the terms hereof and (b) as to all Revolving Credit Lenders, the aggregate
commitment of all Revolving Credit Lenders to make Revolving Credit Loans and issue or participate in Letters of Credit, as such amounts may be reduced at any time or from time to time pursuant to the
terms hereof. The Revolving Credit Commitment of all Revolving Credit Lenders on the Closing Date shall be $25,000,000.00. 

        "Revolving Credit Commitment Percentage" means, as to any Revolving Lender at any time, the ratio of (a) the amount of the
Revolving Credit Commitment of such Revolving Credit Lender to (b) the Revolving Credit Commitments of all Revolving Credit Lenders. 

        "Revolving Credit Facility" means the revolving credit facility established pursuant to  Article II. 

        "Revolving Credit Lenders" means Lenders with a Revolving Credit Commitment. 

        "Revolving Credit Loans" means any revolving loan made to the Borrower pursuant to  Section 2.1, and all such revolving loans collectively as the context requires.

        "Revolving Credit Maturity Date" means the earliest to occur of (a) February 10, 2008, (b) the date of termination by
the Borrower pursuant to Section 2.4, or (c) the date of termination by the Administrative Agent on behalf of the Lenders pursuant to  Section 12.2(a)
. 

14

 

        "Revolving Credit Note" means a promissory note made by the Borrower in favor of a Lender evidencing the Revolving Credit Loans made by
such Lender, substantially in the form of Exhibit A, and any amendments, supplements and modifications thereto, any substitutes therefor, and any
replacements, restatements, renewals or extension thereof, in whole or in part. 

        "Sanctioned Entity" means (i) an agency of the government of, (ii) an organization directly or indirectly controlled by, or
(iii) a person resident in a country that is subject to a sanctions program identified on the list maintained by OFAC and available at  http://www.treas.gov/offices/enforcement/ofac/sanctions/index.html, or as otherwise published from time to time as such program may be applicable to
such agency, organization or person. 

        "Sanctioned Person" means a person named on the list of Specially Designated Nationals or Blocked Persons maintained by OFAC available at  http://www.treas.gov/offices/
enforcement/ofac/sdn/index.html, or as otherwise published from time to time. 

        "Secured Parties" has the meaning assigned thereto in the Guarantee and Collateral Agreement. 

        "Security Documents" means the collective reference to the Guarantee and Collateral Agreement, any Mortgage and each other agreement or
writing pursuant to which any Credit Party purports to pledge or grant a security interest in any property or assets securing the Obligations or any such Person purports to guarantee the payment
and/or performance of the Obligations, in each case, as amended, restated, supplemented or otherwise modified from time to time. 

        "Solvent" means, as to the Borrower and its Subsidiaries on a particular date, that any such Person (a) has capital sufficient to
carry on its business and transactions and all business and transactions in which it is about to engage and is able to pay its debts as they mature, (b) has assets having a value, both at fair
valuation and at present fair saleable value, greater than the amount required to pay its probable liabilities (including contingencies), and (c) does not believe that it will incur debts or
liabilities beyond its ability to pay such debts or liabilities as they mature. 

        "Subordinated Indebtedness" means the collective reference to any Indebtedness of the Borrower or any Subsidiary subordinated in right and
time of payment to the Obligations and containing such other terms and conditions, in each case as are satisfactory to the Required Lenders. 

        "Subsidiary" means as to any Person, any corporation, partnership, limited liability company or other entity of which more than fifty
percent (50%) of the outstanding Capital Stock having ordinary voting power to elect a majority of the board of directors or other managers of such corporation, partnership, limited liability company
or other entity is at the time owned by or the management is otherwise controlled by such Person (irrespective of whether, at the time, Capital Stock of any other class or classes of such corporation,
partnership, limited liability company or other entity shall have or might have voting power by reason of the happening of any contingency). Unless otherwise qualified references to "Subsidiary" or
"Subsidiaries" herein shall refer to those of the Borrower. 

        "Synthetic Lease" means any synthetic lease, tax retention operating lease, off-balance sheet loan or similar
off-balance sheet financing product where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an Operating Lease in accordance with GAAP. 

        "Taxes" means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed
by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto. 

        "Termination Event" means except for any such event or condition that could not reasonably be expected to have a Material Adverse Effect:
(a) a "Reportable Event" described in Section 4043 of ERISA for which the notice requirement has not been waived by the PBGC, or (b) the withdrawal of the Borrower or any ERISA
Affiliate from a Pension Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or (c) the termination of a Pension 

15

 

Plan,
the filing of a notice of intent to terminate a Pension Plan or the treatment of a Pension Plan amendment as a termination, under Section 4041 of ERISA, if the plan assets are not
sufficient to pay all plan liabilities, or (d) the institution of proceedings to terminate, or the appointment of a trustee with respect to, any Pension Plan by the PBGC, or (e) any
other event or condition which would constitute grounds under Section 4042(a) of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan, or (f) the
imposition of a Lien pursuant to Section 412 of the Code or Section 302 of ERISA, or (g) the partial or complete withdrawal of the Borrower of any ERISA Affiliate from a
Multiemployer Plan if withdrawal liability is asserted by such plan, or (h) any event or condition which results in the reorganization or insolvency of a Multiemployer Plan under Sections 4241
or 4245 of ERISA, or (i) any event or condition which results in the termination of a Multiemployer Plan under Section 4041A of ERISA or the institution by PBGC of proceedings to
terminate a Multiemployer Plan under Section 4042 of ERISA. 

        "Termination Value" means, in respect of any one or more Hedging Agreements, after taking into account the effect of any legally
enforceable netting agreement relating to such Hedging Agreements, (a) for any date on or after the date such Hedging Agreements have been closed out and termination value(s) determined in
accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market
value(s) for such Hedging Agreements, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Hedging Agreements
(which may include a Lender or any Affiliate of a Lender). 

        "Transaction Costs" means all transaction fees, charges and other amounts related to this Credit Facility or any Permitted Acquisitions
(including, without limitation, any financing fees, merger and acquisition fees, legal fees and expenses, due diligence fees or any other fees and expenses in connection therewith), all such
transaction fees as approved by the Administrative Agent. 

        "UCC" means the Uniform Commercial Code as in effect in the State of Texas, as amended or modified from time to time. 

        "Uniform Customs" means the Uniform Customs and Practice for Documentary Credits (1993 Revision), effective January, 1994 International
Chamber of Commerce Publication No. 500. 

        "United States" means the United States of America. 

        "Wachovia" means Wachovia Bank, National Association, a national banking association, and its successors. 

        "Wholly-Owned" means, with respect to a Subsidiary, that all of the shares of Capital Stock of such Subsidiary are, directly or
indirectly, owned or controlled by the Borrower and/or one or more of its Wholly-Owned Subsidiaries (except for directors' qualifying shares or other shares required by Applicable Law to be owned by a
Person other than the Borrower). 

16

  

 
 

           SECTION 1.2    Other Definitions and Provisions.     With reference to this Agreement and each other Loan
Document, unless otherwise specified herein or in such other Loan Document: (a) the definitions of
terms herein shall apply equally to the singular and plural forms of the terms defined, (b) whenever the context may require, any pronoun shall include the corresponding masculine, feminine and
neuter forms, (c) the words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation", (d) the word "will" shall be construed to have the
same meaning and effect as the word "shall", (e) 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, restated, supplemented or otherwise modified (subject to any restrictions on such amendments, restatements, supplements or modifications set
forth herein), (f) any reference herein to any Person shall be construed to include such Person's successors and assigns, (g) 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, (h) 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, (i) 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, (j) the term
"documents" includes any and all instruments, documents, agreements, certificates, notices, reports, financial statements and other writings, however
evidenced, whether in physical or electronic form, (k) in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including;" the
words "to" and "until" each mean "to but excluding;" and the word "through" means "to and including", and (l) Section headings herein and in the other Loan Documents are included for
convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document. 

 
 

           SECTION 1.3    Accounting Terms.     All accounting terms not specifically or completely defined herein
shall be construed in conformity with, and all financial data (including financial ratios and
other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a
manner consistent with that used in preparing the audited financial statements required by Section 8.1(b),  except as otherwise specifically prescribed
herein. 

 
 

           SECTION 1.4    UCC Terms.     Terms defined in the UCC in effect on the Closing Date and not otherwise
defined herein shall, unless the context otherwise indicates, have the meanings provided
by those definitions. Subject to the foregoing, the term "UCC" refers, as of any date of determination, to the UCC then in effect. 

 
 

          SECTION 1.5    Rounding.     Any financial ratios required to be maintained by the Borrower pursuant to this
Agreement shall be calculated by dividing the appropriate component by the other
component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a
rounding-up if there is no nearest number). 

 
 

           SECTION 1.6    References to Agreement and Laws.     Unless otherwise expressly provided herein,
(a) references to formation documents, governing documents, agreements (including the Loan Documents) and other
contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto, but only to the extent that such amendments,
restatements, extensions, supplements and other modifications are not prohibited by any Loan Document; and (b) references to any Applicable Law shall include all statutory and regulatory
provisions consolidating, amending, replacing, supplementing or interpreting such Applicable Law. 

 
 

           SECTION 1.7    Times of Day.     Unless otherwise specified, all references herein to times of day shall be
references to Central time (daylight or standard, as applicable). 

17

 

 
 

           SECTION 1.8    Letter of Credit Amounts.     Unless otherwise specified, all references herein to the amount
of a Letter of Credit at any time shall be deemed to mean the maximum face amount of such Letter
of Credit after giving effect to all increases thereof contemplated by such Letter of Credit or the Letter of Credit Application therefor, whether or not such maximum face amount is in effect at such
time. 

 
 

ARTICLE II
  REVOLVING CREDIT FACILITY    

 
 
        SECTION 2.1    Revolving Credit Loans.     Subject to the terms and conditions of this Agreement, and in reliance
upon the representations and warranties set forth herein, each Revolving Credit Lender
severally agrees to make Revolving Credit Loans to the Borrower from time to time from the Closing Date through, but not including, the Revolving Credit Maturity Date as requested by the Borrower in
accordance with the terms of Section 2.2; provided, that (a) the aggregate principal
amount of all outstanding Revolving Credit Loans (after giving effect to any amount requested) shall not exceed the Revolving Credit Commitment less the
sum of all outstanding L/C Obligations and (b) the principal amount of outstanding Revolving Credit Loans from any Revolving Credit Lender to the Borrower shall not at any time exceed such
Revolving Credit Lender's Revolving Credit Commitment less such Revolving Credit Lender's Revolving Credit Commitment Percentage of outstanding L/C
Obligations. Each Revolving Credit Loan by a Revolving Credit Lender shall be in a principal amount equal to such Revolving Lender's Revolving Credit Commitment Percentage of the aggregate principal
amount of Revolving Credit Loans requested on such occasion. Subject to the terms and conditions hereof, the Borrower may borrow, repay and reborrow Revolving Credit Loans hereunder until the
Revolving Credit Maturity Date. 

 
 

           SECTION 2.2    Procedure for Advances of Revolving Credit Loans.     

        (a)   Requests for Borrowing. The Borrower shall give the Administrative Agent irrevocable prior written notice substantially
in the form of Exhibit B (a "Notice of Borrowing") not later than 11:00 a.m. (i) on
the same Business Day as each Base Rate Loan and (ii) at least three (3) Business Days before each LIBOR Rate Loan, of its intention to borrow, specifying (A) the date of such
borrowing, which shall be a Business Day, (B) the amount of such borrowing, which shall be, (x) with respect to Base Rate Loans in an aggregate principal amount of $500,000 or a whole
multiple of $100,000 in excess thereof and (y) with respect to LIBOR Rate Loans in an aggregate principal amount of $500,000 or a whole multiple of $100,000 in excess thereof,
(C) whether the Loans are to be LIBOR Rate Loans or Base Rate Loans, and (D) in the case of a LIBOR Rate Loan, the duration of the Interest Period applicable thereto. A Notice of
Borrowing received after 11:00 a.m. shall be deemed received on the next Business Day. The Administrative Agent shall promptly notify the Lenders of each Notice of Borrowing. 

        (b)   Disbursement of Revolving Credit Loans. Not later than 1:00 p.m. on the proposed borrowing date, each Lender will
make available to the Administrative Agent, for the account of the Borrower, at the office of the Administrative Agent in funds immediately available to the Administrative Agent, such Lender's
Revolving Credit Commitment Percentage of the Revolving Credit Loans to be made on such borrowing date. The Borrower hereby irrevocably authorizes the Administrative Agent to disburse the proceeds of
each borrowing requested pursuant to this Section in immediately available funds by crediting or wiring such proceeds to the deposit account of the Borrower identified in the most recent notice
substantially in the form of Exhibit C (a "Notice of Account Designation") delivered by the
Borrower to the Administrative Agent or as may be otherwise agreed upon by the Borrower and the Administrative Agent from time to time. Subject to  Section 5.7 hereof, the Administrative Agent shall
not be obligated to disburse the portion of the proceeds of any Revolving Credit Loan
requested pursuant to this Section to the 

18

 

extent
that any Lender has not made available to the Administrative Agent its Revolving Credit Commitment Percentage of such Loan. 

 
 

           SECTION 2.3    Repayment and Prepayment of Revolving Credit Loans.     

        (a)   Repayment on Termination Date. The Borrower hereby agrees to repay the outstanding principal amount of all Revolving
Credit Loans in full on the Revolving Credit Maturity Date together with all accrued but unpaid interest thereon. 

        (b)   Mandatory Prepayments. If at any time the outstanding principal amount of all Revolving Credit Loans plus the sum of all
outstanding L/C Obligations exceeds the Revolving Credit Commitment, the Borrower agrees to repay immediately upon notice from the Administrative Agent, by payment to the Administrative Agent for the
account of the Lenders, Extensions of Credit in an amount equal to such excess with each such repayment applied first to the principal amount of outstanding Revolving Credit Loans and second, with
respect to any Letters of Credit then outstanding, a payment of cash collateral into a cash collateral account opened by the Administrative Agent, for the benefit of the Lenders in an amount equal to
the aggregate then undrawn and unexpired amount of such Letters of Credit (such cash collateral to be applied in accordance with  Section 12.2(b)). 

        (c)   Optional Prepayments. The Borrower may at any time and from time to time prepay Revolving Credit Loans, in whole or in
part, with irrevocable prior written notice to the Administrative Agent substantially in the form of Exhibit D (a "Notice
of Prepayment") given not later than 11:00 a.m. (i) on the same Business Day as each Base Rate Loan and (ii) at least three (3) Business Days before
each LIBOR Rate Loan, specifying the date and amount of prepayment and whether the prepayment is of LIBOR Rate Loans, Base Rate Loans or a combination thereof, and, if of a combination thereof, the
amount allocable to each. Upon receipt of such notice, the Administrative Agent shall promptly notify each Lender. If any such notice is given, the amount specified in such notice shall be due and
payable on
the date set forth in such notice. Partial prepayments shall be in an aggregate amount of $500,000 or a whole multiple of $100,000 in excess thereof with respect to Base Rate Loans and $500,000 or a
whole multiple of $100,000 in excess thereof with respect to LIBOR Rate Loans. A Notice of Prepayment received after 11:00 a.m. shall be deemed received on the next Business Day. Each such
repayment shall be accompanied by any amount required to be paid pursuant to Section 5.9 hereof. 

        (d)   Limitation on Prepayment of LIBOR Rate Loans. The Borrower may not prepay any LIBOR Rate Loan on any day other than on
the last day of the Interest Period applicable thereto unless such prepayment is accompanied by any amount required to be paid pursuant to  Section 5.9 hereof. 

        (e)   Hedging Agreements. All Hedging Agreements, if any, between the Borrower and a Lender or an Affiliate of a Lender are
independent agreements governed by the written provisions of such Hedging Agreement, which will remain in full force and effect, unaffected by any repayment, prepayment, acceleration, reduction,
increase or change in the terms of this Agreement, except as otherwise expressly provided in such Hedging Agreement, and any payoff statement from such Lender or Affiliate relating to this Agreement
and the Notes shall not apply to such Hedging Agreement except as otherwise expressly provided in such payoff statement. 

 
 

          SECTION 2.4    Permanent Reduction of the Revolving Credit Commitment.     

        (a)   Voluntary Reduction. The Borrower shall have the right at any time and from time to time, upon at least five
(5) Business Days prior written notice to the Administrative Agent, to terminate or permanently reduce (as applicable), without premium or penalty, (i) the entire Revolving Credit
Commitment at any time or (ii) portions of the Revolving Credit Commitment, from time to time, in an aggregate principal amount not less than $500,000 or any whole multiple 

19

 

of
$100,000 in excess thereof. Any reduction of the Revolving Credit Commitments shall be applied to the Revolving Credit Commitment of each Revolving Credit Lender according to its Revolving Credit
Commitment Percentage. All commitment fees accrued until the effective date of any termination of the Revolving Credit Commitments shall be paid on the effective date of such termination. 

        (b)   Corresponding Payment. Each permanent reduction permitted pursuant to this Section shall be accompanied by a payment of
principal sufficient to reduce the aggregate outstanding Revolving Credit Loans and L/C Obligations, as applicable, after such reduction to the Revolving Credit Commitment as so reduced and if the
Revolving Credit Commitment as so reduced is less than the aggregate amount of all outstanding Letters of Credit, the Borrower shall be required to deposit cash collateral in a cash collateral account
opened by the Administrative Agent in an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit. Such cash collateral shall be applied in
accordance with Section 12.2(b). Any reduction of the Revolving Credit Commitment to zero shall be accompanied by payment of all outstanding
Revolving Credit Loans (and furnishing of cash collateral satisfactory to the Administrative Agent for all L/C Obligations) and shall result in the termination of the Revolving Credit Commitment and
the Revolving Credit Facility. Such cash collateral shall be applied in accordance with Section 12.2(b). If the reduction of the Revolving Credit
Commitment requires the repayment of any LIBOR Rate Loan, such repayment shall be accompanied by any amount required to be paid pursuant to  Section 5.9 hereof. 

 
 

          SECTION 2.5    Termination of Revolving Credit Facility.     The Revolving Credit Facility shall terminate on
the Revolving Credit Maturity Date. 

 
 

ARTICLE III
  LETTER OF CREDIT FACILITY    

 
 

          SECTION 3.1    L/C Commitment.     Subject to the terms and conditions hereof, the Issuing Lender, in
reliance on the agreements of the other Lenders set forth in  Section 3.4(a), agrees to issue standby letters of credit ("Letters of Credit") for the
account
of the Borrower on any Business Day from the Closing Date through but not including the Revolving Credit Maturity Date in such form as may be approved from time to time by the Issuing Lender;  provided,
that the Issuing Lender shall have no obligation to issue any Letter of Credit if, after giving effect to such issuance, (a) the L/C
Obligations would exceed the L/C Commitment or (b) the aggregate principal amount of outstanding Revolving Credit Loans, plus the aggregate
amount of L/C Obligations would exceed the Revolving Credit Commitment. Each Letter of Credit shall (i) be denominated in Dollars in a minimum amount of $500,000, (ii) be a standby
letter of credit issued to support obligations of the Borrower or any of its Subsidiaries, contingent or otherwise, incurred in the ordinary course of business, (iii) expire on a date no more
than twelve (12) months after the date of issuance or last renewal of such Letter of Credit, which date shall be no later than the fifth (5th) Business Day prior to the Revolving
Credit Maturity Date and (iv) be subject to the Uniform Customs and/or ISP98, as set forth in the Letter of Credit Application or as determined by the Issuing Lender and, to the extent not
inconsistent therewith, the laws of the State of Texas. The Issuing Lender shall not at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause the
Issuing Lender or any L/C Participant to exceed any limits imposed by, any Applicable Law. References herein to "issue" and derivations thereof with respect to Letters of Credit shall also include
extensions or modifications of any outstanding Letters of Credit, unless the context otherwise requires. 

 
 

           SECTION 3.2    Procedure for Issuance of Letters of Credit.     The Borrower may from time to time request
that the Issuing Lender issue a Letter of Credit by delivering to the Issuing Lender at the Administrative Agent's
Office a Letter of Credit Application therefor, completed to the satisfaction of 

20

 

the
Issuing Lender, and such other certificates, documents and other papers and information as the Issuing Lender may request. Upon receipt of any Letter of Credit Application, the Issuing Lender
shall process such Letter of Credit Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and
shall, subject to Section 3.1 and Article VI, promptly issue the Letter of Credit
requested thereby (but in no event shall the Issuing Lender be required to issue any Letter of Credit earlier than three (3) Business Days after its receipt of the Letter of Credit Application
therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may
be agreed by the Issuing Lender and the Borrower. The Issuing Lender shall promptly furnish to the Borrower a copy of such Letter of Credit and promptly notify each Lender of the issuance and upon
request by any Lender, furnish to such Lender a copy of such Letter of Credit and the amount of such Lender's participation therein. 

 
 

          SECTION 3.3    Commissions and Other Charges.     

