Document:

Exhibit 10.1

LEASE
AGREEMENT

THIS
LEASE AGREEMENT (this “Lease”) is
made this 10th day of July, 2006, between ARE-SAN
FRANCISCO NO. 17, LLC, a Delaware limited liability company (“Landlord”), and PONIARD
PHARMACEUTICALS, INC., a Washington corporation (“Tenant”).

Building:                                            7000
Shoreline Court, South San Francisco, California

Premises:                                        That portion
of the Project, containing approximately 17,045 rentable square feet,
consisting of (i) approximately 14,083 rentable square feet (“Initial Premises), and (ii) approximately
2,962 rentable square feet (“Additional
Premises”), as determined by Landlord and both as more particularly
shown on Exhibit A.

Project:                                                     The real
property on which the Building in which the Premises are located, together with
all improvements thereon and appurtenances thereto as described on Exhibit B.

Base Rent:                                    $2.65 per
rentable square foot per month, subject to adjustment as provided for in Sections
3 and 4 hereof.

Rentable Area of
Premises: 17,045 sq.
ft.

Rentable Area of Project:  136,691 sq. ft.

Tenant’s Share of Operating
Expenses:   12.47%

Security Deposit:  $135,507.75

Target Commencement Date:   July 1, 2006; provided, however, that if
Landlord is required by the City of South San Francisco to construct the fire
rate corridor shown on Exhibit G
prior to Landlord being permitted to deliver the Initial Premises to Tenant for
its use and occupancy, the Target Commencement Date shall be October 2,
2006.

Rent
Adjustment Percentage:  Greater of 3% or the CPI Adjustment
Percentage not to exceed 5%

Base Term:                                Beginning on
the Commencement Date and ending 60 months from the first day of the first full
month of the Term (as defined in Section 2 hereof).

	
  Permitted Use:

  	
  Research and development laboratories, related
  office and other related uses and otherwise in compliance with the provisions
  of Section 7 hereof.

  

 

	
  Address for Rent Payment:

  	
  Landlord’s Notice Address:

  
	
  385 E. Colorado
  Boulevard, Suite 299

  Pasadena, CA 91101

  Attention: Accounts Receivable

  	
  385 E. Colorado Boulevard, Suite 299

  Pasadena, CA 91101

  Attention: Corporate Secretary

  
	
   

  	
   

  
	
  Tenant’s
  Notice Address:

  	
   

  
	
  750 Battery
  Street, Suite 600

  San Francisco, CA 94111

  Attention: Chief Financial Officer

  	
   

  

 

The following Exhibits
and Addenda are attached hereto and incorporated herein by this reference:

	
  x
  EXHIBIT A — PREMISES DESCRIPTION

  	
  x EXHIBIT B — DESCRIPTION OF PROJECT

  
	
  x
  EXHIBIT C — WORK LETTER

  	
  x EXHIBIT D — COMMENCEMENT DATE

  
	
  x
  EXHIBIT E — RULES AND REGULATIONS

  	
  x EXHIBIT F — TENANT’S PROPERTY

  
	
  x
  EXHIBIT G — LANDLORD’S WORK

  	
  x EXHIBIT H — LANDLORD’S PROPERTY

  

 

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1.             Lease of
Premises.   Upon and subject to all of the terms and conditions
hereof,  Landlord hereby leases the
Premises to Tenant and Tenant hereby leases the Premises from Landlord. The
portions of the Project which are for the non-exclusive use of tenants of the
Project are collectively referred to herein as the “Common
Areas.”  Landlord reserves the
right to modify Common Areas, provided that such modifications do not
materially adversely affect Tenant’s access to or use of the Premises for the
Permitted Use or materially adversely affect Tenant’s access to or use of
parking at the Project.

2.             Delivery;
Acceptance of Premises; Commencement Date.   Landlord shall use
reasonable efforts to deliver the Initial Premises to Tenant on or before the
Target Commencement Date (“Delivery” or “Deliver”). Subject to Landlord’s right to enter the Initial
Premises to complete the Landlord’s Work (as defined below), Tenant may
commence Tenant’s Work with respect to Initial Premises upon Landlord’s
Delivery of the Initial Premises. If Landlord fails to timely Deliver the
Initial Premises, Landlord shall not be liable to Tenant for any loss or damage
resulting therefrom, and this Lease shall not be void or voidable except as
provided herein. If Landlord does not Deliver the Initial Premises within 10
business days of the Target Commencement Date for any reason other than Force
Majeure delays, this Lease may be terminated by Tenant by written notice given
to Landlord, and if so terminated by Tenant: 
(a) the Security Deposit, or any balance thereof (i.e., after
deducting therefrom all amounts to which Landlord is entitled under the
provisions of this Lease), shall be returned to Tenant, and (b) neither
Landlord nor Tenant shall have any further rights, duties or obligations under
this Lease, except with respect to provisions which expressly survive
termination of this Lease. As used
herein, the term “Tenant’s Work” shall have the meaning set forth for such terms in the “Work Letter” attached to this Lease as Exhibit C.
If Tenant does not elect to void this Lease within 5 business days of the lapse
of such 10 business day period, such right to void this Lease shall be waived
and this Lease shall remain in full force and effect.

The
“Commencement Date” shall be the date
Landlord Delivers the Initial Premises to Tenant. Upon request
of Landlord, Tenant shall execute and deliver a written acknowledgment of the
Commencement Date and the expiration date of the Term when such are established
in the form of the “Acknowledgement of Commencement Date” attached to this
Lease as Exhibit D; provided, however,
Tenant’s failure to execute and deliver such acknowledgment shall not affect Landlord’s
or Tenant’s rights hereunder. The “Term” of this
Lease shall be the Base Term, as defined above on the first page of this
Lease, and any Extension Term which Tenant may elect pursuant to Section 39
hereof.

Landlord
and Tenant acknowledge and agree that the Additional Premises are currently
subject to a lease agreement between Landlord and another tenant (“Existing Tenant”). Landlord shall deliver the Additional
Premises to Tenant promptly after the expiration of the term of such other
lease and the surrender of the Additional Premises by the Existing Tenant. The
parties project the date for delivery of the Additional Premises to be December 31,
2006 (the “Additional Premises Delivery Date”).
Until Landlord delivers the Additional Premises to Tenant, the provisions of
this Lease shall only apply to the Initial Premises. Thereafter, the provisions
of this Lease shall apply to both the Initial Premises and the Additional
Premises. Upon the request of Landlord, Tenant shall execute a written acknowledgment
of the date of the delivery of the Additional Premises to Tenant provided,
however, Tenant’s failure to execute and deliver such acknowledgment
shall not affect Landlord’s rights hereunder.

If Landlord fails to
deliver the Additional Premises to Tenant with Landlord’s Work substantially
completed on or before the Additional Premises Delivery Date, Landlord shall
not be liable to Tenant for any loss or damage resulting therefrom, and this
Lease shall not be void or voidable except as provided herein. If Landlord does
not Deliver the Additional Premises to Tenant with Landlord’s Work
substantially completed on or before February 1, 2007, or, if there are
Force Majeure delays, on or before April 2, 2007, this Lease may be
terminated by Tenant by written notice given to Landlord, and if so terminated
by Tenant:  (a) the Security
Deposit, or any balance thereof (i.e., after deducting therefrom all amounts to
which Landlord is entitled under the provisions of this Lease), shall be
returned to Tenant, and (b) neither 

 2
 

 

Landlord
nor Tenant shall have any further rights, duties or obligations under this
Lease, except with respect to provisions which expressly survive termination of
this Lease. If Tenant does not elect to void
this Lease within 7 days after Tenant has the right to do so pursuant to the
second sentence of this paragraph, 
Tenant’s right to void this Lease shall be waived and this Lease shall
remain in full force and effect

The Premises shall
contain the previously used furniture described on Exhibit H
(collectively, “Landlord’s Property”) for Tenant’s
use at no additional cost. Tenant shall not remove any of Landlord’s Property
from the Premises and shall return the same to Landlord at the expiration or
earlier termination of the Term in the same condition as received except for
normal wear and tear.

Landlord shall endeavor
to cause Landlord’s Work with respect to the Initial Premises to be constructed
in the Premises within 6 months following the Commencement Date, and shall
cause Landlord’s Work with respect to the Additional Premises to be
substantially completed no later than the date of delivery of the Additional
Premises to Tenant. Tenant acknowledges that completion of Landlord’s Work may
be delayed depending on when the terms of the Existing Tenant’s lease expires
and the Existing Tenant vacates the Additional Premises. As used herein, the
term “Landlord’s Work” shall
mean substantial completion of the improvements described on Exhibit G attached hereto. Landlord and its contractors
and agents shall have the right to enter the Premises to perform Landlord’s
Work and Tenant shall cooperate with Landlord in connection with the same.
Landlord shall cooperate with Tenant during the construction of Landlord’s Work
to comply with Tenant’s reasonable security requirements. Tenant acknowledges
that Landlord’s Work may adversely affect Tenant’s use and occupancy of the
Premises. Landlord shall complete Landlord’s Work (including any punch list
items) in a good and workmanlike manner. Tenant shall have no right to abate,
reduce or set-off any Rent in connection with Landlord’s Work.

Except as set forth in
this Lease:  (i) Tenant shall accept
the Premises in their condition as of the Commencement Date, subject to all
applicable Legal Requirements (as defined in Section 7 hereof); (ii) Landlord
shall have no obligation for any defects in the Premises, and (iii) Tenant’s
taking possession of the Premises shall be conclusive evidence that Tenant
accepts the Premises and that the Premises were in good condition at the time
possession was taken.

Tenant agrees and
acknowledges that neither Landlord nor any agent of Landlord has made any
representation or warranty with respect to the condition of all or any portion
of the Premises or the Project, and/or the suitability of the Premises or the
Project for the conduct of Tenant’s business, and Tenant waives any implied
warranty that the Premises or the Project are suitable for the Permitted Use. This
Lease constitutes the complete agreement of Landlord and Tenant with respect to
the subject matter hereof and supersedes any and all prior representations,
inducements, promises, agreements, understandings and negotiations which are
not contained herein. Landlord in executing this Lease does so in reliance upon
Tenant’s representations, warranties, acknowledgments and agreements contained
herein.

3.             Rent.

(a)           Base Rent.   The
Base Rent due for the first month that Tenant is required to pay Base Rent
under this Lease and the Security Deposit shall be due and payable on delivery
of an executed copy of this Lease to Landlord. Tenant shall pay to Landlord in
advance, without demand, abatement, deduction or set-off, monthly installments
of Base Rent on or before the first day of each calendar month during the Term
hereof, in lawful money of the United States of America, at the office of
Landlord for payment of Rent set forth above, or to such other person or at
such other place as Landlord may from time to time designate in writing. Payments
of Base Rent for any fractional calendar month shall be prorated. The
obligation of Tenant to pay Base Rent and other sums to Landlord and the
obligations of Landlord under this Lease are independent obligations. Tenant
shall have no right at any time to abate, reduce, or set-off any Rent (as
defined in Section 5) due hereunder except for any abatement as may
be expressly provided in this Lease.

 3
 

 

Notwithstanding the
amount set forth as Base Rent on page 1 of this Lease, Base Rent shall be
due and payable as follows: (a) for
months 1 through 4 of the Base Term, the amount of $14,700.00 per month, (b) commencing
with month 5, the amount of $29,574.30 per month, and (c) commencing 120
days after the delivery of the Additional Premises with Landlord’s Work
substantially completed to Tenant, in the amount set forth on the first page of
this Lease.

(b)           Additional Rent. In
addition to Base Rent, Tenant agrees to pay to Landlord as additional rent (“Additional Rent”):  (i) Tenant’s
Share of “Operating Expenses” (as defined in Section 5), and (ii) any
and all other amounts Tenant assumes or agrees to pay under the provisions of
this Lease, including, without limitation, any and all other sums that may
become due by reason of any default of Tenant or failure to comply with the
agreements, terms, covenants and conditions of this Lease to be performed by
Tenant, after any applicable notice and cure period.

4.             Base Rent Adjustments.

(a)           Adjustments
for Tenant Improvements.   For each of the following incremental
levels of the TI Allowance (as defined in the Work Letter) disbursed to Tenant,
Base Rent shall increase by the amount (per rentable square foot per annum) for
such increment of TI Allowance on the schedule set forth below:

	
  TI Allowance

  (per rentable square foot)

  	
   

  	
  Incremental Increase in Base Rent

  (per rentable square foot per month)

  
	
  $0.00-$15.00

  	
   

  	
  $0.021

  
	
  $15.01-$25.00

  	
   

  	
  $0.025

  

 

For example, if the
entire TI Allowance was disbursed by Landlord, the initial Base Rent would be
increased to $3.215 per rentable square foot per month. The TI Allowance shall
only be available for use by Tenant as part of the construction of the initial
Tenant Improvements and Tenant shall have no right thereafter to use any
undisbursed portion thereof. Following each disbursement of the TI
Allowance,  Landlord shall provide Tenant
with written notice of the amount of the TI Allowance disbursed by Landlord and
the amount of the increase to Base Rent as a result thereof.

(b)           Annual Adjustments. Base Rent
(exclusive, however, of any increase in Base Rent attributable to the TI
Allowance) shall be increased on each annual anniversary of the Commencement
Date during the Term of this Lease (each an “Adjustment
Date”) by multiplying the relevant portion of the Base Rent payable
immediately before such Adjustment Date by the Rent Adjustment Percentage and
adding the resulting amount to the Base Rent payable immediately before such
Adjustment Date. Base Rent, as so adjusted, shall thereafter be due as provided
herein. Base Rent adjustments for any fractional calendar month shall be
prorated. “CPI Adjustment Percentage” means (i) a fraction, stated as
a percentage, the numerator of which shall be the Index for the calendar month
3 months before the month in which the Adjustment Date occurs, and the
denominator of which shall be the Index for the calendar month 3 months before
the last Adjustment Date or, if no prior Base Rent adjustment has been made, 3
months before the first day of the first full month during the Term of this
Lease, less (ii) 1.00. “Index”
means the “Consumer Price Index-All Urban Consumers-San Francisco Metropolitan
Area, All Items” compiled by the U.S. Department of Labor, Bureau of Labor
Statistics, (1982-84 = 100). If a substantial change is made in the
Index, the revised Index shall be used, subject to such adjustments as Landlord
may reasonably deem appropriate in order to make the revised Index comparable
to the prior Index. If the Bureau of Labor Statistics ceases to publish the Index,
then (a) the substitute Index published by the Bureau of Labor Statistics
shall be used, or (b) in the event the Bureau of Labor Statistics does not
publish a substitute Index, the successor or most nearly comparable index, as
reasonably determined by Landlord, shall be used, subject to such adjustments
as Landlord may reasonably deem appropriate in order to make the new index
comparable to the Index. Landlord shall give Tenant written notice indicating
the Base Rent, as adjusted pursuant to this Section, and the method 

 4
 

 

of computation and Tenant shall pay to
Landlord an amount equal to any underpayment of Base Rent by Tenant within 30
days of Landlord’s notice to Tenant. Failure to deliver such notice shall not
reduce, abate, waive or diminish Tenant’s obligation to pay the adjusted Base
Rent.

5.             Operating
Expense Payments.   Landlord shall deliver to Tenant a written
estimate of Operating Expenses for each calendar year during the Term (the “Annual Estimate”), which may be revised by Landlord from
time to time during such calendar year. Commencing on the Commencement Date and
thereafter on the first day of each month of the Term, Tenant shall pay
Landlord an amount equal to 1/12th of Tenant’s Share of the Annual Estimate. Payments
for any fractional calendar month shall be prorated.

Notwithstanding anything
to the contrary contained herein, Tenant’s Share of Operating Expenses shall be
(i) 5.12% during months 1 through 4 of the Base Term, (ii) commencing
with month 5 of the Base Term, 10.30%, and (iii) commencing 120 days after delivery of the Additional Premises with Landlord’s Work substantially completed
to Tenant, in the amount set forth on the first page of this Lease.

The term “Operating Expenses” means all costs and expenses of any kind
or description whatsoever incurred or accrued each calendar year by Landlord
with respect to the Project (including, without duplication, Taxes (as defined
in Section 9), capital repairs and improvements amortized over the
lesser of 7 years and the useful life of such capital items, and the costs of
Landlord’s third party property manager (not to exceed 3% of Base Rent) or, if
there is no third party property manager, administration rent in the amount of
3.0% of Base Rent), excluding only:

(a)           the original construction costs of
the Project and renovation prior to the date of the Lease and costs of
correcting defects in such original construction or renovation;

(b)           capital expenditures for expansion of
the Project or capital expenditures for the addition of amenities (such as, for
example, expansion of the health club) not provided for tenants of the Building
as of the date of this Lease;

(c)           interest, principal payments of
Mortgage (as defined in Section 27) debts of Landlord, financing
costs and amortization of funds borrowed by Landlord, whether secured or
unsecured and all payments of base rent (but not taxes or operating expenses)
under any ground lease or other underlying lease of all or any portion of the
Project;

(d)           depreciation of the Project (except
for capital improvements that are includable in Operating Expenses);

(e)           advertising, legal and space planning
expenses and leasing commissions and other costs and expenses incurred in
procuring and leasing space to tenants for the Project, including any leasing
office maintained in the Project, free rent and construction allowances for
tenants;

(f)            legal and other expenses incurred in
the negotiation or enforcement of leases;

(g)           completing, fixturing, improving,
renovating, painting, redecorating or other work, which Landlord pays for or
performs for other tenants within their premises, and costs of correcting
defects in such work;

(h)           costs of utilities outside normal
business hours sold to tenants of the Project;

(i)            costs to be reimbursed by other
tenants of the Project or Taxes to be paid directly by Tenant or other tenants
of the Project, whether or not actually paid;

(j)            salaries, wages, benefits and other
compensation paid to officers and employees of Landlord who are not assigned in
whole or in part to the operation, management, maintenance or repair 

 5
 

 

of the Project, and to
the extent such persons perform services not in connection with the management,
operation, repair or maintenance of the Project;

(k)           general organizational,
administrative and overhead costs relating to maintaining Landlord’s existence,
either as a corporation, partnership, or other entity, including general
corporate, legal and accounting expenses;

(l)            costs (including attorneys’ fees and
costs of settlement, judgments and payments in lieu thereof) incurred in
connection with disputes with tenants, other occupants, or prospective tenants,
and costs and expenses, including legal fees, incurred in connection with
negotiations or disputes with employees, consultants, management agents, leasing
agents, purchasers or mortgagees of the Building;

(m)          costs incurred by Landlord due to the
violation by Landlord, its employees, agents or contractors or any tenant of
the terms and conditions of any lease of space in the Project or any Legal
Requirement (as defined in Section 7);

(n)           penalties, fines or interest incurred
as a result of Landlord’s inability or failure 
to make payment of Taxes and/or to file any tax or informational returns
when due, or from Landlord«‘s failure to make any payment of Taxes required to
be made by Landlord hereunder before delinquency;

(o)           overhead and profit increment paid to
Landlord or to subsidiaries or affiliates of Landlord for goods and/or services
in or to the Project to the extent the same exceeds the costs of such goods
and/or services rendered by unaffiliated third parties on a competitive basis;

(p)           costs of Landlord’s charitable or
political contributions, or of fine art maintained at the Project;

(q)           costs in connection with services
(including electricity), items or other benefits of a type which are not
standard for the Project and which are not available to Tenant without specific
charges therefor, but which are provided to another tenant or occupant of the
Project, whether or not such other tenant or occupant is specifically charged
therefor by Landlord;

(r)            costs incurred in the sale or
refinancing of the Project;

(s)           net income taxes of Landlord or the
owner of any interest in the Project, franchise, capital stock, gift, estate or
inheritance taxes or any federal, state or local documentary taxes imposed
against the Project or any portion thereof or interest therein;

(t)            any expenses otherwise includable
within Operating Expenses to the extent actually reimbursed by persons other
than tenants of the Project under leases for space in the Project;

(u)           any insurance deductibles to the
extent that they exceed $150,000, provided, however, that in the event that
Tenant’s Share of insurance deductibles exceed $50,000, Tenant shall have the
right to elect to fully amortize (with annualized interest on the unamortized
amount at the lesser of 15% or the maximum rate permitted by law in connection
with this Lease) Tenant’s Share of such insurance deductibles over the then
remaining number of months in the Term of the Lease and such payments shall be
due on the first day of each month;  and

(v)           the cost of repairs or other work occasioned by fire, windstorm,
earthquake, flood or other casualty for which there would have been insurance
proceeds if the applicable coverage limit being maintained by Landlord with
respect to such loss were higher than the amount which Landlord elected to
maintain (or for which insurance proceeds would have been available had
Landlord maintained the insurance required to be maintained by Landlord pursuant
to this Lease); provided, however, that with respect to any repairs or other
work occasioned by a casualty (i) to the extent that any of such repairs
or other work is capital in nature, the cost of the same shall be excluded from
Operating Expenses and, (ii)

 6
 

 

in
no event shall Tenant’s Share of the cost of such repairs and other work (not
paid for by insurance proceeds) exceed $150,000 and if Tenant’s
Share exceeds $50,000, Tenant shall have the right to elect to fully amortize
(with annualized interest on the unamortized amount at the lesser of 15% or the
maximum rate permitted by law in connection with this Lease) Tenant’s Share
over the then remaining number of months in the Term of the Lease and such
payments shall be due on the first day of each month.

                Within 90 days after the end of
each calendar year (or such longer period as may be reasonably required),
Landlord shall furnish to Tenant a statement (an “Annual
Statement”) showing in reasonable detail:  (a) the total and Tenant’s Share of actual
Operating Expenses for the previous calendar year, and (b) the total of
Tenant’s payments in respect of Operating Expenses for such year. If Tenant’s
Share of actual Operating Expenses for such year exceeds Tenant’s payments of
Operating Expenses for such year, the excess shall be due and payable by Tenant
as Rent within 30 days after delivery of such Annual Statement to Tenant. If
Tenant’s payments of Operating Expenses for such year exceed Tenant’s Share of
actual Operating Expenses for such year Landlord shall pay the excess to Tenant
within 30 days after delivery of such Annual Statement, except that after the
expiration, or earlier termination of the Term or if Tenant is delinquent in
its obligation to pay Rent, Landlord shall pay the excess to Tenant after
deducting all other amounts due Landlord. Landlord shall have the right to
amend the Annual Statement from time to time; provided, however, that Landlord
shall have no right, after the date which is 12 months after Landlord’s
delivery of the Annual Statement to Tenant, to amend the Annual Statement with
respect to (x) association fees if Landlord actually received a bill for
those fees prior to the expiration of such 12 month period and did not amend
the Annual Statement to reflect the same within such 12 month period, and (y) costs
for services (such as landscaping) where Landlord has entered into a direct
contractual relationship with the vendor providing the service and the timing
of bills from such vendor is within Landlord’s reasonable control. The parties
acknowledge that the preceding limitation shall not apply to costs such as
Taxes, Utilities or other matters outside of Landlord’s reasonable control and
shall not apply to any newly billed association fees.

The Annual Statement
shall be final and binding upon Tenant unless Tenant, within 45 days after
Tenant’s receipt thereof, shall contest any item therein by giving written
notice to Landlord, specifying each item contested and the reason therefor. If,
during such 45 day period, Tenant reasonably and in good faith questions or
contests the accuracy of Landlord’s statement of Tenant’s Share of Operating
Expenses, Landlord will provide Tenant with access to Landlord’s books and
records relating to the operation of the Project and such information as
Landlord reasonably determines to be responsive to Tenant’s questions (the “Expense Information”). If after Tenant’s review of such
Expense Information, Landlord and Tenant cannot agree upon the amount of Tenant’s
Share of Operating Expenses, then Tenant shall have the right to have an
independent regionally recognized public accounting firm selected by Tenant,
working pursuant to a fee arrangement other than a contingent fee (at Tenant’s
sole cost and expense) and approved by Landlord (which approval shall not be
unreasonably withheld or delayed), audit and/or review the Expense Information
for the year in question (the “Independent Review”).
The results of any such Independent Review shall be binding on Landlord and
Tenant. If the Independent Review shows that the payments actually made by
Tenant with respect to Operating Expenses for the calendar year in question
exceeded Tenant’s Share of Operating Expenses for such calendar year, Landlord
shall at Landlord’s option either (i) credit the excess amount to the next
succeeding installments of estimated Operating Expenses or (ii) pay the
excess to Tenant within 30 days after delivery of such statement, except that
after the expiration or earlier termination of this Lease or if Tenant is
delinquent in its obligation to pay Rent, Landlord shall pay the excess to
Tenant after deducting all other amounts due Landlord. If the Independent
Review shows that Tenant’s payments with respect to Operating Expenses for such
calendar year were less than Tenant’s Share of Operating Expenses for the
calendar year, Tenant shall pay the deficiency to Landlord within 30 days after
delivery of such statement. If the Independent Review shows that Tenant has
overpaid with respect to Operating Expenses by more than 5% then Landlord shall
reimburse Tenant for all costs incurred by Tenant for the Independent Review. Operating Expenses for the calendar years in which Tenant’s
obligation to share therein begins and ends shall be prorated. Notwithstanding
anything set forth herein to the contrary, if the Building is not at least 95%
occupied on average during any year of the Term, Tenant’s Share of Operating
Expenses for such year shall be computed as though the Building had been 95%
occupied on average during such year.

 7
 

 

“Tenant’s Share” shall be the percentage set forth on the
first page of this Lease as Tenant’s Share as reasonably adjusted by
Landlord for actual changes in the physical size of the Premises or the Project
occurring thereafter; provided, however that Tenant’s Share shall not increase
if Landlord voluntarily takes any space in the Building “off line”. Landlord
may equitably increase Tenant’s Share for any item of expense or cost
reimbursable by Tenant that relates to a repair, replacement, or service that
benefits only the Premises or only a portion of the Project that includes the
Premises or that varies with occupancy or use provided Landlord makes such
adjustments equitably for all tenants of the Building. Base Rent, Tenant’s
Share of Operating Expenses and all other amounts payable by Tenant to Landlord
hereunder are collectively referred to herein as “Rent.”

6.             Security Deposit.   Tenant shall deposit with Landlord,
upon delivery of an executed copy of this Lease to Landlord, a security deposit
(the “Security Deposit”) for the performance
of all of Tenant’s obligations hereunder in the amount set forth on page 1
of this Lease, which Security Deposit shall be in the form of an unconditional
and irrevocable letter of credit (the “Letter of Credit”):  (i) in form and substance satisfactory
to Landlord, (ii) naming Landlord as beneficiary, (iii) expressly
allowing Landlord to draw upon it at any time from time to time by delivering
to the issuer notice that Landlord is entitled to draw thereunder, (iv) issued
by an FDIC-insured financial institution satisfactory to Landlord, and (v) redeemable
by presentation of a sight draft in the state of Landlord’s choice. If Tenant
does not provide Landlord with a substitute Letter of Credit complying with all
of the requirements hereof at least 10 days before the stated expiration date
of any then current Letter of Credit, Landlord shall have the right to draw the
full amount of the current Letter of Credit and hold the funds drawn in cash
without obligation for interest thereon as the Security Deposit. The Security
Deposit shall be held by Landlord as security for the performance of Tenant’s
obligations under this Lease. The Security Deposit is not an advance rental
deposit or a measure of Landlord’s damages in case of Tenant’s default. Upon
each occurrence of a Default (as defined in Section 20), Landlord
may use all or any part of the Security Deposit to pay delinquent payments due
under this Lease, and the cost of any damage, injury, expense or liability
caused by such Default, without prejudice to any other remedy provided herein
or provided by law. Upon any such use of all or any portion of the Security
Deposit, if applied by making a draw on the Letter of Credit, Tenant shall
restore the Letter of Credit on demand to the full amount of the Security
Deposit, and if applied by expending the amounts held in cash as a Security
Deposit, Tenant shall pay Landlord on demand the amount that will restore the
Security Deposit to the amount set forth on Page 1 of this Lease. Tenant
hereby waives the provisions of any law, now or hereafter in force, including,
but not limited to, California Civil Code Section 1951.7,which provide
that Landlord may claim from a security deposit only those sums reasonably
necessary to remedy defaults in the payment of Rent, to repair damage caused by
Tenant or to clean the Premises, it being agreed that Landlord may, in addition,
claim those sums reasonably necessary to compensate Landlord for any other loss
or damage, foreseeable or unforeseeable, caused by the act or omission of
Tenant or any officer, employee, agent or invitee of Tenant. Upon bankruptcy or
other debtor-creditor proceedings against Tenant, the Security Deposit shall be
deemed to be applied first to the payment of Rent and other charges due
Landlord for periods prior to the filing of such proceedings. Upon any such use
of all or any portion of the Security Deposit, Tenant shall, within 5 days
after demand from Landlord, restore the Security Deposit to its original amount.
If Tenant shall fully perform every provision of this Lease to be performed by
Tenant, the Security Deposit, or any balance thereof (i.e., after deducting
therefrom all amounts to which Landlord is entitled under the provisions of
this Lease), shall be returned to Tenant (or, at Landlord’s option, to the last
assignee of Tenant’s interest hereunder) within 90 days after the expiration or
earlier termination of this Lease.