        (a)   Letter of Credit Commissions. The Borrower shall pay to the Administrative Agent, for the account of the Issuing Lender
and the L/C Participants, a letter of credit commission with respect to each Letter of Credit in an amount equal to the face amount of such Letter of Credit multiplied by the Applicable Margin with
respect to Revolving Credit Loans that are LIBOR Rate Loans (determined on a per annum basis). Such commission shall be payable quarterly in arrears on the last Business Day of each calendar quarter,
on the Revolving Credit Maturity Date and thereafter on demand of the Administrative Agent. The Administrative Agent shall, promptly following its receipt thereof, distribute to the Issuing Lender and
the L/C Participants all commissions received pursuant to this Section in accordance with their respective Revolving Credit Commitment Percentages. 

        (b)   Issuance Fee. In addition to the foregoing commission, the Borrower shall pay to the Administrative Agent, for the
account of the Issuing Lender, an issuance fee with respect to each Letter of Credit in an amount equal to the face amount of such Letter of Credit multiplied by the Applicable Margin with respect to
Revolving Credit Loans that are LIBOR Rate Loans (determined on a per annum basis). Such issuance fee shall be payable quarterly in arrears on the last Business Day of each calendar quarter commencing
with the first such date to occur after the issuance of such Letter of Credit, on the Revolving Credit Maturity Date and thereafter on demand of the Administrative Agent. 

        (c)   Other Costs. In addition to the foregoing fees and commissions, the Borrower shall pay or reimburse the Issuing Lender
for such normal and customary costs and expenses as are incurred or charged by the Issuing Lender in issuing, effecting payment under, amending or otherwise administering any Letter of Credit. 

 
 

          SECTION 3.4    L/C Participations.     

        (a)   The
Issuing Lender irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce the Issuing Lender to issue Letters of Credit hereunder, each
L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Lender, on the terms and conditions hereinafter stated, for such L/C Participant's own
account and risk, an undivided interest equal to such L/C Participant's Revolving Credit Commitment Percentage in the Issuing Lender's obligations and rights under and in respect of each Letter of
Credit issued hereunder and the amount of each draft paid by the Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees with the Issuing Lender that, if a draft is paid
under any Letter of Credit for which the Issuing Lender is not reimbursed in full by the Borrower through a Revolving Credit Loan or otherwise in accordance with the terms of this Agreement, such L/C
Participant shall pay to the Issuing Lender upon demand at the Issuing Lender's address for notices specified herein an amount equal to such L/C Participant's Revolving 

21

 

Credit
Commitment Percentage of the amount of such draft, or any part thereof, which is not so reimbursed. 

        (b)   Upon
becoming aware of any amount required to be paid by any L/C Participant to the Issuing Lender pursuant to  Section 3.4(a) in respect of any unreimbursed portion of any payment made by the Issuing
Lender under any Letter of Credit, the Issuing Lender
shall notify each L/C Participant of the amount and due date of such required payment and such L/C Participant shall pay to the Issuing Lender the amount specified on the applicable due date. If any
such amount is paid to the Issuing Lender after the date such payment is due, such L/C Participant shall pay to the Issuing Lender on demand, in addition to such amount, the product of (i) such
amount, times (ii) the daily average Federal Funds Rate as determined by the Administrative Agent during the period from and including the date such payment is due to the date on which such
payment is immediately available to the Issuing Lender, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. A
certificate of the Issuing Lender with respect to any amounts owing under this Section shall be conclusive in the absence of manifest error. With respect to payment to the Issuing Lender of the
unreimbursed amounts described in this Section, if the L/C Participants receive notice that any such payment is due (A) prior to 1:00 p.m. on any Business Day, such payment shall be due
that Business Day, and (B) after 1:00 p.m. on any Business Day, such payment shall be due on the following Business Day. 

        (c)   Whenever,
at any time after the Issuing Lender has made payment under any Letter of Credit and has received from any L/C Participant its Revolving Credit Commitment
Percentage of such payment in accordance with this Section, the Issuing Lender receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise), or any payment
of interest on account thereof, the Issuing Lender will distribute to such L/C Participant its pro rata share thereof; provided, that in the event that any such payment received by the Issuing Lender
shall be required to be returned by the Issuing Lender, such L/C Participant shall return to the Issuing Lender the portion thereof previously distributed by the Issuing Lender to it. 

 
 

          SECTION 3.5    Reimbursement Obligation of the Borrower.     In the event of any drawing under any Letter of
Credit, the Borrower agrees to reimburse (either with the proceeds of a Revolving Credit Loan as provided for in
this Section or with funds from other sources), in same day funds, the Issuing Lender on each date on which the Issuing Lender notifies the Borrower of the date and amount of a draft paid under any
Letter of Credit for the amount of (a) such draft so paid and (b) any amounts referred to in Section 3.3(c) incurred by the Issuing
Lender in connection with such payment. Unless the Borrower shall immediately notify the Issuing Lender that the Borrower intends to reimburse the Issuing Lender for such drawing from other sources or
funds, the Borrower shall be deemed to have timely given a Notice of Borrowing to the Administrative Agent requesting that the Revolving Credit Lenders make a Revolving Credit Loan bearing interest at
the Base Rate on such date in the amount of (a) such draft so paid and (b) any amounts referred to in Section 3.3(c) incurred by
the Issuing Lender in connection with such payment, and the Revolving Credit Lenders shall make a Revolving Credit Loan bearing interest at the Base Rate in such amount, the proceeds of which shall be
applied to reimburse the Issuing Lender for the amount of the related drawing and costs and expenses. Each Revolving Credit Lender acknowledges and agrees that its obligation to fund a Revolving
Credit Loan in accordance with this Section to reimburse the Issuing Lender for any draft paid under a Letter of Credit is absolute and unconditional and shall not be affected by any circumstance
whatsoever, including, without limitation, non-satisfaction of the conditions set forth in Section 2.2(a) or  Article VI. If the Borrower has
elected to pay the amount of such drawing with funds from other sources and shall fail to reimburse the Issuing
Lender as provided above, the unreimbursed amount of such drawing shall bear interest at the rate which would be payable on any outstanding Base Rate Loans which were then 

22

 

overdue
from the date such amounts become payable (whether at stated maturity, by acceleration or otherwise) until payment in full. 

 
 

           SECTION 3.6    Obligations Absolute.     The Borrower's obligations under this Article III (including, without limitation, the Reimbursement
Obligation) shall be absolute and unconditional under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which the Borrower may have or have had
against the Issuing Lender or any beneficiary of a Letter of Credit or any other Person. The Borrower also agrees that the Issuing Lender and the L/C Participants shall not be responsible for, and the
Borrower's Reimbursement Obligation under Section 3.5 shall not be affected by, among other things, the validity or genuineness of documents or
of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among the Borrower and any beneficiary of any Letter of
Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee. The
Issuing Lender shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of
Credit, except for errors or omissions caused by the Issuing Lender's gross negligence or willful misconduct, as determined by a court of competent jurisdiction by final nonappealable judgment. The
Borrower agrees that any action taken or omitted by the Issuing Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence
or willful misconduct shall be binding on the Borrower and shall not result in any liability of the Issuing Lender or any L/C Participant to the Borrower. The responsibility of the Issuing Lender to
the Borrower in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to
determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are in conformity with such Letter of Credit. 

 
 

           SECTION 3.7    Effect of Letter of Credit Application.     To the extent that any provision of any Letter of
Credit Application related to any Letter of Credit is inconsistent with the provisions of this  Article III, the provisions of this Article III
shall apply. 

 
 

ARTICLE IV
  INTENTIONALLY DELETED.    

 
 

ARTICLE V
  GENERAL LOAN PROVISIONS    

 
 
        SECTION 5.1    Interest.     

        (a)   Interest Rate Options. Subject to the provisions of this Section, at the election of the Borrower, Revolving Credit Loans
shall bear interest at (A) the Base Rate plus the Applicable Margin or (B) the LIBOR Rate plus the Applicable Margin (provided that the LIBOR Rate shall not be available until three
(3) Business Days after the Closing Date). The Borrower shall select the rate of interest and Interest Period, if any, applicable to any Loan at the time a Notice of Borrowing is given or at
the time a Notice of Conversion/Continuation is given pursuant to Section 5.2. Any Loan or any portion thereof as to which the Borrower has not
duly specified an interest rate as provided herein shall be deemed a Base Rate Loan. 

        (b)   Interest Periods. In connection with each LIBOR Rate Loan, the Borrower, by giving notice at the times described in  Section 2.2 or 5.2, as applicable, shall elect an interest period 

23

 

(each,
an "Interest Period") to be applicable to such Loan, which Interest Period shall be a period of one (1), two (2), or three (3) months;
provided that: 

        (i)    the
Interest Period shall commence on the date of advance of or conversion to any LIBOR Rate Loan and, in the case of immediately successive Interest Periods, each
successive Interest Period shall commence on the date on which the immediately preceding Interest Period expires; 

        (ii)   if
any Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day;  provided, that if any Interest Period with respect
to a LIBOR Rate Loan would otherwise expire on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such Interest Period shall expire on the immediately preceding Business Day; 

        (iii)  any
Interest Period with respect to a LIBOR Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the relevant calendar month at the end of such Interest Period; 

        (iv)  no
Interest Period shall extend beyond the Revolving Credit Maturity Date; and 

        (v)   there
shall be no more than six (6) Interest Periods in effect at any time. 

        (c)   Default Rate. Subject to Section 12.2, (i) immediately upon
the occurrence and during the continuance of an Event of Default under Section 12.1(a), (b),  (j) or
(k), or (ii) at the election of the Required Lenders, upon the occurrence and during the
continuance of any other Event of Default, (A) the Borrower shall no longer have the option to request LIBOR Rate Loans or Letters of Credit, (B) all outstanding LIBOR Rate Loans shall
bear interest at a rate per annum of two percent (2%) in excess of the rate then applicable to LIBOR Rate Loans until the end of the applicable Interest Period and thereafter at a rate equal to two
percent (2%) in excess of the rate then applicable to Base Rate Loans, and (C) all outstanding Base Rate Loans and other Obligations arising hereunder or under any other Loan Document shall
bear interest at a rate per annum equal to two percent (2%) in excess of the rate then applicable to Base Rate Loans or such other Obligations arising hereunder or under any other Loan Document.
Interest shall continue to accrue on the Obligations after the filing by or against the Borrower of any petition seeking any relief in bankruptcy or under any act or law pertaining to insolvency or
debtor relief, whether state, federal or foreign. Interest payable pursuant to this Section 5.1(c) shall be payable by the Borrower from time to
time on demand by the Administrative Agent. 

        (d)   Interest Payment and Computation. Interest on each Base Rate Loan shall be due and payable in arrears on the last
Business Day of each calendar quarter commencing on March 31, 2006 and on the Revolving Credit Maturity Date; and interest on each LIBOR Rate Loan shall be due and payable on the last day of
each Interest Period applicable thereto and on the Revolving Credit Maturity Date. Interest on LIBOR Rate Loans and all fees payable hereunder shall be computed on the basis of a 360-day
year and assessed for the actual number of days elapsed and interest on Base Rate Loans shall be computed on the basis of a 365/366-day year and assessed for the actual number of days
elapsed. 

 
 

           SECTION 5.2    Notice and Manner of Conversion or Continuation of Loans.     Provided that no Default or
Event of Default has occurred and is then continuing, the Borrower shall have the option to (a) convert at any time following
the third Business Day after the Closing Date all or any portion of any outstanding Base Rate Loans in a principal amount equal to $500,000 or any whole multiple of $100,000 in excess thereof into one
or more LIBOR Rate Loans and (b) upon the expiration of any Interest Period, (i) convert all or any part of its outstanding LIBOR Rate Loans in a principal amount equal to $500,000 or a
whole multiple of $100,000 in excess thereof into Base Rate Loans or 

24

 

(ii) continue
such LIBOR Rate Loans as LIBOR Rate Loans. Whenever the Borrower desires to convert or continue Loans as provided above, the Borrower shall give the Administrative Agent
irrevocable prior written notice in the form attached as Exhibit E (a "Notice of Conversion/Continuation") not later than 11:00 a.m. three
(3) Business Days before the day on which a proposed conversion or continuation of such Loan is to be effective specifying (A) the Loans to be converted or continued, and, in the case of
any LIBOR Rate Loan to be converted or continued, the last day of the Interest Period therefor, (B) the effective date of such conversion or continuation (which shall be a Business Day),
(C) the principal amount of such Loans to be converted or continued, and (D) the Interest Period to be applicable to such converted or continued LIBOR Rate Loan. The Administrative Agent
shall promptly notify the Lenders of such Notice of Conversion/Continuation. 

 
 

           SECTION 5.3    Fees.     

        (a)   Commitment Fee. Commencing on the Closing Date, the Borrower shall pay to the Administrative Agent, for the account of
the Revolving Credit Lenders, a non-refundable commitment fee at a rate per annum equal to the Applicable Margin on the average daily unused portion of the Revolving Credit Commitment. The
commitment fee shall be payable in arrears on the last Business Day of each calendar quarter during the term of this Agreement commencing on March 31, 2006, and ending on the Revolving Credit
Maturity Date. Such commitment fee shall be distributed by the Administrative Agent to the Revolving Credit Lenders pro rata in accordance with the Lenders' respective Revolving Credit Commitment
Percentages. 

        (b)   Administrative Agent's and Other Fees. In order to compensate the Administrative Agent for structuring and syndicating
the Lenders for their obligations hereunder, the Borrower agrees to pay to the Administrative Agent, for the account of the Administrative Agent, the Lenders and their Affiliates, any fees set forth
in the Fee Letter. 

 
 

           SECTION 5.4    Manner of Payment.     Each payment by the Borrower on account of the principal of or
interest on the Loans or of any fee, commission or other amounts (including the Reimbursement
Obligation) payable to the Lenders under this Agreement shall be made not later than 1:00 p.m. on the date specified for payment under this Agreement to the Administrative Agent at the
Administrative Agent's Office for the account of the Lenders (other than as set forth below) pro rata in accordance with their respective Commitment
Percentages, (except as specified below), in Dollars, in immediately available funds and shall be made without any set-off, counterclaim or deduction whatsoever. Any payment received after
such time but before 2:00 p.m. on such day shall be deemed a payment on such date for the purposes of Section 12.1, but for all other
purposes shall be deemed to have been made on the next succeeding Business Day. Any payment received after 2:00 p.m. shall be deemed to have been made on the next succeeding Business Day for
all purposes. Upon receipt by the Administrative Agent of each such payment, the Administrative Agent shall distribute to each Lender at its address for notices set forth herein its  pro rata share of
such payment in accordance with such Lender's Commitment Percentage, (except as specified below) and shall wire advice of the amount
of such credit to each Lender. Each payment to the Administrative Agent of the Issuing Lender's fees or L/C Participants' commissions shall be made in like manner, but for the account of the Issuing
Lender or the L/C Participants, as the case may be. Each payment to the Administrative Agent of Administrative Agent's fees or expenses shall be made for the account of the Administrative Agent and
any amount payable to any Lender under Sections 5.9, 5.10,  5.11 or 14.3 shall be paid to the Administrative Agent for the account of the applicable Lender. Subject
to Section 5.1(b)(ii) if any payment under this Agreement shall be specified to be made upon a day which is not a Business Day, it shall be made
on the next succeeding day which is a Business Day and such extension of time shall in such case be included in computing any interest if payable along with such payment. 

 
 

           SECTION 5.5    Evidence of Indebtedness.     

        (a)   Extensions of Credit. The Extensions of Credit made by each Lender shall be evidenced by one or more accounts or records
maintained by such Lender and by the Administrative Agent in 

25

 

the
ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Extensions of Credit made
by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower
hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the
Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon the request of any Lender made through the
Administrative Agent, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Revolving Credit Note which shall evidence such Lender's Revolving Credit Loans, in
addition to such accounts or records. Each Lender may attach schedules to its Notes and endorse thereon the date, amount and maturity of its Loans and payments with respect thereto. 

        (b)   Participations. In addition to the accounts and records referred to in subsection (a), each Lender and the Administrative
Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations in Letters of Credit. In the event of any conflict
between the accounts and records maintained by the Administrative Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Administrative Agent
shall control in the absence of manifest error. 

 
 

           SECTION 5.6    Adjustments.     If any Lender shall, by exercising any right of setoff or counterclaim or
otherwise, obtain payment in respect of any principal of or interest on any of its Loans
or other obligations hereunder resulting in such Lender's receiving payment of a proportion of the aggregate amount of its Loans and accrued interest thereon or other such obligations (other than
pursuant to Sections 5.9, 5.10, 5.11 or  14.3 hereof) greater
than its pro rata share thereof as provided herein, then the Lender receiving such
greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Loans and such other obligations of the other
Lenders, or make such other adjustments as shall be equitable, 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 Loans and other amounts owing them; provided that 

        (a)   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 

        (b)   the
provisions of this paragraph shall not be construed to apply to (x) any payment made by the Borrower pursuant to and in accordance with the express terms of
this Agreement or (y) 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 Letters of Credit to any
assignee or participant, other than to the Borrower or any Subsidiary thereof (as to which the provisions of this paragraph shall apply). 

        Each
Credit Party 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 each Credit Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of each Credit Party in the
amount of such participation. 

 
 

          SECTION 5.7    Nature of Obligations of Lenders Regarding Extensions of Credit; Assumption by the Administrative Agent.     The obligations of the Lenders under this Agreement to make the Loans and issue or participate in Letters of Credit are several and are not joint or joint and
several. Unless the Administrative Agent shall have received notice from a Lender prior to a proposed borrowing date that such Lender will not make available to the Administrative Agent such Lender's
ratable portion of the 

26

 

amount
to be borrowed on such date (which notice shall not release such Lender of its obligations hereunder), the Administrative Agent may assume that such Lender has made such portion available to
the Administrative Agent on the proposed borrowing date in accordance with Section 2.2(b), and the Administrative Agent may, in reliance upon
such assumption, make available to the Borrower on such date a corresponding amount. If such amount is made available to the Administrative Agent on a date after such borrowing date, such Lender shall
pay to the Administrative Agent on demand an amount, until paid, equal to the product of (a) the amount not made available by such Lender in accordance with the terms hereof,  times (b) the
daily average Federal Funds Rate during such period as determined by the Administrative Agent,  times (c) a fraction the numerator of which is the number of days that elapse from and including such
borrowing date to the date on which such
amount not made available by such Lender in accordance with the terms hereof shall have become immediately available to the Administrative Agent and the denominator of which is 360. A certificate of
the Administrative Agent with respect to any amounts owing under this Section shall be conclusive, absent manifest error. If such Lender's Commitment Percentage of such borrowing is not made available
to the Administrative Agent by such Lender within three (3) Business Days after such borrowing date, the Administrative Agent shall be entitled to recover such amount made available by the
Administrative Agent with interest thereon at the rate per annum applicable to Base Rate Loans hereunder, on demand, from the Borrower. The failure of any Lender to make available its Commitment
Percentage of any Loan requested by the Borrower shall not relieve it or any other Lender of its obligation, if any, hereunder to make its Commitment Percentage of such Loan available on the borrowing
date, but no Lender shall be responsible for the failure of any other Lender to make its Commitment Percentage of such Loan available on the borrowing date. 

 
 

          SECTION 5.8    Changed Circumstances.     

        (a)   Circumstances Affecting LIBOR Rate Availability. If with respect to any Interest Period the Administrative Agent or any
Lender (after consultation with the Administrative Agent) shall determine that, by reason of circumstances affecting the foreign exchange and interbank markets generally, deposits in eurodollars, in
the applicable amounts are not being quoted via the Telerate Page 3750 or offered to the Administrative Agent or such Lender for such Interest Period, then the Administrative Agent shall forthwith
give notice thereof to the Borrower. Thereafter, until the Administrative Agent notifies the Borrower that such circumstances no longer exist, the obligation of the Lenders to make LIBOR Rate Loans
and the right of the Borrower to convert any Loan to or continue any Loan as a LIBOR Rate Loan shall be suspended, and the Borrower shall repay in full (or cause to be repaid in full) the then
outstanding principal amount of each such LIBOR Rate Loan together with accrued interest thereon, on the last day of the then current Interest Period applicable to such LIBOR Rate
Loan or convert the then outstanding principal amount of each such LIBOR Rate Loan to a Base Rate Loan as of the last day of such Interest Period. 

        (b)   Laws Affecting LIBOR Rate Availability. If, after the date hereof, the introduction of, or any change in, any Applicable
Law or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or
compliance by any of the Lenders (or any of their respective Lending Offices) with any request or directive (whether or not having the force of law) of any such Governmental Authority, central bank or
comparable agency, shall make it unlawful or impossible for any of the Lenders (or any of their respective Lending Offices) to honor its obligations hereunder to make or maintain any LIBOR Rate Loan,
such Lender shall promptly give notice thereof to the Administrative Agent and the Administrative Agent shall promptly give notice to the Borrower and the other Lenders. Thereafter, until the
Administrative Agent notifies the Borrower that such circumstances no longer exist, (i) the obligations of the Lenders to make LIBOR Rate Loans and the right of the Borrower to convert any Loan
or continue any Loan as a LIBOR Rate Loan shall be suspended and thereafter the Borrower may select only Base Rate Loans hereunder, and (ii) if any of the Lenders may not lawfully continue to
maintain a LIBOR 

27

 

Rate
Loan to the end of the then current Interest Period applicable thereto as a LIBOR Rate Loan, the applicable LIBOR Rate Loan shall immediately be converted to a Base Rate Loan for the remainder of
such Interest Period. 

 
 

           SECTION 5.9    Indemnity.     The Borrower hereby indemnifies each of the Lenders against any loss or
expense which may arise or be attributable to each Lender's obtaining, liquidating or
employing deposits or other funds acquired to effect, fund or maintain any Loan (a) as a consequence of any failure by the Borrower to make any payment when due of any amount due hereunder in
connection with a LIBOR Rate Loan, (b) due to any failure of the Borrower to borrow, continue or convert on a date specified therefor in a Notice of Borrowing or Notice of
Conversion/Continuation or (c) due to any payment, prepayment or conversion of any LIBOR Rate Loan on a date other than the last day of the Interest Period therefor. The amount of such loss or
expense shall be determined, in the applicable Lender's sole discretion, based upon the assumption that such Lender funded its Commitment Percentage of the LIBOR Rate Loans in the London interbank
market and using any reasonable attribution or averaging methods which such Lender deems appropriate and practical. A certificate of such Lender setting forth the basis for determining such amount or
amounts necessary to compensate such Lender shall be forwarded to the Borrower through the Administrative Agent and shall be conclusively presumed to be correct save for manifest error. 

 
 

           SECTION 5.10    Increased Costs.     

        (a)   Increased Costs Generally. If any Change in Law shall. 

        (i)    impose,
modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the
account of, or advances, loans or other credit extended or participated in by, any Lender (except any reserve requirement reflected in the LIBOR Rate) or the Issuing Lender; 

        (ii)   subject
any Lender or the Issuing Lender to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit
or any LIBOR Rate Loan made by it, or change the basis of taxation of payments to such Lender or the Issuing Lender in respect thereof (except for Indemnified Taxes or Other Taxes covered by  Section 5.11 and the imposition of, or any change in the rate of any Excluded Tax payable by such Lender or the Issuing Lender); or 

        (iii)  impose
on any Lender or the Issuing Lender or the London interbank market any other condition, cost or expense affecting this Agreement or LIBOR Rate 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, converting into or maintaining any LIBOR Rate Loan (or of maintaining its obligation to make any such
Loan), or to increase the cost to such Lender or the Issuing Lender of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any
Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender or the Issuing Lender hereunder (whether of principal, interest or any other amount) then, upon written
request of such Lender or the Issuing Lender, the Borrower shall promptly pay to any such Lender or the Issuing Lender, as the case may be, such additional amount or amounts as will compensate such
Lender or the Issuing Lender, as the case may be, for such additional costs incurred or reduction suffered. 

        (b)   Capital Requirements. If any Lender or the Issuing Lender determines that any Change in Law affecting such Lender or the
Issuing Lender or any lending office of such Lender or such Lender's or the Issuing Lender's holding company, if any, regarding capital requirements has or would have the effect of reducing the rate
of return on such Lender's or the Issuing Lender's capital or on the capital of such Lender's or the Issuing Lender's holding company, if any, as a 

28

 

consequence
of this Agreement, the Commitments of such Lender or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Lender,
to a level below that which such Lender or the Issuing Lender or such Lender's or the Issuing Lender's holding company could have achieved but for such Change in Law (taking into consideration such
Lender's or the Issuing Lender's policies and the policies of such Lender's or the Issuing Lender's holding company with respect to capital adequacy), then from time to time upon written request of
such Lender or such Issuing Lender the Borrower shall promptly pay to such Lender or the Issuing Lender, as the case may be, such additional amount or amounts as will compensate such Lender or the
Issuing Lender or such Lender's or the Issuing Lender's holding company for any such reduction suffered. 

        (c)   Certificates for Reimbursement. A certificate of a Lender or the Issuing Lender setting forth the amount or amounts
necessary to compensate such Lender or the Issuing Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section and delivered to the Borrower
shall be conclusive absent manifest error. The Borrower shall pay such Lender or the Issuing Lender, as the case may be, the amount shown as due on any such certificate within ten (10) days
after receipt thereof. All payments by the Borrower hereunder shall be made without any offset, abatement, withholding, deduction, counterclaim, or reduction. 

        (d)   Delay in Requests. Failure or delay on the part of any Lender or the Issuing Lender to demand compensation pursuant to
this Section shall not constitute a waiver of such Lender's or the Issuing Lender's right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or the
Issuing Lender pursuant to this Section for any increased costs incurred or reductions suffered more than nine (9) months prior to the date that such Lender or the Issuing Lender, 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 Lender's intention to claim compensation therefor (except that,
if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive
effect thereof). 

 
 

           SECTION 5.11    Taxes.     

        (a)   Payments Free of Taxes. Any and all payments by or on account of any obligation of the Borrower hereunder or under any
other Loan Document shall be made free and clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be
required by Applicable Law to deduct any Indemnified Taxes (including any 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 Lender, 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 timely pay the full amount deducted to the
relevant Governmental Authority in accordance with Applicable Law. 

        (b)   Payment of Other Taxes by the Borrower. Without limiting the provisions of paragraph (a) above, the Borrower shall
timely pay any Other Taxes to the relevant Governmental Authority in accordance with Applicable Law. 

        (c)   Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent, each Lender and the Issuing
Lender, within ten (10) days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) paid by the Administrative Agent, such Lender or the Issuing Lender, as the case may be, and any penalties, interest and reasonable 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 

29

 

Governmental
Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or the Issuing Lender (with a copy to the Administrative Agent), or by the
Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Lender, shall be conclusive absent manifest error. 

        (d)   Evidence of Payments. 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)   Status of Lenders. 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 resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall
deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by Applicable Law or reasonably requested by the Borrower or the Administrative Agent, such properly
completed and executed documentation prescribed by Applicable Law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if requested
by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by Applicable Law or reasonably requested by the Borrower or the Administrative Agent as will enable the
Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Without
limiting the generality of the foregoing, in the event that the Borrower is a resident for tax purposes in the United States, any Foreign Lender shall deliver to the Borrower and the Administrative
Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter
upon the request of the Borrower or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable: 

        (i)    duly
completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States is
a party, 

        (ii)   duly
completed copies of Internal Revenue Service Form W-8ECI, 

        (iii)  in
the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (x) a certificate to the
effect that such Foreign Lender is not (A) a "bank" within the meaning of section 881(c)(3)(A) of the Code, (B) a "10 percent shareholder" of the Borrower within the
meaning of section 881(c)(3)(B) of the Code, or (C) a "controlled foreign corporation" described in section 881(c)(3)(C) of the Code and (y) duly completed copies of
Internal Revenue Service Form W-8BEN, or 

        (iv)  any
other form prescribed by Applicable Law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with
such supplementary documentation as may be prescribed by Applicable Law to permit the Borrower to determine the withholding or deduction required to be made. 

        (f)    Treatment of Certain Refunds. If the Administrative Agent, a Lender or the Issuing 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, it shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with
respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent, such Lender or the Issuing Lender, 

30

 

as
the case may be, 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, such Lender or the Issuing 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, such Lender or the Issuing Lender in the event the Administrative Agent, such Lender or the Issuing Lender is required to repay such refund to such Governmental
Authority. This paragraph shall not be construed to require the Administrative Agent, any Lender or the Issuing 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. 

        (g)   Survival. Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and
obligations of the Borrower contained in this Section shall survive the payment in full of the Obligations and the termination of the Commitments. 

 
 

           SECTION 5.12    Mitigation Obligations; Replacement of Lenders.     

        (a)   Designation of a Different Lending Office. If any Lender requests compensation under  Section 5.10, or requires the Borrower to pay any additional amount to any
Lender or any Governmental Authority for the account of any Lender
pursuant to Section 5.11, 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 5.10 or 5.11, 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)   Replacement of Lenders. If any Lender requests compensation under  Section 5.10, 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 5.11, 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, and consents required by, Section 14.10), all of its interests, rights and obligations under this
Agreement and the related Loan Documents 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 paid to the Administrative Agent the assignment fee specified in Section 14.10, 

        (ii)   such
Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in Letters of Credit, accrued interest thereon,
accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 5.9) 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), 

        (iii)  in
the case of any such assignment resulting from a claim for compensation under Section 5.10 or payments
required to be made pursuant to Section 5.11, such assignment will result in a reduction in such compensation or payments thereafter, and 

        (iv)  such
assignment does not conflict with Applicable Law. 

31

 

        A
Lender shall not be required to make any such assignment or 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. 

 
 

           SECTION 5.13    Security.     The Obligations of the Borrower, the other Credit Parties and DG III shall be
secured or guaranteed as provided in the Security Documents and the DG III Guaranty. 

 
 

ARTICLE VI
  CLOSING; CONDITIONS OF CLOSING AND BORROWING    

 
 
        SECTION 6.1    Closing.     The closing shall take place at the offices of Bracewell & Giuliani LLP at
10:00 a.m. on February 10, 2006, or on such other place, date and
time as the parties hereto shall mutually agree. 

 
 

          SECTION 6.2    Conditions to Closing and Initial Extensions of Credit.     The obligation of the Lenders to
close this Agreement and to make the initial Loan or issue or participate in the initial Letter of Credit, if any, is subject to
the satisfaction of each of the following conditions: 

        (a)   Executed Loan Documents. This Agreement, a Revolving Credit Note in favor of each Lender requesting a Revolving Credit
Note (if requested thereby), the Security Documents, the DG III Guaranty, together with any other applicable Loan Document, shall have been duly authorized, executed and delivered to the
Administrative Agent by the parties thereto, shall be in full force and effect and no Default or Event of Default shall exist hereunder or thereunder. 

        (b)   Closing Certificates; Etc. The Administrative Agent shall have received each of the following in form and substance
reasonably satisfactory to the Administrative Agent: 

        (i)    Certificate of Secretary of each Credit Party and DG III. A certificate from a Responsible Officer of each Credit Party
and DG III substantially in the form attached hereto as Exhibit L certifying (A) as to the incumbency and genuineness of the signature of
each officer of such Person executing Loan Documents to which it is a party, (B) that attached thereto is a true, correct and complete copy of (1) the articles or certificate of
incorporation or formation of such Person and all amendments thereto, certified as of a recent date by the appropriate Governmental Authority in its jurisdiction of incorporation or formation,
(2) the bylaws or other governing document of such Person as in effect on the Closing Date, (3) resolutions duly adopted by the board of directors or other governing body of such Person
authorizing the transactions contemplated hereunder and the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party, and (4) each certificate
required to be delivered pursuant to Section 6.2(b)(ii), and (C) that (1) all representations and warranties of the Credit Parties
contained in this Agreement and the other Loan Documents are true, correct and complete, (2) none of the Credit Parties or DG III is in violation of any of the covenants contained in this
Agreement and the other Loan Documents, (3) after giving effect to the transactions contemplated by this Agreement, no Default or Event of Default has occurred and is continuing and
(4) each of the Credit Parties and DG III, as applicable, has satisfied each of the conditions set forth in Section 6.2 and  Section 6.3.

        (ii)   Certificates of Good Standing. Certificates as of a recent date of the good standing of each Credit Party and DG III
under the laws of its jurisdiction of organization and, to the extent requested by the Administrative Agent, each other jurisdiction where such Person is qualified to do business and, to the extent
available, a certificate of the relevant taxing authorities of such jurisdictions certifying that such Person has filed required tax returns and owes no delinquent taxes. 

32

 

        (iii)  Opinions of Counsel. Favorable opinions of counsel to the Credit Parties and DG III substantially in the form attached
hereto as Exhibit M and addressed to the Administrative Agent and the Lenders with respect to the Credit Parties and DG III, the Loan Documents
and such other matters as the Lenders shall request. 

        (iv)  Tax Forms. Copies of the United States Internal Revenue Service forms required by  Section 5.11(e). 

        (c)   Personal Property Collateral. 

        (i)    Filings and Recordings. The Administrative Agent shall have received all filings and recordations that are necessary to
perfect the security interests of the Administrative Agent, on behalf of itself and the Lenders, in the Collateral shall have been received by the Administrative Agent and the Administrative Agent
shall have received evidence and evidence reasonably satisfactory to the Administrative Agent that upon such filings and recordations such security interests constitute valid and perfected first
priority Liens thereon. 

        (ii)   Pledged Collateral. The Administrative Agent shall have received (A) original stock certificates or other
certificates evidencing the Capital Stock pledged pursuant to the Security Documents, together with an undated stock power for each such certificate duly executed in blank by the registered owner
thereof and (B) each original promissory note pledged pursuant to the Security Documents. 

        (iii)  Lien Search. The Administrative Agent shall have received the results of a Lien search (including a search as to
judgments, pending litigation and tax matters), in form and substance reasonably satisfactory thereto, made against the Credit Parties and DG III under the Uniform Commercial Code (or applicable
judicial docket) as in effect in any state in which any of the assets of such Person are located, indicating among other things that its assets are free and clear of any Lien except for Permitted
Liens. 

        (iv)  Hazard and Liability Insurance. The Administrative Agent shall have received certificates of property hazard, business
interruption and liability insurance, evidence of payment of all insurance premiums for the current policy year of each (naming the Administrative Agent as loss payee (and mortgagee, as applicable) on
all certificates for property hazard insurance and as additional insured on all certificates for liability insurance), and, if requested by the Administrative Agent, copies (certified by a Responsible
Officer) of insurance policies in form and substance reasonably satisfactory to the Administrative Agent. 

        (d)   Consents; Defaults. 

        (i)    Governmental and Third Party Approvals. The Credit Parties and DG III shall have received all material governmental,
shareholder and third party consents and approvals necessary (or any other material consents as determined in the reasonable discretion of the Administrative Agent) in connection with the transactions
contemplated by this Agreement and the other Loan Documents and the other transactions contemplated hereby and all applicable waiting periods shall have expired without any action being taken by any
Person that could reasonably be expected to restrain, prevent or impose any material adverse conditions on any of the Credit Parties or DG III or such other transactions or that could seek or threaten
any of the foregoing, and no law or regulation shall be applicable which in the reasonable judgment of the Administrative Agent could reasonably be expected to have such effect. 

        (ii)   No Injunction, Etc. No action, proceeding, investigation, regulation or legislation shall have been instituted,
threatened or proposed before any Governmental Authority to enjoin, restrain, or prohibit, or to obtain substantial damages in respect of, or which is related to or 

33

 

arises
out of this Agreement or the other Loan Documents or the consummation of the transactions contemplated hereby or thereby, or which, in the Administrative Agent's sole discretion, would make it
inadvisable to consummate the transactions contemplated by this Agreement or the other Loan Documents or the consummation of the transactions contemplated hereby or thereby. 

        (e)   Financial Matters. 

        (i)    Financial Statements. The Administrative Agent shall have received (A) unaudited Consolidated balance sheet of the
Borrower and its Subsidiaries as of December 31, 2005 and the related unaudited statements of income and retained earnings and cash flows for the Fiscal Year then ended and (B) unaudited
Consolidated balance sheet of the Borrower and its Subsidiaries as of September 30, 2005 and related unaudited interim statements of income and retained earnings. 

        (ii)   Financial Projections. Pro forma Consolidated financial statements for the Borrower and its Subsidiaries, and forecasts
prepared by management of the Borrower, of balance sheets, income statements and cash flow statements on a quarterly basis for the first year following the Closing Date and on an annual basis for each
year thereafter during the term of the Credit Facility. 

        (iii)  Financial Condition Certificate. The Borrower shall have delivered to the Administrative Agent a certificate from the
chief financial officer of the Borrower substantially in the form attached hereto as Exhibit N certifying that (A) the Borrower and each
Subsidiary are each Solvent (after giving effect to the Revolving Credit Facility and the incurrence of Indebtedness thereunder) and (B) the financial projections previously delivered to the
Administrative Agent represent the good faith estimates (utilizing reasonable assumptions) of the financial condition and operations of the Borrower and its Subsidiaries. 

        (iv)  Payment at Closing; Fee Letters. The Borrower shall have paid to the Administrative Agent and the Lenders the fees set
forth or referenced in Section 5.3 and any other accrued and unpaid fees or commissions due hereunder (including, without limitation, legal fees
and expenses) and to any other Person such amount as may be due thereto in connection with the transactions contemplated hereby, including all taxes, fees and other charges in connection with the
execution, delivery, recording, filing and registration of any of the Loan Documents. 

        (f)    Miscellaneous. 

        (i)    Notice of Borrowing. The Administrative Agent shall have received a Notice of Borrowing from the Borrower in accordance
with Section 2.2(a), and a Notice of Account Designation specifying the account or accounts to which the proceeds of any Loans made after the
Closing Date are to be disbursed. 

        (ii)   Due Diligence. The Administrative Agent shall have completed, to its satisfaction, all legal, tax, business and other
due diligence with respect to the business, assets, liabilities, operations and condition (financial or otherwise) of the Borrower and its Subsidiaries in scope and determination satisfactory to the
Administrative Agent in its sole discretion. 

        (iii)  Existing Facility. The Existing Facility shall be repaid in full and terminated and all collateral security therefor
shall be released, and the Administrative Agent shall have received a pay-off letter in form and substance satisfactory to it evidencing such repayment, termination, reconveyance and
release. 

        (iv)  Availability. After giving effect to the initial Loan and, if applicable, the initial Letter of Credit, at least
$5,000,000 in availability shall exist under the Credit Facility. 

34

 

        (v)   Material Adverse Effect. There shall have occurred no change, occurrence, or development since January 19, 2006 in
the business, assets, properties, liabilities (actual or contingent), operations, condition (financial or otherwise), or prospects of the Borrower or any Subsidiary that could reasonably be expected
to have a Material Adverse Effect on the Borrower and its Subsidiaries, taken as a whole. 

        (vi)  MDVX Indebtedness. The collateral securing the MDVX Indebtedness pursuant to the MDVX Security Agreement (the
"MDVX Collateral") and its relationship with the Collateral is satisfactory to the Administrative Agent. 

        (vii) Capital Structure. Administrative Agent shall have approved the legal, capital or ownership structure and the
shareholder arrangements of the Borrower and each Subsidiary. 

        (viii) Landlord Waivers. The Administrative Agent shall have received waiver letters from all landlords, warehousemen and
processors as the Administrative Agent shall reasonably request and either substantially in the form attached hereto as Exhibit J or in such
other form and substance as is reasonably acceptable to Administrative Agent. 

        (ix)  Other Documents. All opinions, certificates and other instruments and all proceedings in connection with the
transactions contemplated by this Agreement shall be satisfactory in form and substance to the Administrative Agent. The Administrative Agent shall have received copies of all other documents,
certificates and instruments reasonably requested thereby, with respect to the transactions contemplated by this Agreement. 

 
 

          SECTION 6.3    Conditions to All Extensions of Credit.     The obligations of the Lenders to make any
Extensions of Credit (including the initial Extension of Credit), convert or continue any Loan and/or the Issuing
Lender to issue or extend any Letter of Credit are subject to the satisfaction of the following conditions precedent on the relevant borrowing, continuation, conversion, issuance or extension date: 

        (a)   Continuation of Representations and Warranties. The representations and warranties of the Credit Parties contained in the
Loan Documents shall be true and correct on and as of such borrowing, continuation, conversion, issuance or extension date with the same effect as if made on and as of such
date, except for any representation and warranty that specifically refers to an earlier date, which representation and warranty shall remain true and correct as of such earlier date. 

        (b)   No Existing Default. No Default or Event of Default shall have occurred and be continuing (i) on the borrowing,
continuation or conversion date with respect to such Loan or after giving effect to the Loans to be made, continued or converted on such date or (ii) on the issuance or extension date with
respect to such Letter of Credit or after giving effect to the issuance or extension of such Letter of Credit on such date. 

        (c)   Notices. The Administrative Agent shall have received a Notice of Borrowing or Notice of Conversion/Continuation, as
applicable, from the Borrower in accordance with Section 2.2(a) or 5.2, as applicable. 

        (d)   Additional Documents. The Administrative Agent shall have received each additional document, instrument, legal opinion or
other item reasonably requested by it. 

 
 

ARTICLE VII
  REPRESENTATIONS AND WARRANTIES OF THE BORROWER    

        SECTION
7.1 Representations and Warranties. To induce the Administrative Agent and Lenders to enter into this Agreement and to induce the
Lenders to make Extensions of Credit, the Borrower 

35

 

hereby
represents and warrants to the Administrative Agent and Lenders both before and after giving effect to the transactions contemplated hereunder that: 

        (a)   Organization; Power; Qualification. Each of the Borrower and its Subsidiaries is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or formation, has the power and authority to own its properties and to carry on its business as now being and hereafter proposed
to be conducted and is duly qualified and authorized to do business in each jurisdiction in which the character of its properties or the nature of its business requires such qualification and
authorization except in jurisdictions where the failure to be so qualified or in good standing could not reasonably be expected to result in a Material Adverse Effect. The jurisdictions in which the
Borrower and its Subsidiaries are organized and qualified to do business as of the Closing Date are described on Schedule 7.1(a). 