If
Landlord transfers its interest in the Project or this Lease, Landlord shall
either (a) transfer any Security Deposit then held by Landlord to a person
or entity assuming Landlord’s obligations under this Section 6, or (b) return
to Tenant any Security Deposit then held by Landlord and remaining after the
deductions permitted herein. Upon such transfer to such transferee or the
return of the Security Deposit to Tenant, Landlord shall have no further
obligation with respect to the Security Deposit, and Tenant’s right to the
return of the Security Deposit shall apply solely against Landlord’s transferee.
The Security Deposit is not an advance rental deposit or a measure of Landlord’s
damages in case of Tenant’s default. Landlord’s obligation respecting the
Security Deposit is that of a debtor, not a trustee, and no interest shall
accrue thereon.

 8
 

 

7.             Use.   The
Premises shall be used solely for the Permitted Use set forth in the basic
lease provisions on page 1 of this Lease, and in compliance with all laws,
orders, judgments, ordinances, regulations, codes, directives, permits,
licenses, covenants and restrictions now or hereafter applicable to the
Premises, and to the use and occupancy thereof, including, without limitation,
the Americans With Disabilities Act, 42 U.S.C. § 12101, et seq. (together with
the regulations promulgated pursuant thereto, “ADA”)
(collectively, “Legal Requirements” and each, a “Legal Requirement”). Tenant shall, upon 5
days’ written notice from Landlord, discontinue any use of the Premises which
is declared by any Governmental Authority (as defined in Section 9)
having jurisdiction to be a violation of a Legal Requirement. Tenant will not
use or permit the Premises to be used for any purpose or in any manner that
would void Tenant’s or Landlord’s insurance, increase the insurance risk, or
cause the disallowance of any sprinkler or other credits. The provisions of the
preceding sentence are intended to apply in the event that Tenant’s use of the
Premises changes from the use that Tenant has disclosed to Landlord that Tenant
will be making of the Premises as of the Commencement Date. Landlord
acknowledges that Landlord does not object to the use which Tenant has
disclosed to Landlord that it shall be making of the Premises as of the
Commencement Date and Tenant may continue to make such use of the Premises
during the Term of the Lease. Tenant shall not permit any part of the Premises
to be used as a “place of public accommodation”, as defined in the ADA or any
similar legal requirement. Tenant shall reimburse Landlord promptly upon demand
for any additional premium charged for any such insurance policy by reason of
Tenant’s failure to comply with the provisions of this Section or
otherwise caused by Tenant’s use and/or occupancy of the Premises. Tenant will
use the Premises in a careful, safe and proper manner and will not commit or
permit waste, overload the floor or structure of the Premises, subject the
Premises to use that would damage the Premises or obstruct or interfere with
the rights of Landlord or other tenants or occupants of the Project, including
conducting or giving notice of any auction, liquidation, or going out of
business sale on the Premises, or using or allowing the Premises to be used for
any unlawful purpose. Tenant shall cause any equipment or machinery to be
installed in the Premises so as to reasonably prevent sounds or vibrations from
the Premises from extending into Common Areas, or other space in the Project. Tenant
shall not place any machinery or equipment weighing 500 pounds or more in or
upon the Premises or transport or move such items through the Common Areas of
the Project or in the Project elevators without the prior written consent of
Landlord which consent shall not be unreasonably withheld. Except as may be
provided under the Work Letter and/or consented to by Landlord in connection
with any Alterations, Tenant shall not, without the prior written consent of
Landlord, use the Premises in any manner which will require ventilation, air exchange,
heating, gas, steam, electricity or water beyond the existing capacity of the
Project as proportionately allocated to the Premises based upon Tenant’s Share
as usually furnished for the Permitted Use.

Tenant, at its sole
expense, shall make any alterations or modifications to the interior or the
exterior of the Premises or the Project that are required by Legal Requirements
(including, without limitation, compliance of the Premises with the ADA)
related to Tenant’s use or occupancy of the Premises. Notwithstanding any other
provision herein to the contrary, Tenant shall be responsible for any and all
demands, claims, liabilities, losses, costs, expenses, actions, causes of
action, damages or judgments, and all reasonable expenses incurred in investigating
or resisting the same (including, without limitation, reasonable attorneys’
fees, charges and disbursements and costs of suit) (collectively, “Claims”) arising out of or in connection with Legal
Requirements solely related to Tenant’s use or occupancy of the Premises,
provided that if alterations or modifications to the Building or Project (that
are not improvements made for the exclusive benefit of another tenant) are
required as a result of the occupancy of the Building by one or more tenants, and
not as a result solely of Tenant’s occupancy, the cost of the alterations or
modifications shall be paid by Landlord as an Operating Expense. Tenant shall
indemnify, defend, hold and save Landlord harmless from and against any and all
Claims arising out of or in connection with any failure of the Premises to
comply with any Legal Requirement.

8.             Holding Over.   If,
with Landlord’s express written consent, Tenant retains possession of the
Premises after the termination of the Term, (i) unless otherwise agreed in
such written consent, such possession shall be subject to immediate termination
by Landlord at any time, (ii) all of the other terms and provisions of
this Lease (including, without limitation, the adjustment of Base Rent pursuant
to Section 4 hereof) shall remain in full force and effect
(excluding any expansion or renewal option or other similar right or option)
during such holdover period, (iii) Tenant shall continue to pay Base Rent
in the 

 9
 

 

amount payable upon the
date of the expiration or earlier termination of this Lease or such other
amount as Landlord may indicate, in Landlord’s sole and absolute discretion, in
such written consent, and (iv) all other payments shall continue under the
terms of this Lease. If Tenant remains in possession of the Premises after the
expiration or earlier termination of the Term without the express written
consent of Landlord, (A) Tenant shall become a tenant at sufferance upon
the terms of this Lease except that the monthly rental shall be equal to 150%
of Rent in effect during the last 30 days of the Term, and (B) Tenant
shall be responsible for all damages suffered by Landlord resulting from or
occasioned by Tenant’s holding over, including consequential damages. No
holding over by Tenant, whether with or without consent of Landlord, shall
operate to extend this Lease except as otherwise expressly provided, and this Section 8
shall not be construed as consent for Tenant to retain possession of the
Premises. Acceptance by Landlord of Rent after the expiration of the Term or
earlier termination of this Lease shall not result in a renewal or
reinstatement of this Lease.

9.             Taxes.   Landlord
shall pay, as part of Operating Expenses, all taxes, levies, assessments and
governmental charges of any kind (collectively referred to as “Taxes”) imposed by any federal, state, regional, municipal,
local or other governmental authority or agency, including, without limitation,
quasi-public agencies (collectively, “Governmental Authority”)
during the Term, including, without limitation, all Taxes:  (i) imposed on or measured by or based,
in whole or in part, on rent payable to Landlord under this Lease and/or from
the rental by Landlord of the Project or any portion thereof, or (ii) based
on the square footage, assessed value or other measure or evaluation of any
kind of the Premises or the Project, or (iii) assessed or imposed by or on
the operation or maintenance of any portion of the Premises or the Project,
including parking, or (iv) assessed or imposed by, or at the direction of,
or resulting from statutes or regulations, or interpretations thereof,
promulgated by, any Governmental Authority, or (v) imposed as a license or
other fee on Landlord’s business of leasing space in the Project. Landlord may
contest by appropriate legal proceedings the amount, validity, or application
of any Taxes or liens securing Taxes. Taxes shall not include any net income
taxes imposed on Landlord unless such net income taxes are in substitution for
any Taxes payable hereunder. If any such Tax is levied or assessed directly
against Tenant, then Tenant shall be responsible for and shall pay the same at
such times and in such manner as the taxing authority shall require. Tenant
shall pay, prior to delinquency, any and all Taxes levied or assessed against
any personal property or trade fixtures placed by Tenant in the Premises,
whether levied or assessed against Landlord or Tenant. If any Taxes on Tenant’s
personal property or trade fixtures are levied against Landlord or Landlord’s
property, or if the assessed valuation of the Project is increased by a value
attributable to improvements in or alterations to the Premises, whether owned
by Landlord or Tenant and whether or not affixed to the real property so as to
become a part thereof, higher than the base valuation on which Landlord from
time-to-time allocates Taxes to all tenants in the Project, Landlord shall have
the right, but not the obligation, to pay such Taxes. Landlord’s determination
of any excess assessed valuation shall be binding and conclusive, absent
manifest error. The amount of any such payment by Landlord shall constitute
Additional Rent due from Tenant to Landlord within 30 days of Landlord’s
demand.

10.           Parking.   Subject
to all matters of record, Force Majeure, a Taking (as defined in Section 19
below) and the exercise by Landlord of its rights hereunder, Tenant shall have
the right, in common with other tenants of the Project pro rata in accordance
with the rentable area of the Premises and the rentable areas of the Project
occupied by such other tenants, to park in those areas designated for
non-reserved parking, subject in each case to Landlord’s rules and
regulations. Landlord may allocate parking spaces among Tenant and other
tenants in the Project pro rata as described above if Landlord determines that
such parking facilities are becoming crowded. Landlord shall not be responsible
for enforcing Tenant’s parking rights against any third parties, including
other tenants of the Project. If Landlord elects to enforce parking rights,
Landlord shall not do so in a discriminatory manner.

11.           Utilities, Services.

Landlord shall provide,
subject to the terms of this Section 11, water, electricity, heat,
light, power, telephone, sewer, and other utilities (including gas and fire
sprinklers to the extent the Project is plumbed for such services), refuse and
trash collection and janitorial services (collectively, “Utilities”).
Except for any separately metered Utilities to the Premises, Landlord shall
pay, as Operating Expenses or subject to 

 10
 

 

Tenant’s
reimbursement obligation, for all Utilities used on the Premises, all
maintenance charges for Utilities, and any storm sewer charges or other similar
charges for Utilities imposed by any Governmental Authority or Utility
provider, and any taxes, penalties, surcharges or similar charges thereon. Landlord
may cause, at Tenant’s expense, any Utilities to be separately metered or
charged directly to Tenant by the provider. Tenant shall pay directly to the
Utility provider, prior to delinquency, any separately metered Utilities and
services which may be furnished to Tenant or the Premises during the Term. Tenant
shall pay, as part of Operating Expenses, its share of all charges for jointly
metered Utilities based upon consumption, as reasonably determined by Landlord.
No interruption or failure of Utilities, from any cause whatsoever other than
Landlord’s willful misconduct, shall result in eviction or constructive
eviction of Tenant, termination of this Lease or the abatement of Rent. Tenant
agrees to limit use of water and sewer with respect to Common Areas to normal
restroom use.

Notwithstanding anything
in this Lease to the contrary, if any interruption or failure of Utilities or services
is due to the gross negligence or willful misconduct of Landlord, its
employees, agents or contractors, and such interruption renders a substantial
portion of the Premises untenantable for their intended purposes for more than
5 continuous business days, and if the Premises remain untenantable for a
period longer than is covered by Tenant’s business interruption insurance,
then, as Tenant’s sole and exclusive remedy for such failure, Tenant’s
obligation to pay Base Rent shall, to the extent that Landlord is entitled to
receive insurance proceeds in connection with the abatement in question, abate
for the period commencing with the expiration of coverage under Tenant’s
business interruption insurance and for so long as the Premises remains
substantially untenantable.

12.           Alterations and Tenant’s
Property.   Any alterations, additions, or improvements made to
the Premises by or on behalf of Tenant, including additional locks or bolts of
any kind or nature upon any doors or windows in the Premises, but excluding
installation, removal or realignment of furniture systems (other than removal
of furniture systems owned or paid for by Landlord) not involving any
modifications to the structure or connections (other then by ordinary plugs or
jacks) to Building Systems (as defined in Section 13) (“Alterations”) shall be subject to Landlord’s prior written
consent, which may be given or withheld in Landlord’s sole discretion if any
such Alteration affects the structure and shall otherwise not be unreasonably
withheld. It shall be reasonable for Landlord to withhold its consent to any
Alteration which affects Building Systems if such Alteration will require
ventilation, air exchange, heating, gas, steam, electricity or water beyond the
existing capacity of the Project as proportionately allocated to the Premises
based upon Tenant’s Share as usually furnished for the Permitted Use and/or in
the event that Landlord determines that a Building System upgrade is required
unless Tenant pays 100% of the cost incurred by Landlord in connection with
modifying or upgrading the applicable Building System.  If Landlord approves any Alterations, Landlord
may impose such conditions on Tenant in connection with the commencement,
performance and completion of such Alterations as Landlord may deem reasonably
appropriate. Any request for approval shall be in writing, delivered not less
than 15 business days in advance of any proposed construction, and accompanied
by plans, specifications, bid proposals, work contracts and such other information
concerning the nature and cost of the alterations as may be reasonably
requested by Landlord, including the identities and mailing addresses of all
persons performing work or supplying materials. Landlord’s right to review
plans and specifications and to monitor construction shall be solely for its
own benefit, and Landlord shall have no duty to ensure that such plans and
specifications or construction comply with applicable Legal Requirements. Tenant
shall cause, at its sole cost and expense, all Alterations to comply with
insurance requirements and with Legal Requirements and shall implement at its
sole cost and expense any alteration or modification required by Legal
Requirements as a result of any Alterations. Tenant shall pay to Landlord, as
Additional Rent, on demand an amount equal to 3% of all charges incurred by
Tenant or its contractors or agents in connection with any Alteration to cover
Landlord’s overhead and expenses for plan review, coordination, scheduling and
supervision. Before Tenant begins any Alteration, Landlord may post on and
about the Premises notices of non-responsibility pursuant to applicable law. Tenant
shall reimburse Landlord for, and indemnify and hold Landlord harmless from,
any expense incurred by Landlord by reason of faulty work done by Tenant or its
contractors or inadequate cleanup.

Tenant shall furnish
security or make other arrangements satisfactory to Landlord to assure payment
for the completion of all Alterations work free and clear of liens, and shall
provide (and cause 

 11
 

 

each
contractor or subcontractor to provide) certificates of insurance for workers’
compensation and other coverage in amounts and from an insurance company
satisfactory to Landlord protecting Landlord against liability for personal
injury or property damage during construction. Upon completion of any
Alterations, Tenant shall deliver to Landlord: 
(i) sworn statements setting forth the names of all contractors and
subcontractors who did the work and final lien waivers from all such
contractors and subcontractors; and (ii) “as built” plans for any such
Alteration.

Except for Removable Installations (as hereinafter defined),
all Installations (as hereinafter defined) shall be and shall remain the
property of Landlord during the Term and following the expiration or earlier
termination of the Term, shall not be removed by Tenant at any time during the
Term, and shall remain upon and be surrendered with the Premises as a part
thereof. Notwithstanding the foregoing, Landlord may, at the time its approval
of any such Installation is requested, notify Tenant that Landlord requires
that Tenant remove such Installation upon the expiration or earlier termination
of the Term, in which event Tenant shall remove such Installation in accordance
with the immediately succeeding sentence. Upon the expiration or earlier
termination of the Term, Tenant shall remove (i) all wires, cables or
similar equipment which Tenant has installed in the Premises or in the risers
or plenums of the Building, (ii) any Installations for which Landlord has
given Tenant notice of removal in accordance with the immediately preceding
sentence, and (iii) all of Tenant’s Property (as hereinafter defined), and
Tenant shall restore and repair any damage caused by or occasioned as a result
of such removal, including, without limitation, capping off all such
connections behind the walls of the Premises and repairing any holes. During
any restoration period beyond the expiration or earlier termination of the
Term, Tenant shall pay Rent to Landlord as provided herein as if said space
were otherwise occupied by Tenant. If Landlord is requested by Tenant or any
lender, lessor or other person or entity claiming an interest in any of Tenant’
Property to waive any lien Landlord may have against any of Tenant’s Property,
and Landlord consents to such waiver, then Landlord shall be entitled to be
paid as administrative rent a fee of $1,000 per occurrence for its time and
effort in preparing and negotiating such a waiver of lien.

For purposes of this
Lease, (w)  “Removable Installations” means any items listed on Exhibit F attached hereto and any items agreed by
Landlord in writing to be included on Exhibit F
in the future, (x) “Tenant’s
Property” means Removable Installations and, other than
Installations, any personal property or equipment of Tenant that may be removed
without material damage to the Premises, and (z) “Installations”
means all property of any kind paid for with the TI Fund, all Alterations, all
fixtures, and all partitions, hardware, built-in machinery, built-in casework
and cabinets and other similar additions, equipment, property and improvements
built into the Premises so as to become an integral part of the Premises,
including, without limitation, fume hoods which penetrate the roof or plenum
area, built-in cold rooms, built-in warm rooms, walk-in cold rooms, walk-in
warm rooms, deionized water systems, glass washing equipment, autoclaves,
chillers, built-in plumbing, electrical and mechanical equipment and systems,
and any power generator and transfer switch.

13.           Landlord’s Repairs.   Landlord,
as an Operating Expense, shall maintain all of the structural, exterior,
parking and other Common Areas of the Project, including HVAC, plumbing, fire
sprinklers, elevators and all other building systems serving the Premises and
other portions of the Project (“Building Systems”),
in good repair, reasonable wear and tear and uninsured losses and damages
caused by Tenant, or by any of Tenant’s agents, servants, employees, invitees
and contractors (collectively, “Tenant Parties”)
excluded. Losses and damages caused by Tenant or any Tenant Party shall be
repaired by Landlord, to the extent not covered by insurance, at Tenant’s sole
cost and expense. Landlord reserves the right to stop Building Systems services
when necessary (i) by reason of accident or emergency, or (ii) for
planned repairs, alterations or improvements, which are, in the judgment of
Landlord, desirable or necessary to be made, until said repairs, alterations or
improvements shall have been completed. Landlord shall have no responsibility
or liability for failure to supply Building Systems services during any such
period of interruption; provided, however, that Landlord shall,
except in case of emergency, make a commercially reasonable effort to give
Tenant 24 hours advance notice of any planned stoppage of Building Systems
services for routine maintenance, repairs, alterations or improvements. Tenant
shall promptly give Landlord written notice of any repair required by Landlord
pursuant to this Section, after which Landlord shall make a commercially
reasonable effort to effect such repair. Landlord shall not be liable for any
failure to make any repairs or to perform any maintenance 

 12
 

 

unless such failure
shall persist for an unreasonable time after Tenant’s written notice of the
need for such repairs or maintenance. Tenant waives its rights under any state
or local law to terminate this Lease or to make such repairs at Landlord’s
expense and agrees that the parties’ respective rights with respect to such
matters shall be solely as set forth herein. Repairs required as the result of
fire, earthquake, flood, vandalism, war, or similar cause of damage or
destruction shall be controlled by Section 18.

14.           Tenant’s Repairs.   Subject
to Section 13 hereof, Tenant, at its expense, shall repair, replace
and maintain in good condition all portions of the Premises, including, without
limitation, entries, doors, ceilings, interior windows, interior walls, and the
interior side of demising walls. Such repair and replacement may include
capital expenditures and repairs whose benefit may extend beyond the Term. Should
Tenant fail to make any such repair or replacement or fail to maintain the
Premises, Landlord shall give Tenant notice of such failure. If Tenant fails to
commence cure of such failure within 10 days of Landlord’s notice, and
thereafter diligently prosecute such cure to completion, Landlord may perform
such work and shall be reimbursed by Tenant within 10 days after demand therefor;
provided, however, that if such failure by Tenant creates or could create an
emergency, Landlord may immediately commence cure of such failure and shall
thereafter be entitled to recover the costs of such cure from Tenant. Subject
to Sections 17 and 18, Tenant shall bear the full uninsured cost
of any repair or replacement to any part of the Project that results from
damage caused by Tenant or any Tenant Party and any repair that benefits only
the Premises.

15.           Mechanic’s Liens.   Tenant
shall discharge, by bond or otherwise, any mechanic’s lien filed against the
Premises or against the Project for work claimed to have been done for, or
materials claimed to have been furnished to, Tenant within 10 days after the
filing thereof, at Tenant’s sole cost and shall otherwise keep the Premises and
the Project free from any liens arising out of work performed, materials
furnished or obligations incurred by Tenant. Should Tenant fail to discharge
any lien described herein, Landlord shall have the right, but not the
obligation, to pay such claim or post a bond or otherwise provide security to
eliminate the lien as a claim against title to the Project and the cost thereof
shall be immediately due from Tenant as Additional Rent. If Tenant shall lease
or finance the acquisition of office equipment, furnishings, or other personal
property of a removable nature utilized by Tenant in the operation of Tenant’s
business, Tenant warrants that any Uniform Commercial Code Financing Statement
filed as a matter of public record by any lessor or creditor of Tenant will
upon its face or by exhibit thereto indicate that such Financing Statement is
applicable only to removable personal property of Tenant located within the
Premises. In no event shall the address of the Project be furnished on the
statement without qualifying language as to applicability of the lien only to
removable personal property, located in an identified suite held by Tenant.

16.           Indemnification.   Tenant
hereby indemnifies and agrees to defend, save and hold Landlord harmless from
and against any and all Claims for injury or death to persons or damage to
property occurring within or about the Premises, arising directly or indirectly
out of use or occupancy of the Premises or a breach or default by Tenant in the
performance of any of its obligations hereunder, unless caused solely by the
willful misconduct or gross negligence of Landlord or Landlord’s officers,
directors, employees or agents. Landlord shall not be liable to Tenant for, and
Tenant assumes all risk of damage to, personal property (including, without
limitation, loss of records kept within the Premises). Tenant further waives
any and all Claims for injury to Tenant’s business or loss of income relating
to any such damage or destruction of personal property (including, without
limitation, any loss of records). Landlord shall not be liable for any damages
arising from any act, omission or neglect of any tenant in the Project or of
any other third party.

17.           Insurance.   Landlord shall maintain all risk
property and, if applicable, sprinkler damage insurance covering the full
replacement cost of the Project or such lesser coverage amount as Landlord may
elect provided such coverage amount is not less than 90% of such full
replacement cost. Landlord shall further procure and maintain commercial
general liability insurance with a single loss limit of not less than
$2,000,000 for bodily injury and property damage with respect to the Project. Landlord
may, but is not obligated to, maintain such other insurance and additional
coverages as it may deem necessary, including, but not limited to, flood,
environmental hazard and earthquake, loss or failure of building equipment,
errors and omissions, rental loss during the period of repair or rebuilding,
workers’ 

 13
 

 

compensation insurance
and fidelity bonds for employees employed to perform services and insurance for
any improvements installed by Tenant or which are in addition to the standard
improvements customarily furnished by Landlord without regard to whether or not
such are made a part of the Project. All such insurance shall be included as
part of the Operating Expenses. The Project may be included in a blanket policy
(in which case the cost of such insurance allocable to the Project will be
determined by Landlord based upon the insurer’s cost calculations). Tenant shall also reimburse Landlord for any
increased premiums or additional insurance which Landlord reasonably deems
necessary as a result of Tenant’s use of the Premises. The use which
Tenant has disclosed to Landlord that it shall be making of the Premises as of
the Commencement Date shall not, as of the Commencement Date, result in an
increase in Landlord’s insurance premium or require additional insurance.

Tenant, at its sole cost
and expense, shall maintain during the Term: 
all risk property insurance with business interruption and extra expense
coverage, covering the full replacement cost of all property and improvements
installed or placed in the Premises by Tenant at Tenant’s expense; workers’
compensation insurance with no less than the minimum limits required by law;
employer’s liability insurance with such limits as required by law; and
commercial general liability insurance, with a minimum limit of not less than $2,000,000
per occurrence for bodily injury and property damage with respect to the
Premises. The commercial general liability insurance policy shall name
Landlord, its officers, directors, employees, managers, agents, invitees and
contractors (collectively, “Landlord Parties”),
as additional insureds; shall insure on an occurrence and not a claims-made
basis; shall be issued by insurance companies which have a rating of not less
than policyholder rating of A and financial category rating of at least Class X
in “Best’s Insurance Guide”; shall not be cancelable for nonpayment of premium
unless 30 days prior written notice shall have been given to Landlord from the
insurer; contain a hostile fire endorsement and a contractual liability
endorsement; and provide primary coverage to Landlord (any policy issued to
Landlord providing duplicate or similar coverage shall be deemed excess over
Tenant’s policies). Copies of such policies (if requested  by Landlord), or certificates of insurance
showing the limits of coverage required hereunder and showing Landlord as an
additional insured, along with reasonable evidence of the payment of premiums
for the applicable period, shall be delivered to Landlord by Tenant upon
commencement of the Term and upon each renewal of said insurance. Tenant’s
policy may be a “blanket policy” with an aggregate per location endorsement
which specifically provides that the amount of insurance shall not be
prejudiced by other losses covered by the policy. Tenant shall, at least 5 days
prior to the expiration of such policies, furnish Landlord with renewal
certificates.

In each instance where
insurance is to name Landlord as an additional insured, Tenant shall upon
written request of Landlord also designate and furnish certificates so
evidencing Landlord as additional insured to: 
(i) any lender of Landlord holding a security interest in the
Project or any portion thereof, (ii) the landlord under any lease wherein
Landlord is tenant of the real property on which the Project is located, if the
interest of Landlord is or shall become that of a tenant under a ground or
other underlying lease rather than that of a fee owner, and/or (iii) any
management company retained by Landlord to manage the Project.

The property insurance
obtained by Landlord and Tenant shall include a waiver of subrogation by the
insurers and all rights based upon an assignment from its insured, against
Landlord or Tenant, and their respective officers, directors, employees,
managers, agents, invitees and contractors (“Related Parties”),
in connection with any loss or damage thereby insured against. Neither party
nor its respective Related Parties shall be liable to the other for loss or
damage caused by any risk insured against under property insurance required to
be maintained hereunder including loss or damage to any building, structure, or
tangible personal property of Landlord, Tenant or their respective Related
Parties, and each party waives any claims against the other party, and its
respective Related Parties, for such loss or damage even though such loss or
damage might have been occasioned by the negligence of Landlord, Tenant or
their respective Related Parties, if such loss or damage would fall within the
scope of an all risk policy of insurance. The failure of a party to insure its
property shall not void this waiver. Landlord and its respective Related
Parties shall not be liable for, and Tenant hereby waives all claims against
such parties for, business interruption and losses occasioned thereby sustained
by Tenant or any person claiming through Tenant resulting from any accident or
occurrence in or upon the Premises or the Project from any cause whatsoever. If
the foregoing waivers shall contravene any law with respect to exculpatory 

 14
 

 

agreements,
the liability of Landlord or Tenant shall be deemed not released but shall be
secondary to the other’s insurer.

Landlord may require
insurance policy limits to be raised to conform with requirements of Landlord’s
lender and/or to bring coverage limits to levels then being generally required
of new tenants within the Project; provided, however, that the increased amount
of coverage is consistent with coverage amounts then being required by
institutional owners of similar projects with tenants occupying similar size
premises in the geographical area in which the Project is located.

18.           Restoration.   If,
at any time during the Term, the Project or the Premises are damaged or
destroyed by a fire or other insured casualty, Landlord shall notify Tenant
within 60 days after discovery of such damage as to the amount of time Landlord
reasonably estimates it will take to restore the Project or the Premises, as
applicable (the “Restoration Period”). If the
Restoration Period is estimated to exceed 12 months (the “Maximum
Restoration Period”), Landlord may, in such notice, elect to
terminate this Lease as of the date that is 75 days after the date of discovery
of such damage or destruction; provided, however, that notwithstanding
Landlord’s election to restore, Tenant may elect to terminate this Lease by
written notice to Landlord delivered within 5 business days of receipt of a
notice from Landlord estimating a Restoration Period for the Premises longer
than the Maximum Restoration Period. Unless either Landlord or Tenant so elect
to terminate this Lease, Landlord shall, subject to receipt of sufficient
insurance proceeds (with any deductible to be treated as a current Operating
Expense), promptly restore the Premises (excluding the improvements installed
by Tenant or by Landlord and paid for by Tenant), subject to delays arising
from the collection of insurance proceeds, from Force Majeure events or as
needed to obtain any license, clearance or other authorization of any kind
required to enter into and restore the Premises issued by any Governmental
Authority having jurisdiction over the use, storage, handling, treatment,
generation, release, disposal, removal or remediation of Hazardous Materials
(as defined in Section 30) in, on or about the Premises
(collectively referred to herein as “Hazardous Materials
Clearances”); provided, however, that if repair or
restoration of the Premises is not substantially complete as of the end of the
Maximum Restoration Period or, if longer, the Restoration Period, Landlord may,
in its sole and absolute discretion, elect not to proceed with such repair and
restoration, or Tenant may by written notice to Landlord delivered within 5
business days of the expiration of the Maximum Restoration Period or, if
longer, the Restoration Period, elect to terminate this Lease, in which event
Landlord shall be relieved of its obligation to make such repairs or
restoration and this Lease shall terminate as of the date that is 75 days after
the later of:  (i) discovery of such
damage or destruction, or (ii) the date all required Hazardous Materials
Clearances are obtained, but Landlord shall retain any Rent paid and the right
to any Rent payable by Tenant prior to such election by Landlord or Tenant.