        (b)   Ownership. Each Subsidiary of the Borrower as of the Closing Date is listed on  Schedule 7.1(b). As of the Closing Date, the capitalization of the Subsidiaries of
the Borrower consists of the number of shares, authorized,
issued and outstanding, of such classes and series, with or without par value, described on Schedule 7.1(b). All outstanding shares have been
duly authorized and validly issued and are fully paid and nonassessable, with no personal liability attaching to the ownership thereof, and not subject to any preemptive or similar rights, except as
described in Schedule 7.1(b). The shareholders of the Subsidiaries of the Borrower and the number of shares owned by each as of the Closing Date
are described on Schedule 7.1(b). As of the Closing Date, there are no outstanding stock purchase warrants, subscriptions, options, securities,
instruments or other rights of any type or nature whatsoever, which are convertible into, exchangeable for or otherwise provide for or permit the issuance of Capital Stock of the Subsidiaries of the
Borrower, except as described on Schedule 7.1(b). 

        (c)   Authorization of Agreement, Loan Documents and Borrowing. Each of the Borrower and its Subsidiaries has the right, power
and authority and has taken all necessary corporate and other action to authorize the execution, delivery and performance of this Agreement and each of the other Loan Documents to which it is a party
in accordance with their respective terms. This Agreement and each of the other Loan Documents have been duly executed and delivered by the duly authorized officers of the Borrower and each of its
Subsidiaries party thereto, and each such document constitutes the legal, valid and binding obligation of the Borrower or its Subsidiary party thereto, enforceable in accordance with its terms, except
as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar state or federal debtor relief laws from time to time in effect which affect the enforcement of
creditors' rights in general and the availability of equitable remedies. 

        (d)   Compliance of Agreement, Loan Documents and Borrowing with Laws, Etc. The execution, delivery and performance by the
Borrower and its Subsidiaries of the Loan Documents to which each such Person is a party, in accordance with their respective terms, the Extensions of Credit hereunder and the transactions
contemplated hereby do not and will not, by the passage of time, the giving of notice or otherwise, (i) require any Governmental Approval or violate any Applicable Law relating to the Borrower
or any of its Subsidiaries where the failure to obtain such Governmental Approval could reasonably be expected to have a Material Adverse Effect, (ii) conflict with, result in a breach of or
constitute a default under the articles of incorporation, bylaws or other organizational documents of the Borrower or any of its Subsidiaries, (iii) conflict with, result in a breach of or
constitute a default under any indenture, agreement or other instrument to which such Person is a party or by which any of its properties may be bound or any Governmental Approval relating to such
Person, which could reasonably be expected to have a Material Adverse Effect, (iv) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or
hereafter acquired by such Person other than Liens arising under the Loan Documents or (v) require any consent or authorization of, filing with, or 

36

 

other
act in respect of, an arbitrator or Governmental Authority and no consent of any other Person is required in connection with the execution, delivery, performance, validity or enforceability of
this Agreement other than consents, authorizations, filings or other acts or consents for which the failure to obtain or make could not reasonably be expected to have a Material Adverse Effect and
other than consents or filings under the UCC. 

        (e)   Compliance with Law; Governmental Approvals. Each of the Borrower and its Subsidiaries (i) has all Governmental
Approvals required by any Applicable Law for it to conduct its business, each of which is in full force and effect, is final and not subject to review on appeal and is not the subject of any pending
or, to the best of its knowledge, threatened attack by direct or collateral proceeding, (ii) is in compliance with each Governmental Approval applicable to it and in compliance with all other
Applicable Laws relating to it or any of its respective properties and (iii) has timely filed all material reports, documents and other materials required to be filed by it under all Applicable
Laws with any Governmental Authority and has retained all material records and documents required to be retained by it under Applicable Law except in each case (i), (ii) or (iii) where
the failure to have, comply or file could not reasonably be expected to have a Material Adverse Effect. 

        (f)    Tax Returns and Payments. Each of the Borrower and its Subsidiaries has duly filed or caused to be filed all federal,
state, local and other tax returns required by Applicable Law to be filed, and has paid, or made adequate provision for the payment of, all federal, state, local and other taxes, assessments and
governmental charges or levies upon it and its property, income, profits and assets which are due and payable. Such returns accurately reflect in all material respects all liability for taxes of the
Borrower and its Subsidiaries for the periods covered thereby. There is no ongoing audit or examination or, to the knowledge of the Borrower, other investigation by any Governmental Authority of the
tax liability of the Borrower and its Subsidiaries. No Governmental Authority has asserted any Lien or other claim against the Borrower or any Subsidiary thereof with respect to unpaid taxes which has
not been discharged or resolved other than Permitted Liens. The charges, accruals and reserves on the books of the Borrower and any of its Subsidiaries in respect of federal, state, local and other
taxes for all Fiscal Years and portions thereof since the organization of the Borrower and any of its Subsidiaries are in the judgment of the Borrower adequate, and the Borrower does not anticipate
any additional taxes or assessments for any of such years. 

        (g)   Intellectual Property Matters. Each of the Borrower and its Subsidiaries owns or possesses rights to use all material
franchises, licenses, copyrights, copyright applications, patents, patent rights or licenses, patent applications, trademarks, trademark rights, service mark, service mark rights, trade names, trade
name rights, copyrights and other rights with respect to the foregoing which are reasonably necessary to conduct its business. No event has occurred which permits, or after notice or lapse of time or
both would permit, the revocation or termination of any such rights, and neither the Borrower nor any Subsidiary thereof is liable to any Person for infringement under Applicable Law with respect to
any such rights as a result of its business operations except as could not reasonably be expected to have a Material Adverse Effect. 

        (h)   Environmental Matters. 

        (i)    The
properties owned, leased or operated by the Borrower and its Subsidiaries now, and to their knowledge have not previously, contained any Hazardous Materials in
amounts or concentrations which (A) constitute or constituted a violation of applicable Environmental Laws or (B) could give rise to liability under applicable Environmental Laws; 

        (ii)   The
Borrower, each of its Subsidiaries and their respective properties and all operations conducted in connection thereon are in compliance in all material respects,
and have been in compliance in all material respects, with all applicable Environmental Laws, to 

37

 

the
their knowledge, there is no contamination at, under or about such properties or such operations which could interfere with the continued operation of such properties or impair the fair saleable
value thereof; 

        (iii)  Neither
the Borrower nor any Subsidiary thereof has received any written notice of violation, alleged violation, non-compliance, liability or potential
liability regarding environmental matters, Hazardous Materials, or compliance with Environmental Laws, nor does the Borrower or any Subsidiary thereof have knowledge or reason to believe that any such
notice will be received or is being threatened; 

        (iv)  Hazardous
Materials have not been transported or disposed of to or from the properties owned, leased or operated by the Borrower and its Subsidiaries in violation of,
or in a manner or to a location which could give rise to liability under, Environmental Laws with respect to the Borrower or its Subsidiaries, nor have any Hazardous Materials been generated, treated,
stored or disposed of at, on or under any of such properties in violation of, or in a manner that could give rise to liability under, any applicable Environmental Laws with respect to the Borrower or
its Subsidiaries; 

        (v)   No
judicial proceedings or governmental or administrative action is pending, or, to the knowledge of the Borrower, threatened, under any Environmental Law to which the
Borrower or any Subsidiary thereof is or will be named as a potentially responsible party with respect to such properties or operations conducted in connection therewith, nor are there any consent
decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to Borrower, any
Subsidiary or such properties or such operations that could reasonably be expected to have a Material Adverse Effect; and 

        (vi)  There
has been no release, or to the best of the Borrower's knowledge, threat of release, of Hazardous Materials at or from properties owned, leased or operated by the
Borrower or any Subsidiary, now or in the past, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws that could reasonably be expected to have a
Material Adverse Effect. 

        (i)    ERISA. 

        (i)    As
of the Closing Date, neither the Borrower nor any ERISA Affiliate maintains or contributes to, or has any obligation under, any Employee Benefit Plans other than
those identified on Schedule 7.1(i); 

        (ii)   The
Borrower and each ERISA Affiliate is in material compliance with all applicable provisions of ERISA and the regulations and published interpretations thereunder
with respect to all Employee Benefit Plans except for any required amendments for which the remedial amendment period as defined in Section 401(b) of the Code has not yet expired and except
where a failure to so comply could not reasonably be expected to have a Material Adverse Effect. Each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code has
been determined by the Internal Revenue Service to be so qualified, and each trust related to such plan has been determined to be exempt under Section 501(a) of the Code except for such plans
that have not yet received determination letters but for which the remedial amendment period for submitting a determination letter has not yet expired. No liability has been incurred by the Borrower
or any ERISA Affiliate which remains unsatisfied for any taxes or penalties with respect to any Employee Benefit Plan or any Multiemployer Plan except for a liability that could not reasonably be
expected to have a Material Adverse Effect; 

38

 

        (iii)  As
of the Closing Date, no Pension Plan has been terminated, nor has any accumulated funding deficiency (as defined in Section 412 of the Code) been incurred
(without regard to any waiver granted under Section 412 of the Code), nor has any funding waiver from the Internal Revenue Service been received or requested with respect to any Pension Plan,
nor has the Borrower or any ERISA Affiliate failed to make any contributions or to pay any amounts due and owing as required by Section 412 of the Code, Section 302 of ERISA or the terms
of any Pension Plan prior to the due dates of such contributions under Section 412 of the Code or Section 302 of ERISA, nor has there been any event requiring any disclosure under
Section 4041(c)(3)(C) or 4063(a) of ERISA with respect to any Pension Plan; 

        (iv)  Except
where the failure of any of the following representations to be correct in all material respects could not reasonably be expected to have a Material Adverse
Effect, neither the Borrower nor any ERISA Affiliate has: (A) engaged in a nonexempt prohibited transaction described in Section 406 of the ERISA or Section 4975 of the Code,
(B) incurred any liability to the PBGC which remains outstanding other than the payment of premiums and there are no premium payments which are due and unpaid, (C) failed to make a
required contribution or payment to a Multiemployer Plan, or (D) failed to make a required installment or other required payment under Section 412 of the Code; 

        (v)   No
Termination Event has occurred or is reasonably expected to occur; and 

        (vi)  Except
where the failure of any of the following representations to be correct in all material respects could not reasonably be expected to have a Material Adverse
Effect, no proceeding, claim (other than a benefits claim in the ordinary course of business), lawsuit and/or investigation is existing
or, to the best knowledge of the Borrower after due inquiry, threatened concerning or involving any (A) employee welfare benefit plan (as defined in Section 3(1) of ERISA) currently
maintained or contributed to by the Borrower or any ERISA Affiliate, (B) Pension Plan or (C) Multiemployer Plan. 

        (j)    Margin Stock. Neither the Borrower nor any Subsidiary thereof is engaged principally or as one of its activities in the
business of extending credit for the purpose of "purchasing" or "carrying" any "margin stock" (as each such term is defined or used, directly or indirectly, in Regulation U of the Board of
Governors of the Federal Reserve System). No part of the proceeds of any of the Loans or Letters of Credit will be used for purchasing or carrying margin stock or for any purpose which violates, or
which would be inconsistent with, the provisions of Regulation T, U or X of such Board of Governors. 

        (k)   Government Regulation. Neither the Borrower nor any Subsidiary thereof is an "investment company" or a company
"controlled" by an "investment company" (as each such term is defined or used in the Investment Company Act of 1940, as amended) and neither the Borrower nor any Subsidiary thereof is, or after giving
effect to any Extension of Credit will be, subject to regulation under the Public Utility Holding Company Act of 1935 or the Interstate Commerce Act, each as amended, or any other Applicable Law which
limits its ability to incur or consummate the transactions contemplated hereby. 

        (l)    Material Contracts. Schedule 7.1(l) sets forth a complete and
accurate list of all Material Contracts of the Borrower and its Subsidiaries in effect as of the Closing Date not listed on any other Schedule hereto; other than as set forth in  Schedule 7.1(l),
each such Material Contract is, and after giving effect to the consummation of the transactions contemplated by the Loan
Documents will be, in full force and effect in accordance with the terms thereof. To the extent requested by the Administrative Agent, the Borrower and its Subsidiaries have delivered to the
Administrative Agent a true and complete copy of each Material Contract required to be listed on Schedule 7.1(l) or any other Schedule hereto.
Neither the Borrower nor any Subsidiary (nor, to the 

39

 

knowledge
of the Borrower, any other party thereto) is in breach of or in default under any Material Contract in any material respect. 

        (m)  Employee Relations. Each of the Borrower and its Subsidiaries has a stable work force in place and is not, as of the
Closing Date, party to any collective bargaining agreement nor has any labor union been recognized as the representative of its employees except as set forth on  Schedule 7.1(m). The Borrower knows
of no pending, threatened or contemplated strikes, work stoppage or other collective labor disputes involving
its employees or those of its Subsidiaries that could reasonably be expected to have a Material Adverse Effect. 

        (n)   Burdensome Provisions. Neither the Borrower nor any Subsidiary thereof is a party to any indenture, agreement, lease or
other instrument, or subject to any corporate or partnership restriction,
Governmental Approval or Applicable Law which is so unusual or burdensome as in the foreseeable future could be reasonably expected to have a Material Adverse Effect. The Borrower and its Subsidiaries
do not presently anticipate that future expenditures needed to meet the provisions of any statutes, orders, rules or regulations of a Governmental Authority will be so burdensome as to have a Material
Adverse Effect. No Subsidiary is party to any agreement or instrument or otherwise subject to any restriction or encumbrance that restricts or limits its ability to make dividend payments or other
distributions in respect of its Capital Stock to the Borrower or any Subsidiary or to transfer any of its assets or properties to the Borrower or any other Subsidiary in each case other than existing
under or by reason of the Loan Documents or Applicable Law. 

        (o)   Financial Statements. The unaudited financial statements delivered pursuant to  Section 6.2(e)(i) are complete and correct and fairly present on a Consolidated
basis the assets, liabilities and financial position of the
Borrower and its Subsidiaries as at such dates, and the results of the operations and changes of financial position for the periods then ended (other than customary year-end adjustments
for unaudited financial statements). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP. Such financial statements show all
material indebtedness and other material liabilities, direct or contingent, of the Borrower and its Subsidiaries as of the date thereof, including material liabilities for taxes, material commitments,
and Indebtedness, in each case, to the extent required to be disclosed under GAAP. The pro forma financial statements delivered pursuant to  Section 6.2(e)(ii) were prepared in good faith on the
basis of the assumptions stated therein, which assumptions are believed to be reasonable in
light of then existing conditions except that such financial statements and forecasts shall be subject to normal year end closing and audit adjustments. 

        (p)   No Material Adverse Change. Since September 30, 2005, there has been no material adverse change in the properties,
business, operations, prospects, or condition (financial or otherwise) of the Borrower and its Subsidiaries, taken as a whole, and no event has occurred or condition arisen that could reasonably be
expected to have a Material Adverse Effect. 

        (q)   Solvency. As of the Closing Date and after giving effect to each Extension of Credit made hereunder, the Borrower and
each of its Subsidiaries will be Solvent. 

        (r)   Real Property; Titles to Properties. All real property currently owned or leased by the Borrower or any Subsidiary is
listed on Schedule 7.1(r). Each of the Borrower and its Subsidiaries has such title to the real property owned or leased by it as is necessary or
desirable to the conduct of its business and valid and legal title to all of its personal property and assets, including, but not limited to, those reflected on the balance sheets of the Borrower and
its Subsidiaries delivered pursuant to Section 6.2(e), except those which have been disposed of by the Borrower or its Subsidiaries subsequent to
such date which dispositions have been in the ordinary course of business or as otherwise expressly permitted hereunder. 

40

 

        (s)   Insurance. The properties of the Borrower and its Subsidiaries are insured with financially sound and reputable insurance
companies not Affiliates of the Borrower, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar
properties in locations where the Borrower or the applicable Subsidiary operates. 

        (t)    Liens. None of the properties and assets of the Borrower or any Subsidiary thereof is subject to any Lien, except
Permitted Liens. Neither the Borrower nor any Subsidiary thereof has signed any financing statement or any security agreement authorizing any secured party thereunder to file any financing statement,
except to perfect those Permitted Liens. 

        (u)   Indebtedness and Guaranty Obligations. Schedule 7.1(u) is a
complete and correct listing of all Indebtedness and Guaranty Obligations of the Borrower and its Subsidiaries as of the Closing Date in excess of $100,000. The Borrower and its Subsidiaries have
performed and are in compliance with all of the material terms of such Indebtedness and Guaranty Obligations and all instruments and agreements relating thereto, and no default or event of default, or
event or condition which with notice or lapse of time or both would constitute such a default or event of default on the part of the Borrower or any of its Subsidiaries exists with respect to any such
Indebtedness or Guaranty Obligation. 

        (v)   Litigation. Except for matters existing on the Closing Date and set forth on  Schedule 7.1(v), there are no actions, suits or proceedings pending nor, to the
knowledge of the Borrower, threatened against or in any other way
relating adversely to or affecting the Borrower or any Subsidiary thereof or any of their respective properties in any court or before any arbitrator of any kind or before or by any Governmental
Authority that (i) has or could reasonably be expected to have a Material Adverse Effect, or (ii) materially adversely affects any transaction contemplated hereby. 

        (w)  Absence of Defaults. No event has occurred or is continuing which constitutes a Default or an Event of Default, or which
constitutes, or which with the passage of time or giving of notice or both would constitute, a default or event of default by the Borrower or any Subsidiary thereof under any Material Contract or
judgment, decree or order to which the Borrower or its Subsidiaries is a party or by which the Borrower or its Subsidiaries or any of their respective properties may be bound or which would require
the Borrower or its Subsidiaries to make any payment thereunder prior to the scheduled maturity date therefor. 

        (x)   Senior Indebtedness Status. The Obligations of the Borrower and each Subsidiary under this Agreement and each of the
other Loan Documents ranks and shall continue to rank at least senior in priority of payment to all Subordinated Indebtedness permitted hereunder and all senior unsecured Indebtedness of each such
Person and is designated as "Senior Indebtedness" under all instruments and documents, now or in the future, relating to all Subordinated Indebtedness and all senior unsecured Indebtedness of such
Person. The security interests created by the Security Documents are valid and perfected first priority security interests (subject to Permitted Liens) in the Collateral in favor of Administrative
Agent, for itself and for the benefit of the Secured Parties, securing, in accordance with the terms of the Security Documents, the outstanding Obligations, and the Collateral is subject to no Liens
other than Permitted Liens. The Liens created by the Security Documents are enforceable as security for the outstanding Obligations in accordance with their terms with respect to the Collateral
subject, as to enforcement of remedies, to the following qualifications: (i) an order of specific performance and an injunction are discretionary remedies and, in particular, may not be
available where damages are considered an adequate remedy at law, (ii) enforcement may be limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction and other similar laws
affecting enforcement of creditors' rights generally (insofar as any such law relates to the bankruptcy, insolvency or similar event of any 

41

 

Credit
Party or DG III), and (iii) enforcement may be subject to general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law) and may
be limited by Applicable Law that may affect the enforcement of certain rights or remedies provided for in such Loan Documents. 

        (y)   OFAC. None of the Borrower, any Subsidiary of the Borrower or any Affiliate of the Borrower: (i) is a Sanctioned
Person, (ii) has more than 10% of its assets in Sanctioned Entities, or (iii) derives more than 10% of its operating income from investments in, or transactions with Sanctioned Persons
or Sanctioned Entities. The proceeds of any Loan will not be used and have not been used to fund any operations in, finance any investments or activities in, or make any payments to, a Sanctioned
Person or a Sanctioned Entity. 

        (z)   Disclosure. The Borrower and/or its Subsidiaries have disclosed to the Administrative Agent and the Lenders all
agreements, instruments and corporate or other restrictions to which the Borrower or any of its Subsidiaries are subject, and all other matters known to it, that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect. No financial statement, material report, material certificate or other material information furnished (whether in writing or
orally), taken together as a whole, by or on behalf of any of the Borrower or any of its Subsidiaries to the Administrative Agent or any Lender in connection with the transactions contemplated hereby
and the negotiation of this Agreement or delivered hereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material
fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, pro forma
financial information, estimated financial information and other projected or estimated information, such information was prepared in good faith based upon assumptions believed to be reasonable at the
time. 

 
 

           SECTION 7.2    Survival of Representations and Warranties, Etc.     All representations and warranties set
forth in this Article VII and all representations and warranties
contained in any certificate, or any of the Loan Documents (including, but not limited to, any such representation or warranty made in or in connection with any amendment thereto) shall constitute
representations and warranties made under this Agreement. All representations and warranties made under this Agreement shall be made or deemed to be made at and as of the Closing Date (except those
that are expressly made as of a specific date), shall survive the Closing Date and shall not be waived by the execution and delivery of this Agreement, any investigation made by or on behalf of the
Lenders or any borrowing hereunder. 

 
 

ARTICLE VIII
  FINANCIAL INFORMATION AND NOTICES    

        Until
all the Obligations have been paid and satisfied in full and the Commitments terminated, unless consent has been obtained in the manner set forth in  Section 14.2, the Borrower will furnish or cause
to be furnished to the Administrative Agent at the Administrative Agent's Office at the address
set forth in Section 14.1 and to the Lenders at their respective addresses as set forth on the Register, or such other office as may be
designated by the Administrative Agent and Lenders from time to time: 

 
 

           SECTION 8.1    Financial Statements and Projections.
    

        (a)   Quarterly Financial Statements. As soon as practicable and in any event within forty-five (45) days
(or, if earlier, on the date of any required public filing thereof) after the end of each fiscal quarter of each Fiscal Year, an unaudited Consolidated and consolidating balance sheet of the Borrower
and its Subsidiaries as of the close of such fiscal quarter and unaudited Consolidated and consolidating statements of income, retained earnings and cash flows and a report containing management's
discussion and analysis of such financial statements for the fiscal quarter then ended and that portion of the Fiscal Year then ended, including the notes thereto, all in reasonable detail 

42

 

setting
forth in comparative form the corresponding figures as of the end of and for the corresponding period in the preceding Fiscal Year and prepared by the Borrower in accordance with GAAP and, if
applicable, containing disclosure of the effect on the financial position or results of operations of any change in the application of accounting principles and practices during the period, and
certified by the chief financial officer of the Borrower to present fairly in all material respects the financial condition of the Borrower and its Subsidiaries on a Consolidated and consolidating
basis as of their respective dates and the results of operations of the Borrower and its Subsidiaries for the respective periods then ended, subject to normal year end adjustments. 

        (b)   Annual Financial Statements. As soon as practicable and in any event within ninety (90) days (or, if earlier, on
the date of any required public filing thereof) after the end of each Fiscal Year, an audited Consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as of the close of such
Fiscal Year and audited Consolidated and consolidating statements of income, retained earnings and cash flows and a report containing management's discussion and analysis of such financial statements
for the Fiscal Year then ended, including the notes thereto, all in reasonable detail setting forth in comparative form the corresponding figures as of the end of and for the preceding Fiscal Year and
prepared in accordance with GAAP and, if applicable, containing disclosure of the effect on the financial position or results of operations of any change in the application of accounting principles
and practices during the year. Such annual financial statements shall be audited by an independent certified public accounting firm acceptable to the Administrative Agent, and accompanied by a report
thereon by such certified public accountants that does not contain a "going concern" or like qualification or exception or a qualification with respect to scope limitations imposed by the Borrower or
any of its Subsidiaries or with respect to accounting principles followed by the Borrower or any of its Subsidiaries not in accordance with GAAP. 

        (c)   Annual Business Plan and Financial Projections. As soon as practicable and in any event within forty-five
(45) days prior to the beginning of each Fiscal Year, a business plan of the Borrower and its Subsidiaries for the ensuing four (4) fiscal quarters, such plan to be prepared in
accordance with GAAP and to include, on a quarterly basis, the following: a quarterly operating and capital budget, a projected income statement, statement of cash flows and balance sheet and a report
containing management's discussion and analysis of such projections, accompanied by a certificate from a Responsible Officer of the Borrower to the effect that, to the best of such officer's
knowledge, such projections are good faith estimates (utilizing reasonable assumptions) of the financial condition and operations of the Borrower and its Subsidiaries for such four (4) quarter
period. 

 
 

           SECTION 8.2    Officer's Compliance Certificate.     At each time financial statements are delivered
pursuant to Section 8.1(a) or  (b) and at such other times as the Administrative Agent shall reasonably request, an Officer's Compliance Certificate.

 
 

          SECTION 8.3    Accountants' Certificate.     At each time financial statements are delivered pursuant to
Section 8.1(b), a certificate of the
independent public accountants certifying such financial statements that in connection with their audit, nothing came to their attention that caused them to believe that the Borrower failed to comply
with the terms, covenants, provisions or conditions of Article X, insofar as they relate to financial and accounting matters or, if such is not
the case, specifying such non-compliance and its nature and period of existence. 

 
 

           SECTION 8.4    Other Reports.     

        (a)   Promptly
upon receipt thereof, copies of all reports, if any, submitted to the Borrower or its Board of Directors by its independent public accountants in connection
with their auditing function, including, without limitation, any management report and any management responses thereto; and 

43

 

        (b)   such
other information regarding the operations, business affairs and financial condition of the Borrower or any of its Subsidiaries as the Administrative Agent or any
Lender may reasonably request. 

 
 

           SECTION 8.5    Notice of Litigation and Other Matters.     Prompt (but in no event later than ten
(10) days after an officer of the Borrower obtains knowledge thereof) telephonic and written notice of:
 

        (a)   the
commencement of all proceedings and investigations by or before any Governmental Authority and all actions and proceedings in any court or before any arbitrator
against or involving the Borrower or any Subsidiary thereof or any of their respective properties, assets or businesses that if adversely determined could reasonably be expected to result in material
liability to the Borrower and its Subsidiaries; 

        (b)   any
notice of any violation received by the Borrower or any Subsidiary thereof from any Governmental Authority including, without limitation, any notice of violation of
Environmental Laws which in any such case could reasonably be expected to have a Material Adverse Effect; 

        (c)   any
labor controversy that has resulted in, or threatens to result in, a strike or other work action against the Borrower or any Subsidiary thereof; 

        (d)   any
attachment, judgment, lien, levy or order exceeding $250,000 that may be assessed against or threatened against the Borrower or any Subsidiary thereof; 

        (e)   (i) any
Default or Event of Default or (ii) any event which constitutes or which with the passage of time or giving of notice or both would constitute a
default or event of default under any Material Contract to which the Borrower or any of its Subsidiaries is a party or by which the Borrower or any Subsidiary thereof or any of their respective
properties may be bound which could reasonably be expected to have a Material Adverse Effect; 

        (f)    (i) any
unfavorable determination letter from the Internal Revenue Service regarding the qualification of an Employee Benefit Plan under Section 401(a) of
the Code (along with a copy thereof), (ii) all notices received by the Borrower or any ERISA Affiliate of the PBGC's intent to terminate any Pension Plan or to have a trustee appointed to
administer any Pension Plan, (iii) all notices received by the Borrower or any ERISA Affiliate from a Multiemployer Plan sponsor concerning the imposition or amount of withdrawal liability
pursuant to Section 4202 of ERISA and (iv) the Borrower obtaining knowledge or reason to know that the Borrower or any ERISA Affiliate has filed or intends to file a notice of
intent to terminate any Pension Plan under a distress termination within the meaning of Section 4041(c) of ERISA; and 

        (g)   any
event which makes any of the representations set forth in Section 7.1 that is subject to materiality or
Material Adverse Effect qualifications inaccurate in any respect or any event which makes any of the representations set forth in Section 7.1
that is not subject to materiality or Material Adverse Effect qualifications inaccurate in any material respect. 

 
 

           SECTION 8.6    Accuracy of Information.     All written information, reports, statements and other papers
and data furnished by or on behalf of the Borrower to the Administrative Agent or any Lender whether
pursuant to this Article VIII or any other provision of this Agreement, or any of the Security Documents, shall, at the time the same is so
furnished, comply with the representations and warranties set forth in Section 7.1(y). 

44

 
 
 

ARTICLE IX
  AFFIRMATIVE COVENANTS    

        Until
all of the Obligations have been paid and satisfied in full and the Commitments terminated, unless consent has been obtained in the manner provided for in  Section 14.2, the Borrower will, and will
cause each of its Subsidiaries to: 

 
 

           SECTION 9.1    Preservation of Corporate Existence and Related Matters.     Except as permitted by
Section 11.4, preserve and maintain its separate corporate existence and all rights,
franchises, licenses and privileges necessary to the conduct of its business, and qualify and remain qualified as a foreign corporation and authorized to do business in each jurisdiction in which the
failure to so qualify could reasonably be expected to have a Material Adverse Effect. 

 
 

           SECTION 9.2    Maintenance of Property.     In addition to the requirements of any of the Security Documents,
 protect and preserve all properties necessary in and material to its business, including
copyrights, patents, trade names, service marks and trademarks; maintain in good working order and condition, ordinary wear and tear excepted, all buildings, equipment and other tangible real and
personal property; and from time to time make or cause to be made all repairs, renewals and replacements thereof and additions to such property necessary for the conduct of its business, so that the
business carried on in connection therewith may be conducted in a commercially reasonable manner. 

 
 

           SECTION 9.3    Insurance.     Maintain insurance with financially sound and reputable insurance companies
against such risks and in such amounts as are customarily maintained by similar
businesses and as may be required by Applicable Law and as are required by this Agreement and any Security Document (including, without limitation, hazard and business interruption insurance), and on
the Closing Date and from time to time thereafter deliver to the Administrative Agent upon its request information in reasonable detail as to the insurance then in effect, stating the names of the
insurance companies, the amounts and rates of the insurance, the dates of the expiration thereof and the properties and risks covered thereby. 

 
 

           SECTION 9.4    Accounting Methods and Financial Records.     Maintain a system of accounting, and keep
proper books, records and accounts (which shall be true and complete in all material respects) as may be required or as
may be necessary to permit the preparation of financial statements in accordance with GAAP and in compliance with the regulations of any Governmental Authority having jurisdiction over it or any of
its properties. 

 
 

           SECTION 9.5    Payment and Performance of Obligations.     Pay and perform all Obligations under this
Agreement and the other Loan Documents, and pay or perform (a) all taxes, assessments and other governmental
charges that may be levied or assessed upon it or any of its property, and (b) all other indebtedness, obligations and liabilities in accordance with customary trade practices;  provided, that the
Borrower or such Subsidiary may contest any item described in clauses (a) or (b) of this Section in good faith so long
as adequate reserves are maintained with respect thereto in accordance with GAAP. 

 
 

           SECTION 9.6    Compliance With Laws and Approvals.     Observe and remain in compliance in all material
respects with all Applicable Laws and maintain in full force and effect all Governmental Approvals, in each case
applicable to the conduct of its business. 

 
 

           SECTION 9.7    Environmental Laws.     In addition to and without limiting the generality of Section 9.6, (a) comply with, and ensure such
compliance by all tenants and subtenants with all applicable Environmental Laws and obtain and comply with and maintain, and ensure that all tenants and subtenants, if any, obtain and comply with and
maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws, (b) conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions 

45

 

required
under Environmental Laws, and promptly comply with all lawful orders and directives of any Governmental Authority regarding Environmental Laws, and (c) defend, indemnify and hold
harmless the Administrative Agent and the Lenders, and their respective parents, Subsidiaries, Affiliates, employees, agents, officers and directors, from and against any claims, demands, penalties,
fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to the presence of Hazardous
Materials, or the violation of, noncompliance with or liability under any Environmental Laws applicable to the operations of the Borrower or any such Subsidiary, or any orders, requirements or demands
of Governmental Authorities related thereto, including, without limitation, reasonable attorney's and consultant's fees, investigation and laboratory fees, response costs, court costs and litigation
expenses, except to the extent that any of the foregoing directly result from the gross negligence or willful misconduct of the party seeking indemnification therefor, as determined by a court of
competent jurisdiction by final nonappealable judgment. 

 
 

           SECTION 9.8    Compliance with ERISA.     In addition to and without limiting the generality of Section 9.6, (a) except where the failure to
so comply could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) comply with all material applicable provisions of ERISA and the regulations
and published interpretations thereunder with respect to all Employee Benefit Plans, (ii) not take any action or fail to take action the result of which could be a liability to the PBGC or to a
Multiemployer Plan, (iii) not participate in any prohibited transaction that could result in any civil penalty under ERISA or tax under the Code and (iv) operate each Employee Benefit
Plan in such a manner that will not incur any tax liability under Section 4980B of the Code or any liability to any qualified beneficiary as defined in Section 4980B of the Code and
(b) furnish to the Administrative Agent upon the Administrative Agent's request such additional information about any Employee Benefit Plan as may be reasonably requested by the Administrative
Agent. 

 
 

          SECTION 9.9    Compliance With Agreements.     Comply in all material respects with each term, condition and
provision of all leases, agreements and other instruments entered into in the conduct of its
business including, without limitation, any Material Contract. 

 
 

           SECTION 9.10    Visits and Inspections.     Permit representatives of the Administrative Agent or any Lender,
 from time to time upon prior reasonable notice and at such times during normal business hours,
to visit and inspect its properties; inspect, audit and make extracts from its books, records and files, including, but not limited to, management letters prepared by independent accountants; and
discuss with its principal officers, and its independent accountants, its business, assets, liabilities, financial condition, results of operations and business prospects. Upon the occurrence and
during the continuance of an Event of Default, the Administrative Agent or any Lender may do any of the foregoing at any time without advance notice. 

 
 

           SECTION 9.11    Additional Subsidiaries.     

        (a)   Additional Domestic Subsidiaries. Notify the Administrative Agent of the creation or acquisition of any Domestic
Subsidiary and promptly thereafter (and in any event within thirty (30) days), cause such Person to (i) grant to the Administrative Agent a first priority security interest in all assets
owned by such Subsidiary and guarantee the Obligations by delivering to the Administrative Agent a duly executed assumption agreement to the Guarantee and Collateral Agreement substantially in the
form of Annex 1 thereto and such other documents as the Administrative Agent shall deem appropriate for such purpose, (ii) deliver to the
Administrative Agent such documents and certificates referred to in Section 6.2 as may be reasonably requested by the Administrative Agent,
(iii) deliver to the Administrative Agent such original Capital Stock or other certificates and stock or other transfer powers evidencing the Capital Stock of such Person, (iv) deliver
to the Administrative Agent such updated Schedules to the Loan Documents as requested by the Administrative Agent with respect to such Person, and (v) deliver to the 

46

 

Administrative
Agent such other documents as may be reasonably requested by the Administrative Agent, all in form, content and scope reasonably satisfactory to the Administrative Agent. 

        (b)   Additional Foreign Subsidiaries. Notify the Administrative Agent at the time that any Person becomes a first tier Foreign
Subsidiary of the Borrower or any Subsidiary, and promptly thereafter (and in any event within forty-five (45) days after creation of such Foreign Subsidiary), cause (i) the
Borrower or the applicable Subsidiary to deliver to the Administrative Agent, Security Documents pledging sixty-six percent (66%) of the total outstanding Capital Stock of such new Foreign
Subsidiary and a consent thereto executed by such new Foreign Subsidiary (including, without limitation, if applicable, original stock certificates (or the equivalent thereof pursuant to the
Applicable Laws and practices of any relevant foreign jurisdiction) evidencing the Capital Stock of such new Foreign Subsidiary, together with an appropriate undated stock power for each certificate
duly executed in blank by the registered owner thereof), provided, however, that the Borrower or applicable Subsidiary shall pledge one hundred percent (100%) of the total outstanding Capital Stock of
such new Foreign Subsidiary if, in the good faith judgment of the Borrower or such Subsidiary, no material adverse tax consequences would result from such 100% pledge, (ii) such Person to
guarantee the Obligations by delivering to the Administrative Agent an executed assumption and supplement to the
Guarantee and Collateral Agreement or such other documents as the Administrative Agent shall deem appropriate for such purpose (provided that, in the good faith judgment of the Borrower or such
Subsidiary, no material adverse tax consequences would result from such Person guaranteeing the Obligations), (iii) such Person to deliver to the Administrative Agent such documents and
certificates referred to in Section 6.2 as may be reasonably requested by the Administrative Agent, (iv) such Person to deliver to the
Administrative Agent such updated Schedules to the Loan Documents as requested by the Administrative Agent with regard to such Person and (v) such Person to deliver to the Administrative Agent
such other documents as may be reasonably requested by the Administrative Agent, all in form, content and scope reasonably satisfactory to the Administrative Agent. 

 
 

           SECTION 9.12    DG III as Grantor.     Notify the Administrative Agent of the payment in full of the MDVX
Indebtedness and promptly thereafter (and in any event within ten (10) days), cause DG
III to (i) grant to the Administrative Agent a first priority security interest in all assets owned by DG III and guarantee the Obligations by delivering to the Administrative Agent a duly
executed assumption agreement to the Guarantee and Collateral Agreement substantially in the form of Annex 1 thereto and such other documents as
the Administrative Agent shall deem appropriate for such purpose, (ii) deliver to the Administrative Agent such documents and certificates referred to in  Section 6.2 as may be reasonably
requested by the Administrative Agent, (iii) deliver to the Administrative Agent such original Capital
Stock or other certificates and stock or other transfer powers evidencing the Capital Stock of DG III, (iv) deliver to the Administrative Agent such updated Schedules to the Loan Documents as
requested by the Administrative Agent with respect to such Person, and (v) deliver to the Administrative Agent such other documents as may be reasonably requested by the Administrative Agent,
all in form, content and scope reasonably satisfactory to the Administrative Agent. 

 
 

           SECTION 9.13    Real Property Collateral.     Notify the Administrative Agent, within ten (10) days
after the acquisition or lease by any Credit Party of any real property that is not subject to the
existing Security Documents, and within sixty (60) days following request by the Administrative Agent, deliver such Mortgages, deeds of trust, title insurance policies, environmental
assessments, surveys, landlord waivers and other documents reasonably requested by the Administrative Agent in connection with granting and perfecting a first priority Lien, other than Permitted
Liens, on such real property in favor of the Administrative Agent, for the benefit of itself and the Secured Parties, all in form and substance acceptable to the Administrative Agent. 

 
 

           SECTION 9.14    Use of Proceeds.     The Borrower shall use the proceeds of the Extensions of Credit
(a) to refinance the Existing Facility and (b) for working capital and general
corporate purposes of the Borrower and its Subsidiaries, including the payment of certain fees and expenses incurred in connection with the transactions. 

 
 

           SECTION 9.15    Further Assurances.     Make, execute and deliver all such additional and further acts,
things, deeds and instruments as the Administrative Agent or the Required Lenders (through the
Administrative Agent) may reasonably require to document and consummate the transactions contemplated hereby and to vest completely in and insure the Administrative Agent and the Lenders their
respective rights under this Agreement, the Letters of Credit and the other Loan Documents. 

47

  

 
 

ARTICLE X
  FINANCIAL COVENANTS    

        Until
all of the Obligations have been paid and satisfied in full and the Commitments terminated, unless consent has been obtained in the manner set forth in  Section 14.2, the Borrower will not on a
Consolidated basis: 

 
 

           SECTION 10.1    Consolidated Leverage Ratio.     As of each fiscal quarter end (beginning with the fiscal
quarter ending on March 31, 2006 and continuing thereafter), permit the Consolidated Leverage
Ratio to be greater than 3.50 to 1.00. 

 
 

          SECTION 10.2    Minimum EBITDA.     As of any Fiscal Year end (beginning with the Fiscal Year ending on
December 31, 2006 and continuing thereafter), permit the Consolidated EBITDA to be less
than $12,000,000. 

 
 

ARTICLE XI
  NEGATIVE COVENANTS    

        Until
all of the Obligations have been paid and satisfied in full and the Commitments terminated, unless consent has been obtained in the manner set forth in  Section 14.2, the Borrower has not and will
not and will not permit any of its Subsidiaries to: 

 
 

           SECTION 11.1    Limitations on Indebtedness.     Create, incur, assume or suffer to exist any Indebtedness
except: (a) the Obligations (excluding Hedging Obligations permitted pursuant to  Section 11.1(b)); 

        (b)   Indebtedness
of the Borrower incurred in connection with a Hedging Agreement with a counterparty and upon terms and conditions (including interest rate) reasonably
satisfactory to the Administrative Agent; provided, that any counterparty that is a Lender shall be deemed satisfactory to the Administrative Agent; 

        (c)   Indebtedness
of any Credit Party existing on the Closing Date and not otherwise permitted under this Section and listed on  Schedule 7.1(u), and any refinancings, refundings, renewals or extensions thereof;
provided that the principal amount of such Indebtedness is not
increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to a reasonable premium or other reasonable amount paid, and fees and expenses reasonably incurred,
in connection with such refinancing; 

        (d)   Indebtedness
of any Credit Party and DG III pursuant to any Loan Document; 

        (e)   Unsecured
Guaranty Obligations with respect to Indebtedness permitted pursuant to subsection (c) of this Section; 

        (f)    Unsecured
Subordinated Indebtedness owing by any Credit Party to another Credit Party; 

        (g)   Indebtedness
of DG III to MDVX pursuant to the MDVX Loan Agreement and the MDVX Note; and 

        (h)   Additional
Indebtedness of any Credit Party not otherwise permitted pursuant to this Section in an aggregate amount outstanding not to exceed $1,500,000; 

provided, that no agreement or instrument with respect to Indebtedness permitted to be incurred by this Section shall restrict, limit or otherwise
encumber (by covenant or otherwise) the ability of any Subsidiary of the Borrower to make any payment to the Borrower or any of its Subsidiaries (in the form of dividends, intercompany advances or
otherwise) for the purpose of enabling the Borrower to pay the Obligations. 