Tenant, at its expense,
shall promptly perform, subject to delays arising from the collection of
insurance proceeds, from Force Majeure (as defined in Section 34)
events or to obtain Hazardous Material Clearances, all repairs or restoration
not required to be done by Landlord and shall promptly re-enter the Premises
and commence doing business in accordance with this Lease. Notwithstanding the
foregoing, Landlord may terminate this Lease if the Premises are damaged during
the last 1 year of the Term and Landlord reasonably estimates that it will take
more than 2 months to repair such damage, or if insurance proceeds are not
available for such restoration. Rent shall be abated from the date all required
Hazardous Material Clearances are obtained until the Premises are repaired and
restored, in the proportion which the area of the Premises, if any, which is
not usable by Tenant bears to the total area of the Premises, unless Landlord
provides Tenant with other space during the period of repair that is suitable
for the temporary conduct of Tenant’s business. Such abatement shall be the
sole remedy of Tenant, and except as provided in this Section 18,
Tenant waives any right to terminate the Lease by reason of damage or casualty
loss.

The provisions of this
Lease, including this Section 18, constitute an express agreement
between Landlord and Tenant with respect to any and all damage to, or
destruction of, all or any part of the Premises, or any other portion of the
Project, and any statute or regulation which is now or may hereafter be in
effect shall have no application to this Lease or any damage or destruction to
all or any part of the 

 15
 

 

Premises
or any other portion of the Project, the parties hereto expressly agreeing that
this Section 18 sets forth their entire understanding and agreement
with respect to such matters.

19.           Condemnation.   If
the whole or any material part of the Premises or the Project is taken for any
public or quasi-public use under governmental law, ordinance, or regulation, or
by right of eminent domain, or by private purchase in lieu thereof (a “Taking” or “Taken”), and
the Taking would in Landlord’s reasonable judgment either prevent or materially
interfere with Tenant’s use of the Premises or materially interfere with or
impair Landlord’s ownership or operation of the Project, then upon written
notice by Landlord this Lease shall terminate and Rent shall be apportioned as
of said date. If part of the Premises shall be Taken, and this Lease is not
terminated as provided above, Landlord shall promptly restore the Premises and
the Project as nearly as is commercially reasonable under the circumstances to
their condition prior to such partial Taking and the rentable square footage of
the Building, the rentable square footage of the Premises, Tenant’s Share of
Operating Expenses and the Rent payable hereunder during the unexpired Term
shall be reduced to such extent as may be fair and reasonable under the
circumstances. Upon any such Taking, Landlord shall be entitled to receive the
entire price or award from any such Taking without any payment to Tenant, and
Tenant hereby assigns to Landlord Tenant’s interest, if any, in such award. Tenant
shall have the right, to the extent that same shall not diminish Landlord’s
award, to make a separate claim against the condemning authority (but not
Landlord) for such compensation as may be separately awarded or recoverable by
Tenant for moving expenses and damage to Tenant’s trade fixtures, if a separate
award for such items is made to Tenant. Tenant hereby waives any and all rights
it might otherwise have pursuant to any provision of state law to terminate
this Lease upon a partial Taking of the Premises or the Project.

20.           Events of Default.   Each
of the following events shall be a default (“Default”)
by Tenant under this Lease:

(a)           Payment Defaults.   Tenant
shall fail to pay any installment of Rent or any other payment hereunder when
due; provided, however, that Landlord will give Tenant notice and an
opportunity to cure any failure to pay Rent within 3 days of any such notice
not more than once in any 12 month period and Tenant agrees that such notice
shall be in lieu of and not in addition to, or shall be deemed to be, any
notice required by law.

(b)           Insurance.   Any
insurance required to be maintained by Tenant pursuant to this Lease shall be
canceled or terminated or shall expire or shall be reduced or materially
changed, or Landlord shall receive a notice of nonrenewal of any such insurance
and Tenant shall fail to obtain replacement insurance at least 20 days before
the expiration of the current coverage.

(c)           Abandonment.   Tenant
shall abandon the Premises. Tenant shall not be deemed to have abandoned the
Premises if (i) Tenant provides Landlord with reasonable advance notice
prior to vacating and, at the time of vacating the Premises, Tenant completes
Tenant’s obligations with respect to the Surrender Plan in compliance with Section 28,
(ii) Tenant has made reasonable arrangements with Landlord for the
security of the Premises for the balance of the Term, and (iii) Tenant
continues during the balance of the Term to satisfy all of its obligations
under the Lease as they come due.

(d)           Improper Transfer.   Tenant
shall assign, sublease or otherwise transfer or attempt to transfer all or any
portion of Tenant’s interest in this Lease or the Premises except as expressly
permitted herein, or Tenant’s interest in this Lease shall be attached,
executed upon, or otherwise judicially seized and such action is not released
within 90 days of the action.

(e)           Liens.   Tenant
shall fail to discharge or otherwise obtain the release of any lien placed upon
the Premises in violation of this Lease within 10 days after any such lien is
filed against the Premises.

(f)            Insolvency Events.   Tenant
or any guarantor or surety of Tenant’s obligations hereunder shall:  (A) make a general assignment for the
benefit of creditors; (B) commence any case, proceeding or 

 16
 

 

other action seeking to
have an order for relief entered on its behalf as a debtor or to adjudicate it
a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or of any substantial part of its property (collectively a “Proceeding for Relief”); (C) become the subject of any
Proceeding for Relief which is not dismissed within 90 days of its filing or entry;
or (D) die or suffer a legal disability (if Tenant, guarantor, or surety
is an individual) or be dissolved or otherwise fail to maintain its legal
existence (if Tenant, guarantor or surety is a corporation, partnership or
other entity).

(g)           Estoppel Certificate or
Subordination Agreement.   Tenant fails to execute any document
required from Tenant under Sections 23 or 27 within 5 days after
a second notice requesting such document.

(h)           Other Defaults.   Tenant
shall fail to comply with any provision of this Lease other than those
specifically referred to in this Section 20, and, except as
otherwise expressly provided herein, such failure shall continue for a period
of 20 days after written notice thereof from Landlord to Tenant.

Any notice given under Section 20(h) hereof
shall:  (i) specify the alleged
default, (ii) demand that Tenant cure such default, (iii) be in lieu
of, and not in addition to, or shall be deemed to be, any notice required under
any provision of applicable law, and (iv) not be deemed a forfeiture or a
termination of this Lease unless Landlord elects otherwise in such notice; provided
that if the nature of Tenant’s default pursuant to Section 20(h) is
such that it cannot be cured by the payment of money and reasonably requires
more than 20 days to cure, then Tenant shall not be deemed to be in default if
Tenant commences such cure within said 20 day period and thereafter diligently
prosecutes the same to completion; provided, however, that such
cure shall be completed no later than 75 days from the date of Landlord’s
notice except where such cure requires construction to be done by Tenant and a
permit is required in which case such cure shall be completed no later than 120
days from the date of Landlord’s notice.

21.           Landlord’s
Remedies.

(a)           Payment By Landlord;
Interest.   Upon a Default by Tenant hereunder, Landlord may,
without waiving or releasing any obligation of Tenant hereunder, make such
payment or perform such act. All sums so paid or incurred by Landlord, together
with interest thereon, from the date such sums were paid or incurred, at the
annual rate equal to 12% per annum or the highest rate permitted by law (the “Default Rate”), whichever is less, shall be payable to
Landlord on demand as Additional Rent. Nothing herein shall be construed to
create or impose a duty on Landlord to mitigate any damages resulting from
Tenant’s Default hereunder.

(b)           Late Payment Rent.   Late
payment by Tenant to Landlord of Rent and other sums due will cause Landlord to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult and impracticable to ascertain. Such costs include, but are
not limited to, processing and accounting charges and late charges which may be
imposed on Landlord under any Mortgage covering the Premises. Therefore, if any
installment of Rent due from Tenant is not received by Landlord within 5 days
after the date such payment is due, Tenant shall pay to Landlord an additional
sum equal to 6% of the overdue Rent as a late charge. The parties agree that
this late charge represents a fair and reasonable estimate of the costs
Landlord will incur by reason of late payment by Tenant. In addition to the
late charge, Rent not paid when due shall bear interest at the Default Rate from
the 5th day after the date due until paid.

(c)           Remedies.   Upon
the occurrence of a Default, Landlord, at its option, without further notice or
demand to Tenant, shall have in addition to all other rights and remedies
provided in this Lease, at law or in equity, the option to pursue any one or
more of the following remedies, each and all of which shall be cumulative and
nonexclusive, without any notice or demand whatsoever.

 17

 

 

(i)            Terminate this Lease, or at Landlord’s
option, Tenant’s right to possession only, in which event Tenant shall
immediately surrender the Premises to Landlord, and if Tenant fails to do so,
Landlord may, without prejudice to any other remedy which it may have for
possession or arrearages in rent, enter upon and take possession of the
Premises and expel or remove Tenant and any other person who may be occupying
the Premises or any part thereof, without being liable for prosecution or any
claim or damages therefor;

(ii)           Upon any termination of this Lease,
whether pursuant to the foregoing Section 21(c)(i) or
otherwise, Landlord may recover from Tenant the following:

(A)          The worth at the time of award of any
unpaid rent which has been earned at the time of such termination; plus

(B)           The worth at the time of award of the
amount by which the unpaid rent which would have been earned after termination
until the time of award exceeds the amount of such rental loss that Tenant
proves could have been reasonably avoided; plus

(C)           The worth at the time of award of the
amount by which the unpaid rent for the balance of the Term after the time of
award exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; plus

(D)          Any other amount necessary to
compensate Landlord for all the detriment proximately caused by Tenant’s
failure to perform its obligations under this Lease or which in the ordinary
course of things would be likely to result therefrom, specifically including,
but not limited to, brokerage commissions and advertising expenses incurred,
expenses of remodeling the Premises or any portion thereof for a new tenant,
whether for the same or a different use, and any special concessions made to
obtain a new tenant; and

(E)           At Landlord’s election, such other
amounts in addition to or in lieu of the foregoing as may be permitted from
time to time by applicable law.

The term “rent”
as used in this Section 21 shall be deemed to be and to mean all
sums of every nature required to be paid by Tenant pursuant to the terms of
this Lease, whether to Landlord or to others. As used in Sections 21(c)(ii) (A) and
(B), above, the “worth at the time of award”
shall be computed by allowing interest at the Default Rate. As used in Section 21(c)(ii)(C) above,
the “worth at the time of award” shall be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus 1%.

(iii)          Landlord may continue this Lease in
effect after Tenant’s Default and recover rent as it becomes due (Landlord and
Tenant hereby agreeing that Tenant has the right to sublet or assign hereunder,
subject only to reasonable limitations). Accordingly, if Landlord does not
elect to terminate this Lease following a Default by Tenant, Landlord may, from
time to time, without terminating this Lease, enforce all of its rights and
remedies hereunder, including the right to recover all Rent as it becomes due.

(iv)          Whether or not Landlord elects to
terminate this Lease following a Default by Tenant, Landlord shall have the
right to terminate any and all subleases, licenses, concessions or other
consensual arrangements for possession entered into by Tenant and affecting the
Premises or may, in Landlord’s sole discretion, succeed to Tenant’s interest in
such subleases, licenses, concessions or arrangements. Upon Landlord’s election
to succeed to Tenant’s interest in any such subleases, licenses, concessions or
arrangements, Tenant shall, as of the date of notice by Landlord of such
election, have no further right to or interest in the rent or other
consideration receivable thereunder.

 18
 

 

 

(v)           Independent of the exercise of any
other remedy of Landlord hereunder or under applicable law, Landlord may
conduct an environmental test of the Premises as generally described in Section 30(d) hereof,
at Tenant’s expense.

(d)           Effect of Exercise.
Exercise by Landlord of any remedies hereunder or otherwise available shall not
be deemed to be an acceptance of surrender of the Premises and/or a termination
of this Lease by Landlord, it being understood that such surrender and/or
termination can be effected only by the express written agreement of Landlord
and Tenant. Any law, usage, or custom to the contrary notwithstanding, Landlord
shall have the right at all times to enforce the provisions of this Lease in
strict accordance with the terms hereof; and the failure of Landlord at any
time to enforce its rights under this Lease strictly in accordance with same
shall not be construed as having created a custom in any way or manner contrary
to the specific terms, provisions, and covenants of this Lease or as having
modified the same and shall not be deemed a waiver of Landlord’s right to
enforce one or more of its rights in connection with any subsequent default. A receipt
by Landlord of Rent or other payment with knowledge of the breach of any
covenant hereof shall not be deemed a waiver of such breach, and no waiver by
Landlord of any provision of this Lease shall be deemed to have been made
unless expressed in writing and signed by Landlord. To the greatest extent
permitted by law, Tenant waives the service of notice of Landlord’s intention
to re-enter, re-take or otherwise obtain possession of the Premises as provided
in any statute, or to institute legal proceedings to that end, and also waives
all right of redemption in case Tenant shall be dispossessed by a judgment or
by warrant of any court or judge. Any reletting of the Premises or any portion
thereof shall be on such terms and conditions as Landlord in its sole
discretion may determine. Landlord shall not be liable for, nor shall Tenant’s
obligations hereunder be diminished because of, Landlord’s failure to relet the
Premises or collect rent due in respect of such reletting or otherwise to
mitigate any damages arising by reason of Tenant’s Default.

22.           Assignment
and Subletting.

(a)           General Prohibition.
Without Landlord’s prior written consent subject to and on the conditions
described in this Section 22, Tenant shall not, directly or
indirectly, voluntarily or by operation of law, assign this Lease or sublease
the Premises or any part thereof or mortgage, pledge, or hypothecate its
leasehold interest or grant any concession or license within the Premises, and
any attempt to do any of the foregoing shall be void and of no effect. If
Tenant is a corporation, partnership or limited liability company, the shares
or other ownership interests thereof which are not actively traded upon a stock
exchange or in the over-the-counter market, a transfer or series of transfers
whereby 25% or more of the issued and outstanding shares or other ownership
interests of such corporation are, or voting control is, transferred (but
excepting transfers upon deaths of individual owners) from a person or persons
or entity or entities which were owners thereof at time of execution of this
Lease to persons or entities who were not owners of shares or other ownership
interests of the corporation, partnership or limited liability company at time
of execution of this Lease, shall be deemed an assignment of this Lease
requiring the consent of Landlord as provided in this Section 22. The
provisions of the preceding sentence shall not apply to Tenant while Tenant is
a publicly traded company.

(b)           Permitted Transfers.
If Tenant desires to assign, sublease, hypothecate or otherwise transfer this
Lease or sublet the Premises other than pursuant to a Permitted Assignment (as
defined below), then at least 15 business days, but not more than 45 business
days, before the date Tenant desires the assignment or sublease to be effective
(the “Assignment Date”), Tenant shall give
Landlord a notice (the “Assignment Notice”)
containing such information about the proposed assignee or sublessee, including
the proposed use of the Premises and any Hazardous Materials proposed to be
used, stored handled, treated, generated in or released or disposed of from the
Premises, the Assignment Date, any relationship between Tenant and the proposed
assignee or sublessee, and all material terms and conditions of the proposed assignment
or sublease, including a copy of any proposed assignment or sublease in its
final form, and such other information as Landlord may deem reasonably
necessary or appropriate to its consideration whether to grant its consent. Landlord
may, by giving written notice to Tenant within 15 business days after receipt
of the Assignment Notice:  (i) grant
such consent, (ii) refuse such consent, in its reasonable discretion, (iii) refuse
such consent, in its reasonable discretion, if the proposed subletting concerns
(together with all other then effective subleases) 50% or 

 19
 

 

 

less of the Premises
(provided that Landlord shall further have the right to review and approve or
disapprove the proposed form of sublease prior to the effective date of any
such subletting), or (iv) terminate this Lease with respect to the space
described in the Assignment Notice as of the Assignment Date (an “Assignment Termination”). If Landlord delivers notice of its
election to exercise an Assignment Termination, Tenant shall have the right to
withdraw such Assignment Notice by written notice to Landlord of such election
within 5 business days after Landlord’s notice electing to exercise the
Assignment Termination. If Tenant withdraws such Assignment Notice, this Lease
shall continue in full force and effect. If Tenant does not withdraw such
Assignment Notice, this Lease, and the term and estate herein granted, shall
terminate as of the Assignment Date with respect to the space described in such
Assignment Notice. No failure of Landlord to exercise any such option to
terminate this Lease, or to deliver a timely notice in response to the
Assignment Notice, shall be deemed to be Landlord’s consent to the proposed
assignment, sublease or other transfer. Tenant shall reimburse Landlord for all
of Landlord’s reasonable out-of-pocket expenses in connection with its
consideration of any Assignment Notice; provided, however, that the
reimbursement amount shall be based on actual costs. Notwithstanding the
foregoing, Landlord’s consent to an assignment of this Lease or a subletting of
any portion of the Premises to any entity controlling, controlled by or under
common control with Tenant (a “Permitted Assignment”)
shall not be required, provided that Landlord shall have the right to
reasonably approve the form of any such sublease or assignment. Tenant
acknowledges and agrees that, among other things, it shall be reasonable for
Landlord to withhold its consent to any assignment or subletting to an assignee
or subtenant whose business or financial reputation is objectionable in
Landlord’s reasonable judgment, or that is engaged in areas of scientific
research or other business concerns that are controversial, in Landlord’s
reasonable judgment, or that would require the removal of, or result in any changes,
to Landlord’s Work or to the Tenant Improvements.

(c)           Additional Conditions.
As a condition to any such assignment or subletting, whether or not Landlord’s
consent is required, Landlord may require:

(i)            that any assignee or subtenant
agree, in writing at the time of such assignment or subletting, that if
Landlord gives such party notice that Tenant is in default under this Lease,
such party shall thereafter make all payments otherwise due Tenant directly to
Landlord, which payments will be received by Landlord without any liability
except to credit such payment against those due under the Lease, and any such
third party shall agree to attorn to Landlord or its successors and assigns
should this Lease be terminated for any reason; provided, however,
in no event shall Landlord or its successors or assigns be obligated to accept
such attornment; and

(ii)           A list of Hazardous Materials,
certified by the proposed assignee or sublessee to be true and correct, which
the proposed assignee or sublessee intends to use, store, handle, treat,
generate in or release or dispose of from the Premises, together with copies of
all documents relating to such use, storage, handling, treatment, generation,
release or disposal of Hazardous Materials by the proposed assignee or
subtenant in the Premises or on the Project, prior to the proposed assignment
or subletting, including, without limitation: 
permits; approvals; reports and correspondence; storage and management
plans; plans relating to the installation of any storage tanks (excluding
mobile storage tanks commonly used in biology or chemistry laboratories) to be
installed in or under the Project (provided, said installation of tanks (other
than mobile tanks commonly used in biology or chemistry laboratories) shall
only be permitted after Landlord has given its written consent to do so, which
consent may be withheld in Landlord’s sole and absolute discretion); and all
closure plans or any other documents required by any and all federal, state and
local Governmental Authorities for any storage tanks installed in, on or under
the Project for the closure of any such tanks. Neither Tenant nor any such
proposed assignee or subtenant is required, however, to provide Landlord with
any portion(s) of the such documents containing information of a
proprietary nature which, in and of themselves, do not contain a reference to
any Hazardous Materials or hazardous activities. Landlord acknowledges that
Tenant shall be deemed to have satisfied its obligation to provide the list of
each type of Hazardous Material if Tenant provides Landlord with the list of
each type of Hazardous Material which Tenant is required to deliver to the fire
department or other applicable governmental 

 20
 

 

 

authority
in connection with the Tenant’s Hazardous Materials Management Plan for its
operations at the Premises.

(d)           No Release of Tenant,
Sharing of Excess Rents. Notwithstanding any assignment or
subletting, Tenant and any guarantor or surety of Tenant’s obligations under
this Lease shall at all times remain fully and primarily responsible and liable
for the payment of Rent and for compliance with all of Tenant’s other
obligations under this Lease. If the Rent due and payable by a sublessee or
assignee (or a combination of the rental payable under such sublease or
assignment plus any bonus or other consideration therefor or incident thereto
in any form) exceeds the sum of the rental
payable under this Lease, (excluding however, any Rent payable under this
Section) and actual and reasonable brokerage fees, legal costs and any design
or construction fees directly related to and required pursuant to the terms of
any such sublease or assignment (“Excess Rent”),
then Tenant shall be bound and obligated to pay Landlord as Additional Rent
hereunder 50% of such Excess Rent within 10 days following receipt thereof by
Tenant. If Tenant shall sublet the Premises or any part thereof, Tenant hereby
immediately and irrevocably assigns to Landlord, as security for Tenant’s
obligations under this Lease, all rent from any such subletting, and Landlord
as assignee and as attorney-in-fact for Tenant, or a receiver for Tenant
appointed on Landlord’s application, may collect such rent and apply it toward
Tenant’s obligations under this Lease; except that, until the occurrence of a
Default, Tenant shall have the right to collect such rent.

(e)           No Waiver. The
consent by Landlord to an assignment or subletting shall not relieve Tenant or
any assignees of this Lease or any sublessees of the Premises from obtaining
the consent of Landlord to any further assignment or subletting nor shall it
release Tenant or any assignee or sublessee of Tenant from full and primary
liability under the Lease. The acceptance of Rent hereunder, or the acceptance
of performance of any other term, covenant, or condition thereof, from any
other person or entity shall not be deemed to be a waiver of any of the
provisions of this Lease or a consent to any subletting, assignment or other
transfer of the Premises.

(f)            Prior
Conduct of Proposed Transferee. Notwithstanding any other provision of this
Section 22, if (i) the proposed assignee or sublessee of
Tenant has been required by any prior landlord, lender or Governmental
Authority to take remedial action in connection with Hazardous Materials
contaminating a property, where the contamination resulted from such party’s
action or use of the property in question, (ii) the proposed assignee or
sublessee is subject to an enforcement order issued by any Governmental
Authority in connection with the use, storage, handling, treatment, generation,
release or disposal of Hazardous Materials (including, without limitation, any
order related to the failure to make a required reporting to any Governmental
Authority), or (iii) because of the existence of a pre-existing
environmental condition in the vicinity of or underlying the Project, the risk
that Landlord would be targeted as a responsible party in connection with the
remediation of such pre-existing environmental condition would be materially
increased or exacerbated by the proposed use of Hazardous Materials by such
proposed assignee or sublessee, Landlord shall have the absolute right to
refuse to consent to any assignment or subletting to any such party.

23.           Estoppel Certificate. Tenant
shall, within 10 business days of written notice from Landlord, execute,
acknowledge and deliver a statement in writing in any form reasonably requested
by a proposed lender or purchaser, (i) certifying that this Lease is
unmodified and in full force and effect (or, if modified, stating the nature of
such modification and certifying that this Lease as so modified is in full
force and effect) and the dates to which the rental and other charges are paid
in advance, if any, (ii) acknowledging that there are not any uncured
defaults on the part of Landlord hereunder, or specifying such defaults if any
are claimed, and (iii) setting forth such further information with respect
to the status of this Lease or the Premises as may be requested thereon. Any
such statement may be relied upon by any prospective purchaser or encumbrancer
of all or any portion of the real property of which the Premises are a part. Tenant’s
failure to deliver such statement within such time shall be conclusive upon
Tenant that the Lease is in full force and effect and without modification
except as may be represented by Landlord in any certificate prepared by
Landlord and delivered to Tenant for execution.

24.           Quiet Enjoyment.
So long as Tenant shall perform all of the covenants and agreements herein
required to be performed by Tenant, Tenant shall, subject to the terms of this
Lease, at all times 

 21
 

 

 

during the Term, have
peaceful and quiet enjoyment of the Premises against any person claiming by,
through or under Landlord.

25.           Prorations. All
prorations required or permitted to be made hereunder shall be made on the
basis of a 365 day year and the actual number of days in the relevant months.

26.           Rules and Regulations.
Tenant shall, at all times during the Term and any extension thereof, comply
with all reasonable rules and regulations at any time or from time to time
established by Landlord covering use of the Premises and the Project. The
current rules and regulations are attached hereto as Exhibit J.
If there is any conflict between said rules and regulations and other
provisions of this Lease, the terms and provisions of this Lease shall control.
Landlord shall not have any liability or obligation for the breach of any rules or
regulations by other tenants in the Project and shall not enforce such rules and
regulations in a discriminatory manner.

27.           Subordination. This
Lease and Tenant’s interest and rights hereunder are hereby made and shall be
subject and subordinate at all times to the lien of any Mortgage now existing
or hereafter created on or against the Project or the Premises, and all
amendments, restatements, renewals, modifications, consolidations, refinancing,
assignments and extensions thereof, without the necessity of any further
instrument or act on the part of Tenant; provided, however that
so long as there is no Default hereunder, Tenant’s right to possession of the
Premises shall not be disturbed by the Holder of any such Mortgage. Tenant
agrees, at the election of the Holder of any such Mortgage, to attorn to any
such Holder. Tenant agrees upon demand to execute, acknowledge and deliver such
instruments, confirming such subordination, and such instruments of attornment
as shall be requested by any such Holder, provided any such instruments contain
appropriate non-disturbance provisions assuring Tenant’s quiet enjoyment of the
Premises as set forth in Section 24 hereof. Notwithstanding the
foregoing, any such Holder may at any time subordinate its Mortgage to this
Lease, without Tenant’s consent, by notice in writing to Tenant, and thereupon
this Lease shall be deemed prior to such Mortgage without regard to their
respective dates of execution, delivery or recording and in that event such
Holder shall have the same rights with respect to this Lease as though this
Lease had been executed prior to the execution, delivery and recording of such
Mortgage and had been assigned to such Holder. The term “Mortgage”
whenever used in this Lease shall be deemed to include deeds of trust, security
assignments and any other encumbrances, and any reference to the “Holder” of a Mortgage shall be deemed to include the
beneficiary under a deed of trust.

28.           Surrender. Upon
the expiration of the Term or earlier termination of Tenant’s right of
possession, Tenant shall surrender the Premises to Landlord in the same
condition as received, subject to any Alterations or Installations permitted by
Landlord to remain in the Premises (and subject to Tenant’s right under the
Lease to remove Tenant’s Property), free of Hazardous Materials brought upon,
kept, used, stored, handled, treated, generated in, or released or disposed of
from, the Premises by any person other than a Landlord Party (collectively, “Tenant HazMat Operations”) and released of all Hazardous
Materials Clearances, broom clean, ordinary wear and tear and casualty loss and
condemnation. At least 3 months prior to the surrender of the Premises, Tenant
shall deliver to Landlord a narrative description of the actions proposed (or
required by any Governmental Authority) to be taken by Tenant in order to
surrender the Premises (including any Installations permitted by Landlord to
remain in the Premises) at the expiration or earlier termination of the Term,
free from any residual impact from the Tenant HazMat Operations and otherwise
released for unrestricted use and occupancy (the “Surrender Plan”).
Such Surrender Plan shall be accompanied by a current listing of (i) all
Hazardous Materials licenses and permits held by or on behalf of any Tenant
Party with respect to the Premises, and (ii) all Hazardous Materials used,
stored, handled, treated, generated, released or disposed of from the Premises,
and shall be subject to the review and approval of Landlord’s environmental
consultant. In connection with the review and approval of the Surrender Plan,
upon the request of Landlord, Tenant shall deliver to Landlord or its
consultant such additional non-proprietary information concerning Tenant HazMat
Operations as Landlord shall request. On or before such surrender, Tenant shall
deliver to Landlord evidence that the approved Surrender Plan shall have been
satisfactorily completed and Landlord shall have the right, subject to
reimbursement at Tenant’s expense as set forth below, to cause Landlord’s
environmental consultant to inspect the Premises and perform such additional
procedures as 

 22
 

 

 

may be deemed reasonably
necessary to confirm that the Premises are, as of the effective date of such
surrender or early termination of the Lease, free from any residual impact from
Tenant HazMat Operations. Tenant shall reimburse Landlord, as Additional Rent,
for the actual out-of pocket expense incurred by Landlord for Landlord’s
environmental consultant to review and approve the Surrender Plan and to visit
the Premises and verify satisfactory completion of the same, which cost shall
not exceed $2,500. Landlord shall have the unrestricted right to deliver such
Surrender Plan and any report by Landlord’s environmental consultant with
respect to the surrender of the Premises to third parties.

If Tenant shall fail to
prepare or submit a Surrender Plan approved by Landlord, or if Tenant shall
fail to complete the approved Surrender Plan, or if such Surrender Plan,
whether or not approved by Landlord, shall fail to adequately address any
residual effect of Tenant HazMat Operations in, on or about the Premises,
Landlord shall have the right to take such actions as Landlord may deem
reasonable or appropriate to assure that the Premises and the Project are
surrendered free from any residual impact from Tenant HazMat Operations, the
cost of which actions shall be reimbursed by Tenant as Additional Rent, without
regard to the limitation set forth in the first paragraph of this Section 28.