48

 

 
 

           SECTION 11.2    Limitations on Liens.     Create, incur, assume or suffer to exist, any Lien on or with
respect to any of its assets or properties (including, without limitation, shares of Capital Stock),
real or personal, whether now owned or hereafter acquired, except the following (each, a "Permitted Lien"):(a) Liens for taxes, assessments and other
governmental charges or levies (excluding any Lien imposed pursuant to any of the provisions of ERISA or Environmental Laws) not yet due or as to which the period of grace (not to exceed thirty
(30) days), if any, related thereto has not expired or which are being contested in good faith and by appropriate proceedings if adequate reserves are maintained to the extent required by GAAP; 

        (b)   the
claims of materialmen, mechanics, carriers, warehousemen, processors or landlords for labor, materials, supplies or rentals incurred in the ordinary course of
business, (i) which are not overdue for a period of more than thirty (30) days or (ii) which are being contested in good faith and by appropriate proceedings if adequate reserves
are maintained to the extent required by GAAP; 

        (c)   Liens
consisting of deposits or pledges made in the ordinary course of business in connection with, or to secure payment of, obligations under workers' compensation,
unemployment insurance or similar legislation; 

        (d)   Liens
constituting encumbrances in the nature of zoning restrictions, easements and rights or restrictions of record on the use of real property, which in the aggregate
are not substantial in amount and which do not, in any case, detract from the value of such property or impair the use thereof in the ordinary conduct of business; 

        (e)   Liens
of the Administrative Agent for the benefit of (i) the Administrative Agent and the Secured Parties under the Loan Documents and in connection with any
Banking Services Obligations and (ii) each Hedge Lender under any Hedging Agreement permitted under Section 11.1(b); 

        (f)    Liens
existing on any asset of any Person at the time such Person becomes a Subsidiary or is merged or consolidated with or into a Subsidiary which (i) were not
created in contemplation of or in connection with such event and (ii) do not extend to or cover any other property or assets of Borrower or any Subsidiary, so long as any Indebtedness related
to any such Liens are permitted under Section 11.1(h); 

        (g)   Liens
not otherwise permitted by this Section and in existence on the Closing Date and described on Schedule 11.2;
and 

        (h)   Liens
securing purchase money Indebtedness and Indebtedness in connection with Capital Leases of the Borrower or any other Credit Party, in each case as such
Indebtedness is permitted under  Section 11.1(h); provided that (i) such Liens shall be created substantially simultaneously with the acquisition or lease of the related
asset, as the case may be, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness, (iii) the amount of Indebtedness secured
thereby is not increased and (iv) the principal amount of Indebtedness secured by any such Lien shall at no time exceed the cost or fair market value, whichever is lower, of such property or
lease payment amount of such property at the time it was acquired. 

 
 

           SECTION 11.3    Limitations on Loans, Advances, Investments and Acquisitions.     Purchase, own, invest in
or otherwise acquire, directly or indirectly, any Capital Stock, interests in any partnership or joint venture (including, without
limitation, the creation or capitalization of any Subsidiary), evidence of Indebtedness or other obligation or security, substantially all or a portion of the business or assets of any other Person or
any other investment or interest whatsoever in any other Person, or make or permit to exist, directly or indirectly, any loans, advances or extensions of credit to, any investment in 

49

 

cash
or by delivery of property in, or Guaranty Obligation in favor of, any Person (each, an "Investment") except: 

        (a)   Investments
(i) in any Credit Party, (ii) in Subsidiaries formed after the Closing Date so long as the Borrower complies with the applicable provisions of  Section 9.11 and (iii) the Investments
described on Schedule 11.3 existing on the
Closing Date; 

        (b)   Investments
in (i) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency thereof maturing within one hundred
twenty (120) days from the date of acquisition thereof, (ii) commercial paper maturing no more than one hundred twenty (120) days from the date of creation thereof and currently
having the highest rating obtainable from either Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. or Moody's Investors Service, Inc.,
(iii) certificates of deposit maturing no more than one hundred twenty (120) days from the date of creation thereof issued by commercial banks incorporated under the laws of the United
States, each having combined capital, surplus and undivided profits of not less than $500,000,000 and having a rating of "A" or better by a nationally recognized rating agency; provided, that the
aggregate amount invested in such certificates of deposit shall not at any time exceed $5,000,000 for any one such certificate of deposit and $10,000,000 for any one such bank, or (iv) time
deposits maturing no more than thirty (30) days from the date of creation thereof with commercial banks or savings banks or savings and loan associations each having membership either in the
FDIC or the deposits of which are insured by the FDIC and in amounts not exceeding the maximum amounts of insurance thereunder; 

        (c)   Investments
by the Borrower or any Credit Party in the form of Permitted Acquisitions; 

        (d)   Hedging
Agreements permitted pursuant to Section 11.1(b); 

        (e)   purchases
of assets in the ordinary course of business; 

        (f)    Investments
in the form of loans and advances to employees in the ordinary course of business, which, in the aggregate, do not exceed at any time $200,000; 

        (g)   intercompany
Indebtedness permitted pursuant to Section 11.1(f); 

        (h)   Guaranty
Obligations permitted pursuant to Section 11.1(e); 

        (i)    Investments
in the form of loans and advances by the Borrower to DG III made solely to enable DG III to make regularly scheduled payments of principal and interest on
the MDVX Indebtedness provided that such payments do not violate Section 11.14 below and no Default or Event of Default has occurred and is
continuing prior to (or would occur after giving effect to) such Investment; and 

        (j)    other
additional Investments by any Credit Party not otherwise permitted pursuant to this Section not exceeding $200,000 in the aggregate in any Fiscal Year. 

 
 

          SECTION 11.4    Limitations on Mergers and Liquidation.     Merge, consolidate or enter into any similar
combination with any other Person or liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution) except: 

        (a)   any
Wholly-Owned Subsidiary of the Borrower (other than DG III) may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the
continuing or surviving Person) or with or into any other Credit Party (other than a Foreign Subsidiary of the Borrower) (provided that such Credit Party shall be the continuing or surviving Person); 

        (b)   any
Wholly-Owned Subsidiary of any Credit Party (other than DG III) may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to the Borrower or any other Credit Party (other than a Foreign Subsidiary of the Borrower); 

50

 

(provided
that if the transferor in such a transaction is a Credit Party, then the transferee must either be the Borrower or any other Credit Party that is not a Foreign Subsidiary of the Borrower); 

        (c)   any
Wholly-Owned Subsidiary of the Borrower (other than DG III) may merge into the Person such Wholly-Owned Subsidiary was formed to acquire in connection with a
Permitted Acquisition; and 

        (d)   any
Subsidiary of the Borrower (other than DG III) may wind-up into the Borrower or any other Credit Party. 

 
 

          SECTION 11.5    Limitations on Asset Dispositions.     Make any Asset Disposition (including, without
limitation, the sale of any receivables and leasehold interests and any sale-leaseback or similar
transaction) except: 

        (a)   the
sale of inventory in the ordinary course of business; 

        (b)   the
sale of obsolete, worn-out or surplus assets no longer used or usable in the business of the Borrower or any of its Subsidiaries; 

        (c)   the
transfer of assets to the Borrower or any other Credit Party pursuant to Section 11.4(b); 

        (d)   the
sale or discount without recourse of accounts receivable arising in the ordinary course of business in connection with the compromise or collection thereof; 

        (e)   the
disposition of any Hedging Agreement permitted pursuant to Section 11.1(b); and 

        (f)    additional
Asset Dispositions by any Credit Party not otherwise permitted pursuant to this Section in an aggregate amount not to exceed $500,000 in any Fiscal Year. 

 
 

           SECTION 11.6    Limitations on Dividends and Distributions.     Declare or pay any dividends upon any of its
Capital Stock; purchase, redeem, retire or otherwise acquire, directly or indirectly, any shares of its Capital
Stock, or make any distribution of cash, property or assets among the holders of shares of its Capital Stock, or make any change in its capital structure;  provided that:(a) the Borrower or any
Subsidiary (other than DG III and any of its Subsidiaries) may pay dividends payable solely in shares of its own
Capital Stock; and 

        (b)   any
Subsidiary may pay cash dividends to the Borrower. 

 
 

           SECTION 11.7    Limitations on Exchange and Issuance of Capital Stock.     Issue, sell or otherwise dispose
of any class or series of Capital Stock that, by its terms or by the terms of any security into which it is convertible or
exchangeable, is, or upon the happening of an event or passage of time would be, (a) convertible or exchangeable into Indebtedness or (b) required to be redeemed or repurchased,
including at the option of the holder, in whole or in part, or has, or upon the happening of an event or passage of time would have, a redemption or similar payment due.  Transactions with Affiliates.
Directly or indirectly (a) make any loan or advance to, or purchase or assume any note or other obligation to or
from, any of its officers, directors, shareholders or other Affiliates, or to or from any member of the immediate family of any of its officers, directors, shareholders or other Affiliates, or
subcontract any operations to any of its Affiliates or (b) enter into, or be a party to, any other transaction not described in clause (a) above with any of its Affiliates other than:(i)
transactions permitted by Section 11.3, 11.4,  11.6 and 11.7; 

        (ii)   transactions
existing on the Closing Date and described on Schedule 11.8; 

        (iii)  normal
compensation and reimbursement of reasonable expenses of officers and directors; and 

51

 

        (iv)  other
transactions in the ordinary course of business on terms as favorable as would be obtained by it on a comparable arms-length transaction with an
independent, unrelated third party as determined in good faith by the board of directors of the Borrower. 

 
 

           SECTION 11.9    Certain Accounting Changes; Organizational Documents.     (a) Change its Fiscal Year end, or
make any change in its accounting treatment and reporting practices except as required by GAAP or (b) amend, modify or
change its articles of incorporation (or corporate charter or other similar organizational documents) or amend, modify or change its bylaws (or other similar documents) in any manner adverse in any
respect to the rights or interests of the Lenders.Amendments; Payments and Prepayments of Subordinated Indebtedness. (a) Amend or modify (or permit the
modification or amendment of) any of the terms or provisions of any Subordinated Indebtedness in any respect which would materially adversely affect the rights or interests of the Administrative Agent
and Lenders hereunder; 

        (b)   Amend
or modify (or permit the modification or amendment of) any of the terms or provisions of any MDVX Loan Document in any respect which would (i) increase the
principal amount of, or the interest rate attributable to, the MDVX Indebtedness, (ii) increase or otherwise modify the collateral securing the MDVX Indebtedness, (iii) shorten the
maturity of the MDVX Indebtedness, (iv) increase the interest rate on, or the rate of amortization of, the MDVX Indebtedness or (v) otherwise adversely affect any of the rights or
interests of the Administrative Agent and the Lenders as determined in their sole discretion; or 

        (c)   Cancel,
forgive, make any payment or prepayment on, or redeem or acquire for value (including, without limitation, (i) by way of depositing with any trustee with
respect thereto money or securities before due for the purpose of paying when due and (ii) at the maturity thereof) any Subordinated Indebtedness. 

 
 

           SECTION 11.11    Restrictive Agreements.     

        (a)   Enter
into any Indebtedness which contains any negative pledge on assets or any covenants more restrictive than the provisions of Articles
IX, X and XI hereof, or which restricts, limits or otherwise encumbers its
ability to incur Liens on or with respect to any of its assets or properties other than the assets or properties securing such Indebtedness. 

        (b)   Enter
into or permit to exist any agreement which impairs or limits the ability of any Subsidiary of the Borrower to pay dividends to the Borrower. 

 
 

           SECTION 11.12    Nature of Business.     Alter in any material respect the character or conduct of the
business conducted by the Borrower and its Subsidiaries as of the Closing Date. 

 
 

          SECTION 11.13    Impairment of Security Interests.     Take or omit to take any action, which might or would
have the result of materially impairing the security interests in favor of the Administrative Agent with
respect to the Collateral or grant to any Person (other than the Administrative Agent for the benefit of itself and the Secured Parties pursuant to the Security Documents) any interest whatsoever in
the Collateral, except for Permitted Liens and asset sales permitted under Section 11.5. 

 
 

          SECTION 11.14    Prepayments of MDVX Indebtedness.     Prepay, repurchase or redeem the MDVX Indebtedness or
any part thereof without the prior written consent of the Administrative Agent. 

 
 

ARTICLE XII
  DEFAULT AND REMEDIES    

 
 

          SECTION 12.1    Events of Default.     Each of the following shall constitute an Event of Default, whatever
the reason for such event and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any Governmental Authority or otherwise: (a) Default in Payment of
Principal of Loans and  

52

 

 Reimbursement Obligations. The Borrower shall default in any payment of principal of any Loan or Reimbursement Obligation when and as due (whether at maturity, by reason of
acceleration or otherwise). 

        (b)   Other Payment Default. The Borrower or any Subsidiary shall default in the payment when and as due (whether at maturity,
by reason of acceleration or otherwise) of interest on any Loan or Reimbursement Obligation or the payment of any other Obligation, and such default shall continue for a period of three
(3) Business Days. 

        (c)   Misrepresentation. Any representation, warranty, certification or statement of fact made or deemed made by or on behalf
of the Borrower or any other Credit Party herein, in any other Loan Document, or in any document delivered in connection herewith or therewith that is subject to materiality or
Material Adverse Effect qualifications, shall be incorrect or misleading in any respect when made or deemed made or any representation, warranty, certification or statement of fact made or deemed made
by or on behalf of the Borrower or any Subsidiary herein, any other Loan Document, or in any document delivered in connection herewith or therewith that is not subject to materiality or Material
Adverse Effect qualifications, shall be incorrect or misleading in any material respect when made or deemed made. 

        (d)   Default in Performance of Certain Covenants. The Borrower or any Subsidiary shall default in the performance or
observance of any covenant or agreement contained in Sections 8.1, 8.2 or  8.5(e)(i) or Articles X or XI. 

        (e)   Default in Performance of Other Covenants and Conditions. The Borrower or any Subsidiary shall default in the performance
or observance of any term, covenant, condition or agreement contained in this Agreement (other than as specifically provided for otherwise in this Section) or any other Loan Document and such default
shall continue for a period of thirty (30) days after written notice thereof has been given to the Borrower by the Administrative Agent. 

        (f)    Hedging Agreement. (i) The Borrower shall default in the performance or observance of any terms, covenant,
condition or agreement (after giving effect to any applicable grace or cure period) under any Hedging Agreement with a Lender or an Affiliate of a Lender or (ii) the Borrower shall default in
the performance or observance of any terms, covenant, condition or agreement (after giving effect to any applicable grace or cure period) under any other Hedging Agreement permitted hereunder and such
default causes the termination of such Hedging Agreement and the Termination Value owed by the Borrower as a result thereof exceeds $100,000. 

        (g)   Indebtedness Cross-Default. The Borrower or any Subsidiary shall (i) default in the payment of any Indebtedness
(including, without limitation, any MDVX Indebtedness but excluding the Loans or any Reimbursement Obligation) the aggregate outstanding amount of which Indebtedness is in excess of $500,000 beyond
the period of grace if any, provided in the instrument or agreement under which such Indebtedness was created, or (ii) default in the observance or performance of any other agreement or
condition relating to any Indebtedness (including, without limitation, the MDVX Indebtedness but excluding the Loans or any Reimbursement Obligation) the aggregate outstanding amount of which
Indebtedness is in excess of $500,000 or contained in any instrument or agreement evidencing, securing or relating thereto or any other event shall occur or condition exist, the effect of which
default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause, with the giving of notice
if required, any such Indebtedness to become due prior to its stated maturity (any applicable grace period having expired). 

        (h)   Other Cross-Defaults. The Borrower or any Subsidiary shall default in the payment when due, or in the performance or
observance, of any obligation or condition of any Material Contract 

53

 

unless,
but only as long as, the existence of any such default is being contested by the Borrower or any such Subsidiary in good faith by appropriate proceedings and adequate reserves in respect
thereof have been established on the books of the Borrower or such Subsidiary to the extent required by GAAP. 

        (i)    Change in Control. Any Change in Control shall occur. 

        (j)    Voluntary Bankruptcy Proceeding. The Borrower or any Subsidiary thereof shall (i) commence a voluntary case under
the federal bankruptcy laws (as now or hereafter in effect), (ii) file a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition for adjustment of debts, (iii) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case
under such bankruptcy laws or other laws, (iv) apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver,
custodian, trustee, or liquidator of itself or of a substantial part of its property, domestic or foreign, (v) admit in writing its inability to pay its debts as they become due,
(vi) make a general assignment for the benefit of creditors, or (vii) take any corporate or other organizational action for the purpose of authorizing any of the foregoing. 

        (k)   Involuntary Bankruptcy Proceeding. A case or other proceeding shall be commenced against the Borrower or any Subsidiary
thereof in any court of competent jurisdiction seeking (i) relief under the federal bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, winding up or adjustment of debts, or (ii) the appointment of a trustee, receiver, custodian, liquidator or the like for the Borrower or such Subsidiary
for all or any substantial part of their respective assets, domestic or foreign, and such case or proceeding shall continue without dismissal or stay for a period of sixty (60) consecutive
days, or an order granting the relief requested in such case or proceeding (including, but not limited to, an order for relief under such federal bankruptcy laws) shall be entered. 

        (l)    Failure of Agreements. Any provision of this Agreement or any provision of any other Loan Document shall for any reason
cease to be valid and binding on the Borrower or any Subsidiary party thereto or any such Person shall so state in writing, or any Loan Document shall for any reason cease to create a valid and
perfected first priority Lien on, or security interest in, any of the Collateral purported to be covered thereby, in each case other than in accordance with the express terms hereof or thereof. 

        (m)  Termination Event. The occurrence of any of the following events: (i) the Borrower or any ERISA Affiliate fails to
make full payment when due of all amounts which, under the provisions of any
Pension Plan or Section 412 of the Code, the Borrower or any ERISA Affiliate is required to pay as contributions thereto, (ii) an accumulated funding deficiency in excess of $250,000
occurs or exists, whether or not waived, with respect to any Pension Plan, (iii) a Termination Event or (iv) the Borrower or any ERISA Affiliate as employers under one or more
Multiemployer Plans makes a complete or partial withdrawal from any such Multiemployer Plan and the plan sponsor of such Multiemployer Plans notifies such withdrawing employer that such employer has
incurred a withdrawal liability requiring payments in an amount exceeding $250,000. 

        (n)   Judgment. A judgment or order for the payment of money which causes the aggregate amount of all such judgments to exceed
$250,000 in any Fiscal Year shall be entered against the Borrower or any Subsidiary by any court and such judgment or order shall continue without having been discharged, vacated or stayed for a
period of thirty (30) days after the entry thereof. 

        (o)   Environmental. Any one or more Environmental Claims shall have been asserted against the Borrower or any Subsidiary; the
Borrower or such Subsidiary would be reasonably likely to 

54

 

incur
liability as a result thereof; and such liability would be reasonably likely, individually or in the aggregate, to have a Material Adverse Effect. 

        (p)   Material Adverse Effect. There shall occur a Material Adverse Effect with respect to the Borrower and its Subsidiaries,
taken as a whole. 

 
 

           SECTION 12.2    Remedies.     Upon the occurrence of an Event of Default, with the consent of the Required
Lenders, the Administrative Agent may, or upon the request of the Required Lenders,
the Administrative Agent shall, by notice to the Borrower: 

        (a)   Acceleration; Termination of Credit Facility. Terminate the Commitments and declare the principal of and interest on the
Loans and the Reimbursement Obligations at the time outstanding, and all other amounts owed to the Lenders and to the Administrative Agent under this Agreement or any of the other Loan Documents
(including, without limitation, all L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented or shall be entitled to present the documents
required thereunder) and all other Obligations (other than Hedging Obligations), to be forthwith due and payable, whereupon the same shall immediately become due and payable without presentment,
demand, protest, notice of acceleration, notice of intent to accelerate or any other notice of any kind, all of which are expressly waived by each Credit Party and DG III, anything in this Agreement
or the other Loan Documents to the contrary notwithstanding, and terminate the Credit Facility and any right of the Borrower to request borrowings or Letters of Credit thereunder; provided, that upon
the occurrence of an Event of Default specified in Section 12.1(j) or (k), the Credit Facility
shall be automatically terminated and all Obligations (other than Hedging
Obligations) shall automatically become due and payable without presentment, demand, protest, notice of acceleration, notice of intent to accelerate or any other notice of any kind, all of which are
expressly waived by each Credit Party and DG III, anything in this Agreement or in any other Loan Document to the contrary notwithstanding. 

        (b)   Letters of Credit. With respect to all Letters of Credit with respect to which presentment for honor shall not have
occurred at the time of an acceleration pursuant to the preceding paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to
the aggregate then undrawn and unexpired amount of such Letters of Credit. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn
under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay the other Obligations on a  pro rata basis. After all such Letters of Credit shall have expired or been fully drawn upon, the Reimbursement Obligation shall have been satisfied and
all other Obligations shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Borrower. 

        (c)   Rights of Collection. Exercise on behalf of the Lenders all of its other rights and remedies under this Agreement, the
other Loan Documents and Applicable Law, in order to satisfy all of the Borrower's Obligations. 