Tenant shall immediately
return to Landlord all keys and/or access cards to parking, the Project,
restrooms or all or any portion of the Premises furnished to or otherwise
procured by Tenant. If any such access card or key is lost, Tenant shall pay to
Landlord, at Landlord’s election, either the cost of replacing such lost access
card or key or the cost of reprogramming the access security system in which
such access card was used or changing the lock or locks opened by such lost key.
Any Tenant’s Property, Alterations and property not so removed by Tenant as
permitted or required herein shall be deemed abandoned and may be stored,
removed, and disposed of by Landlord at Tenant’s expense, and Tenant waives all
claims against Landlord for any damages resulting from Landlord’s retention
and/or disposition of such property. All obligations of Tenant hereunder not
fully performed as of the termination of the Term, including the obligations of
Tenant under Section 30 hereof, shall survive the expiration or
earlier termination of the Term, including, without limitation, indemnity
obligations, payment obligations with respect to Rent and obligations concerning
the condition and repair of the Premises.

29.           Waiver of Jury Trial.
TO THE EXTENT PERMITTED BY LAW, TENANT AND LANDLORD WAIVE ANY RIGHT TO TRIAL BY
JURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING
IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LANDLORD AND TENANT ARISING OUT OF
THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.

30.           Environmental
Requirements.

(a)           Prohibition/Compliance/Indemnity.
Tenant shall not cause or permit any Hazardous Materials (as hereinafter
defined) to be brought upon, kept, used, stored, handled, treated,
generated  in or about, or released or
disposed of from, the Premises or the Project in violation of applicable Environmental
Requirements (as hereinafter defined) by Tenant or any Tenant Party. If Tenant
breaches the obligation stated in the preceding sentence, or if the presence of
Hazardous Materials in the Premises during the Term or any holding over results
in contamination of the Premises, the Project or any adjacent property or if
contamination of the Premises, the Project or any adjacent property by
Hazardous Materials brought into, kept, used, stored, handled, treated,
generated in or about, or released or disposed of from, the Premises by anyone
other than Landlord and Landlord’s employees, agents and contractors otherwise
occurs during the Term or any holding over, Tenant hereby indemnifies and shall
defend and hold Landlord, its officers, directors, employees, agents and
contractors harmless from any and all actions (including, without limitation,
remedial or enforcement actions of any kind, administrative or judicial
proceedings, and orders or judgments arising out of or resulting therefrom),
costs, claims, damages (including, without limitation, punitive damages and
damages based upon diminution in value of the Premises or the Project, or the
loss of, or restriction on, use of the Premises or any portion of the Project),
expenses (including, without limitation, attorneys’, consultants’ and experts’
fees, court costs and amounts paid in settlement of any claims or actions),
fines, forfeitures or other civil, administrative or criminal penalties,
injunctive or other relief (whether or not based upon personal injury, property
damage, 

 23
 

 

 

or contamination of, or
adverse effects upon, the environment, water tables or natural resources),
liabilities or losses (collectively, “Environmental Claims”)
which arise during or after the Term as a result of such contamination. This
indemnification of Landlord by Tenant includes, without limitation, costs
incurred in connection with any investigation of site conditions or any
cleanup, treatment, remedial, removal, or restoration work required by any
federal, state or local Governmental Authority because of Hazardous Materials
present in the air, soil or ground water above, on, or under the Premises. Without
limiting the foregoing, if the presence of any Hazardous Materials on the
Premises, the Project or any adjacent property caused or permitted by Tenant or
any Tenant Party results in any contamination of the Premises, the Project or
any adjacent property, Tenant shall promptly take all actions at its sole
expense and in accordance with applicable Environmental Requirements as are
necessary to return the Premises, the Project or any adjacent property to the
condition existing prior to the time of such contamination, provided that
Landlord’s approval of such action shall first be obtained, which approval
shall not unreasonably be withheld so long as such actions would not
potentially have any material adverse long-term or short-term effect on the
Premises or the Project.

(b)           Business. Landlord
acknowledges that it is not the intent of this Section 30 to
prohibit Tenant from using the Premises for the Permitted Use. Tenant may
operate its business according to prudent industry practices so long as the use
or presence of Hazardous Materials is strictly and properly monitored according
to all then applicable Environmental Requirements. As a material inducement to
Landlord to allow Tenant to use Hazardous Materials in connection with its
business, Tenant agrees to deliver to Landlord prior to the Commencement Date a
list identifying each type of Hazardous Materials to be brought upon, kept,
used, stored, handled, treated, generated on, or released or disposed of from,
the Premises and setting forth any and all governmental approvals or permits
required in connection with the presence, use, storage, handling, treatment,
generation, release or disposal of such Hazardous Materials on or from the
Premises (“Hazardous Materials List”). Landlord
acknowledges that Tenant shall be deemed to have satisfied its obligation to
provide the list of each type of Hazardous Material if Tenant provides Landlord
with the list of each type of Hazardous Material which Tenant is required to
deliver to the fire department or other applicable governmental authority in
connection with the Tenant’s Hazardous Materials Management Plan for its
operations at the Premises. Tenant shall, however, deliver to Landlord an
updated Hazardous Materials List at least once a year and shall also deliver an
updated list before any new Hazardous Material is brought onto, kept, used,
stored, handled, treated, generated on, or released or disposed of from, the
Premises. Tenant shall deliver to Landlord true and correct copies of the
following documents (the “Haz Mat Documents”)
relating to the use, storage, handling, treatment, generation, release or
disposal of Hazardous Materials prior to the Commencement Date, or if
unavailable at that time, concurrent with the receipt from or submission to a
Governmental Authority:  permits;
approvals; reports and correspondence; storage and management plans, notice of
violations of any Legal Requirements; plans relating to the installation of any
storage tanks to be installed in or under the Project (provided, with the
exception of mobile tanks commonly used in biology or chemistry laboratories,
for which Landlord’s consent shall not be required, said installation of tanks
shall only be permitted after Landlord has given Tenant its written consent to
do so, which consent may be withheld in Landlord’s sole and absolute
discretion); all closure plans or any other documents required by any and all
federal, state and local Governmental Authorities for any storage tanks
installed in, on or under the Project for the closure of any such tanks; and a
Surrender Plan (to the extent surrender in accordance with Section 28
cannot be accomplished in 3 months). Tenant is not required, however, to
provide Landlord with any portion(s) of the Haz Mat Documents containing
information of a proprietary nature which, in and of themselves, do not contain
a reference to any Hazardous Materials or hazardous activities. It is not the
intent of this Section to provide Landlord with information which could be
detrimental to Tenant’s business should such information become possessed by
Tenant’s competitors.

(c)           Tenant Representation and
Warranty. Tenant hereby represents and warrants to Landlord that (i) neither
Tenant nor any of its legal predecessors has been required by any prior
landlord, lender or Governmental Authority to take remedial action in
connection with Hazardous Materials contaminating a property which contamination
was permitted by Tenant of such predecessor or resulted from Tenant’s or such
predecessor’s action or use of the property in question except for actions
which have been completed to the satisfaction of the Governmental Authorities
having jurisdiction, and (ii) Tenant is not subject to any enforcement
order issued by any Governmental Authority in connection with 

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the use, storage,
handling, treatment, generation, release or disposal of Hazardous Materials
(including, without limitation, any order related to the failure to make a
required reporting to any Governmental Authority). If Landlord determines that
this representation and warranty was not true as of the date of this lease,
Landlord shall have the right to terminate this Lease in Landlord’s sole and
absolute discretion.

(d)           Testing. Landlord
shall have the right to conduct annual tests of the Premises to determine
whether any contamination of the Premises or the Project has occurred as a
result of Tenant’s use. Tenant shall be required to pay the cost of such annual
test of the Premises if Tenant is determined to be in violation of any
provisions of this Lease. If Tenant so elects, Tenant may, at Tenant’s sole
cost and expense, conducts its own tests of the Premises using third party
contractors and test procedures acceptable to Landlord which tests are
certified to Landlord. Landlord shall accept such tests in lieu of the annual
tests to be performed by Landlord. Prior to the expiration or earlier
termination of the Term, Landlord shall have the right to conduct appropriate
tests of the Premises and the Project to determine if contamination has
occurred as a result of Tenant’s use of the Premises. In connection with such
testing, upon the request of Landlord, Tenant shall deliver to Landlord or its
consultant such non-proprietary information concerning the use of Hazardous
Materials in or about the Premises by Tenant or any Tenant Party. If
contamination has occurred for which Tenant is liable under this Section 30,
Tenant shall pay all costs to conduct such tests. If no such contamination is
found, Landlord shall pay the costs of such tests (which shall not constitute
an Operating Expense). Landlord shall provide Tenant with a copy of all third
party, non-confidential reports and tests of the Premises made by or on behalf
of Landlord during the Term without representation or warranty and subject to a
confidentiality agreement. Tenant shall, at its sole cost and expense, promptly
and satisfactorily remediate any environmental conditions identified by such
testing which are the responsibility of Tenant under this Lease in accordance
with all Environmental Requirements. Landlord’s receipt of or satisfaction with
any environmental assessment in no way waives any rights which Landlord may
have against Tenant.

(e)           Underground Tanks.
If underground or other storage tanks storing Hazardous Materials located on
the Premises or the Project are used by Tenant or are hereafter placed on the
Premises or the Project by Tenant, Tenant shall install, use, monitor, operate,
maintain, upgrade and manage such storage tanks, maintain appropriate records,
obtain and maintain appropriate insurance, implement reporting procedures,
properly close any underground storage tanks, and take or cause to be taken all
other actions necessary or required under applicable state and federal Legal
Requirements, as such now exists or may hereafter be adopted or amended in
connection with the installation, use, maintenance, management, operation,
upgrading and closure of such storage tanks.

(f)            Tenant’s Obligations.
Tenant’s obligations under this Section 30 shall survive the
expiration or earlier termination of the Lease. During any period of time after
the expiration or earlier termination of this Lease required by Tenant or
Landlord to complete the removal from the Premises of any Hazardous Materials
(including, without limitation, the release and termination of any licenses or
permits restricting the use of the Premises and the completion of the approved
Surrender Plan), Tenant shall continue to pay the full Rent in accordance with
this Lease for any portion of the Premises not relet by Landlord in Landlord’s
sole discretion, which Rent shall be prorated daily.

(g)           Definitions. As
used herein, the term “Environmental Requirements”
means all applicable present and future statutes, regulations, ordinances,
rules, codes, judgments, orders or other similar enactments of any Governmental
Authority regulating or relating to health, safety, or environmental conditions
on, under, or about the Premises or the Project, or the environment, including
without limitation, the following:  the
Comprehensive Environmental Response, Compensation and Liability Act; the
Resource Conservation and Recovery Act; and all state and local counterparts
thereto, and any regulations or policies promulgated or issued thereunder. As
used herein, the term “Hazardous Materials”
means and includes any substance, material, waste, pollutant, or contaminant
listed or defined as hazardous or toxic, or regulated by reason of its impact
or potential impact on humans, animals and/or the environment under any
Environmental Requirements, asbestos and petroleum, including crude oil or any
fraction thereof, natural gas liquids, liquefied natural gas, or synthetic gas
usable for fuel (or mixtures of natural gas and such synthetic gas). As defined
in Environmental Requirements, Tenant is and shall be deemed to be the “operator” of Tenant’s “facility” and
the “owner” of all Hazardous Materials
brought 

 25
 

 

 

on the Premises by
Tenant or any Tenant Party, and the wastes, by-products, or residues generated,
resulting, or produced therefrom.

31.           Tenant’s
Remedies/Limitation of Liability. Landlord shall not be in default
hereunder unless Landlord fails to perform any of its obligations hereunder
within 30 days after written notice from Tenant specifying such failure (unless
such performance will, due to the nature of the obligation, require a period of
time in excess of 30 days, then after such period of time as is reasonably
necessary). Upon any default by Landlord, Tenant shall give notice by
registered or certified mail to any Holder of a Mortgage covering the Premises
and to any landlord of any lease of property in or on which the Premises are
located and Tenant shall offer such Holder and/or landlord a reasonable
opportunity to cure the default, including time to obtain possession of the
Project by power of sale or a judicial action if such should prove necessary to
effect a cure; provided Landlord shall have furnished to Tenant in
writing the names and addresses of all such persons who are to receive such
notices. All obligations of Landlord hereunder shall be construed as covenants,
not conditions; and, except as may be otherwise expressly provided in this
Lease, Tenant may not terminate this Lease for breach of Landlord’s obligations
hereunder.

Subject to assumption of
Landlord’s obligations as described in the last sentence of this paragraph, all
obligations of Landlord under this Lease will be binding upon Landlord only
during the period of its ownership of the Premises and not thereafter. The term
“Landlord” in this Lease shall mean only
the owner for the time being of the Premises. Upon the transfer by such owner
of its interest in the Premises and the assumption by the new owner of the
obligations of Landlord arising from and after the date of such transfer, such
owner shall thereupon be released and discharged from all obligations of
Landlord thereafter accruing, but such obligations shall be binding during the
Term upon each new owner for the duration of such owner’s ownership.

32.           Inspection and Access.
At reasonable times and on reasonable prior notice (except in cases of an
emergency), Landlord and its agents, representatives, and contractors may enter
the Premises to inspect the Premises, to make such repairs as may be required
or permitted pursuant to this Lease, during the last 9 months of the Term, to
show the Premises to prospective tenants, and for any other business purpose. Except
in case of an emergency, Landlord and Landlord’s representatives shall at all
times be accompanied by a representative of Tenant, and shall comply with
Tenant’s security and confidentiality protocols and procedures so long as a
copy of such protocols and procedures shall have been provided to Landlord. Landlord
may grant easements, make public dedications, designate Common Areas and create
restrictions on or about the Premises, provided that no such easement,
dedication, designation or restriction materially, adversely affects Tenant’s
use or occupancy of the Premises for the Permitted Use. At Landlord’s request,
Tenant shall execute such instruments as may be necessary for such easements,
dedications or restrictions

33.           Security. Tenant
acknowledges and agrees that security devices and services, if any, while intended
to deter crime may not in given instances prevent theft or other criminal acts
and that Landlord is not providing any security services with respect to the
Premises. Tenant agrees that Landlord shall not be liable to Tenant for, and
Tenant waives any claim against Landlord with respect to, any loss by theft or
any other damage suffered or incurred by Tenant in connection with any
unauthorized entry into the Premises or any other breach of security with
respect to the Premises. Tenant shall be solely responsible for the personal
safety of Tenant’s officers, employees, agents, contractors, guests and
invitees while any such person is in, on or about the Premises and/or the
Project. Tenant shall at Tenant’s cost obtain insurance coverage to the extent
Tenant desires protection against such criminal acts.

34.           Force Majeure. Landlord
shall not responsible or liable for delays in the performance of its
obligations hereunder when caused by, related to, or arising out of acts of
God, strikes, lockouts, or other labor disputes, embargoes, quarantines,
weather, national, regional, or local disasters, calamities, or catastrophes,
inability to obtain labor or materials (or reasonable substitutes therefor) at
reasonable costs or failure of, or inability to obtain, utilities necessary for
performance, governmental restrictions, orders, limitations, regulations, or
controls, national emergencies, delay in issuance or revocation of permits,
enemy or hostile governmental action, terrorism, insurrection, riots, civil disturbance
or 

 26
 

 

 

commotion, fire or other
casualty, and other causes or events beyond the reasonable control of Landlord
(“Force Majeure”).

35.           Brokers, Entire Agreement,
Amendment. Landlord and Tenant each represents and warrants that it
has not dealt with any broker, agent or other person (collectively, “Broker”) in connection
with this transaction and that no Broker brought about this transaction, other than CB Richard Ellis. Landlord
and Tenant each hereby agree to indemnify and hold the other harmless from and
against any claims by any Broker, other than the broker, if any named in this Section 35,
claiming a commission or other form of compensation by virtue of having dealt
with Tenant or Landlord, as applicable, with regard to this leasing
transaction.

36.           Limitation on Landlord’s
Liability. NOTWITHSTANDING ANYTHING SET FORTH HEREIN OR IN ANY OTHER
AGREEMENT BETWEEN LANDLORD AND TENANT TO THE CONTRARY:  (A) LANDLORD SHALL NOT BE LIABLE TO
TENANT OR ANY OTHER PERSON FOR (AND TENANT AND EACH SUCH OTHER PERSON ASSUME
ALL RISK OF) LOSS, DAMAGE OR INJURY, WHETHER ACTUAL OR CONSEQUENTIAL TO:  TENANT’S PERSONAL PROPERTY OF EVERY KIND AND
DESCRIPTION, INCLUDING, WITHOUT LIMITATION TRADE FIXTURES, EQUIPMENT,
INVENTORY, SCIENTIFIC RESEARCH, SCIENTIFIC EXPERIMENTS, LABORATORY ANIMALS,
PRODUCT, SPECIMENS, SAMPLES, AND/OR SCIENTIFIC, BUSINESS, ACCOUNTING AND OTHER
RECORDS OF EVERY KIND AND DESCRIPTION KEPT AT THE PREMISES AND ANY AND ALL
INCOME DERIVED OR DERIVABLE THEREFROM; (B) THERE SHALL BE NO PERSONAL
RECOURSE TO LANDLORD FOR ANY ACT OR OCCURRENCE IN, ON OR ABOUT THE PREMISES OR
ARISING IN ANY WAY UNDER THIS LEASE OR ANY OTHER AGREEMENT BETWEEN LANDLORD AND
TENANT WITH RESPECT TO THE SUBJECT MATTER HEREOF AND ANY LIABILITY OF LANDLORD
HEREUNDER SHALL BE STRICTLY LIMITED SOLELY TO LANDLORD’S INTEREST IN THE
PROJECT OR ANY PROCEEDS FROM SALE OR CONDEMNATION THEREOF AND ANY INSURANCE
PROCEEDS PAYABLE IN RESPECT OF LANDLORD’S INTEREST IN THE PROJECT OR IN
CONNECTION WITH ANY SUCH LOSS; AND (C) IN NO EVENT SHALL ANY PERSONAL
LIABILITY BE ASSERTED AGAINST LANDLORD IN CONNECTION WITH THIS LEASE NOR SHALL
ANY RECOURSE BE HAD TO ANY OTHER PROPERTY OR ASSETS OF LANDLORD OR ANY OF
LANDLORD’S OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR CONTRACTORS. UNDER NO
CIRCUMSTANCES SHALL LANDLORD OR ANY OF LANDLORD’S OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS OR CONTRACTORS BE LIABLE FOR INJURY TO TENANT’S BUSINESS OR
FOR ANY LOSS OF INCOME OR PROFIT THEREFROM.

37.           Severability. If
any clause or provision of this Lease is illegal, invalid or unenforceable
under present or future laws, then and in that event, it is the intention of
the parties hereto that the remainder of this Lease shall not be affected
thereby. It is also the intention of the parties to this Lease that in lieu of
each clause or provision of this Lease that is illegal, invalid or
unenforceable, there be added, as a part of this Lease, a clause or provision
as similar in effect to such illegal, invalid or unenforceable clause or
provision as shall be legal, valid and enforceable.

38.           Signs; Exterior Appearance.
Tenant shall not, without the prior written consent of Landlord, which may be
granted or withheld in Landlord’s sole discretion:  (i) attach any awnings, exterior lights,
decorations, balloons, flags, pennants, banners, painting or other projection
to any outside wall of the Project, (ii) use any curtains, blinds, shades
or screens other than Landlord’s standard window coverings, (iii) coat or
otherwise sunscreen the interior or exterior of any windows, (iv) place
any bottles, parcels, or other articles on the window sills, (v) place any
equipment, furniture or other items of personal property on any exterior
balcony, or (vi) paint, affix or exhibit on any part of the Premises or
the Project any signs, notices, window or door lettering, placards,
decorations, or advertising media of any type which can be viewed from the
exterior of the Premises. Interior signs on doors and the directory tablet
shall be inscribed, painted or affixed for Tenant by Landlord at the sole cost
and expense of Tenant, and shall be of a size, color and type acceptable to
Landlord. Nothing may be placed on the exterior of corridor walls or corridor
doors other than Landlord’s standard lettering.

 27
 

 

 

39.           Right to Extend Term. Tenant
shall have the right to extend the Term of the Lease upon the following terms
and conditions:

(a)           Extension Right. Tenant shall have the right (“Extension Right”) to extend the term of this Lease for 3
years (“Extension Term”) on the same terms and
conditions as this Lease (other than Base Rent) by giving Landlord written
notice of its election to exercise the Extension Right at least 9 months prior
to the expiration of the Base Term of the Lease.

Upon the commencement of the Extension Term, Base
Rent shall be payable at the Market Rate (as defined below). Base Rent shall
thereafter be adjusted on each annual anniversary of the commencement of the
Extension Term by a percentage as determined by Landlord and agreed to by
Tenant at the time the Market Rate is determined. As used herein, “Market Rate” shall mean the annual amount per square foot
that a willing tenant would pay and a willing landlord would accept, in an
arms-length lease extension for comparable space (exclusive, however, of
Alterations paid for by Tenant) for a comparable period of time, giving
consideration to the nature and character and use of the Building, the
Permitted Use, the approximate amount of operating expenses to be paid by the
tenant, the number of parking spaces available for use by Tenant, the amenities
and services provided and all other applicable conditions of the tenancy;
provided, however, that in no event shall the Market Rate be less than the Base
Rent payable as of the date immediately preceding the commencement of such
Extension Term increased by the Rent Adjustment Percentage multiplied by such
Base Rent.

If,
on or before the date which is 180 days prior to the expiration of the Base
Term of this Lease, Tenant has not agreed with Landlord’s determination of the
Market Rate and the rent escalations during the Extension Term after
negotiating in good faith, Tenant shall be deemed to have elected arbitration
as described in Section 39(b). Tenant acknowledges and agrees that,
if Tenant has elected to exercise the Extension Right by delivering notice to
Landlord as required in this Section 39(a), Tenant shall have no
right thereafter to rescind or elect not to extend the term of the Lease for
the Extension Term.

(b)           Arbitration.

(i)            Within
10 days of Tenant’s notice to Landlord of its election or the deemed election
to arbitrate Market Rate and escalations, each party shall deliver to the other
a proposal containing the Market Rate and escalations that the submitting party
believes to be correct (“Extension Proposal”).
If either party fails to timely submit an Extension Proposal, the other party’s
submitted proposal shall determine the Base Rent and escalations for the
Extension Term. If both parties submit Extension Proposals, then Landlord and
Tenant shall meet within 7 days after delivery of the last Extension Proposal
and make a good faith attempt to mutually appoint a single Arbitrator (and
defined below) to determine the Market Rate and escalations. If Landlord and
Tenant are unable to agree upon a single Arbitrator, then each shall, by
written notice delivered to the other within 10 days after the meeting, select
an Arbitrator. If either party fails to timely give notice of its selection for
an Arbitrator, the other party’s submitted proposal shall determine the Base
Rent for the Extension Term. The 2 Arbitrators so appointed shall, within 10
business days after their appointment, appoint a third Arbitrator. If the 2
Arbitrators so selected cannot agree on the selection of the third Arbitrator
within the time above specified, then either party, on behalf of both parties,
may request such appointment of such third Arbitrator by application to any
state court of general jurisdiction in the jurisdiction in which the Premises
are located, upon 10 days prior written notice to the other party of such
intent.

(ii)           The
decision of the Arbitrator(s) shall be made within 30 days after the
appointment of a single Arbitrator or the third Arbitrator, as applicable. The
decision of the single Arbitrator shall be final and binding upon the parties. The
average of the two closest Arbitrators in a three Arbitrator panel shall be
final and binding upon the parties. Each party shall pay the fees and expenses
of the Arbitrator appointed by or on behalf of such party and the fees and
expenses of the third Arbitrator shall be borne equally by both parties. If the
Market Rate and escalations are not determined by the first day of the
Extension Term, then Tenant shall pay Landlord Base Rent in an amount equal to
the Base Rent in effect immediately prior to the 

 28
 

 

 

Extension Term and increased by the Rent Adjustment
Percentage until such determination is made. After the determination of the
Market Rate and escalations, the parties shall make any necessary adjustments
to such payments made by Tenant. Landlord and Tenant shall then execute an
amendment recognizing the Market Rate and escalations for the Extension Term.

(iii)          An “Arbitrator” shall be any person appointed by or on behalf of
either party or appointed pursuant to the provisions hereof and:  (i) shall be (A) a member of the
American Institute of Real Estate Appraisers with not less than 10 years of
experience in the appraisal of improved office and high tech industrial real
estate in the greater North Peninsula area, or (B) a licensed commercial
real estate broker with not less than 15 years experience representing
landlords and/or tenants in the leasing of high tech or life sciences space in
the greater North Peninsula area, (ii) devoting substantially all of their
time to professional appraisal or brokerage work, as applicable, at the time of
appointment and (iii) be in all respects impartial and disinterested.

(c)           Rights Personal. The
Extension Right is personal to Tenant and is not assignable without Landlord’s
consent, which may be granted or withheld in Landlord’s sole discretion
separate and apart from any consent by Landlord to an assignment of Tenant’s
interest in the Lease, except that they may be assigned in connection with any
Permitted Assignment of this Lease.

(d)           Exceptions. Notwithstanding
anything set forth above to the contrary, the Extension Right shall not be in
effect and Tenant may not exercise the Extension Right:

(i)            during any period of time that
Tenant is in Default under any provision of this Lease; or

(ii)           if Tenant has been in Default under
any provision of this Lease 3 or more times, whether or not the Defaults are
cured, during the 12 month period immediately prior to the date that Tenant
intends to exercise the Extension Right, whether or not the Defaults are cured.

(e)           No Extensions. The
period of time within which the Extension Right may be exercised shall not be
extended or enlarged by reason of Tenant’s inability to exercise the Extension
Right.

(f)            Termination. The
Extension Right shall terminate and be of no further force or effect even after
Tenant’s due and timely exercise of the Extension Right, if, after such
exercise, but prior to the commencement date of the Extension Term, (i) Tenant
fails to timely cure any default by Tenant under this Lease; or (ii) Tenant
has Defaulted 3 or more times during the period from the date of the exercise
of the Extension Right to the date of the commencement of the Extension Term,
whether or not such Defaults are cured.

40.           Intentionally
Omitted.

41.           Miscellaneous.

(a)           Notices. All
notices or other communications between the parties shall be in writing and
shall be deemed duly given upon delivery or refusal to accept delivery by the
addressee thereof if delivered in person, or upon actual receipt if delivered
by reputable overnight guaranty courier, addressed and sent to the parties at
their addresses set forth above. Landlord and Tenant may from time to time by
written notice to the other designate another address for receipt of future
notices.

(b)           Joint and Several
Liability. If and when included within the term “Tenant,” as used in this instrument, there is more than one
person or entity, each shall be jointly and severally liable for the
obligations of Tenant.

 29
 

 

 

(c)           Financial
Information. Tenant shall
furnish Landlord  with true and complete
copies of (i) Tenant’s most recent audited annual financial statements
within 45 days of the end of each of Tenant’s fiscal years during the Term, (ii) Tenant’s
most recent unaudited quarterly financial statements within 90 days of the end
of each of Tenant’s first three fiscal quarters of each of Tenant’s fiscal
years during the Term, (iii) at Landlord’s request from time to time,
updated business plans, including cash flow projections and/or pro forma
balance sheets and income statements, all of which shall be treated by Landlord
as confidential information belonging to Tenant, (iv) corporate brochures
and/or profiles prepared by Tenant for prospective investors, and (v) any
other financial information or summaries that Tenant typically provides to its
lenders or shareholders. The provisions of this Section 41(c) shall
not apply to Tenant while Tenant is a publicly traded company.

(d)           Recordation. Neither
this Lease nor a memorandum of lease shall be filed by or on behalf of Tenant
in any public record. Landlord may prepare and file, and upon request by
Landlord Tenant will execute, a memorandum of lease.

(e)           Interpretation.
The normal rule of construction to the effect that any ambiguities are to
be resolved against the drafting party shall not be employed in the
interpretation of this Lease or any exhibits or amendments hereto. Words of any
gender used in this Lease shall be held and construed to include any other
gender, and words in the singular number shall be held to include the plural,
unless the context otherwise requires. The captions inserted in this Lease are
for convenience only and in no way define, limit or otherwise describe the
scope or intent of this Lease, or any provision hereof, or in any way affect
the interpretation of this Lease.

(f)            Not Binding Until Executed.
The submission by Landlord to Tenant of this Lease shall have no binding force
or effect, shall not constitute an option for the leasing of the Premises, nor
confer any right or impose any obligations upon either party until execution of
this Lease by both parties.

(g)           Limitations on Interest.
It is expressly the intent of Landlord and Tenant at all times to comply with
applicable law governing the maximum rate or amount of any interest payable on
or in connection with this Lease. If applicable law is ever judicially
interpreted so as to render usurious any interest called for under this Lease,
or contracted for, charged, taken, reserved, or received with respect to this
Lease, then it is Landlord’s and Tenant’s express intent that all excess
amounts theretofore collected by Landlord be credited on the applicable
obligation (or, if the obligation has been or would thereby be paid in full,
refunded to Tenant), and the provisions of this Lease immediately shall be
deemed reformed and the amounts thereafter collectible hereunder reduced,
without the necessity of the execution of any new document, so as to comply
with the applicable law, but so as to permit the recovery of the fullest amount
otherwise called for hereunder.

(h)           Choice of Law. Construction
and interpretation of this Lease shall be governed by the internal laws of the
state in which the Premises are located, excluding any principles of conflicts
of laws.

(i)            Time. Time is
of the essence as to the performance of Tenant’s obligations under this Lease.

(j)            Incorporation by Reference.
All exhibits and addenda attached hereto are hereby incorporated into this
Lease and made a part hereof. If there is any conflict between such exhibits or
addenda and the terms of this Lease, such exhibits or addenda shall control.

(k)           Hazardous Activities.
Notwithstanding any other provision of this Lease, Landlord, for itself and its
employees, agents and contractors, reserves the right to refuse to perform any
repairs or services in any portion of the Premises which, pursuant to Tenant’s
routine safety guidelines, practices or custom or prudent industry practices,
require any form of protective clothing or equipment other than safety glasses.
In any such case, Tenant shall contract with parties who are acceptable to Landlord,
in Landlord’s reasonable discretion, for all such repairs and services, and
Landlord shall, to the extent 

 30
 

 

 

required, equitably
adjust Tenant’s Share of Operating Expenses in respect of such repairs or
services to reflect that Landlord is not providing such repairs or services to
Tenant.

(l)            Project Specific
Requirements. Tenant acknowledges that the use and operation of the
Project are governed by, among other things, CC&Rs and Environmental
CC&Rs, and Tenant acknowledges having reviewed copies of the same. Tenant
agrees to comply with all of the terms of 
the CC&Rs and Environmental CC&Rs which are applicable to
tenants of the Project including, without limitation, maintaining the insurance
required under the Environmental CC&Rs. As used herein, (i) “CC&Rs” mean that certain Amended and Restated
Declaration of Covenants, Conditions and Restrictions for Sierra Point recorded
in the Official Records of San Mateo County on October 23, 1998, as
amended, and (ii) “Environmental CC&Rs”
mean that certain First Amended and Restated Declaration of Covenants,
Conditions and Environmental Restrictions Relating to Environmental Compliance
for Sierra Point, recorded in the Official Records of San Mateo County on October 20,
1999 as Instrument No. 1999-176058.

 31
 

 

 

IN
WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the day and
year first above written.

	
  

  	
  TENANT:

  
	
   

  	
   

  	
   

  
	
   

  	
  PONIARD PHARMACEUTICALS, INC.,

  
	
   

  	
  a Washington corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ GERALD MCMAHON

  
	
   

  	
  Name:

  	
  Gerald McMahon

  
	
   

  	
  Title:

  	
  Chairman, CEO & President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LANDLORD:

  
	
   

  	
   

  	
   

  
	
   

  	
  ARE-SAN FRANCISCO NO. 17, LLC,

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  ALEXANDRIA REAL ESTATE EQUITIES, L.P.,

  
	
   

  	
   

  	
  a Delaware limited partnership,

  
	
  

  	
   

  	
  managing member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  ARE-QRS CORP.,

  
	
   

  	
   

  	
   

  	
  a Maryland corporation,

  
	
   

  	
   

  	
   

  	
  general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ JENNIFER PAPPAS

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Jennifer Pappas

  
	
   

  	
   

  	
   

  	
  Title:

  	
  V. P. and Assistant Secretary

  
									

 

 32

EXHIBIT A TO LEASE

DESCRIPTION
OF INITIAL AND ADDITIONAL PREMISES

[Graphic of floor plan]

 1

EXHIBIT
B TO LEASE

DESCRIPTION
OF PROJECT

CITY OF SOUTH SAN
FRANCISCO

PARCEL 1:

PARCEL C, AS SHOWN ON THAT CERTAIN MAP ENTITLED, “PARCEL
MAP 98-044 LANDS OF SIERRA POINT, LLC, CITY OF SOUTH SAN FRANCISCO”,
FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN MATEO COUNTY, STATE OF
CALIFORNIA, ON AUGUST 6, 1999, IN BOOK 71 OF PARCEL MAPS, AT PAGE(S) 71
AND 72.

PARCEL 2:

THOSE CERTAIN ACCESS EASEMENTS AS DESCRIBED IN THE
FIRST AMENDMENT TO AMENDED AND RESTATED DECLARATION OF COVENANTS, CONDITIONS
AND RESTRICTIONS FOR SIERRA POINT RECORDED AUGUST 6, 1999, AS DOCUMENT NO.
1999-134787, AND RERECORDED OCTOBER 20, 1999, AS DOCUMENT NO. 1999-176057.

	
  ASSESSOR’S PARCEL NO. 015-010-570

  	
   

  	
  JOINT PLANT NO. 015-001-010-02.04A

  

 

 1

 

EXHIBIT
C TO LEASE

WORK
LETTER

THIS WORK LETTER (this “Work Letter”) is incorporated into that certain Lease (the “Lease”) dated as of June 26, 2006 by and between ARE SAN FRANCISCO NO. 17, LLC, a Delaware limited liability
company (“Landlord”), and PONIARD
PHARMACEUTICALS, INC., a Washington corporation (“Tenant”). Any initially capitalized terms used but not
defined herein shall have the meanings given them in the Lease.

1.             General
Requirements.

(a)           Tenant’s Authorized
Representative. Tenant designates                       
and                         
(either such individual acting alone, “Tenant’s Representative”)
as the only persons authorized to act for Tenant pursuant to this Work Letter. Landlord
shall not be obligated to respond to or act upon any request, approval, inquiry
or other communication (“Communication”)
from or on behalf of Tenant in connection with this Work Letter unless such
Communication is in writing from Tenant’s Representative. Tenant may change
either Tenant’s Representative at any time upon not less than 5 business days
advance written notice to Landlord.

(b)           Landlord’s Authorized
Representative. Landlord designates                         
and                   
(either such individual acting alone, “Landlord’s Representative”)
as the only persons authorized to act for Landlord pursuant to this Work Letter.
Tenant shall not be obligated to respond to or act upon any request, approval,
inquiry or other Communication from or on behalf of Landlord in connection with
this Work Letter unless such Communication is in writing from Landlord’s
Representative. Landlord may change either Landlord’s Representative at any
time upon not less than 5 business days advance written notice to Tenant.

(c)           Architects, Consultants
and Contractors. Landlord and Tenant hereby acknowledge and agree
that the architect (the “TI Architect”)
for the Tenant Improvements (as defined in Section 2(a) below), the
general contractor and any subcontractors for the Tenant Improvements shall be
selected by Tenant, subject to Landlord’s approval, which approval shall not be
unreasonably withheld, conditioned or delayed. Landlord shall be named a third
party beneficiary of any contract entered into by Tenant with the TI Architect,
any consultant, any contractor or any subcontractor, and of any warranty made
by any contractor or any subcontractor.

2.             Tenant
Improvements.

(a)           Tenant Improvements
Defined. As used herein, “Tenant Improvements”
shall mean all improvements to the Premises desired by Tenant of a fixed and
permanent nature. Other than funding the TI Allowance (as defined below) as
provided herein, Landlord shall not have any obligation whatsoever with respect
to the finishing of the Premises for Tenant’s use and occupancy.

(b)           Tenant’s Space Plans.
Tenant shall deliver to Landlord schematic drawings and outline specifications
(the “TI Design Drawings”) detailing Tenant’s
requirements for the Tenant Improvements within         
days of the date hereof. Not more than          
days thereafter, Landlord shall deliver to Tenant the written objections,
questions or comments of Landlord and the TI Architect with regard to the TI
Design Drawings. Tenant shall cause the TI Design Drawings to be revised to
address such written comments and shall resubmit said drawings to Landlord for
approval within          days
thereafter. Such process shall continue until Landlord has approved the TI
Design Drawings.

(c)           Working Drawings.
Not later than 15 business days following the approval of the TI Design
Drawings by Landlord, Tenant shall cause the TI Architect to prepare and
deliver to Landlord for review and comment construction plans, specifications
and drawings for the Tenant Improvements (“TI 

 1
 

 

Construction Drawings”), which TI
Construction Drawings shall be prepared substantially in accordance with the TI
Design Drawings. Tenant shall be solely responsible for ensuring that the TI
Construction Drawings reflect Tenant’s requirements for the Tenant Improvements.
Landlord shall deliver its written comments on the TI Construction Drawings to
Tenant not later than 10 business days after Landlord’s receipt of the same;
provided, however, that Landlord may not disapprove any matter that is
consistent with the TI Design Drawings. Tenant and the TI Architect shall
consider all such comments in good faith and shall, within 10 business days
after receipt, notify Landlord how Tenant proposes to respond to such comments.
Any disputes in connection with such comments shall be resolved in accordance
with Section 2(d) hereof. Provided that the design reflected in the
TI Construction Drawings is consistent with the TI Design Drawings, Landlord
shall approve the TI Construction Drawings submitted by Tenant. Once approved
by Landlord, subject to the provisions of Section 4 below, Tenant shall
not materially modify the TI Construction Drawings except as may be reasonably
required in connection with the issuance of the TI Permit (as defined in Section 3(a) below).

(d)           Approval and Completion.
If any dispute regarding the design of the Tenant Improvements is not settled
within 10 business days after notice of such dispute is delivered by one party
to the other, Tenant may make the final decision regarding the design of the
Tenant Improvements, provided (i) Tenant acts reasonably and such final
decision is either consistent with or a compromise between Landlord’s and
Tenant’s positions with respect to such dispute, (ii) that all costs and
expenses resulting from any such decision by Tenant shall be payable out of the
TI Fund (as defined in Section 5(d) below), and (iii) Tenant’s
decision will not affect the base Building, structural components of the
Building or any Building systems (in which case Landlord shall make the final
decision). Any changes to the TI Construction Drawings following Landlord’s and
Tenant’s approval of same requested by Tenant shall be processed as provided in
Section 4 hereof.

3.             Performance
of the Tenant Improvements.

(a)           Commencement and
Permitting of the Tenant Improvements. Tenant shall commence
construction of the Tenant Improvements upon obtaining and delivering to
Landlord a building permit (the “TI Permit”)
authorizing the construction of the Tenant Improvements consistent with the TI
Construction Drawings approved by Landlord. The cost of obtaining the TI Permit
shall be payable from the TI Fund. Landlord shall assist Tenant in obtaining
the TI Permit. Prior to the commencement of the Tenant Improvements, Tenant
shall deliver to Landlord a copy of any contract with Tenant’s contractors
(including the TI Architect), and certificates of insurance from any contractor
performing any part of the Tenant Improvement evidencing industry standard
commercial general liability, automotive liability, “builder’s risk”, and
workers’ compensation insurance. Tenant shall cause the general contractor to
provide a certificate of insurance naming Landlord, Alexandria Real Estate
Equities, Inc., and Landlord’s lender (if any) as additional insureds for
the general contractor’s liability coverages required above.

(b)           Selection of Materials,
Etc. Where more than one type of material or structure is indicated
on the TI Construction Drawings approved by Tenant and Landlord, the option
will be within Tenant’s reasonable discretion if the matter concerns the Tenant
Improvements, and within Landlord’s sole and absolute subjective discretion if
the matter concerns the structural components of the Building or any Building
system.

(c)           Tenant Liability.
Tenant shall be responsible for correcting any deficiencies or defects in the
Tenant Improvements.

(d)           Substantial Completion.
Tenant shall substantially complete or cause to be substantially completed the
Tenant Improvements in a good and workmanlike manner, in accordance with the TI
Permit subject, in each case, to Minor Variations and normal “punch list” items
of a non-material nature which do not interfere with the use of the Premises (“Substantial Completion” or “Substantially
Complete”). Upon Substantial Completion of the Tenant Improvements,
Tenant shall require the TI Architect and the general contractor to execute and
deliver, for the benefit of Tenant and Landlord, a 

 2
 

 

Certificate of
Substantial Completion in the form of the American Institute of Architects (“AIA”) document G704. For purposes of this Work Letter, “Minor Variations” shall mean any modifications reasonably
required:  (i) to comply with all
applicable Legal Requirements and/or to obtain or to comply with any required
permit (including the TI Permit); (ii) to comport with good design,
engineering, and construction practices which are not material; or (iii) to
make reasonable adjustments for field deviations or conditions encountered
during the construction of the Tenant Improvements.

4.             Changes.
Any changes requested by Tenant to the Tenant Improvements after the delivery
and approval by Landlord of the TI Design Drawings, shall be requested and
instituted in accordance with the provisions of this Section 4 and shall
be subject to the written approval of Landlord, which approval shall not be
unreasonably withheld, conditioned or delayed.

(a)           Tenant’s Right to Request
Changes. If Tenant shall request changes (“Changes”),
Tenant shall request such Changes by notifying Landlord in writing in
substantially the same form as the AIA standard change order form (a “Change Request”), which Change Request shall detail the
nature and extent of any such Change. Such Change Request must be signed by
Tenant’s Representative. Landlord shall review and approve or disapprove such
Change Request within 10 business days thereafter, provided that Landlord’s
approval shall not be unreasonably withheld, conditioned or delayed.

(b)           Implementation of Changes.
If Landlord approves such Change and Tenant deposits with Landlord any Excess
TI Costs (as defined in Section 5(d) below) required in connection
with such Change, Tenant may cause the approved Change to be instituted. If any
TI Permit modification or change is required as a result of such Change, Tenant
shall promptly provide Landlord with a copy of such TI Permit modification or
change.

5.             Costs.

(a)           Budget For Tenant Improvements.
Before the commencement of construction of the Tenant Improvements, Tenant
shall obtain a detailed breakdown, by trade, of the costs incurred or that will
be incurred, in connection with the design and construction of The Tenant
Improvements (the “Budget”), and
deliver a copy of the Budget to Landlord for Landlord’s approval, which shall
not be unreasonably withheld or delayed. The Budget shall be based upon the TI
Construction Drawings approved by Landlord and shall include a payment to
Landlord of administrative rent (“Administrative Rent”)
equal to 2% of the TI Costs (as hereinafter defined) for monitoring and
inspecting the construction of the Tenant Improvements, which sum shall be
payable from the TI Fund. Such Administrative Rent shall include, without
limitation, all out-of-pocket costs, expenses and fees incurred by or on behalf
of Landlord arising from, out of, or in connection with, such monitoring of the
construction of the Tenant Improvements, and shall be payable out of the TI
Fund. If the Budget is greater than the TI Allowance, Tenant shall deposit with
Landlord the difference, in cash, prior to the commencement of construction of
the Tenant Improvements, for disbursement by Landlord as described in Section 5(d).

(b)           Landlord shall provide to Tenant a
tenant improvement allowance (the “TI Allowance”)
in the maximum amount of $25.00 per rentable square foot in the Premises, or
$426,125.00 in the aggregate, which shall, to the extent used, result in
adjustments to the Base Rent as set forth in the Lease.  Within 5 business days after Tenant’s delivery
of the Budget to Landlord, Tenant shall notify Landlord how much TI Allowance
Tenant has elected to receive from Landlord. Such election shall be final and
binding on Tenant, and may not thereafter be modified without Landlord’s
consent, which may be granted or withheld in Landlord’s sole and absolute
subjective discretion The TI Allowance shall be disbursed in accordance with
this Work Letter.

Tenant shall have no right to the use or
benefit (including any reduction to Base Rent) of any portion of the TI
Allowance not required for the construction of (i) the Tenant Improvements
described in the TI Construction Drawings approved pursuant to Section 2(d) or
(ii) any Changes pursuant to Section 4. 

 3
 

 

Tenant shall have no right to any portion
of the TI Allowance that is not disbursed within 6 months after the delivery of
the Additional Premises to Tenant.

(c)           Costs Includable in TI
Fund. The TI Fund shall be used solely for the payment of design, permits
and construction costs in connection with the construction of the Tenant
Improvements, including, without limitation, the cost of electrical power and
other utilities used in connection with the construction of the Tenant
Improvements, the cost of preparing the TI Design Drawings and the TI
Construction Drawings, all costs set forth in the Budget, including Landlord’s
Administrative Rent, and the cost of Changes (collectively, “TI Costs”). Notwithstanding anything to the contrary
contained herein, the TI Fund shall not be used to purchase any furniture,
personal property or other non-Building system materials or equipment,
including, but not be limited to, Tenant’s voice or data cabling, non-ducted
biological safety cabinets and other scientific equipment not incorporated into
the Tenant Improvements.

(d)           Excess TI Costs.
Landlord shall have no obligation to bear any portion of the cost of any of the
Tenant Improvements except to the extent of the TI Allowance. If at any time
and from time-to-time, the remaining TI Costs under the Budget exceed the
remaining unexpended TI Allowance, Tenant shall deposit with Landlord, as a
condition precedent to Landlord’s obligation to complete the Tenant
Improvements, 100% of the then current TI Cost in excess of the remaining TI
Allowance (“Excess TI Costs”). If Tenant fails
to deposit, or is late in depositing any Excess TI Costs with Landlord,
Landlord shall have all of the rights and remedies set forth in the Lease for
nonpayment of Rent (including, but not limited to, the right to interest at the
Default Rate and the right to assess a late charge). For purposes of any
litigation instituted with regard to such amounts, those amounts will be deemed
Rent under the Lease. The TI Allowance and Excess TI Costs is herein referred
to as the “TI Fund.”  Funds deposited by
Tenant shall be the first thereafter disbursed to pay TI Costs. Notwithstanding
anything to the contrary set forth in this Section 5(d), Tenant shall be
fully and solely liable for TI Costs and the cost of Minor Variations in excess
of the TI Allowance. If upon Substantial Completion of the Tenant Improvements
and the payment of all sums due in connection therewith there remains any
undisbursed portion of the TI Fund, Tenant shall be entitled to such undisbursed
TI Fund solely to the extent of any Excess TI Costs deposit Tenant has actually
made with Landlord.

(e)           Payment for TI Costs.
During the course of design and construction of the Tenant Improvements,
Landlord shall pay TI Costs once a month against a draw request in Landlord’s
standard form, containing such certifications, lien waivers (including a
conditional lien release for each progress payment and unconditional lien
releases for the prior month’s progress payments), inspection reports and other
matters as Landlord customarily obtains, to the extent of Landlord’s approval
thereof for payment, no later than 30 days following receipt of such draw
request. Upon completion of the Tenant Improvements (and prior to any final
disbursement of the TI Fund), Tenant shall deliver to Landlord:  (i) sworn statements setting forth the
names of all contractors and first tier subcontractors who did the work and
final, unconditional lien waivers from all such contractors and first tier
subcontractors; (ii) as-built plans (one copy in print format and two
copies in electronic CAD format) for such Tenant Improvements; (iii) a
certification of substantial completion in Form AIA G704, (iv) a
certificate of occupancy for the Premises; and (v) copies of all operation
and maintenance manuals and warranties affecting the Premises.

6.             Miscellaneous.

(a)           Consents. Whenever
consent or approval of either party is required under this Work Letter, that
party shall not unreasonably withhold, condition or delay such consent or
approval, except as may be expressly set forth herein to the contrary.

(b)           Modification. No
modification, waiver or amendment of this Work Letter or of any of its
conditions or provisions shall be binding upon Landlord or Tenant unless in
writing signed by Landlord and Tenant.

 4
 

 

 

IN WITNESS WHEREOF, Landlord
and Tenant have executed this Work Letter to be effective on the date first
above written.

	
  

  	
  TENANT:

  
	
   

  	
   

  
	
   

  	
  PONIARD
  PHARMACEUTICALS, INC.,

  a Washington
  corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

	
  

  	
  LANDLORD:

  
	
   

  	
   

  
	
   

  	
  ARE-SAN FRANCISCO NO. 17, LLC,

  a Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  ALEXANDRIA REAL ESTATE EQUITIES, L.P.,

  
	
   

  	
   

  	
  a Delaware limited partnership,

  
	
   

  	
   

  	
  managing member

  

 

	
  

  	
  By:

  	
  ARE-QRS CORP.,

  
	
   

  	
   

  	
  a Maryland corporation,

  
	
   

  	
   

  	
  general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 5

                                                                                                 

EXHIBIT
D TO LEASE

ACKNOWLEDGEMENT
OF COMMENCEMENT DATE

This ACKNOWLEDGMENT OF COMMENCEMENT DATE is made this         
day of               ,
200  , between ARE-SAN FRANCISCO
NO. 17, LLC, a Delaware limited liability company (“Landlord”), and PONIARD
PHARMACEUTICALS, INC., a Washington corporation (“Tenant”), and is attached to and made a part of the Lease
dated                    ,
2006 (the “Lease”), by and between Landlord
and Tenant. Any initially capitalized terms used but not defined herein shall
have the meanings given them in the Lease.

Landlord and Tenant
hereby acknowledge and agree, for all purposes of the Lease, that the
Commencement Date of the Base Term of the Lease is                      ,
                   ,
and the termination date of the Base Term of the Lease shall be midnight on                       ,
                   .

IN WITNESS WHEREOF,
Landlord and Tenant have executed this ACKNOWLEDGMENT OF COMMENCEMENT DATE to
be effective on the date first above written.

TENANT:

PONIARD
PHARMACEUTICALS, INC.,

a Washington corporation

By: 
                                                                                                        

Name:                                                                                                     

Title:                                                                                                       

LANDLORD:

ARE-SAN FRANCISCO NO. 17, LLC,

a Delaware limited liability company

By:                              ALEXANDRIA
REAL ESTATE EQUITIES, L.P.,

a Delaware limited partnership,

managing member

By:                              ARE-QRS
CORP.,

a Maryland corporation,

general partner

By:                                                                          

Name:                                                                     

Title:                                                                       

 1

 

EXHIBIT
E TO LEASE

RULES
AND REGULATIONS

1.             The sidewalk, entries, and
driveways of the Project shall not be obstructed by Tenant, or any Tenant
Party, or used by them for any purpose other than ingress and egress to and
from the Premises.

2.             Tenant shall not place any objects,
including antennas, outdoor furniture, etc., in the parking areas, landscaped
areas or other areas outside of its Premises, or on the roof of the Project.

3.             Except for animals assisting the
disabled, no animals shall be allowed in the offices, halls, or corridors in
the Project.

4.             Tenant shall not disturb the
occupants of the Project or adjoining buildings by the use of any radio or
musical instrument or by the making of loud or improper noises.

5.             If Tenant desires telegraphic, telephonic
or other electric connections in the Premises, Landlord or its agent will
direct the electrician as to where and how the wires may be introduced; and,
without such direction, no boring or cutting of wires will be permitted. Any
such installation or connection shall be made at Tenant’s expense.

6.             Tenant shall not install or operate
any steam or gas engine or boiler, or other mechanical apparatus in the
Premises, except as specifically approved in the Lease. The use of oil, gas or
inflammable liquids for heating, lighting or any other purpose is expressly
prohibited. Explosives or other articles deemed extra hazardous shall not be
brought into the Project.

7.             Parking any type of recreational
vehicles is specifically prohibited on or about the Project. Except for the
overnight parking of operative vehicles, no vehicle of any type shall be stored
in the parking areas at any time. In the event that a vehicle is disabled, it
shall be removed within 48 hours. There shall be no “For Sale” or other
advertising signs on or about any parked vehicle. All vehicles shall be parked
in the designated parking areas in conformity with all signs and other markings.
All parking will be open parking, and no reserved parking, numbering or
lettering of individual spaces will be permitted except as specified by
Landlord.

8.             Tenant shall maintain the Premises
free from rodents, insects and other pests.

9.             Landlord reserves the right to
exclude or expel from the Project any person who, in the judgment of Landlord,
is intoxicated or under the influence of liquor or drugs or who shall in any
manner do any act in violation of the Rules and Regulations of the
Project.

10.           Tenant shall not cause any
unnecessary labor by reason of Tenant’s carelessness or indifference in the
preservation of good order and cleanliness. Landlord shall not be responsible
to Tenant for any loss of property on the Premises, however occurring, or for
any damage done to the effects of Tenant by the janitors or any other employee
or person.

11.           Tenant shall give Landlord prompt
notice of any defects in the water, lawn sprinkler, sewage, gas pipes,
electrical lights and fixtures, heating apparatus, or any other service
equipment affecting the Premises.

12.           Tenant shall not permit storage
outside the Premises, including without limitation, outside storage of trucks
and other vehicles, or dumping of waste or refuse or permit any harmful
materials to be placed in any drainage system or sanitary system in or about
the Premises.

 1
 

 

 

13.           All moveable trash receptacles provided
by the trash disposal firm for the Premises must be kept in the trash enclosure
areas, if any, provided for that purpose.

14.           No auction, public or private, will
be permitted on the Premises or the Project.

15.           No awnings shall be placed over the
windows in the Premises except with the prior written consent of Landlord.

16.           The Premises shall not be used for
lodging, sleeping or cooking or for any immoral or illegal purposes or for any
purpose other than that specified in the Lease. No gaming devices shall be
operated in the Premises.

17.           Tenant shall ascertain from Landlord
the maximum amount of electrical current which can safely be used in the
Premises, taking into account the capacity of the electrical wiring in the
Project and the Premises and the needs of other tenants, and shall not use more
than such safe capacity. Landlord’s consent to the installation of electric
equipment shall not relieve Tenant from the obligation not to use more
electricity than such safe capacity.

18.           Tenant assumes full responsibility
for protecting the Premises from theft, robbery and pilferage.

19.           Tenant shall not install or operate
on the Premises any machinery or mechanical devices of a nature not directly
related to Tenant’s ordinary use of the Premises and shall keep all such
machinery free of vibration, noise and air waves which may be transmitted
beyond the Premises.

 2

 

EXHIBIT
F TO LEASE

TENANT’S
PROPERTY

None except as set forth below:

The following to the extent installed below the
ceiling grid:

Casework and cabinets

Mill work

Lab benches

Fume and tissue culture hoods

Glass wash equipment

Equipment racks

Bio-safety cabinets

Environmental rooms

Refrigerators, freezers and ice machines

Hyrogenation Parr

Autoclaves

Specialized equipment that can be removed without damage to building structure
or systems

 1

 

EXHIBIT
G TO LEASE

LANDLORD’S
WORK

Initial Premises

·                  Construct
a fire-rated corridor and related card readers and doors in order to secure the
Premises from the adjacent suite.

Additional Premises

·                  Construct
a demising wall between glasswash areas room 223 and 224, and between Biology
Lab 217 and Equipment room.

·                  Install
set of double doors between Biology Lab 217 and vestibule outside of glasswash
area.

 1

 

EXHIBIT
H TO LEASE

LANDLORD’S
PROPERTY

Inventory of Existing
Furniture in the Premises

Main Conference Room:

-Conference room table

-9 conference room chairs

-1 credenza

Patio:

-3 round metal tables

-9 metal chairs

Plug and Play Office
Cubes:

-19 assembled

-Approximately 8 additional unassembled (we are unable to guarantee that all
parts are available)

Private Office Furniture:

-6 office desks with return desk, under desk file
cabinet and upper storage

-2 oval tables

-1 unassembled office desk

-2 return desks

-1 partial desk with file cabinet

Future Chemistry Lab
(upon expansion of square footage to 16,586 sf):

-3, eight-foot chemical fume hoods.

 

EQUITY
PARTICIPATION LETTER

ALEXANDRIA

Alexandria Equities, LLC

385 E. Colorado Boulevard

Suite 299

Pasadena, California 91101

July 10, 2006

Poniard Pharmaceuticals, Inc.
750 Battery
Street, Suite 600

San Francisco, CA 94111

Attention: Susan Berland

Re: 7000 Shoreline Court, South San
Francisco, CA

Ladies and Gentlemen:

Reference is made to the Lease dated as
of July 10, 2006 (the “Lease”) , entered into between ARE-San Francisco No. 17,
LLC (“Landlord”), and Poniard Pharmaceuticals, Inc., a Washington
corporation (“Tenant”), relating to the lease of premises at the
above-referenced address. Pursuant to the Lease, Landlord, or an affiliate
nominee of Landlord, is to be granted certain rights with respect to certain
Tenant equity financings completed after the date of this letter agreement
(this “Participation Rights Agreement”). Alexandria Equities, LLC (“Alexandria”)
is an affiliate of Landlord and this Participation Right Agreement  is intended to implement the foregoing
provisions of the Lease.

20.           Participation
in Future Financings.

(a)           Tenant hereby grants Alexandria the
right, but not the obligation, to purchase an aggregate of not less than
$100,000 and not more than $250,000 (although Alexandria may in its sole
discretion elect to purchase any amount between such amounts) (the “Participation
Right”) of New Securities (as described below) offered by Tenant in any
equity financing completed following the date of this Participation Rights
Agreement. If the equity financing is over-subscribed, the amount of New
Securities which Alexandria may purchase shall be limited on a pro rata basis
based on the proportion of New Securities which Alexandria subscribes to
purchase bears to the total number of New Securities to be purchased by other
investors, provided that such limitation shall not apply to the first equity
financing to which the Participation Right is applicable and Alexandria has the
right to purchase $250,000. The New Securities shall be offered to Alexandria
at the same price and upon the same terms and conditions and subject to the
same qualifications, conditions and restrictions, as those upon which the New
Securities are offered and sold by Tenant to other investors in such equity
financing. Tenant shall offer to sell the New Securities to Alexandria by
sending written notice of such offer (a “New Securities Notice”) to
Alexandria at its above-referenced address; Attention:  Chief Financial Officer; Fax Number (626) 578-0770.
Except as required by Tenant to comply with applicable laws and/or regulations,
any New Securities Notice shall describe the provisions of the New Securities
in reasonable detail and shall specify the terms and conditions upon which they
shall be sold by Tenant, provided that the New Securities Notice shall not
contain more information than is provided to other potential investors in such
equity financing. Alexandria may subscribe to purchase the applicable amount of
New Securities by sending written notice to Tenant of Alexandria’s election to
do so within the same period of time as provided to other investors in such
equity financing (provided Alexandria has received as much notice as the other
investors), and if no such time period is specified, within 15 days after
delivery of the New Securities 

 

Notice. Any New
Securities not subscribed ford by Alexandria may thereafter be offered for sale
and sold by Tenant, on terms and conditions that are no less favorable to
Tenant than those specified in the New Securities Notice, at any time within
120 days after the expiration of Alexandria’s response period.