 
 

           SECTION 12.3    Rights and Remedies Cumulative; Non-Waiver; etc.     The enumeration of the rights and
remedies of the Administrative Agent and the Lenders set forth in this Agreement is not intended to be exhaustive and the
exercise by the Administrative Agent and the Lenders of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative, and shall be in addition
to any other right or remedy given hereunder or under the other Loan Documents or that may now or hereafter exist at law or in equity or by suit or otherwise. No delay or failure to take action on the
part of the Administrative Agent or any Lender in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or
privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege or shall be construed to be a waiver of any Event of Default. No course of dealing 

55

 

between
the Borrower, the Administrative Agent and the Lenders or their respective agents or employees shall be effective to change, modify or discharge any provision of this Agreement or any of the
other Loan Documents or to constitute a waiver of any Event of Default. 

 
 

           SECTION 12.4    Crediting of Payments and Proceeds.     In the event that the Borrower shall fail to pay any
of the Obligations when due and the Obligations have been accelerated pursuant to  Section 12.2, all payments received by the Lenders upon the Obligations, all net proceeds from the enforcement of
the Obligations and all
proceeds of the Collateral shall be applied: 

        First, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts, including attorney fees,
payable to the Administrative Agent in its capacity as such and the Issuing Lender in its capacity as such (ratably among the Administrative Agent and the Issuing Lender in proportion to the
respective amounts described in this clause First payable to them); 

        Second, to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest)
payable to the Lenders, including attorney fees (ratably among the Lenders in proportion to the respective amounts described in this clause Second
payable to them); 

        Third, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans and Reimbursement Obligations
and any Hedging Obligations (including any termination payments and any accrued and unpaid interest thereon) (ratably among the Lenders and, with respect to Hedging Obligations, any Hedge Lender in
proportion to the respective amounts described in this clause Third payable to them); 

        Fourth, ratably, (a) to payment of that portion of the Obligations constituting unpaid principal of the Loans and Reimbursement
Obligations and any Banking Services Obligations and (b) to the Administrative Agent for the account of the Issuing Lender, to cash collateralize any L/C Obligations then outstanding (ratably
among the Lenders and, with respect to Banking Services Obligations, any Affiliate of a Lender in proportion to the respective amounts described in this clause  Fourth held by them); and 

        Last, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Borrower or as otherwise required by
Applicable Law. 

 
 

           SECTION 12.5    Administrative Agent May File Proofs of Claim.     In case of the pendency of any
receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Borrower or any Subsidiary, the Administrative Agent (irrespective of whether the principal of any Loan or L/C Obligation shall then be due and payable as herein expressed
or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or
otherwise: 

        (a)   to
file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, L/C Obligations and all other Obligations that are
owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative
Agent under Sections 3.3, 5.3 and 14.3) allowed in such
judicial proceeding; and 

        (b)   to
collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; 

and
any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the 

56

 

Administrative
Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the
reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under  Sections 5.3 and
14.3. 

        Nothing
contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization,
arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such
proceeding. 

 
 

ARTICLE XIII
  THE ADMINISTRATIVE AGENT    

 
 
        SECTION 13.1    Appointment and Authority.     Each of the Lenders and the Issuing Lender hereby irrevocably
appoints Wachovia to act on its behalf as the Administrative Agent hereunder and under the other
Loan Documents 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 or thereof,
together with such actions and powers as are reasonably incidental thereto. The provisions of this Article are solely for the benefit of the Administrative Agent, the Lenders and the Issuing Lender,
and neither the Borrower nor any Subsidiary thereof shall have rights as a third party beneficiary of any of such provisions. 

 
 

           SECTION 13.2    Rights as a Lender.     The Person 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 the term "Lender" or "Lenders" shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person
serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory
capacity for and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any
duty to account therefor to the Lenders. 

 
 

           SECTION 13.3    Exculpatory Provisions.     The Administrative Agent shall not have any duties or
obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the
generality of the foregoing, the Administrative Agent: 

        (a)   shall
not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing; 

        (b)   shall
not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by
the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly
provided for herein or in the other Loan Documents), provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the
Administrative Agent to liability or that is contrary to any Loan Document or Applicable Law; and 

        (c)   shall
not, except as expressly set forth herein and in the other Loan Documents, 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 Affiliates that is communicated to or obtained by the Person serving as the 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 (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the
Lenders 

57

 

as
shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in  Section 14.2 and Section 12.2) or (ii) in the absence of its own gross negligence
or willful misconduct as determined by a court of competent jurisdiction by final nonappealable judgment. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until
notice describing such Default is given to the Administrative Agent by the Borrower, a Lender or the Issuing Lender. 

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 other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or
genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in  Article VI or elsewhere herein,
other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. 

 
 

           SECTION 13.4    Reliance by 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 (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or
otherwise authenticated 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 have been made by the proper Person, and
shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan, or the issuance of a Letter of Credit, that by its terms must be
fulfilled to the satisfaction of a Lender or the Issuing Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender or the Issuing Lender unless the Administrative
Agent shall have received notice to the contrary from such Lender or the Issuing Lender prior to the making of such Loan or the issuance of such Letter of Credit. 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. 

 
 

           SECTION 13.5    Delegation of Duties.     The Administrative Agent may perform any and all of its duties and
exercise its rights and powers hereunder or under any other Loan Document 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 of its duties and exercise its rights and
powers by or through their respective Related Parties. The exculpatory provisions of this Article 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. 

 
 

           SECTION 13.6    Resignation of Administrative Agent.     

        (a)   The
Administrative Agent may at any time give notice of its resignation to the Lenders, the Issuing Lender and the Borrower. Upon receipt of any such notice of
resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any
such bank with an office in the United States. If no such 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 Lender, appoint a successor Administrative Agent
meeting the qualifications set forth above provided that if the Administrative Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such
resignation 

58

 

shall
nonetheless become effective in accordance with such notice and (1) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other
Loan Documents (except that in the case of any collateral security held by the Administrative Agent on behalf of the Lenders or the Issuing Lender under any of the Loan Documents, the retiring
Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed) and (2) all payments, communications and determinations
provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender and the Issuing Lender directly, until such time as the Required Lenders appoint a successor
Administrative Agent as provided for above in this paragraph. Upon the acceptance of a successor's appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with
all of the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent, and the retiring Administrative Agent shall be discharged from all of its duties and obligations
hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this paragraph). 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 retiring Administrative Agent's resignation hereunder and under the other Loan
Documents, the provisions of this Article and Section 14.2 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 the retiring Administrative Agent was acting as Administrative
Agent. 

        (b)   Any
resignation by Wachovia as Administrative Agent pursuant to this Section shall also constitute its resignation as Issuing Lender. Upon the acceptance of a
successor's appointment as Administrative Agent hereunder, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring Issuing
Lender, (b) the retiring Issuing Lender shall be discharged from all of their respective duties and obligations hereunder or under the other Loan Documents, and (c) the successor Issuing
Lender shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangement satisfactory to the retiring Issuing Lender
to effectively assume the obligations of the retiring Issuing Lender with respect to such Letters of Credit. 

 
 

           SECTION 13.7    Non-Reliance on Administrative Agent and Other Lenders.     Each Lender and the Issuing
Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their
Related Parties 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 and the Issuing Lender
also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties 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 other Loan Document or any related agreement or any
document furnished hereunder or thereunder. 

 
 

          SECTION 13.8    Collateral and Guarantee Matters.     The Lenders irrevocably authorize the Administrative
Agent, at its option and in its discretion: 

        (a)   to
release any Lien on any Collateral granted to or held by the Administrative Agent, for the benefit of itself and the other Secured Parties, under any Loan Document
(i) upon payment in full of the Obligations, (ii) that is sold or to be sold as part of or in connection with any Asset Disposition expressly permitted hereunder, or (iii) subject
to Section 14.2, if approved, authorized or ratified in writing by the Required Lenders and each Hedge Lender; 

        (b)   to
subordinate or release any Lien on any Collateral granted to or held by the Administrative Agent under any Loan Document to the holder of any Permitted Lien, if
approved, authorized or ratified in writing by each Hedge Lender; and 

59

 

        (c)   to
release any Credit Party from its obligations under the Guarantee and Collateral Agreement if such Person ceases to be a Subsidiary as a result of a transaction
expressly permitted hereunder and if no Default or an Event of Default shall have occurred and be continuing. 

Upon
request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent's authority to release or subordinate its interest in particular types or
items of property, or to release any Credit Party from its obligations under the Guarantee and Collateral Agreement pursuant to this Section. 

 
 

ARTICLE XIV
  MISCELLANEOUS    

 
 
        SECTION 14.1    Notices.     

        (a)   Method of Communication. Except as otherwise provided in this Agreement, all notices and communications hereunder shall
be in writing (for purposes hereof, the term "writing" shall include information in electronic format such as electronic mail and internet web pages), or by telephone subsequently confirmed in
writing. Any notice shall be effective if delivered by hand delivery or sent via electronic mail, posting on an internet web page, telecopy, recognized overnight courier service or certified mail,
return receipt requested, and shall be presumed to be received by a party hereto (i) on the date of delivery if delivered by hand or sent by electronic mail, posting on an internet web page,
telecopy, (ii) on the next Business Day if sent by recognized overnight courier service and (iii) on the third Business Day following the date sent by certified mail, return receipt
requested. A telephonic notice to the Administrative Agent as understood by the Administrative Agent will be deemed to be the controlling and proper notice in the event of a discrepancy with or
failure to receive a confirming written notice. 

60

 

        (b)   Addresses for Notices. Notices to any party shall be sent to it at the following addresses, or any other address as to
which all the other parties are notified in writing. 

	

If to the Borrower:	
 	

750 W. John W. Carpenter Freeway, Suite 700

Dallas, Texas 75039

Attention: Omar Choucair

Telephone No.: 972-581-2000

Telecopy No.: 972-581-2100
	

With copies to:	
 	

Gardere Wynne Sewell LLP

1601 Elm Street, Suite 3000

Dallas, Texas 75201-4761

Attention: Steven S. Camp

Telephone No.: 214-999-4354

Telecopy No.: 214-999-3354
	

If to Wachovia as

Administrative Agent:	
 	

Wachovia Bank, National Association

Charlotte Plaza, CP-8

201 South College Street

Charlotte, North Carolina 28288-0680

Attention: Syndication Agency Services

Telephone No.: (704) 374-2698

Telecopy No.: (704) 383-0288
	

With copies to:	
 	

Bracewell & Giuliani LLP

500 N. Akard St., Suite 4000

Dallas, TX 75201-3387

T: (214) 758-1004

M:(214) 228-1680

Attention: Mark Knowles

Telephone No.: (214) 758-1004

Telecopy No.: (214) 758-8304
	

If to any Lender:	
 	

To the address set forth on the Register.

        (c)   Administrative Agent's Office. The Administrative Agent hereby designates its office located at the address set forth
above, or any subsequent office which shall have been specified for such purpose by written notice to the Borrower and Lenders, as the Administrative Agent's Office referred to herein, to which
payments due are to be made and at which Loans will be disbursed and Letters of Credit requested. 

 
 

           SECTION 14.2    Amendments, Waivers and Consents.     Except as set forth below or as specifically provided
in any Loan Document, any term, covenant, agreement or condition of this Agreement or any of the other Loan
Documents may be amended or waived by the Lenders, and any consent given by the Lenders, if, but only if, such amendment, waiver or consent is in writing signed by the Required Lenders (or by the
Administrative Agent with the consent of the Required Lenders) and delivered to the Administrative Agent and, in the case of an amendment, signed by the Borrower;  provided, that no amendment, waiver or
consent shall: 

        (a)   waive
any condition set forth in Section 6.2 without the written consent of each Lender; 

        (b)   extend
or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 12.2)
or the amount of Loans of any Lender without the written consent of such Lender; 

61

 

        (c)   postpone
any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees or other amounts due to the Lenders (or any of them)
hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby; 

        (d)   reduce
the principal of, or the rate of interest specified herein on, any Loan or Reimbursement Obligation, or (subject to clause (iii) of the second proviso to
this Section) any fees or other amounts payable hereunder or under any other Loan Document, or change the manner of computation of any financial ratio (including any change in any applicable defined
term) used in determining the Applicable Margin that would result in a reduction of any interest rate on any Loan or any fee payable hereunder without the written consent of each Lender directly
affected thereby; provided that only the consent of the Required Lenders shall be necessary to waive any obligation of the Borrower to pay interest at the rate set forth in  Section 5.1(c) during
the continuance of an Event of Default; 

        (e)   change
(i) Section 5.4 in a manner that would alter the pro rata sharing of payments required thereby
without the written consent of each Lender or (ii) Section 12.4 in a manner that would alter the pro rata sharing of payments required
thereby without the written consent of each Lender and, with respect to Hedging Obligations, each Hedge Lender; 

        (f)    change
any provision of this Section or the definition of "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders required to
amend, waive or otherwise modify
any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender; 

        (g)   amend
or otherwise modify the definition of "Obligations" or "Hedging Obligations", without the written consent of each Lender and Hedge Lender; 

        (h)   amend
or otherwise modify the definition of "Secured Parties" in this Agreement or in the Guarantee and Collateral Agreement, without the written consent of each Lender
and Hedge Lender; 

        (i)    release
all of the Credit Parties or release Credit Parties comprising substantially all of the credit support for the Obligations, in either case, from the Guarantee
and Collateral Agreement (other than as authorized in Section 13.8), without the written consent of each Lender; or 

        (j)    release
all or a material part of the Collateral or release any Security Document (other than as authorized in  Section 13.8 or as otherwise specifically permitted or contemplated in this Agreement or the
applicable Security Document) without the written
consent of each Lender; 

provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the Issuing Lender in addition to the Lenders
required above, affect the rights or duties of the Issuing Lender under this Agreement or any Letter of Credit Application relating to any Letter of Credit issued or to be issued by it; (ii) no
amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under
this Agreement or any other Loan Document; and (iii) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto. Notwithstanding
anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Commitment of such Lender may not be
increased or extended without the consent of such Lender. 

 
 

           SECTION 14.3    Expenses; Indemnity.     

        (a)   Costs and Expenses. The Borrower shall pay (i) all reasonable out-of-pocket expenses
incurred by the Administrative Agent and its Affiliates (including the reasonable fees, charges and 

62

 

disbursements
of counsel for the Administrative Agent), in connection with the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and
administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing Lender 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, any Lender or the Issuing Lender
(including the fees, charges and disbursements of any counsel for the Administrative Agent, any Lender or the Issuing Lender), in connection with the enforcement or protection of its rights
(A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) 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. 

        (b)   Indemnification by the Borrower. THE BORROWER SHALL INDEMNIFY THE ADMINISTRATIVE AGENT (AND ANY SUB-AGENT
THEREOF), EACH LENDER AND THE ISSUING 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 (INCLUDING, WITHOUT LIMITATION, ANY ENVIRONMENTAL CLAIMS OR CIVIL PENALTIES OR FINES ASSESSED BY OFAC), DAMAGES, LIABILITIES
AND RELATED EXPENSES (INCLUDING THE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE), INCURRED BY ANY INDEMNITEE OR ASSERTED AGAINST ANY INDEMNITEE BY ANY THIRD PARTY OR BY THE
BORROWER OR ANY SUBSIDIARY ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF (I) THE EXECUTION OR DELIVERY OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT
CONTEMPLATED HEREBY OR THEREBY, THE PERFORMANCE BY THE PARTIES HERETO OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY,
(II) ANY LOAN OR LETTER OF CREDIT OR THE USE OR PROPOSED USE OF THE PROCEEDS THEREFROM (INCLUDING ANY REFUSAL BY THE ISSUING LENDER 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 SUBSIDIARY, OR ANY ENVIRONMENTAL CLAIM RELATED IN ANY WAY TO THE BORROWER OR ANY SUBSIDIARY, (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, WHETHER BROUGHT BY A THIRD PARTY OR BY THE BORROWER OR ANY SUBSIDIARY,
AND REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO, OR (V) ANY CLAIM (INCLUDING, WITHOUT LIMITATION, ANY ENVIRONMENTAL CLAIMS OR CIVIL PENALTIES OR FINES ASSESSED BY THE U.S.
DEPARTMENT OF THE TREASURY'S OFFICE OF FOREIGN ASSETS CONTROL), INVESTIGATION, LITIGATION OR OTHER PROCEEDING (WHETHER OR NOT THE ADMINISTRATIVE AGENT OR ANY LENDER IS A PARTY THERETO) AND THE
PROSECUTION AND DEFENSE THEREOF, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE LOANS, THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, OR ANY DOCUMENTS CONTEMPLATED BY OR REFERRED TO HEREIN 

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OR
THEREIN OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, INCLUDING WITHOUT LIMITATION, REASONABLE ATTORNEYS AND CONSULTANT'S FEES, INCLUDING ANY LOSSES, CLAIMS, DAMAGES,
LIABILITIES, OR RELATED EXPENSES CAUSED BY ANY INDEMNITEE'S OWN NEGLIGENCE, PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH
LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES (X) 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 OR (Y) RESULT FROM A CLAIM BROUGHT BY THE BORROWER OR ANY SUBSIDIARY AGAINST AN INDEMNITEE FOR BREACH IN BAD FAITH OF SUCH INDEMNITEE'S OBLIGATIONS
HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT, IF THE BORROWER OR SUCH SUBSIDIARY HAS OBTAINED A FINAL AND NONAPPEALABLE JUDGMENT IN ITS FAVOR ON SUCH CLAIM AS DETERMINED BY A COURT OF COMPETENT
JURISDICTION. 

        (c)   Reimbursement by Lenders. To the extent that the Borrower for any reason fails to indefeasibly pay any amount required
under clause (a) or (b) of this Section to be paid by it to the Administrative Agent (or any sub-agent thereof), the Issuing Lender or any Related Party of any of the
foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent), the Issuing Lender or such Related Party, as the case may be, such Lender's Applicable
Margin (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 (or any such sub-agent) or the Issuing Lender in its capacity as
such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent) or Issuing Lender in connection with such capacity. The obligations
of the Lenders under this clause (c) are subject to the provisions of Section 5.7. 

        (d)   Waiver of Consequential Damages, Etc. TO THE FULLEST 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, ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY, THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, ANY LOAN OR LETTER OF
CREDIT OR THE USE OF THE PROCEEDS THEREOF. NO INDEMNITEE REFERRED TO IN CLAUSE (B) ABOVE SHALL BE LIABLE FOR ANY DAMAGES ARISING FROM THE USE BY UNINTENDED RECIPIENTS OF ANY INFORMATION OR
OTHER MATERIALS DISTRIBUTED BY IT THROUGH TELECOMMUNICATIONS, ELECTRONIC OR OTHER INFORMATION TRANSMISSION SYSTEMS IN CONNECTION WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY. 

        (e)   Payments. All amounts due under this Section shall be payable promptly after demand therefor. 

 
 

          SECTION 14.4    Right of Set-off.     If an Event of Default shall have occurred and be continuing, each
Lender, the Issuing Lender and each of their respective Affiliates is hereby authorized at any
time and from time to time, to the fullest extent permitted by Applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever
currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender, the Issuing 

64

 

Lender
or any such Affiliate to or for the credit or the account of the Borrower or any Subsidiary against any and all of the obligations of the Borrower or such Subsidiary now or hereafter existing
under this Agreement or any other Loan Document to such Lender or the Issuing Lender, irrespective of whether or not such Lender or the Issuing Lender shall have made any demand under this Agreement
or any other Loan Document and although such obligations of the Borrower or such Subsidiary may be contingent or unmatured or are owed to a branch or office of such Lender or the Issuing Lender
different from the branch or office holding such deposit or obligated on such indebtedness. The rights of each Lender or the Issuing Lender and their respective Affiliates under this Section are in
addition to other rights and remedies (including other rights of setoff) that such Lender or the Issuing Lender or their respective Affiliates may have. Each Lender and the Issuing Lender agrees to
notify the Borrower and the Administrative Agent promptly after any such setoff and application; provided that the failure to give such notice shall not
affect the validity of such setoff and application. 

 
 

           SECTION 14.5    Governing Law.     

        (a)   Governing Law. This Agreement and the other Loan Documents, unless expressly set forth therein, shall be governed by, and
construed in accordance with, the law of the State of Texas, without reference to the conflicts or choice of law principles thereof. 

        (b)   Submission to Jurisdiction. THE BORROWER IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS SITTING IN DALLAS COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE NORTHERN DISTRICT OF TEXAS AND ANY APPELLATE COURT FROM ANY
THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH TEXAS STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE 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 APPLICABLE LAW.
NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, ANY LENDER OR THE ISSUING LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR ANY SUBSIDIARY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION. 

        (c)   Waiver of Venue. THE BORROWER IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT 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 APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE
OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT. 

        (d)   Service of Process. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN  SECTION 14.1. 

65

 

NOTHING
IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW. 

 
 

          SECTION 14.6    Waiver of Jury Trial.     

        (a)   EACH
PARTY HERETO HEREBY IRREVOCABLY 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 ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON 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 AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. 