(b)           “New Securities” shall mean
any shares of capital stock of Tenant or any options, warrants or other
securities convertible into or exchangeable or exercisable for shares of
capital stock of Tenant, provided that New Securities shall not include any of
the following:

(i)            securities issued or issuable to
officers, employees, directors, consultants, placement agents and other service
providers of the Company (or any subsidiary) pursuant to stock grants, option
plans, purchase plans, agreements, or other 
compensatory or incentive programs or arrangements;

(ii)           securities issued or issuable
pursuant to the conversion, exercise, redemption or repurchase of any
convertible, exchangeable or exercisable securities outstanding as of this date
of this Participation Rights Agreement;

(iii)          securities issued or issuable as a
dividend, distribution,  subdivision,
combination or reorganization of capital stock of the Company;

(iv)          securities issued or issuable pursuant
to the acquisition of another entity by the Company by merger, consolidation,
reorganization, share exchange, purchase of substantially all of the assets or
other similar reorganization or to a joint venture agreement;

(v)           securities issued or issuable to
financial institutions or lessors in connection with commercial credit
arrangements, equipment financings, service agreements or similar transactions;

(vi)          securities issued or issuable in
connection with sponsored research, collaborations, technology license,
development, OEM, marketing or other similar agreements or strategic
partnerships or alliances that are not primarily for equity financing purposes;

(vii)         securities which are otherwise excluded
by the prior written consent of Landlord;

(viii)        securities which are issued or issuable
in connection with any shareholder rights plan, poison pill or similar
arrangement hereafter approved by the board of directors of Tenant; and

(ix)           any right, option or warrant to
acquire any security convertible into or exchangeable or exercisable for the
securities excluded from the definition of New Securities pursuant to
subsections (i) through (viii) above.

(c)           Notwithstanding any other provision
of this Participation Rights Agreement or the Lease, Alexandria, shall, as a
condition precedent to exercising any Participation Rights, establish to the
reasonable satisfaction of Tenant and its counsel that Alexandria meets all
purchaser qualification requirements under applicable federal and state
securities laws and regulations and Nasdaq marketplace rules, specifically
including but not limited to any registration exemptions and shareholder
approval exemptions being relied upon by Tenant in making the offer and sale of
the New Securities in the equity financing. Alexandria agrees that it will
furnish Tenant such information and execute such documents as Tenant may
reasonably request, in each case within 7 days’ of receipt of Tenant’s request,
to evaluate whether Alexandria satisfies the legal requirements for purchase of
the New Securities in the equity securities financing.

 

21.           No Conflicts. Neither the
execution and delivery of this Participation Rights Agreement, nor performance
of its terms, will, result in a violation of (i) any of the provisions of
Tenant’s articles of incorporation or bylaws, or (ii) any resolution
adopted by Tenant’s shareholders, Tenant’s board of directors or any committee
thereof as of the date hereof.

22.           Governing Law. The terms and
conditions of this Participation Rights Agreement shall be governed by and
construed in accordance with Washington law, without regard to the conflict of
laws provisions thereof.

23.           Successors and Assigns. The
terms and provisions of this Participation Rights Agreement shall be binding
upon Alexandria and Tenant and their respective successors and assigns, subject
at all times to the restrictions set forth herein; provided that other than
transfers by Alexandria to its affiliates, Alexandria may not assign or
transfer this Participation Rights Agreement (or any of its rights hereunder)
without the prior written consent of Tenant.

24.           Confidentiality. Each party
hereto agrees that, except with the prior written consent of the other party
and except as required by applicable laws and/or regulations, it shall at all
times keep confidential the terms of this Participation Rights Agreement and
the discussions or negotiations relating to this Participation Rights Agreement.
In addition, each party hereto hereby agrees that, except with the prior
written consent of the other party or except as required by applicable laws
and/or regulations, it shall not participate in or generate any press release
or other release of information to the general public relating to this
Participation Rights Agreement or any transactions contemplated by this
Participation Rights Agreement.

25.           Counterparts. This
Participation Rights Agreement may be executed in as many counterparts as the
parties hereto deem necessary or convenient, each of which counterparts shall
be deemed an original but all of which, together, shall constitute but one and
the same document.

26.           Termination. This
Participation Rights Agreement shall terminate upon the date of expiration or
earlier termination of the Lease.

27.           Entire Agreement. This
Participation Rights Agreement constitutes the entire agreement and
understanding of the parties with respect to the subject matter of this
Participation Rights Agreement, and supersedes any and all prior understandings
and agreements, whether oral or written, between or among the parties hereto
with respect to the specific subject matter hereof.

[signature page follows]

 

[signature page]

If you agree that the foregoing
accurately sets forth our agreement, please execute this Participation Rights
Agreement in the space provided below, whereupon it will become a binding
contract between us, and return it to Alexandria Equities, LLC, Attn: Chief
Financial Officer, at the above-referenced address.

	
  

  	
   

  	
  ALEXANDRIA EQUITIES, LLC,

  
	
   

  	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Alexandria Real Estate Equities, Inc.,

  
	
   

  	
   

  	
  a Maryland corporation,

  
	
   

  	
   

  	
  its managing member

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ ETSUKO MASON

  
	
   

  	
  Name:

  	
  Etsuko Mason

  
	
   

  	
  Title:

  	
  Vice President, Treasurer & Assistant Secretary

  
				

 

ACCEPTED AND AGREED TO:

PONIARD PHARMACEUTICALS, INC., a Washington
corporation

	
  By:

  	
  /s/ GERALD MCMAHON

  	
   

  
	
  Name:

  	
  Gerald McMahon

  	
   

  
	
  Title:

  	
  Chairman, CEO & President<PAGE>

                                                                    EXHIBIT 10.1

================================================================================

                           FOURTH AMENDED AND RESTATED
                                 LOAN AGREEMENT

                            Dated as of July 10, 2006

                                  By and among

       ASTA FUNDING ACQUISITION I, LLC, ASTA FUNDING ACQUISITION II, LLC,
                    PALISADES COLLECTION, L.L.C., PALISADES
          ACQUISITION I, LLC, PALISADES ACQUISITION II, LLC, PALISADES
                         ACQUISITION IV, LLC, AND CLIFFS
                          PORTFOLIO ACQUISITION I, LLC

                                  as Borrowers,

                    THE OTHER CREDIT PARTIES SIGNATORY HERETO
                               FROM TIME TO TIME,
                               as Credit Parties,

                          THE LENDERS SIGNATORY HERETO
                               FROM TIME TO TIME,
                                   as Lenders,

                        ISRAEL DISCOUNT BANK OF NEW YORK

      as Administrative Agent, Co-Administrative Agent and Co-Lead Arranger

                             MERRILL LYNCH CAPITAL,
          a Division of Merrill Lynch Business Financial Services Inc.

      as Administrative Agent, Co-Administrative Agent and Co-Lead Arranger

================================================================================

<PAGE>

1.       AMOUNT AND TERMS OF CREDIT

         1.1      Credit Facilities

         1.2      Prepayments

         1.3      Use of Proceeds

         1.4      Interest and Applicable Margins

         1.5      Cash Management Systems

         1.6      Fees

         1.7      Receipt of Payments

         1.8      Application and Allocation of Payments

         1.9      Loan Account and Accounting

         1.10     Indemnity

         1.11     Access

         1.12     Taxes

         1.13     Capital Adequacy; Increased Costs; Illegality

         1.14     Single Loan

         1.15     Security Interest

         1.16     No Obligations Outstanding

2.       CONDITIONS PRECEDENT

         2.1      Conditions to the Initial Revolving Loan

         2.2      Further Conditions to Each Loan

3.       REPRESENTATIONS AND WARRANTIES

         3.1      Corporate Existence; Compliance with Law

         3.2      Executive Offices, Collateral Locations, FEIN

         3.3      Corporate Power, Authorization, Enforceable Obligations

         3.4      Financial Statements and Projections

         3.5      Material Adverse Effect

         3.6      Ownership of Property; Liens

         3.7      Labor Matters

         3.8      Ventures, Subsidiaries and Affiliates; Outstanding Stock and
                  Indebtedness

         3.9      Government Regulation

                                       -i-
<PAGE>

         3.10     Margin Regulations

         3.11     Taxes

         3.12     ERISA

         3.13     No Litigation

         3.14     Brokers

         3.15     Intellectual Property

         3.16     Full Disclosure

         3.17     Environmental Matters

         3.18     Insurance

         3.19     Deposit and Disbursement Accounts

         3.20     Government Contracts

         3.21     Customer and Trade Relations

         3.22     Agreements and Other Documents

         3.23     Solvency

         3.24     Restrictions on or Relating to Subsidiaries

         3.25     Disaster Recovery Plan

4.       FINANCIAL STATEMENTS AND INFORMATION

         4.1      Reports and Notices

         4.2      Communication with Accountants

5.       AFFIRMATIVE COVENANTS

         5.1      Maintenance of Existence and Conduct of Business

         5.2      Payment of Charges

         5.3      Books and Records

         5.4      Insurance; Damage to or Destruction of Collateral

         5.5      Compliance with Laws

         5.6      Supplemental Disclosure

         5.7      Intellectual Property

         5.8      Environmental Matters

         5.9      Landlords' Agreements, Mortgagee Agreements, Bailee Letters
                  and Real Estate Purchases

         5.10     ERISA

         5.11     Servicing Agreements

                                      -ii-
<PAGE>

         5.12     Inactive Subsidiaries

         5.13     Further Assurances

6.       NEGATIVE COVENANTS

         6.1      Mergers, Subsidiaries, Etc

         6.2      Investments; Loans and Advances

         6.3      Indebtedness

         6.4      Employee Loans and Affiliate Transactions

         6.5      Capital Structure and Business

         6.6      Guaranteed Indebtedness

         6.7      Liens; Lien Release

         6.8      Sale of Stock and Assets

         6.9      ERISA

         6.10     Financial Covenants

         6.11     Hazardous Materials

         6.12     Sale-Leasebacks

         6.13     Cancellation of Indebtedness

         6.14     Restricted Payments

         6.15     Change of Corporate Name or Location; Change of Fiscal Year

         6.16     No Impairment of Intercompany Transfers

         6.17     No Speculative Transactions

         6.18     Leases; Real Estate Purchases

         6.19     Changes Relating to Subordinated Debt; Material Contracts

         6.20     Credit Parties Other than Borrowers

         6.21     Adverse Transactions

         6.22     Disaster Recovery Plan

         6.23     Limitation on Collection Fees

         6.24     No Amendment to Servicing Agreements

7.       TERM

         7.1      Termination

         7.2      Survival of Obligations Upon Termination of Financing
                  Arrangements

8.       EVENTS OF DEFAULT; RIGHTS AND REMEDIES

         8.1      Events of Default

                                      -iii-
<PAGE>

         8.2      Remedies

         8.3      Waivers by Credit Parties

9.       ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT

         9.1      Assignment and Participations

         9.2      Appointment of Administrative Agent

         9.3      Administrative Agent's Reliance, Etc

         9.4      IDB and Affiliates

         9.5      [Omitted]

         9.6      Indemnification

         9.7      Successor Administrative Agent

         9.8      Setoff and Sharing of Payments

         9.9      Advances; Payments; Non-Funding Lenders; Information; Actions
                  in Concert

10.      SUCCESSORS AND ASSIGNS

         10.1     Successors and Assigns

11.      MISCELLANEOUS

         11.1     Complete Agreement; Modification of Agreement

         11.2     Amendments and Waivers

         11.3     Fees and Expenses

         11.4     No Waiver

         11.5     Remedies

         11.6     Severability

         11.7     Conflict of Terms

         11.8     Confidentiality

         11.9     GOVERNING LAW

         11.10    Notices

         11.11    Section Titles

         11.12    Counterparts

         11.13    WAIVER OF JURY TRIAL

         11.14    Press Releases and Related Matters

         11.15    Reinstatement

         11.16    Advice of Counsel

                                      -iv-
<PAGE>

         11.17    No Strict Construction

         11.18    Administrative Agent for Service

12.      CROSS-GUARANTY; SUBORDINATION

         12.1     Cross-Guaranty

         12.2     Waivers by Borrowers

         12.3     Benefit of Guaranty

         12.4     Subordination of Subrogation, Etc

         12.5     Election of Remedies

         12.6     Limitation

         12.7     Contribution with Respect to Guaranty Obligations

         12.8     Liability Cumulative

         12.9     Subordination

                                      -v-
<PAGE>

                               BASE OF APPENDICES

<TABLE>
<S>                                                           <C>
Annex A (Recitals)                                   -        Definitions
Annex C (Section 1.8)                                -        Cash Management System
Annex D (Section 2.1(a))                             -        Closing Checklist
Annex E (Section 4.1(a))                             -        Financial Statements and Projections
                                                              Reporting
Annex F (Section 4.1(b))                             -        Collateral Reports
Annex G (Section 6.10)                               -        Financial Covenants
Annex H (Section 9.9(a))                             -        Lenders' Wire Transfer Information
Annex I (Section 11.10)                              -        Notice Addresses
Annex J (from Annex A -
   Commitments definition)                           -        Commitments as of Closing Date
         Annex L (Section 11.2(b)(ii))               -        Counterpart to Fourth Amended and
                                                              Restated Loan Agreement
Schedule 1.1                                         -        Administrative Agent's Representatives
Schedule 1.1(b)                                      -        Ratable Shares of each Borrower
</TABLE>
<PAGE>

                   FOURTH AMENDED AND RESTATED LOAN AGREEMENT

                  THIS FOURTH AMENDED AND RESTATED LOAN AGREEMENT (this
"Agreement") is executed and entered into as of July 11, 2006 (and shall be
effective as of the Effective Date) by and among ASTA FUNDING ACQUISITION I,
LLC, a Delaware limited liability company, ASTA FUNDING ACQUISITION II, LLC, a
Delaware limited liability company, PALISADES COLLECTION, L.L.C., a Delaware
limited liability company, PALISADES ACQUISITION I, LLC, a Delaware limited
liability company, PALISADES ACQUISITION II, LLC, a Delaware limited liability
company, PALISADES ACQUISITION IV, LLC, a Delaware limited liability company,
PALISADES ACQUISITION V, LLC, a Delaware limited liability company, PALISADES
ACQUISITION VI, LLC, a Delaware limited liability company, PALISADES ACQUISITION
VII, LLC, a Delaware limited liability company, PALISADES ACQUISITION VIII, LLC,
a Delaware limited liability company, PALISADES ACQUISITION IX, LLC, a Delaware
limited liability company, PALISADES ACQUISITION X, LLC, a Delaware limited
liability company, CLIFFS PORTFOLIO ACQUISITION I, LLC, a Delaware limited
liability company, SYLVAN ACQUISITION I, LLC, a Delaware limited liability
company, and OPTION CARD, LLC, a Colorado limited liability company (sometimes
collectively referred to herein as "Borrowers" and individually as a
"Borrower"); ASTA FUNDING, INC., a Delaware corporation, COMPUTER FINANCE, LLC,
a Delaware limited liability company, ASTAFUNDING.COM, LLC, a Delaware limited
liability company, ASTA COMMERCIAL, LLC, a Delaware limited liability company,
and VATIV RECOVERY SOLUTIONS, LLC, a Texas limited liability company
(collectively, "Guarantor"); ISRAEL DISCOUNT BANK OF NEW YORK, a New York
banking corporation ("IDB"), as collateral agent for itself and the lenders
signatory hereto from time to time (together with any successor collateral agent
appointed pursuant to Section 9.7, the "Collateral Agent"), as administrative
agent (together with any successor administrative agent appointed pursuant to
Section 9.7, the "Administrative Agent", and together with the Collateral Agent,
the "Agents"), and as co-lead arranger; MERRILL LYNCH CAPITAL, a Division of
Merrill Lynch Business Financial Services Inc. ("Merrill Lynch"), as co-lead
arranger and as co-administrative agent; and the Lenders (as defined below).

                                   BACKGROUND

                  A. Borrowers and Guarantors, along with IDB, as agent, and
certain Lenders are parties to a certain Third Amended and Restated Loan and
Security Agreement dated as of May 11, 2004 (as amended, modified, supplemented
or restated from time to time, the "Existing Loan Agreement").

                  B. Borrowers, Guarantors, IDB and the Lenders have agreed to
amend and restate the terms of the Existing Loan Agreement as set forth herein.

<PAGE>

                  NOW THEREFORE, in consideration of the premises and of the
mutual covenants and agreements contained herein, the parties hereto agree that
the Existing Loan Agreement is amended and restated in its entirety as follows:

                                       2
<PAGE>

1. AMOUNT AND TERMS OF CREDIT

                  1.1 Credit Facilities.

                  (a) Revolving Credit Facility.

                  (i) Subject to the terms and conditions hereof, each Revolving
Lender agrees to make revolving credit advances (each, an "Advance" and
collectively, the "Advances") to Borrowers from time to time until the
Commitment Termination Date its Pro Rata Share of such Advances. The Pro Rata
Share of the Revolving Loan of any Revolving Lender shall not at any time exceed
its separate Revolving Loan Commitment. The obligations of each Revolving Lender
hereunder shall be several and not joint. Until the Commitment Termination Date,
Borrowers may borrow, repay and reborrow under this Section 1.1(a); provided
that the amount of any Advance to be made at any time shall not exceed Borrowing
Availability at such time. Each Advance shall be made on notice by Borrower
Representative on behalf of the applicable Borrower to one of the
representatives of Administrative Agent identified in Schedule 1.1 at the
address specified therein. Any such notice must be given no later than (1) 1:00
p.m. (New York time) on the Business Day of the proposed Advance, in the case of
a Base Rate Loan, or (2) 1:00 p.m. (New York time) on the date which is 3
Business Days prior to the proposed Advance, in the case of a LIBOR Loan. Each
such notice (a "Notice of Borrowing") must be given in writing (by telecopy or
overnight courier) substantially in the form of Exhibit 1.1(a)(i) attached to
the Disclosure Document, and shall include the information required in such
Exhibit and such other information as may be reasonably required by
Administrative Agent. If any Borrower desires to have the Advances bear interest
by reference to a LIBOR Rate, Borrower Representative must comply with Section
1.5(e).

                  (ii) Use of Advances to finance Portfolio purchases in excess
of $15,000,000 shall require the consent of the Administrative Agent and use of
Advances to finance Portfolio purchases in excess of $25,000,000 shall require
the consent of the Requisite Lenders. In connection with such purchases,
Borrowers shall deliver to Administrative Agent and Requisite Lenders, if
applicable, the Portfolio Proposal relating to such purchases. For purposes of
this Section 1.1(a)(ii) only, any Requisite Lenders that have not responded
within 4 Business Days of receipt of a request for their consent for the
purchase of a Portfolio in excess of $25,000,000 shall be deemed to have
consented to such purchase. Borrowers agree not to intentionally propose, modify
or structure (or permit to be structured) any Portfolio purchases from any
seller or its affiliates, whether as a single transaction or a series of
transactions that could reasonably be deemed to be part of the same transaction,
for the purpose of evading the requirements of this Section 1.1(a)(ii) to obtain
the consent of Administrative Agent or Requisite Lenders, as the case may be.
Without limiting the foregoing, any Portfolio purchase occurring within 120 days
of any other Portfolio purchase or purchases shall be deemed to be part of the
same transaction for purposes of determining whether the consent of the
Administrative Agent or Requisite Lenders is required under this Section
1.1(a)(ii). Notwithstanding anything in this Section to the contrary, a Borrower
may acquire a Rejected Portfolio having a purchase price in excess of the amount
set forth in this Section without the consent of the Administrative Agent or the
Requisite Lenders if the purchase is made with Borrowers' own cash or borrowings
that are made without including the Rejected Portfolio as an Eligible New
Portfolio in the Borrowing Base, and if the Rejected Portfolio is subject to a
security interest or Lien in favor of Collateral Agent, for the benefit of
itself, the Agents and Lenders, to secure the Obligations. Without conferring
approval rights upon Administrative Agent (except as otherwise provided in this
Section 1.1(a)(ii)), the applicable Borrower shall deliver to Administrative
Agent, upon Administrative Agent's request, such information (as is reasonably
available to the applicable Borrower) relating to the purchase of a Portfolio as
Administrative Agent may reasonably request (including any available Portfolio
Acquisition Documents) within a reasonable period of time following the
applicable Borrower's purchase of such Portfolio.

                                       3
<PAGE>

                  (iii) Anything in this Agreement to the contrary
notwithstanding, at the request of Borrower Representative, Administrative Agent
may in its discretion (but shall have absolutely no obligation to) make Advances
to Borrowers in amounts that cause the outstanding balance of the aggregate
Revolving Loan to exceed the Borrowing Base (an "Overadvance"), provided that:
(A) the amount of any or all Overadvances shall not exceed an amount equal to
Three Million Dollars ($3,000,000), (B) the outstanding balance of the aggregate
Revolving Loan (after taking into consideration such Overadvance) shall not
exceed an amount equal to one hundred five percent (105%) of the Borrowing Base,
(C) the outstanding balance of the aggregate Revolving Loan shall not exceed the
Maximum Amount at any time, (D) any Overadvance must be repaid, together with
applicable interest thereon, in full to Administrative Agent, on behalf of
Lenders, within 7 calendar days of such Overadvance; and (E) not more than three
(3) Overadvances shall be made in any calendar year.

                  (iv) Administrative Agent shall not be required to advise
Borrowers or any Credit Party for the reason for Lenders' failure to approve any
Portfolio. Notwithstanding anything in this Section 1.1(a) to the contrary, a
Rejected Portfolio may be acquired by any Credit Party in the event that such
acquisition is made pursuant to the use of its own cash or borrowings that are
made without including the Rejected Portfolio as an Eligible New Portfolio in
the Borrowing Base, and if the Rejected Portfolio is subject to a security
interest or Lien in favor of Collateral Agent, for the benefit of itself, the
Agents and Lenders, to secure the Obligations. A Non-Credit Party Affiliate may
finance the acquisition of a Rejected Portfolio, provided, such indebtedness is
not guaranteed directly or indirectly by any Credit Party. In no event shall a
Non-Recourse Non-Credit Party Loan be guaranteed directly or indirectly by any
Credit Party. Provided that any Non-Recourse Non-Credit Party Loan shall have
been assigned and transferred to a Non-Credit Party Affiliate, Collateral Agent
will provide releases reasonably requested by any other lender with respect to
Lender's Liens in any Rejected Portfolio and the proceeds and other rights
related thereto.

                  (v) Except as provided in Section 1.12, Borrowers shall
execute and deliver to each Revolving Lender a note to evidence the Revolving
Loan Commitment of that Revolving Lender. Each note shall be in the principal
amount of the Revolving Loan Commitment of the applicable Revolving Lender,
dated the Closing Date and substantially in the form of Exhibit 1.1(a)(v)
attached to the Disclosure Document (each a "Revolving Note" and, collectively,
the "Revolving Notes"). Each Revolving Note shall represent the obligation of
the Borrowers to pay the amount of the applicable Revolving Lender's Revolving
Loan Commitment or, if less, such Revolving Lender's Pro Rata Share of the
aggregate unpaid principal amount of all Advances to Borrowers together with
interest thereon as prescribed in Section 1.5. The entire unpaid balance of the
aggregate Revolving Loan and all other non-contingent Obligations shall be
immediately due and payable in full in immediately available funds on the
Commitment Termination Date.

                                       4
<PAGE>

                  (b) Reliance on Notices; Appointment of Borrower
Representative. Administrative Agent shall be entitled to rely upon, and shall
be fully protected in relying upon, any Notice of Borrowing, Notice of
Conversion/Continuation or similar notice purporting to be executed by an
officer of the Borrower's Representative and believed by Administrative Agent to
be genuine. Administrative Agent may assume that each Person executing and
delivering any notice in accordance herewith who purports to be a person on the
list of authorized signatories provided from time to time by Borrower's
Representative to Administrative Agent was duly authorized, unless the
responsible individual acting thereon for Administrative Agent has actual
knowledge to the contrary. Each Borrower hereby designates Palisades as its
representative and agent on its behalf for the purposes of executing and
delivering the Agent Fee Letter and the Lenders' Fee Letter, issuing Notices of
Borrowing and Notices of Conversion/Continuation, giving instructions with
respect to the disbursement of the proceeds of the Revolving Loan, selecting
interest rate options, effecting repayment of the Revolving Loan, giving and
receiving all other notices and consents hereunder or under any of the other
Loan Documents and taking all other actions (including in respect of compliance
with covenants) on behalf of any Borrower or Borrowers under the Loan Documents.
Borrower Representative hereby accepts such appointment. Administrative Agent
and each Lender may regard any notice or other communication pursuant to any
Loan Document from Borrower Representative as a notice or communication from all
Borrowers, and shall give any notice or communication required or permitted to
be given to any Borrower or Borrowers hereunder to Borrower Representative on
behalf of such Borrower or Borrowers. Each Borrower agrees that each notice,
election, representation and warranty, covenant, agreement and undertaking made
on its behalf by Borrower Representative shall be deemed for all purposes to
have been made by such Borrower and shall be binding upon and enforceable
against such Borrower to the same extent as if the same had been made directly
by such Borrower.

                  1.2 Prepayments.

                  (a) Voluntary Reductions in Revolving Loan Commitments.
Borrowers may at any time on at least 5 days' prior written notice by Borrower
Representative to Administrative Agent permanently reduce (but not terminate)
the Revolving Loan Commitment; provided that (i) any such prepayments or
reductions shall be in a minimum amount of $1,000,000 and integral multiples of
$500,000 in excess of such amount (and shall be applied to reduce the Revolving
Loan Commitments of the Lenders based on their Pro Rata Share of the reduction),
(ii) the Revolving Loan Commitment shall not be reduced to an amount less than
the amount of the Revolving Loan then outstanding, and (iii) after giving effect
to such reductions, Borrowers shall comply with Section 1.2(b)(i). In addition,
Borrowers may at any time on at least 10 days' prior written notice by Borrower
Representative to Administrative Agent terminate the Revolving Loan Commitment;
provided that upon such termination, the Revolving Loan and other Obligations
shall be immediately due and payable in full. Any voluntary reduction or
termination of the Revolving Loan Commitment must be accompanied by payment of
any LIBOR funding breakage costs in accordance with Section 1.10(b). Upon the
effective date of any such reduction or termination of the Revolving Loan
Commitment, each Borrower's right to request Advances shall simultaneously be
permanently reduced or terminated, as the case may be.

                                       5
<PAGE>

                  (b) Mandatory Prepayments.

                  (i) If at any time the aggregate outstanding balance of the
Revolving Loan exceeds Borrowing Availability, Borrowers shall immediately repay
the aggregate outstanding Advances to the extent required to eliminate such
excess.

                  (ii) Immediately upon receipt by any Credit Party of proceeds
of any asset disposition (excluding proceeds of asset dispositions permitted by
Sections 6.8 (a), (d), and (e)) or any sale of Stock of any Subsidiary of any
Credit Party, Borrowers shall prepay the Revolving Loan in an amount equal to
all such cash proceeds net of (A) underwriting discounts, commissions and other
reasonable and customary transaction costs, fees and expenses properly
attributable to such transaction and payable by Borrowers in connection
therewith (in each case, paid to non-Affiliates), (B) sales, transfer, and
similar taxes, (C) amounts payable to holders of senior Liens (to the extent
such Liens constitute Permitted Encumbrances hereunder), if any, (D) amounts
required to be placed in escrow in connection with such transaction; provided
that such amounts and terms of escrow are customary for transactions of such
nature and are reasonably satisfactory to Administrative Agent, and provided,
further, that upon the release of any such escrowed funds such funds are applied
in accordance with this Section 1.2 and (E) amounts that Administrative Agent
reasonably determines are appropriate to meet indemnity and similar obligations,
including post-closing purchase price adjustments in connection with such
transaction, provided, that upon such obligations terminating, any such amounts
not used for such purposes shall be applied in accordance with this Section 1.2.

                  (iii) Subject to the provisions set forth in Section 6.5 of
this Agreement, if any Credit Party issues Stock or any debt securities, no
later than the Business Day following the date of receipt of the cash proceeds
thereof, Borrowers shall prepay the Revolving Loan in an amount equal to all
such cash proceeds, net of underwriting discounts and commissions and other
reasonable and customary transaction costs paid to non-Affiliates in connection
therewith.

                  (c) No Implied Consent. Nothing in this Section 1.2 shall be
construed to constitute Administrative Agent's or any Lender's consent to any
transaction that is not permitted by other provisions of this Agreement or the
other Loan Documents.

                  1.3 Use of Proceeds. Borrowers shall utilize the proceeds of
the Revolving Loan solely for the purchase of Portfolios, ordinary working
capital and general corporate needs, including, without limitation, the purchase
of Rejected Portfolios and to capitalize or fund a Non-Recourse Non-Credit Party
Affiliate, subject to the terms, conditions and limitations set forth in this
Agreement. The Disclosure Document contains a description of Borrowers' sources
and uses of funds as of the Closing Date, including the Revolving Loan to be
made or incurred on that date.

                  1.4 Interest and Applicable Margins.

                  (a) Borrowers shall pay interest to Administrative Agent, for
the ratable benefit of Lenders in accordance with the Revolving Loan being made
by each Lender, in arrears on each applicable Interest Payment Date, at the
following rates: the Base Rate plus the Applicable Base Rate Margin per annum
or, at the election of Borrower Representative, the applicable LIBOR Rate plus
the Applicable LIBOR Margin per annum, based on the aggregate Advances
outstanding from time to time.

                                       6
<PAGE>

                    The Applicable Margins through and including the First
Adjustment Date shall be minus one percent (-1.0%) for Base Rate Loans and one
hundred seventy-five (175) basis points for LIBOR Loans. The Applicable Margins
if adjusted as described below, shall be determined in accordance with the
following table:

<TABLE>
<CAPTION>
  --------------------------------------------------- -------------------------------- ------------------------------
                                                      APPLICABLE
  IF LEVERAGE RATIO IS:                               BASE RATE MARGIN                 APPLICABLE LIBOR MARGIN
  --------------------------------------------------- -------------------------------- ------------------------------

<S>                                                   <C>                              <C>
  Less than 1.0 to 1.0                                Minus 1%                         Plus 175 basis points
  --------------------------------------------------- -------------------------------- ------------------------------

  Greater than or equal to 1.0 to 1.0 but less than
  1.25 to 1.0                                         Minus 0.5%                       Plus 225 basis points
  --------------------------------------------------- -------------------------------- ------------------------------

  Greater than or equal to 1.25 to 1.0                0%                               Plus 275 basis points
  --------------------------------------------------- -------------------------------- ------------------------------
</TABLE>

                  The Applicable Margins shall be adjusted (up or down)
prospectively on a quarterly basis as determined by Borrowers' consolidated
financial condition for the Fiscal Quarter then ended, commencing with the
delivery of Borrowers' quarterly unaudited Financial Statements to Lenders for
the Fiscal Quarter ending June 30, 2006 (the "First Adjustment Date"). All
adjustments in the Applicable Margins after the First Adjustment Date shall be
implemented quarterly on a prospective basis, commencing at least 5 days after
the date of delivery to Lenders of the quarterly unaudited or annual audited (as
applicable) Financial Statements evidencing the need for an adjustment.
Concurrently with the delivery of those Financial Statements, Borrower
Representative shall deliver to Administrative Agent and Lenders a certificate,
signed by its chief financial officer, setting forth in reasonable detail the
basis for the continuance of, or any change in, the Applicable Margins. Failure
to timely deliver such Financial Statements shall, in addition to any other
remedy provided for in this Agreement, result in an increase in the Applicable
Margins to the highest level set forth in the foregoing grid, until the fifth
day following the delivery of those Financial Statements demonstrating that such
an increase is not required. If a Default, which is not reasonably capable of
being cured, or Event of Default has occurred and is continuing at the time any
reduction in the Applicable Margins is to be implemented, that reduction shall
be deferred until the first day of the first calendar month following the date
on which such Default, which is not reasonably capable of being cured, or Event
of Default is waived or cured.

                  (b) If any payment on any Loan becomes due and payable on a
day other than a Business Day, the maturity thereof will be extended to the next
succeeding Business Day (except as set forth in the definition of LIBOR Period)
and, with respect to payments of principal, interest thereon shall be payable at
the then applicable rate during such extension.

                  (c) All computations of Fees calculated on a per annum basis
and interest shall be made by Administrative Agent on the basis of a 360-day
year, in each case for the actual number of days occurring in the period for
which such interest and Fees are payable. The Base Rate is a floating rate
determined for each day. Each determination by Administrative Agent of an
interest rate and Fees hereunder shall be final, binding and conclusive on
Borrowers, absent manifest error.

                                       7
<PAGE>

                  (d) So long as an Event of Default has occurred and is
continuing under Section 8.1(a), (h) or (i) or so long as any other Default,
which is not reasonably capable of being cured, or Event of Default has occurred
and is continuing and at the election of Administrative Agent (or upon the
written request of Requisite Lenders) confirmed by written notice from
Administrative Agent to Borrower Representative, the interest rates applicable
to the Revolving Loan shall be increased to Base Rate plus three percentage
points (3%) per annum ("Default Rate"), and all outstanding Obligations shall
bear interest at the Default Rate. Interest at the Default Rate shall accrue
from the initial date of such Default, which is not reasonably capable of being
cured, or Event of Default until that Default, which is not reasonably capable
of being cured, or Event of Default is cured or waived and shall be payable upon
demand.

                  (e) Subject to the conditions precedent set forth in Section
2.2, Borrower Representative shall have the option to (i) request that any
Advance be made as a LIBOR Loan, (ii) convert at any time all or any part of
outstanding Revolving Loan from Base Rate Loans to LIBOR Loans, (iii) convert
any LIBOR Loan to a Base Rate Loan, subject to payment of LIBOR breakage costs
in accordance with Section 1.10(b) if such conversion is made prior to the
expiration of the LIBOR Period applicable thereto, or (iv) continue all or any
portion of any Loan as a LIBOR Loan upon the expiration of the applicable LIBOR
Period and the succeeding LIBOR Period of that continued Loan shall commence on
the first day after the last day of the LIBOR Period of the Loan to be
continued. Any Revolving Loan or group of Revolving Loans having the same
proposed LIBOR Period to be made or continued as, or converted into, a LIBOR
Loan must be in a minimum amount of $1,000,000 and integral multiples of
$500,000 in excess of such amount. Any such election must be made by 1:00 p.m.
(New York time) on the 3rd Business Day prior to (1) the date of any proposed
Advance which is to bear interest at the LIBOR Rate, (2) the end of each LIBOR
Period with respect to any LIBOR Loans to be continued as such, or (3) the date
on which Borrower Representative wishes to convert any Base Rate Loan to a LIBOR
Loan for a LIBOR Period designated by Borrower Representative in such election.
If no election is received with respect to a LIBOR Loan by 1:00 p.m. (New York
time) on the 3rd Business Day prior to the end of the LIBOR Period with respect
thereto (or if a Default, which is not reasonably capable of being cured, or an
Event of Default has occurred and is continuing or if the additional conditions
precedent set forth in Section 2.2 shall not have been satisfied), that LIBOR
Loan shall be converted to a Base Rate Loan at the end of its LIBOR Period.
Borrower Representative must make such election by notice to Administrative
Agent in writing, by telecopy or overnight courier. In the case of any
conversion or continuation, such election must be made pursuant to a written
notice (a "Notice of Conversion/Continuation") in the form of Exhibit 1.4(e)
attached to the Disclosure Document.

                  (f) Notwithstanding anything to the contrary set forth in this
Section 1.4, if a court of competent jurisdiction determines in a final order
that the rate of interest payable hereunder exceeds the highest rate of interest
permissible under law (the "Maximum Lawful Rate"), then so long as the Maximum
Lawful Rate would be so exceeded, the rate of interest payable hereunder shall
be equal to the Maximum Lawful Rate; provided, however, that if at any time
thereafter the rate of interest payable hereunder is less than the Maximum
Lawful Rate, Borrowers shall continue to pay interest hereunder at the Maximum
Lawful Rate until such time as the total interest received by Administrative
Agent, on behalf of Lenders, is equal to the total interest that would have been
received had the interest rate payable hereunder been (but for the operation of
this paragraph) the interest rate payable since the Closing Date as otherwise
provided in this Agreement. Thereafter, interest hereunder shall be paid at the
rate(s) of interest and in the manner provided in Sections 1.4(a) through (e),
unless and until the rate of interest again exceeds the Maximum Lawful Rate, and
at that time this paragraph shall again apply. In no event shall the total
interest received by any Lender pursuant to the terms hereof exceed the amount
that such Lender could lawfully have received had the interest due hereunder
been calculated for the full term hereof at the Maximum Lawful Rate. If the
Maximum Lawful Rate is calculated pursuant to this paragraph, such interest
shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by
the number of days in the year in which such calculation is made. If,
notwithstanding the provisions of this Section 1.4(f), a court of competent
jurisdiction shall finally determine that a Lender has received interest
hereunder in excess of the Maximum Lawful Rate, Administrative Agent shall, to
the extent permitted by applicable law, promptly apply such excess in the order
specified in Section 1.10 and thereafter shall refund any excess to Borrowers or
as a court of competent jurisdiction may otherwise order.

                                       8
<PAGE>

                  1.5 Cash Management Systems. On or prior to the Closing Date,
Borrowers will establish and will maintain until the Termination Date, the cash
management systems described in Annex C (the "Cash Management Systems").

                  1.6 Fees.

                  (a) On or prior to the Closing Date, Borrowers shall execute
and deliver to the Administrative Agent the Agent Fee Letter. Borrowers shall
pay to the Agents and Merrill Lynch the fees described therein at the times
specified for payment therein.

                  (b) On or prior to the Closing Date, Borrowers shall execute
and deliver to the Administrative Agent the Lenders' Fee Letter. Borrowers shall
pay to the Lenders the fees described therein at the times specified for payment
therein.

                  1.7 Receipt of Payments. Borrowers shall make each payment
under this Agreement not later than 3:00 p.m. (New York time) on the day when
due in immediately available funds in Dollars to the Collection Account. For
purposes of computing interest and Fees and determining Borrowing Availability
as of any date, all payments shall be deemed received on the Business Day on
which immediately available funds therefor are received in the Collection
Account prior to 3:00 p.m. New York time. Payments received after 3:00 p.m. New
York time on any Business Day or on a day that is not a Business Day shall be
deemed to have been received on the following Business Day.

                  1.8 Application and Allocation of Payments.

                  (a) So long as no Default, which is not reasonably capable of
being cured, or Event of Default has occurred and is continuing, (i) payments
consisting of proceeds of Accounts received in the ordinary course of business
shall be applied to the Revolving Loan; (ii) voluntary prepayments shall be
applied as determined by Borrower Representative, subject to the applicable
provisions of Section 1.2(a); and (iii) mandatory prepayments shall be applied
as set forth in Section 1.2(b). All payments shall be applied ratably to the
portion thereof held by each Lender as determined by its Pro Rata Share. Subject
to this Section 1.8, as to any other payment, and as to all payments made when a
Default, which is not reasonably capable of being cured, or Event of Default has
occurred and is continuing or following the Commitment Termination Date, each
Borrower hereby irrevocably waives the right to direct the application of any
and all payments received from or on behalf of such Borrower, and each Borrower
hereby irrevocably agrees that Administrative Agent shall have the continuing
exclusive right to apply any and all such payments against the Obligations of
Borrowers as Administrative Agent may deem advisable notwithstanding any
previous entry by Administrative Agent in the Loan Account or any other books
and records. Subject to this Section 1.8, in the absence of a specific
determination by Administrative Agent with respect thereto, payments shall be
applied to amounts then due and payable in the following order: (1) to Fees and
Agents' expenses reimbursable hereunder; (2) to interest on the Revolving Loan,
ratably in proportion to the interest accrued as to each Revolving Loan; (3) to
principal payments on the Revolving Loan; and (4) to all other Obligations,
including expenses of Lenders to the extent reimbursable under Section 11.3.

                                       9
<PAGE>

                  (b) Administrative Agent is authorized to, and at its sole
election may, charge to the Revolving Loan balance on behalf of each Borrower
and cause to be paid all Fees, expenses, Charges, costs (including insurance
premiums in accordance with Section 5.4(a)) and interest, owing by Borrowers
under this Agreement or any of the other Loan Documents if and to the extent
Borrowers fail to pay promptly any such amounts as and when due, even if the
amount of such charges would exceed Borrowing Availability at such time or would
cause the aggregate balance of the Revolving Loan to exceed the Borrowing Base
after giving effect to such charges. At Administrative Agent's option and to the
extent permitted by law, any charges so made shall constitute part of the
Revolving Loan hereunder.

                  1.9 Loan Account and Accounting. Administrative Agent shall
maintain loan accounts (the "Loan Account") on its books to record: all
Advances, all payments made by Borrowers, and all other debits and credits as
provided in this Agreement with respect to the Revolving Loan or any other
Obligations. All entries in the Loan Account shall be made in accordance with
Administrative Agent's customary accounting practices as in effect from time to
time. Subject to the Borrowers' right to object in accordance with the terms and
conditions set forth below, the balance in the Loan Account, as recorded on
Administrative Agent's most recent printout or other written statement (which
printout or statement shall be delivered to Borrower Representative upon its
reasonable request), shall, absent manifest error, be presumptive evidence of
the amounts due and owing to Administrative Agent and Lenders by each Borrower;
provided that any failure to so record or any error in so recording shall not
limit or otherwise affect any Borrower's duty to pay the Obligations.
Administrative Agent shall render to Borrower Representative a monthly
accounting of transactions with respect to the Revolving Loan setting forth the
balance of the Loan Account as to each Borrower for the immediately preceding
month. Unless Borrower Representative notifies Administrative Agent in writing
of any objection to any such accounting (specifically describing the basis for
such objection), within 30 days after the date thereof, each and every such
accounting shall (absent manifest error) be deemed final, binding and conclusive
on Borrowers in all respects as to all matters reflected therein. Only those
items expressly objected to in such notice shall be deemed to be disputed by
Borrowers. Notwithstanding any provision herein contained to the contrary, any
Lender may elect (which election may be revoked) to dispense with the issuance
of Notes to that Lender and may rely on the Loan Account as evidence of the
amount of Obligations from time to time owing to it.

                                       10
<PAGE>

                  1.10 Indemnity.

                  (a) Each Credit Party that is a signatory hereto shall jointly
and severally indemnify and hold harmless each of the Agents, Lenders and their
respective Affiliates, and each such Person's respective officers, directors,
employees, attorneys, agents and representatives (each, an "Indemnified
Person"), from and against any and all suits, actions, proceedings, claims,
damages, losses, liabilities and expenses (including reasonable attorneys' fees
and disbursements and other costs of investigation or defense, including those
incurred upon any appeal) that may be instituted or asserted against or incurred
by any such Indemnified Person as the result of credit having been extended,
suspended or terminated under this Agreement and the other Loan Documents and
the administration of such credit, and in connection with or arising out of the
transactions contemplated hereunder and thereunder and any actions or failures
to act in connection therewith, including any and all Environmental Liabilities,
and any and all reasonable legal costs and expenses arising out of or incurred
in connection with disputes between or among any parties to any of the Loan
Documents (collectively, "Indemnified Liabilities"); provided, that no such
Credit Party shall be liable for any indemnification to an Indemnified Person to
the extent that any such suit, action, proceeding, claim, damage, loss,
liability or expense results from (i) that Indemnified Person's gross negligence
or willful misconduct (as finally determined by a court of competent
jurisdiction), or (ii) the failure of such Indemnified Person to act in a
commercially reasonable manner (as finally determined by a court of competent
jurisdiction) such that such Indemnified Person's action is determined by a
court of competent jurisdiction to be egregious, unconscionable and beyond the
standards of experienced commercial lenders in similar circumstances. NO
INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY LOAN
DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR
ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT,
PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF
CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR
AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER,
EXCEPT TO THE EXTENT OF SUCH INDEMNIFIED PERSON'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.

                  (b) To induce Lenders to provide the LIBOR Rate option on the
terms provided herein, if (i) any LIBOR Loans are repaid in whole or in part
prior to the last day of any applicable LIBOR Period (whether that repayment is
made pursuant to any provision of this Agreement or any other Loan Document or
occurs as a result of acceleration, by operation of law or otherwise); (ii) any
Borrower shall default in payment when due of the principal amount of or
interest on any LIBOR Loan; (iii) any Borrower shall refuse to accept any
borrowing of, or shall request a termination of, any borrowing of, conversion
into or continuation of, LIBOR Loans after Borrower Representative has given
notice requesting the same in accordance herewith; or (iv) any Borrower shall
fail to make any prepayment of a LIBOR Loan after Borrower Representative has
given a notice thereof in accordance herewith, then Borrowers shall jointly and
severally indemnify and hold harmless each Lender from and against all losses,
costs and expenses resulting from or arising from any of the foregoing. Such
indemnification shall include any loss (including loss of margin) or expense
arising from the reemployment of funds obtained by it or from fees payable to
terminate deposits from which such funds were obtained. For the purpose of
calculating amounts payable to a Lender under this subsection, each Lender shall
be deemed to have actually funded its relevant LIBOR Loan through the purchase
of a deposit bearing interest at the LIBOR Rate in an amount equal to the amount
of that LIBOR Loan and having a maturity comparable to the relevant LIBOR
Period; provided, that each Lender may fund each of its LIBOR Loans in any
manner it sees fit, and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this subsection. This covenant shall
survive the termination of this Agreement and the payment of the Notes and all
other amounts payable hereunder. As promptly as practicable under the
circumstances, each Lender shall provide Borrower Representative with its
written calculation of all amounts payable pursuant to this Section 1.10(b), and
such calculation shall be binding on the parties hereto unless Borrower
Representative shall object in writing within 10 Business Days of receipt
thereof, specifying the basis for such objection in detail.

                                       11
<PAGE>

                  1.11 Access. Each Credit Party that is a party hereto shall,
during normal business hours, from time to time upon three Business Days' prior
notice as frequently as the Agents reasonably determine to be appropriate: (a)
provide Agents and any of their officers, employees and agents access to its
properties, facilities, advisors and employees (including officers) of each
Credit Party and to the Collateral, (b) permit Agents, and any of their
officers, employees and agents, to inspect, examine and make extracts from any
Credit Party's books and records, and (c) permit Agents, and their officers,
employees and agent, (including third party appraisers selected by Agents) to
appraise, inspect, review, evaluate and make test verifications and counts of
the Accounts, Inventory and other Collateral of any Credit Party.
Notwithstanding other provisions of this Agreement to the contrary, Borrowers
shall pay all costs and expenses incurred or paid by Agents in conducting no
more than two (2) field examinations per year, as described in more detail in
the Agent Fee Letter; provided, however, that after the occurrence of a Default,
which is not reasonably capable of being cured, or Event of Default, there shall
be no such limitation on Borrowers' payment obligations, and Borrowers shall pay
all costs and expenses (described in the Agent Fee Letter) incurred by Agents in
conducting any and all field examinations made by Agents. Notwithstanding the
preceding limitation on Borrowers' payment obligations, nothing in this Section
shall limit or impair the rights of Agents to conduct such number of field
examinations as Agents may determine. If a Default, which is not reasonably
capable of being cured, or Event of Default has occurred and is continuing, or
if access is necessary to preserve or protect the Collateral as reasonably
determined by Agents, each such Credit Party shall provide such access to Agents
and to each Lender at all times and without advance notice. Furthermore, so long
as any Event of Default has occurred and is continuing, Borrowers shall provide
Agents and each Lender with access to their servicers. Each Credit Party shall
make available to Agents and their counsel, as quickly as is reasonably possible
under the circumstances, originals or copies of all books and records that
Agents may reasonably request. Each Credit Party shall deliver any document or
instrument necessary for Agents, as they may from time to time reasonably
request, to obtain records from any service bureau or other Person that
maintains records for such Credit Party, and shall maintain duplicate records or
supporting documentation on traditional or electronic media, including, at such
Credit Party's option, computer tapes and discs owned by such Credit Party. Such
duplicate records shall be kept at an owned location or a location with respect
to which Administrative Agent has received a satisfactory landlord waiver.
Administrative Agent will give Borrowers at least three Business Days' prior
notice (written or oral) of regularly scheduled field exams. Representatives of
other Lenders may accompany Agents' representatives on regularly scheduled field
exams at no charge to Borrowers. Notwithstanding the foregoing, Agents and
Lenders will use commercially reasonable efforts to conduct all activities
described in this Section in a manner that does not interfere in any material
respect with the business operations of any Credit Party or any servicer.

                                       12
<PAGE>

                  1.12 Taxes.

                  (a) Any and all payments by each Borrower hereunder (including
any payments made pursuant to Section 12) or under the Notes shall be made, in
accordance with this Section 1.12 and subject to Section 1.12(d), free and clear
of and without deduction for any and all present or future Taxes. If any
Borrower shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder (including any sum payable pursuant to Section 12) or
under the Notes, (i) subject to Section 1.12(d), the sum payable shall be
increased as much as shall be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 1.12) Agents or Lenders, as applicable, receive an amount equal to
the sum they would have received had no such deductions been made, (ii) such
Borrower shall make such deductions, and (iii) such Borrower shall pay the full
amount deducted to the relevant taxing or other authority in accordance with
applicable law. Promptly upon written request, but not later than 30 days after
the date of any payment of Taxes, Borrower Representative shall furnish to
Administrative Agent the original or a certified copy of a receipt evidencing
payment thereof.

                  (b) Subject to Section 1.12(d), each Credit Party that is a
signatory hereto shall jointly and severally indemnify and, within 15 days of
demand therefor, pay Agents and each Lender for the full amount of Taxes
(including any Taxes imposed by any jurisdiction on amounts payable under this
Section 1.12) paid by Agents or such Lender, as appropriate, and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes were correctly or legally asserted.

                  (c) Each Lender organized under the laws of a jurisdiction
outside the United States (a "Foreign Lender") as to which payments to be made
under this Agreement or under the Notes are exempt from United States
withholding tax under an applicable statute or tax treaty shall provide to
Borrower Representative and Administrative Agent two copies of a properly
completed and executed IRS Form W-8ECI or Form W-8BEN or other applicable form,
certificate or document prescribed by the IRS or the United States certifying as
to such Foreign Lender's entitlement to such exemption (a "Certificate of
Exemption"). Any Person organized under the laws of a jurisdiction outside the
United States (a "Foreign Person") that seeks to become a Lender under this
Agreement including any Foreign Person who seeks to become an assignee or
participant pursuant to Section 9.1 shall provide a Certificate of Exemption to
Borrower Representative and Administrative Agent prior to becoming a Lender
hereunder. No Foreign Person may become a Lender hereunder if such Person fails
to deliver a Certificate of Exemption in advance of becoming a Lender. Each
Foreign Lender shall promptly deliver further copies of any forms or
certificates required to be delivered pursuant to this Section 1.12(c) if the
most recently delivered form or certification expires or becomes obsolete and
after the occurrence of any event requiring a change in the most recently
delivered form. Notwithstanding any other provision of this Section 1.12(c), a
Foreign Lender shall not be required to deliver any form pursuant to this
Section 1.12(c) that such Foreign Lender is not legally able to deliver.

                                       13
<PAGE>

                  (d) Neither the Borrowers nor the Credit Parties shall be
required to pay any additional amounts to any Lender pursuant to Section
1.12(a)(i), or to indemnify any Lender pursuant to Section 1.12(b), in respect
of United States withholding taxes to the extent imposed as a result of (i) the
failure of such Lender to deliver to Borrower Representative and Administrative
Agent a Certificate of Exemption pursuant to Section 1.12(c), (ii) such
Certificate of Exemption not establishing a complete exemption from United
States withholding taxes or the information or certifications made therein by
the Lender being untrue or inaccurate on the date delivered in any material
respect, (iii) the Lender designating a successor lending office which has the
effect of causing the Borrowers or the Credit Parties to become obligated to
make a payment pursuant to Section 1.12(a)(i) or Section 1.12(b) in excess of
its payment obligation immediately prior to such designation, or (iv) such
Lender being treated as a "conduit entity" within the meaning of U.S. Treasury
Regulations Section 1.881-3 or any successor provision; provided, however, that
Borrowers and the Credit Parties shall be required to pay additional amounts to
any Lender pursuant to Section 1.12(a)(i), or to indemnify any Lender pursuant
to Section 1.12(b), in respect of United States withholding taxes if (x) any
such failure to deliver a Certificate of Exemption or the failure of such
Certificate of Exemption to establish a complete exemption from United States
withholding taxes or inaccuracy or untruth contain therein resulted from a
change in any applicable statute, treaty, regulation or other applicable law or
any interpretation of any of the foregoing occurring after the date hereof,
which change rendered such Lender no longer legally entitled to deliver such
Certificate of Exemption or otherwise ineligible for a complete exemption from
United States withholding taxes or render the information or certifications made
in such Certificate of Exemption untrue or inaccurate in any material respect,
(y) the re-designation of the Lender's lending office was made at the request of
a Borrower or (z) the obligation to pay any additional amounts to any such
Lender pursuant to Section 1.12(a)(i), or to indemnify any such Lender pursuant
to Section 1.12(d), is with respect to an assignee Lender that becomes an
assignee Lender pursuant to Section 9.1 as a result of an assignment made at the
request of a Borrower.

                  (e) If, solely as a result of an event described in subsection
(x) of Section 1.12(d), (i) a Lender is unable to provide to Borrower
Representative a Certificate of Exemption or such Certificate of Exemption is
unable to establish a complete exemption from United States withholding taxes or
(ii) the Borrowers become liable to make to pay additional amounts to a Lender
pursuant to Section 1.12(a)(i), or to indemnify a Lender pursuant to Section
1.12(b), Borrowers may exercise the remedies available to it under Section
1.13(d).

                  (f) If any Agent or any Lender receives a refund in respect of
any Taxes as to which it has been paid additional amounts by a Borrower pursuant
to Section 1.12(a) or indemnified by a Borrower or Credit Party pursuant to
Section 1.12(b), such Agent or such Lender shall promptly notify Borrower
Representative of such refund and shall, within 30 days, remit to Borrower
Representative an amount as such Agent or such Lender reasonably determines to
be the proportion of the refunded amount as will leave it, after such
remittance, in no better or worse position than it would have been if the Taxes
had not be imposed and the corresponding additional amounts or indemnification
payment not been made, provided that Borrower Representative, upon the request
of such Lender or such Agent, agrees to return such refund and any amounts which
after such return, will leave such Lender in no better or worse position than it
would have been had Borrower not be required to return such refund to such
Lender or such Agent in the event such Lender or such Agent is required to repay
such refund.

                                       14
<PAGE>

                  1.13 Capital Adequacy; Increased Costs; Illegality.

                  (a) If any Lender shall have reasonably determined that any
law, treaty, governmental (or quasi-governmental) rule, regulation, guideline or
order regarding capital adequacy, reserve requirements or similar requirements
or compliance by any Lender with any request or directive regarding capital
adequacy, reserve requirements or similar requirements (whether or not having
the force of law), in each case, adopted after the Closing Date, from any
central bank or other Governmental Authority increases or would have the effect
of increasing the amount of capital, reserves or other funds required to be
maintained by such Lender and thereby reducing the rate of return on such
Lender's capital as a consequence of its obligations hereunder, then Borrowers
shall from time to time upon demand by such Lender (with a copy of such demand
to Administrative Agent) pay to Administrative Agent, for the account of such
Lender, additional amounts sufficient to compensate such Lender for such
reduction. A reasonably detailed certificate as to the amount of that reduction
and showing the basis of the computation thereof submitted by such Lender to
Borrower Representative and to Administrative Agent shall, absent manifest
error, be final, conclusive and binding for all purposes.

                  (b) If, due to either (i) the introduction of or any change in
any law or regulation (or any change in the interpretation thereof) or (ii) the
compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), in each case
adopted after the Closing Date, there shall be any increase in the cost to any
Lender of agreeing to make or making, funding or maintaining any Loan, then
Borrowers shall from time to time, upon demand by such Lender (with a copy of
such demand to Administrative Agent), pay to Administrative Agent for the
account of such Lender additional amounts sufficient to compensate such Lender
for such increased cost. A certificate as to the amount of such increased cost,
submitted to Borrower Representative and to Administrative Agent by such Lender,
shall be conclusive and binding on Borrowers for all purposes, absent manifest
error. Each Lender agrees that, as promptly as practicable after it becomes
aware of any circumstances referred to in Section 1.13(a) above or in this
Section 1.13(b), which would result in any such increased cost, the affected
Lender shall, to the extent not inconsistent with such Lender's internal
policies of general application, use reasonable commercial efforts to minimize
costs and expenses incurred by it and payable to it by Borrowers pursuant to
Section 1.13(a) and (b).

                  (c) Notwithstanding anything to the contrary contained herein,
if the introduction of or any change in any law or regulation (or any change in
the interpretation thereof) shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for any Lender to agree
to make or to make or to continue to fund or maintain any LIBOR Loan, then,
unless that Lender is able to make or to continue to fund or to maintain such
LIBOR Loan at another branch or office of that Lender without, in that Lender's
opinion, adversely affecting it or its Revolving Loan or the income obtained
therefrom, on notice thereof and demand therefor by such Lender to Borrower
Representative through Administrative Agent, (i) the obligation of such Lender
to agree to make or to make or to continue to fund or maintain LIBOR Loans shall
terminate and (ii) each Borrower shall forthwith prepay in full all outstanding
LIBOR Loans owing by such Borrower to such Lender, together with interest
accrued thereon, unless Borrower Representative on behalf of such Borrower,
within 5 Business Days after the delivery of such notice and demand, converts
all LIBOR Loans into Base Rate Loans.