        (a)   Preservation of Certain Remedies. The parties hereto and the other Loan Documents preserve, without diminution, certain
remedies that such Persons may employ or exercise freely, either alone, in
conjunction with or during a Dispute. Each such Person shall have and hereby reserves the right to proceed in any court of proper jurisdiction or by self help to exercise or prosecute the following
remedies, as applicable: (i) all rights to foreclose against any real or personal property or other security by exercising a power of sale granted in the Loan Documents or under Applicable Law
or by judicial foreclosure and sale, including a proceeding to confirm the sale, (ii) all rights of self help including peaceful occupation of property and collection of rents, set off, and
peaceful possession of property, (iii) obtaining provisional or ancillary remedies including injunctive relief, sequestration, garnishment, attachment, appointment of receiver and in filing an
involuntary bankruptcy proceeding, and (iv) when applicable, a judgment by confession of judgment. 

 
 

           SECTION 14.7    Reversal of Payments.     To the extent the Borrower makes a payment or payments to the
Administrative Agent for the ratable benefit of the Lenders or the Administrative Agent receives any
payment or proceeds of the collateral which payments or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to
a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds repaid, the Obligations or part
thereof intended to be satisfied shall be revived and continued in full force and effect as if such payment or proceeds had not been received by the Administrative Agent. 

 
 

           SECTION 14.8    Injunctive Relief; Punitive Damages.     

        (a)   The
Borrower recognizes that, in the event the Borrower fails to perform, observe or discharge any of its obligations or liabilities under this Agreement, any remedy of
law may prove to be inadequate relief to the Lenders. Therefore, the Borrower agrees that the Lenders, at the Lenders' option, shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving actual damages. 

        (b)   THE
ADMINISTRATIVE AGENT, THE LENDERS AND THE BORROWER (ON BEHALF OF ITSELF AND ITS SUBSIDIARIES) HEREBY AGREE THAT NO SUCH PERSON SHALL HAVE A REMEDY OF PUNITIVE OR
EXEMPLARY DAMAGES AGAINST ANY OTHER PARTY TO A LOAN DOCUMENT AND EACH SUCH PERSON HEREBY WAIVES ANY RIGHT OR CLAIM TO PUNITIVE OR EXEMPLARY DAMAGES 

66

 

THAT
THEY MAY NOW HAVE OR MAY ARISE IN THE FUTURE IN CONNECTION WITH ANY DISPUTE. 

 
 

           SECTION 14.9    Accounting Matters.     If at any time any change in GAAP would affect the computation of
any financial ratio or requirement set forth in any Loan Document, and either the Borrower or
the Required Lenders shall so request, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof
in light of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, (i) such ratio or requirement
shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide to the Administrative Agent and the Lenders financial statements and other
documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to
such change in GAAP. 

 
 

          SECTION 14.10    Successors and Assigns; Participations.     

        (a)   Successors and Assigns Generally. 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, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior
written consent of the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in
accordance with the provisions of paragraph (b) of this Section, (ii) by way of participation in accordance with the provisions of paragraph (d) of this Section or (iii) by
way of pledge or assignment of a security interest subject to the restrictions of paragraph (f) of this Section (and any other attempted assignment or transfer by any party hereto shall be null
and void). 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,
Participants to the extent provided in paragraph (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders)
any legal or equitable right, remedy or claim under or by reason of this Agreement. 

        (b)   Assignments by Lenders. Any Lender may at any time assign to one or more Eligible 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); provided that: 

        (i)    except
in the case of an assignment of the entire remaining amount of the assigning Lender's Commitment and the Loans at the time owing to it or in the case of an
assignment to a Lender or an Affiliate of a Lender or an Approved Fund, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the applicable
Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with
respect to such assignment is delivered to the Administrative Agent or, if "Trade Date" is specified in the Assignment and Assumption, as of the Trade Date) shall not be less than $5,000,000, unless
(A) such assignment is made to an existing Lender, to an Affiliate thereof, or to an Approved Fund, in which case no minimum amount shall apply, or (B) each of the Administrative Agent
and, so long as no Default or Event of Default has occurred and is continuing, the Borrower otherwise consent (each such consent not to be unreasonably withheld or delayed); provided that the Borrower
shall be deemed to have given its consent five (5) Business Days after the date written notice thereof has been delivered by the assigning Lender (through the Administrative Agent) unless such
consent is expressly refused by the Borrower prior to such fifth (5th) Business Day; 

67

 

        (ii)   each
partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement with respect to
the Loan or the Commitment assigned; 

        (iii)  any
assignment of a Revolving Credit Commitment must be approved by the Administrative Agent and the Issuing Lender unless the Person that is the proposed assignee is
itself a Lender with a Revolving Credit Commitment (whether or not the proposed assignee would otherwise qualify as an Eligible Assignee); and 

        (iv)  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 for each assignment, and the Eligible Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire. 

Subject
to acceptance and recording thereof by the Administrative Agent pursuant to paragraph (c) of this Section, from and after the effective date specified in each Assignment and Assumption,
the Eligible Assignee thereunder shall be a party to this Agreement 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 5.8, 5.9, 5.10,  5.11 and
14.3 with respect to facts and circumstances occurring prior to the effective date of such
assignment. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph 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 (d) of this Section. 

        (c)   Register. The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at one of
its offices in Charlotte, North Carolina, 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 Commitments of,
and principal amounts of the Loans 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 and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all
purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon
reasonable prior notice. 

        (d)   Participations. Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative
Agent, sell participations to any Person (other than a natural person or the Borrower or any of the Borrower's Affiliates or Subsidiaries) (each, a
"Participant") in all or a portion of such Lender's rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or
the Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent 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 

68

 

amendment,
modification or waiver or modification described in Section 14.2 that directly affects such Participant. Subject to
paragraph (e) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 5.8,  5.9, 5.10 and 5.11 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 14.4 as though it were a Lender, provided such Participant agrees to be subject to  Section 5.6 as though it were a Lender. 

        (e)   Limitations upon Participant Rights. A Participant shall not be entitled to receive any greater payment under  Sections 5.10 and 5.11 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 5.11 unless the Borrower is notified of the participation sold to such
Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 5.11(e) as though it were a Lender. 

        (f)    Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights
under this Agreement to secure obligations of such Lender, including without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or
assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. 

 
 

           SECTION 14.11    Confidentiality.     Each of the Administrative Agent 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, or required to be
disclosed to, any rating agency, or regulatory or similar authority (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to
the extent required by Applicable Laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies
under this Agreement or under any other Loan Document (or any Hedging Agreement with a Hedge Lender) or any action or proceeding relating to this Agreement or any other Loan Document (or any Hedging
Agreement with a Hedge Lender) 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 purchasing Lender, proposed purchasing Lender, Participant or proposed Participant, (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative
transaction relating to the Borrower and its obligations, (iii) to an investor or prospective investor in an Approved Fund that also agrees that Information shall be used solely for the purpose
of evaluating an investment in such Approved Fund, (iv) to a trustee, collateral manager, servicer, backup servicer, noteholder or secured party in an Approved Fund in connection with the
administration, servicing and reporting on the assets serving as collateral for an Approved Fund, or (v) to a nationally recognized rating agency that requires access to information regarding
the Borrower and its Subsidiaries, the Loans and Loan Documents in connection with ratings issued with respect to an Approved Fund, (g) with the consent of the Borrower, (h) to  Gold Sheets and
other similar bank trade publications, such information to consist of deal terms and other information customarily found in such
publications, or (i) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the
Administrative Agent or any Lender on a nonconfidential basis from a source other than the Borrower or (j) to governmental regulatory authorities in connection with any regulatory examination
of the Administrative Agent or any Lender or in accordance with the Administrative Agent's or any Lender's regulatory compliance policy if the Administrative Agent or such Lender deems necessary for
the mitigation of claims by those authorities 

69

 

against
the Administrative Agent or such Lender or any of its subsidiaries or affiliates. For purposes of this Section, "Information" means all
information received from any Credit Party and DG III relating to any Credit Party, DG III or any of their respective businesses, other than any such information that is available to the
Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by any Credit Party or DG III; provided that, in the case of
information received from a Credit Party or DG III 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 14.12    Performance of Duties.     

        (a)   The
obligations of the Borrower and any Subsidiary under this Agreement and each of the other Loan Documents shall be performed by such Person at the sole cost and
expense of the Borrower. 

        (a)   The
Administrative Agent shall be entitled, after consultation with the Borrower, to change the pricing, terms or structure of the Credit Facility, either before or
after the Closing Date, if the Administrative Agent determines in its sole discretion that such changes are advisable in order to ensure a successful syndication or an optimal capital structure;
provided that the aggregate amount of the Credit Facility shall remain unchanged. 

 
 

           SECTION 14.13    All Powers Coupled with Interest.     All powers of attorney and other authorizations
granted to the Lenders, the Administrative Agent and any Persons designated by the Administrative Agent or any
Lender pursuant to any provisions of this Agreement or any of the other Loan Documents shall be deemed coupled with an interest and shall be irrevocable so long as any of the Obligations remain unpaid
or unsatisfied, any of the Commitments remain in effect or the Credit Facility has not been terminated. 

 
 

           SECTION 14.14    Survival of Indemnities.     Notwithstanding any termination of this Agreement, the
indemnities to which the Administrative Agent and the Lenders are entitled under the provisions of this  Article XIV and any other provision of this Agreement and the other Loan Documents shall
continue in full force and effect and shall protect the
Administrative Agent and the Lenders against events arising after such termination as well as before. 

 
 

           SECTION 14.15    Titles and Captions.     Titles and captions of Articles, Sections and subsections in, and
the table of contents of, this Agreement are for convenience only, and neither limit nor amplify
the provisions of this Agreement. 

 
 

           SECTION 14.16    Severability of Provisions.     Any provision of this Agreement or any other Loan Document
which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating the remainder of such provision or the remaining provisions hereof or thereof or affecting the validity or
enforceability of such provision in any other jurisdiction. 

 
 

           SECTION 14.17    Counterparts.     This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and shall be binding upon all parties, their successors and assigns, and all of which taken together shall constitute one and the same agreement. 

 
 

          SECTION 14.18    Integration.     This Agreement, together with the other Loan Documents, comprises the
complete and integrated agreement of the parties on the subject matter hereof and thereof
and supersedes all prior agreements, written or oral, on such subject matter. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions
of this Agreement shall control; provided that the inclusion of supplemental rights or 

70

 

remedies
in favor of the Administrative Agent or the Lenders in any other Loan Document shall not be deemed a conflict with this Agreement. Each Loan Document was drafted with the joint participation
of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof. 

 
 

           SECTION 14.19    Term of Agreement.     This Agreement shall remain in effect from the Closing Date through
and including the date upon which all Obligations arising hereunder or under any other Loan
Document shall have been indefeasibly and irrevocably paid and satisfied in full and all Commitments have been terminated. No termination of this Agreement shall affect the rights and obligations of
the parties hereto arising prior to such termination or in respect of any provision of this Agreement which survives such termination. 

 
 

           SECTION 14.20    Advice of Counsel, No Strict Construction.     Each of the parties represents to each other
party hereto that it has discussed this Agreement with its counsel. The parties hereto have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto
and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement. 

 
 

           SECTION 14.21    USA Patriot Act.     The Administrative Agent and each Lender hereby notifies the Borrower
that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L.
107-56 (signed into law October 26, 2001)) (the "Act"), it is required to obtain, verify and record information that identifies the
Borrower and each Subsidiary, which information includes the name and address of the Borrower and such Subsidiary and other information that will allow such Lender to identify such Person in
accordance with the Act. 

 
 

           SECTION 14.22    Inconsistencies with Other Documents; Independent Effect of Covenants.     

        (a)   In
the event there is a conflict or inconsistency between this Agreement and any other Loan Document, the terms of this Agreement shall control; provided that any
provision of the Security Documents which imposes additional burdens on the Borrower or its Subsidiaries or further restricts the rights of the Borrower or its Subsidiaries or gives the Administrative
Agent or Lenders additional rights shall not be deemed to be in conflict or inconsistent with this Agreement and shall be given full force and effect. 

        (b)   The
Borrower expressly acknowledges and agrees that each covenant contained in Articles IX,  X, or XI hereof
shall be given independent effect. Accordingly, the Borrower shall not engage in any
transaction or other act otherwise permitted under any covenant contained in Articles IX, X, or  XI if,
before or after giving effect to such transaction or act, the Borrower shall or would be in breach of any other covenant contained in
Articles IX, X, or XI. 

 
 

           SECTION 14.23    Interest Rate Limitation.     

        (a)   It
is the intent of the Administrative Agent, the Lenders and the Borrower to conform to and contract in strict compliance with all applicable usury laws from time to
time in effect. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the Highest Lawful Rate. If
the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Highest Lawful Rate, the excess interest shall be applied to the principal of the Loans and the
Reimbursement Obligations or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by any Agent or any Lender exceeds
the Highest Lawful Rate, such Person may, to the extent permitted by Applicable Law, (i) characterize any payment that is not principal as an expense, fee, or premium rather than interest,
(ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the
contemplated term of the Obligations hereunder. The right to accelerate maturity of the Loans 

71

 

and
the other Obligations does not include the right to accelerate any interest which has not otherwise accrued on the date of such acceleration, and the Agents and the Lenders do not intend to charge
or receive any unearned interest in the event of acceleration. 

        (b)   If
at any time the interest rate (the "Stated Rate") called for under this Agreement or any other Loan Document exceeds
or would exceed the Highest Lawful Rate, the rate at which interest shall accrue thereunder shall automatically be limited to the Highest Lawful Rate, and shall remain at the Highest Lawful Rate until
the total amount of interest accrued equals the total amount of interest which would have accrued but for the operation of this sentence. Thereafter, interest shall accrue at the Stated Rate unless
and until the Stated Rate would again exceed the Highest Lawful Rate, in which case the immediately preceding sentence shall apply. 

 
 

           SECTION 14.24    Time of the Essence.     Time is the essence of this Agreement and the other Loan
Documents. 

 
 

           SECTION 14.25    Entire Agreement.     THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

[Signature
page follows.] 

72

 

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

	

 	
 	
BORROWER:
	

 	
 	

DIGITAL GENERATION SYSTEMS, INC.
	 	 	 	 	 
	

 	
 	

By:	
 	

/s/  OMAR A. CHOUCAIR      

	

 	
 	

Name:	
 	

Omar A. Choucair

	

 	
 	

Title:	
 	

Chief Financial Officer and Secretary

	

 	
 	
ADMINISTRATIVE AGENT, ISSUING LENDER AND LENDER:
	

 	
 	

WACHOVIA BANK, NATIONAL ASSOCIATION
	 	 	 	 	 
	

 	
 	

By:	
 	

/s/  MICHAEL H. KEITH      

	

 	
 	

Name:	
 	

Michael H. Keith

	

 	
 	

Title:	
 	

Senior Vice President

73

QuickLinks

Exhibit 10.24

ARTICLE I DEFINITIONS

Definitions.

SECTION 1.2 Other Definitions and Provisions.

SECTION 1.3 Accounting Terms.

SECTION 1.4 UCC Terms.

SECTION 1.5 Rounding.

SECTION 1.6 References to Agreement and Laws.

SECTION 1.7 Times of Day.

SECTION 1.8 Letter of Credit Amounts.

ARTICLE II REVOLVING CREDIT FACILITY

SECTION 2.1 Revolving Credit Loans.

SECTION 2.2 Procedure for Advances of Revolving Credit Loans.

SECTION 2.3 Repayment and Prepayment of Revolving Credit Loans.

SECTION 2.4 Permanent Reduction of the Revolving Credit Commitment.

SECTION 2.5 Termination of Revolving Credit Facility.

ARTICLE III LETTER OF CREDIT FACILITY

SECTION 3.1 L/C Commitment.

SECTION 3.2 Procedure for Issuance of Letters of Credit.

SECTION 3.3 Commissions and Other Charges.

SECTION 3.4 L/C Participations.

SECTION 3.5 Reimbursement Obligation of the Borrower.

SECTION 3.6 Obligations Absolute.

SECTION 3.7 Effect of Letter of Credit Application.

ARTICLE IV INTENTIONALLY DELETED.

ARTICLE V GENERAL LOAN PROVISIONS

SECTION 5.1 Interest.

SECTION 5.2 Notice and Manner of Conversion or Continuation of Loans.

SECTION 5.3 Fees.

SECTION 5.4 Manner of Payment.

SECTION 5.5 Evidence of Indebtedness.

SECTION 5.6 Adjustments.

SECTION 5.7 Nature of Obligations of Lenders Regarding Extensions of Credit; Assumption by the Administrative Agent.

SECTION 5.8 Changed Circumstances.

SECTION 5.9 Indemnity.

SECTION 5.10 Increased Costs.

SECTION 5.11 Taxes.

SECTION 5.12 Mitigation Obligations; Replacement of Lenders.

SECTION 5.13 Security.

ARTICLE VI CLOSING; CONDITIONS OF CLOSING AND BORROWING

SECTION 6.1 Closing.

SECTION 6.2 Conditions to Closing and Initial Extensions of Credit.

SECTION 6.3 Conditions to All Extensions of Credit.

ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE BORROWER

SECTION 7.2 Survival of Representations and Warranties, Etc.

ARTICLE VIII FINANCIAL INFORMATION AND NOTICES

SECTION 8.1 Financial Statements and Projections .

SECTION 8.2 Officer's Compliance Certificate.

SECTION 8.3 Accountants' Certificate.

SECTION 8.4 Other Reports.

SECTION 8.5 Notice of Litigation and Other Matters.

SECTION 8.6 Accuracy of Information.

ARTICLE IX AFFIRMATIVE COVENANTS

SECTION 9.1 Preservation of Corporate Existence and Related Matters.

SECTION 9.2 Maintenance of Property.

SECTION 9.3 Insurance.

SECTION 9.4 Accounting Methods and Financial Records.

SECTION 9.5 Payment and Performance of Obligations.

SECTION 9.6 Compliance With Laws and Approvals.

SECTION 9.7 Environmental Laws.

SECTION 9.8 Compliance with ERISA.

SECTION 9.9 Compliance With Agreements.

SECTION 9.10 Visits and Inspections.

SECTION 9.11 Additional Subsidiaries.

SECTION 9.12 DG III as Grantor.

SECTION 9.13 Real Property Collateral.

SECTION 9.14 Use of Proceeds.

SECTION 9.15 Further Assurances.

ARTICLE X FINANCIAL COVENANTS

SECTION 10.1 Consolidated Leverage Ratio.

SECTION 10.2 Minimum EBITDA.

ARTICLE XI NEGATIVE COVENANTS

SECTION 11.1 Limitations on Indebtedness.

SECTION 11.2 Limitations on Liens.

SECTION 11.3 Limitations on Loans, Advances, Investments and Acquisitions.

SECTION 11.4 Limitations on Mergers and Liquidation.

SECTION 11.5 Limitations on Asset Dispositions.

SECTION 11.6 Limitations on Dividends and Distributions.

SECTION 11.7 Limitations on Exchange and Issuance of Capital Stock.

SECTION 11.9 Certain Accounting Changes; Organizational Documents.

SECTION 11.11 Restrictive Agreements.

SECTION 11.12 Nature of Business.

SECTION 11.13 Impairment of Security Interests.

SECTION 11.14 Prepayments of MDVX Indebtedness.

ARTICLE XII DEFAULT AND REMEDIES

SECTION 12.1 Events of Default.

SECTION 12.2 Remedies.

SECTION 12.3 Rights and Remedies Cumulative; Non-Waiver; etc.

SECTION 12.4 Crediting of Payments and Proceeds.

SECTION 12.5 Administrative Agent May File Proofs of Claim.

ARTICLE XIII THE ADMINISTRATIVE AGENT

SECTION 13.1 Appointment and Authority.

SECTION 13.2 Rights as a Lender.

SECTION 13.3 Exculpatory Provisions.

SECTION 13.4 Reliance by the Administrative Agent.

SECTION 13.5 Delegation of Duties.

SECTION 13.6 Resignation of Administrative Agent.

SECTION 13.7 Non-Reliance on Administrative Agent and Other Lenders.

SECTION 13.8 Collateral and Guarantee Matters.

ARTICLE XIV MISCELLANEOUS

SECTION 14.1 Notices.

SECTION 14.2 Amendments, Waivers and Consents.

SECTION 14.3 Expenses; Indemnity.

SECTION 14.4 Right of Set-off.

SECTION 14.5 Governing Law.

SECTION 14.6 Waiver of Jury Trial.

SECTION 14.7 Reversal of Payments.

SECTION 14.8 Injunctive Relief; Punitive Damages.

SECTION 14.9 Accounting Matters.

SECTION 14.10 Successors and Assigns; Participations.

SECTION 14.11 Confidentiality.

SECTION 14.12 Performance of Duties.

SECTION 14.13 All Powers Coupled with Interest.

SECTION 14.14 Survival of Indemnities.

SECTION 14.15 Titles and Captions.

SECTION 14.16 Severability of Provisions.

SECTION 14.17 Counterparts.

SECTION 14.18 Integration.

SECTION 14.19 Term of Agreement.

SECTION 14.20 Advice of Counsel, No Strict Construction.

SECTION 14.21 USA Patriot Act.

SECTION 14.22 Inconsistencies with Other Documents; Independent Effect of Covenants.

SECTION 14.23 Interest Rate Limitation.

SECTION 14.24 Time of the Essence.

SECTION 14.25 Entire Agreement.

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