                                       15
<PAGE>

                  (d) Within 15 days after receipt by Borrower Representative of
written notice and demand from any Lender (an "Affected Lender") for payment of
additional amounts or increased costs as provided in Sections 1.12(a), 1.13(a)
or 1.13(b), Borrower Representative may, at its option, notify Administrative
Agent and such Affected Lender of its intention to replace the Affected Lender.
So long as no Default, which is not reasonably capable of being cured, or Event
of Default has occurred and is continuing, Borrower Representative, with the
consent of Administrative Agent, may obtain, at Borrowers' expense, a
replacement Lender ("Replacement Lender") for the Affected Lender, which
Replacement Lender must be reasonably satisfactory to Administrative Agent. If
Borrowers obtain a Replacement Lender within 90 days following notice of their
intention to do so, the Affected Lender must sell and assign its Revolving Loan
and Commitments to such Replacement Lender for an amount equal to the principal
balance of the Revolving Loan held by the Affected Lender and all accrued
interest and Fees with respect thereto through the date of such sale; provided,
that Borrowers shall have reimbursed such Affected Lender for the additional
amounts or increased costs that it is entitled to receive under this Agreement
through the date of such sale and assignment. Notwithstanding the foregoing,
Borrowers shall not have the right to obtain a Replacement Lender if the
Affected Lender rescinds its demand for increased costs or additional amounts
within 15 days following its receipt of Borrowers' notice of intention to
replace such Affected Lender. Furthermore, if Borrowers give a notice of
intention to replace and do not so replace such Affected Lender within 90 days
thereafter, Borrowers' rights under this Section 1.13(d) shall terminate as to
such costs or additional amounts demanded by such Affected Lender and Borrowers
shall promptly pay all increased costs or additional amounts demanded by such
Affected Lender pursuant to Sections 1.12(a), 1.13(a) and 1.13(b).

                  1.14 Single Loan. The Revolving Loan to each Borrower and all
of the other Obligations of each Borrower arising under this Agreement and the
other Loan Documents shall constitute one general obligation of that Borrower
secured, until the Termination Date, by all of the Collateral.

                  1.15 Security Interest.

                  (a) Security Interest. Credit Parties, as more fully set forth
in the Collateral Documents, have granted to the Collateral Agent for the
benefit of itself, the Agents and the Lenders a first priority lien on the
Collateral to secure the Obligations, subject to Permitted Encumbrances. Credit
Parties acknowledge and agree that the security interest granted to the
Collateral Agent for the benefit of itself, the Agents and the Lenders pursuant
to the Collateral Documents is and continues to be a first lien upon and
security interest in the Collateral.

                                       16
<PAGE>

                  (b) Proceeds of Collateral. Upon the exercise of any rights
and remedies by the Agents under the Loan Documents (including, the exercise of
rights and remedies with respect to the Collateral) all proceeds of the
Collateral shall be applied in the order and manner described in Section 1.8.
Agents shall provide Borrowers with a reasonably detailed list of any expenses
and costs for which Agents seek reimbursement and payment from Borrowers at the
time Agents request payment.

                  (c) Benefit. The provisions of this Section 1.15 and the
rights and benefits hereof shall inure solely to the benefit of the Agents, the
Lenders and their respective successors and permitted assigns and no other
Person (including the Credit Parties) shall have or be entitled to assert rights
or benefits under this Section 1.15.

                  1.16 No Outstanding Obligations. Provided no Obligations
remain outstanding under the Revolving Loan and the Loan Documents, upon request
of Borrowers, Administrative Agent shall make available to Borrowers any
Collections, Proceeds and other funds received by Administrative Agent in
connection with any Accounts for such uses that do not violate the terms of this
Agreement and, until so used, shall be deposited into the Blocked Account or
invested in Cash Equivalent Investments, which Cash Equivalent Investments shall
be pledged to Administrative Agent and perfected in a manner reasonably
acceptable to Administrative Agent.

2. CONDITIONS PRECEDENT

                  2.1 Conditions to the Initial Revolving Loan. No Lender shall
be obligated to make any Revolving Loan on the Closing Date, or to take,
fulfill, or perform any other action hereunder, until the following conditions
have been satisfied or provided for in a manner reasonably satisfactory to
Administrative Agent, or waived in writing by Administrative Agent and Lenders:

                  (a) Agreement; Loan Documents. This Agreement or counterparts
hereof shall have been duly executed by, and delivered to, Borrowers, each other
Credit Party, Administrative Agent and Lenders; and Administrative Agent shall
have received such documents, instruments, agreements and legal opinions as
Administrative Agent shall reasonably request in connection with the
transactions contemplated by this Agreement and the other Loan Documents,
including all those listed in the Closing Checklist attached hereto as Annex D,
each in form and substance reasonably satisfactory to Administrative Agent.

                  (b) Approvals. Administrative Agent shall have received (i)
satisfactory evidence that the Credit Parties have obtained all required
consents and approvals of all Persons including all requisite Governmental
Authorities, to the execution, delivery and performance of this Agreement and
the other Loan Documents and the consummation of the Related Transactions or
(ii) an officer's or manager's certificate in form and substance reasonably
satisfactory to Administrative Agent affirming that no such consents or
approvals are required.

                  (c) Payment of Fees. Borrowers shall have executed and
delivered to Administrative Agent the Agent Fee Letter and the Lenders' Fee
Letter and shall have paid the Fees required to be paid on the Closing Date in
the respective amounts specified in Section 1.6 (including the Fees specified in
the Agent Fee Letter and the Fees specified in the Lenders' Fee Letter), and
shall have reimbursed Administrative Agent for all attorneys' fees and
reasonable costs and expenses of closing presented as of the Closing Date.

                                       17
<PAGE>

                  (d) Approval of the Disclosure Document. Borrowers and each of
the other Credit Parties shall have prepared, executed and delivered to
Administrative Agent the Disclosure Document and Administrative Agent shall have
approved the disclosures contained therein.

                  (e) Capital Structure; Other Indebtedness. The capital
structure of each Credit Party and the terms and conditions of all Indebtedness
of each Credit Party shall be acceptable to Administrative Agent in its sole
discretion.

                  (f) Due Diligence. Administrative Agent shall have completed
its business and legal due diligence and background checks on individuals as it
deems appropriate, with results of all reasonably satisfactory to Administrative
Agent.

                  (g) Letter of Direction to Servicing Agents. The applicable
Credit Parties who are parties to any servicing agreement with any Servicing
Agents shall have executed and delivered to Administrative Agent a letter of
direction to its Servicing Agents: (aa) notifying such Servicing Agents of the
Liens of the Agents and Lenders in and to the Collateral and the grant of a lien
and security interest by such Credit Party to Collateral Agent in the servicing
agreement with Servicing Agent, and (bb) instructing such Servicing Agents to
make all payments owing to the applicable Credit Party directly to
Administrative Agent upon receipt by Servicing Agent of written demand to do so,
all in form and substance reasonably acceptable to Administrative Agent.
Administrative Agent shall hold such letters in Administrative Agent's
possession and only release them in connection with the exercise of its remedies
after the occurrence of a Default, which is not reasonably capable of being
cured, or Event of Default.

                  (h) Servicing Agreements. The Credit Parties shall have
delivered to Administrative Agent true and complete fully-executed copies of all
servicing agreements entered into by or between any Credit Party and any
Servicing Agent, other than agreements with Servicing Agents who remit
Collections to any Credit Party that, on average, total less than $50,000 in any
Fiscal Quarter.

                  (i) Insurance Certificates. The Credit Parties shall have
delivered to Administrative Agent such certificates of insurance as
Administrative Agent shall reasonably require in form and content acceptable to
Administrative Agent evidencing the insurance coverages required by the terms of
this Agreement to be maintained by the Credit Parties, including, without
limitation, "All Risk" and business interruption insurance and general liability
and other liability policies.

                  (j) Consummation of Related Transactions. Administrative Agent
shall have received fully executed copies of the Related Transactions Documents,
each of which shall be in form and substance reasonably satisfactory to
Administrative Agent and its counsel.

                  2.2 Further Conditions to Each Loan. No Lender shall be
obligated to fund any Advance, convert or continue any Loan as a LIBOR Loan, if,
as of the date thereof:

                                       18
<PAGE>

                  (a) any representation or warranty by any Credit Party
contained herein or in any other Loan Document is (subject to any materiality or
other qualifiers contained in such representation or warranty) untrue or
incorrect as of such date, except to the extent that such representation or
warranty expressly relates to an earlier date and except for changes therein
expressly permitted or expressly contemplated by this Agreement (including to
the extent a supplement to a disclosure contained in the Disclosure Document is
to be supplied to Administrative Agent when and as required under the Loan
Documents and Requisite Lenders under Section 5.6(a)), and Administrative Agent
or Requisite Lenders have determined not to make such Advance or convert or
continue any Loan as LIBOR Loan as a result of the fact that such warranty or
representation is untrue or incorrect;

                  (b) any event or circumstance having a Material Adverse Effect
has occurred and is continuing since the date hereof as reasonably determined by
the Requisite Lenders, and Requisite Lenders have determined not to make such
Advance or convert or continue any Loan as a LIBOR Loan as a result of the fact
that such event or circumstance has occurred;

                  (c) any Default, which is not reasonably capable of being
cured, or Event of Default has occurred and is continuing or would result after
giving effect to any Advance and Administrative Agent or Requisite Lenders shall
have determined not to make any Advance or convert or continue any Loan as a
LIBOR Loan as a result of that Default, which is not reasonably capable of being
cured, or Event of Default; or

                  (d) after giving effect to any Advance, the outstanding
principal amount of the aggregate Revolving Loan would exceed Borrowing
Availability.

The request and acceptance by any Borrower of the proceeds of any Advance or the
conversion or continuation of any Loan into, or as, a LIBOR Loan shall be deemed
to constitute, as of the date thereof, (i) a representation and warranty by
Borrowers that the conditions in this Section 2.2 have been satisfied and (ii) a
reaffirmation by Borrowers of the cross-guaranty provisions set forth in Section
12 and of the granting and continuance of Administrative Agent's Liens, on
behalf of itself and Lenders, pursuant to the Collateral Documents.

3. REPRESENTATIONS AND WARRANTIES

          To induce Lenders to make the Revolving Loan, the Credit Parties
executing this Agreement, jointly and severally, make the following
representations and warranties to Administrative Agent and each Lender with
respect to all Credit Parties, each and all of which shall survive the execution
and delivery of this Agreement.

                  3.1 Corporate Existence; Compliance with Law. Each Credit
Party (a) is a corporation or limited liability company duly organized, validly
existing and in good standing under the laws of its respective jurisdiction of
incorporation or organization set forth in the Disclosure Document; (b) is duly
qualified to conduct business and is in good standing in each other jurisdiction
where its ownership or lease of property or the conduct of its business requires
such qualification, except where the failure to be so qualified would not
reasonably be expected to result in exposure to losses, damages or liabilities
in excess of $500,000; (c) has the requisite corporate or limited liability
company power and authority and the legal right to own, pledge, mortgage or
otherwise encumber and operate its properties, to lease the property it operates
under lease and to conduct its business as now, heretofore and proposed to be
conducted; (d) subject to specific representations regarding Environmental Laws,
has all material licenses, permits, consents or approvals from or by, and has
made all material filings with, and has given all material notices to, all
Governmental Authorities having jurisdiction, to the extent required for such
ownership, operation and conduct; (e) is in compliance with its charter and
bylaws or operating agreement, as applicable; and (f) to the best of each Credit
Party's actual knowledge, is in compliance with and has all licenses required
under all laws applicable consumer credit and collection laws, except where the
failure to be in compliance or have such licenses could not be reasonably
expected to have a Material Adverse Effect; and (g) subject to specific
representations set forth herein regarding ERISA, Environmental Laws, tax and
other laws, is in compliance with all applicable provisions of law, except where
the failure to comply, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.

                                       19
<PAGE>

                  3.2 Executive Offices, Collateral Locations, FEIN. As of the
Closing Date, the current location of each Credit Party's chief executive office
and premises at which any Collateral is located are set forth in the Disclosure
Document, and none of such locations has changed within the 12 months preceding
the Closing Date. In addition, the Disclosure Document lists the federal
employer identification number of each Credit Party.

                  3.3 Corporate Power, Authorization, Enforceable Obligations.
The execution, delivery and performance by each Credit Party of the Loan
Documents to which it is a party and the creation of all Liens provided for
therein: (a) are within such Person's power; (b) have been duly authorized by
all necessary corporate or limited liability company action; (c) do not
contravene any provision of such Person's charter, bylaws or operating agreement
as applicable; (d) do not violate any law or regulation, or any order or decree
of any court or Governmental Authority applicable to such Person; (e) do not
conflict with or result in the breach or termination of, constitute a default
under or accelerate or permit the acceleration of any performance required by,
any indenture, mortgage, deed of trust, lease, agreement or other instrument to
which such Person is a party or by which such Person or any of its property is
bound; (f) do not result in the creation or imposition of any Lien upon any of
the property of such Person other than those in favor of Administrative Agent,
on behalf of itself and Lenders, pursuant to the Loan Documents; and (g) do not
require the consent or approval of any Governmental Authority or any other
Person, except those referred to in Section 2.1(c), all of which will have been
duly obtained, made or complied with prior to the Closing Date. Each of the Loan
Documents shall be duly executed and delivered by each Credit Party that is a
party thereto and each such Loan Document shall constitute a legal, valid and
binding obligation of such Credit Party enforceable against it in accordance
with its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating or
affecting creditors' rights (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealings.

                  3.4 Financial Statements. All Financial Statements have been
prepared in accordance with GAAP consistently applied throughout the periods
covered (except as disclosed therein and except, with respect to unaudited
Financial Statements, for normal year-end audit adjustments) and present fairly
in all material respects the financial position of the Persons covered thereby
as at the dates thereof and the results of their operations and cash flows for
the periods then ended. The following Financial Statements have been delivered
on the date hereof:

                                       20
<PAGE>

                  (a) The audited consolidated balance sheets at September 30,
2004 and September 30, 2005 and the related statements of income and cash flows
and consolidating schedules of Asta Funding and its Subsidiaries for the Fiscal
Years then ended, certified by Eisner, LLP.

                  (b) The unaudited balance sheet(s) at March 31, 2006 and the
related statement(s) of income of Asta Funding and its Subsidiaries, for the
Fiscal Period then ended, as prepared by Asta Funding on behalf of the Credit
Parties.

                  3.5 Material Adverse Effect. Between September 30, 2005 and
the Closing Date: (a) no Credit Party has incurred any obligations, contingent
or non-contingent liabilities, liabilities for Charges, long-term leases or
unusual forward or long-term commitments that are outstanding as of the Closing
Date and that, alone or in the aggregate, could reasonably be expected to have a
Material Adverse Effect, (b) no contract, lease or other agreement or instrument
has been entered into by any Credit Party or has become binding upon any Credit
Party's assets and no law or regulation applicable to any Credit Party has been
adopted that has had or could reasonably be expected to have a Material Adverse
Effect, and (c) no Credit Party is in default and to the best of Borrowers'
knowledge no third party is in default under any material contract, lease or
other agreement or instrument, that alone or in the aggregate could reasonably
be expected to have a Material Adverse Effect. Between September 30, 2005 and
the Closing Date no event has occurred, that alone or together with other
events, could reasonably be expected to have a Material Adverse Effect.

                  3.6 Ownership of Property; Liens. As of the Closing Date, the
real estate ("Real Estate") listed in the Disclosure Document constitutes all of
the real property owned, leased or subleased, or used by any Credit Party as
warehouse, storage or office space or where assets may otherwise be located, and
identifies any such real property leased from an Affiliate of any Credit Party.
No Credit Party owns any Real Estate, and all leased Real Estate of any Credit
Parties is described on the Disclosure Document. The Disclosure Document further
describes any Real Estate with respect to which any Credit Party is a lessor,
sublessor or assignor as of the Closing Date. Each Credit Party also has good
and marketable title to, or valid leasehold interests in, all of its material
personal property and assets. As of the Closing Date, none of the properties and
assets of any Credit Party are subject to any Liens other than Permitted
Encumbrances, and there are no facts, circumstances or conditions known to any
Credit Party that may result in any Liens (including Liens arising under
Environmental Laws) other than Permitted Encumbrances. The Disclosure Document
also describes any purchase options, rights of first refusal or other similar
contractual rights pertaining to any Real Estate. As of the Closing Date, no
portion of any Credit Party's Real Estate has suffered any material damage by
fire or other casualty loss that has not heretofore been repaired and restored
in all material respects to its pre-casualty condition or otherwise remedied. As
of the Closing Date, all material permits required to have been issued or
appropriate to enable the Real Estate to be lawfully occupied and used for all
of the purposes for which it is currently occupied and used have been lawfully
issued and are in full force and effect, except where the failure to have any
permit will not have a Material Adverse Effect.

                                       21
<PAGE>

                  3.7 Labor Matters. All of the Credit Parties' employees are
leased from Kelly Staff Services, a professional employment organization. As of
the Closing Date (a) no strikes or other material labor disputes against any
Credit Party are pending or, to any Credit Party's knowledge, threatened; (b)
hours worked by and payment made to employees of each Credit Party comply in all
material respects with the Fair Labor Standards Act and each other federal,
state, local or foreign law applicable to such matters; (c) all payments due
from any Credit Party for employee health and welfare insurance have been paid
or accrued as a liability on the books of such Credit Party; (d) except as set
forth in the Disclosure Document, no Credit Party is a party to or bound by any
collective bargaining agreement, management agreement, consulting agreement,
employment agreement, bonus, restricted stock, stock option, or stock
appreciation plan or agreement or any similar plan, agreement or arrangement
(and true and complete copies of any agreements described on the Disclosure
Document have been delivered to Administrative Agent); (e) there is no
organizing activity involving any Credit Party pending or, to any Credit Party's
knowledge, threatened by any labor union or group of employees; (f) there are no
representation proceedings pending or, to any Credit Party's knowledge,
threatened with the National Labor Relations Board, and no labor organization or
group of employees of any Credit Party has made a pending demand for
recognition; and (g) except as set forth in the Disclosure Document, there are
no material complaints or charges against any Credit Party pending or, to the
knowledge of any Credit Party, threatened to be filed with any Governmental
Authority or arbitrator based on, arising out of, in connection with, or
otherwise relating to the employment or termination of employment by any Credit
Party of any individual.

                  3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock
and Indebtedness. Except as set forth in the Disclosure Document, as of the
Closing Date, no Credit Party has any Subsidiaries, is engaged in any joint
venture or partnership with any other Person, or is an Affiliate of any other
Person. All of the issued and outstanding Stock of each Credit Party is owned by
each of the Stockholders and in the amounts set forth in the Disclosure
Document. Except as set forth in the Disclosure Document, there are no
outstanding rights to purchase, options, warrants or similar rights or
agreements pursuant to which any Credit Party may be required to issue, sell,
repurchase or redeem any of its Stock or other equity securities or any Stock or
other equity securities of its Subsidiaries. All outstanding Indebtedness and
Guaranteed Indebtedness of each Credit Party as of the Closing Date (except for
the Obligations) is described in Section 6.3 (including the Disclosure
Document).

                  3.9 Government Regulation. No Credit Party is an "investment
company" or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company," as such terms are defined in the Investment
Company Act of 1940. No Credit Party is subject to regulation under any federal
or state statute that restricts or limits its ability to incur Indebtedness or
to perform its obligations hereunder. The making of the Revolving Loan by
Lenders to Borrowers, the application of the proceeds thereof and repayment
thereof and the consummation of the Related Transactions will not violate any
provision of any such statute or any rule, regulation or order issued by the
Securities and Exchange Commission.

                  3.10 Margin Regulations. No Credit Party is engaged, nor will
it engage, principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" as such terms are defined in Regulation U of the Federal Reserve Board as
now and from time to time hereafter in effect (such securities being referred to
herein as "Margin Stock"). No Credit Party owns any Margin Stock, and none of
the proceeds of the Revolving Loan or other extensions of credit under this
Agreement will be used, directly or indirectly, for the purpose of purchasing or
carrying any Margin Stock, for the purpose of reducing or retiring any
Indebtedness that was originally incurred to purchase or carry any Margin Stock
or for any other purpose that might cause any of the Revolving Loan or other
extensions of credit under this Agreement to be considered a "purpose credit"
within the meaning of Regulations T, U or X of the Federal Reserve Board. No
Credit Party will take or permit to be taken any action that might cause any
Loan Document to violate any regulation of the Federal Reserve Board.

                                       22
<PAGE>

                  3.11 Taxes. All tax returns, reports and statements, including
information returns, required by any Governmental Authority ("Tax Returns") to
be filed by any Credit Party have been filed with the appropriate Governmental
Authority except Tax Returns relating to state and local taxes which do not
exceed $100,000 in the aggregate; but, even then, only if the failure to do so
would not result in material fines, interests, penalties or other Charges; all
such Tax Returns are true, correct and complete in all material respects; and
all Charges have been paid prior to the date on which any fine, penalty,
interest or late charge may be added thereto for nonpayment thereof (or any such
fine, penalty, interest, late charge or loss has been paid), excluding Charges
or other amounts being contested in accordance with Section 5.2(b). There are no
Liens for Charges (other than for current Charges not yet due and payable) upon
the assets of any Credit Party. No adjustment relating to such Tax Returns has
been proposed formally (whether verbally or in writing) or informally (in
writing) by any Governmental Authority and, to the knowledge of each Credit
Party, no basis exists for any such adjustment. Proper and accurate amounts have
been withheld by each Credit Party from its respective employees, independent
contractors, creditors, members, partners and other third parties for all
periods in compliance in all material respects with all applicable federal,
state, local and foreign laws and such withholdings have been timely paid to the
respective Governmental Authorities. The Disclosure Document sets forth as of
the Closing Date those taxable years for which any Credit Party's Tax Returns
are currently being audited by the IRS or any other applicable Governmental
Authority, and any assessments or to the knowledge of any Credit Party, any
threatened assessments in connection with such audit, or otherwise currently
outstanding. Except as described in the Disclosure Document, no Credit Party has
executed or filed with the IRS or any other Governmental Authority any agreement
or other document extending, or having the effect of extending, the period for
assessment or collection of any Charges. None of the Credit Parties nor their
respective predecessors are liable to any Governmental Authority for any
Charges: (a) under any agreement (including any tax sharing agreements) or (b)
to each Credit Party's knowledge, as a transferee. As of the Closing Date, no
Credit Party has agreed or been requested to make any adjustment under IRC
Section 481(a), by reason of a change in accounting method or otherwise, which
would have a Material Adverse Effect.

                  3.12 ERISA.

                  (a) The Disclosure Document lists (i) all ERISA Affiliates,
(ii) all material Plans and separately identifies each such Plan as a Title IV
Plan, ESOP or other Pension Plan or as a Welfare Plan, including Retiree Welfare
Plans and (iii) each Multiemployer Plan. Copies of all such listed Plans (other
than Multiemployer Plans), together with a copy of the latest IRS/DOL
5500-series form for each such Plan, have been delivered or made available to
Administrative Agent. Except as disclosed on Schedule 3.12(a), each Qualified
Plan has been determined by the IRS to qualify under Section 401 of the IRC, the
trusts created thereunder have been determined to be exempt from tax under the
provisions of Section 501 of the IRC, and nothing has occurred that would
reasonably be expected to cause the loss of such qualification or tax-exempt
status. Each Plan is in material compliance with its provisions and the
applicable provisions of ERISA and the IRC, including the timely filing of all
reports required under the IRC or ERISA, including the statement required by 29
CFR Section 2520.104-23. Neither any Credit Party nor ERISA Affiliate has failed
to make any contribution or pay any amount due as required by either Section 412
of the IRC or Section 302 of ERISA. Neither any Credit Party nor ERISA Affiliate
has engaged in a "prohibited transaction," as defined in Section 406 of ERISA
and Section 4975 of the IRC, in connection with any Plan, that would subject any
Credit Party to a material tax on prohibited transactions imposed by Section
502(i) of ERISA or Section 4975 of the IRC.

                                       23
<PAGE>

                  (b) Except as set forth in the Disclosure Document: (i) no
Title IV Plan has any Unfunded Pension Liability, no assets of any Credit Party
or ERISA Affiliate are subject to any Lien under Section 412 of the IRC or
Section 302 or 4068 of ERISA, and no event has occurred that could reasonably be
expected to result in the imposition of such Lien; (ii) no ERISA Event or event
described in Section 4062(e) of ERISA with respect to any Title IV Plan has
occurred or is reasonably expected to occur; (iii) there are no pending, or to
the knowledge of any Credit Party, threatened claims (other than claims for
benefits in the normal course), sanctions, actions or lawsuits, asserted or
instituted against any Plan or any Person as fiduciary or sponsor of any Plan;
(iv) no Credit Party or ERISA Affiliate has incurred or reasonably expects to
incur any liability as a result of a complete or partial withdrawal from a
Multiemployer Plan; (v) within the last five years no Title IV Plan of any
Credit Party or ERISA Affiliate has been terminated, whether or not in a
"standard termination" as that term is used in Section 4041(b)(1) of ERISA, nor
has any Title IV Plan of any Credit Party or any ERISA Affiliate (determined at
any time within the last five years) with Unfunded Pension Liabilities been
transferred outside of the "controlled group" (within the meaning of Section
4001(a)(14) of ERISA) of any Credit Party or ERISA Affiliate (determined at such
time) with respect to which termination or transfer a Credit Party has a
material unsatisfied liability; (vi) except in the case of any ESOP, Stock of
all Credit Parties and their ERISA Affiliates makes up, in the aggregate, no
more than 10% of fair market value of the assets of any Plan measured on the
basis of fair market value as of the latest valuation date of any Plan; and
(vii) no liability under any Title IV Plan has been satisfied with the purchase
of a contract from an insurance company that is not rated AAA by the Standard &
Poor's Corporation or an equivalent rating by another nationally recognized
rating agency.

                  3.13 No Litigation. No action, claim, lawsuit, demand,
investigation or proceeding is now pending or, to the knowledge of any Credit
Party, threatened against any Credit Party, before any Governmental Authority or
before any arbitrator or panel of arbitrators (collectively, "Litigation"), (a)
that challenges any Credit Party's right or power to enter into or perform any
of its obligations under the Loan Documents to which it is a party, or the
validity or enforceability of any Loan Document or any action taken thereunder,
or (b) that would reasonably be expected to be determined adversely to any
Credit Party and that, if so determined, would reasonably be expected to have a
Material Adverse Effect. Except as set forth on the Disclosure Document, as of
the Closing Date there is no Litigation pending or, to any Credit Party's
knowledge, threatened, that seeks damages in excess of $250,000 with respect to
claims for which the applicable Credit Party has no right of indemnification
from the originator or seller of that Account, or that seeks damages in excess
of $1,000,000 with respect to claims for which the applicable Credit Party has a
right of indemnification from the originator or seller of that Account, or
injunctive relief against, or alleges criminal misconduct of, any Credit Party.

                                       24
<PAGE>

                  3.14 Brokers. No broker or finder brought about the obtaining,
making or closing of the Revolving Loan or the Related Transactions, and no
Credit Party or Affiliate thereof has any obligation to any Person in respect of
any finder's or brokerage fees in connection therewith.

                  3.15 Intellectual Property. As of the Closing Date, each
Credit Party owns or has rights to use all Intellectual Property necessary to
continue to conduct its business as now or heretofore conducted by it or
proposed to be conducted by it. Each Trademark, Copyright and Patent registered
with or that is the subject of an application with the United States Patent and
Trademark Office, or its foreign equivalents, or the United States Copyright
Office or its foreign equivalents, as applicable, and each License is listed,
together with application or registration numbers, as applicable, in the
Disclosure Document. Except as set forth in the Disclosure Document, each Credit
Party, jointly and severally, represents and warrants that all Patents,
Trademarks and Copyrights which are necessary or material to the operations of
such Credit Party have been registered with the United States Patent and
Trademark Office or its foreign equivalents or the United States Copyright
Office or its foreign equivalents, as applicable. Each Credit Party conducts its
business and affairs without infringement of or interference with any
Intellectual Property of any other Person in any material respect. Except as set
forth in the Disclosure Document, no Credit Party is aware of any infringement
claim by any other Person with respect to any Intellectual Property.

                  3.16 Full Disclosure. No information contained in this
Agreement, any of the other Loan Documents, Financial Statements or Collateral
Reports or other written reports from time to time delivered hereunder and no
written statement furnished by or on behalf of any Credit Party to
Administrative Agent or any Lender pursuant to the terms of this Agreement
contains or will contain when delivered or furnished any untrue statement of a
material fact or omits or will omit to state a material fact necessary to make
the statements contained herein or therein not misleading in light of the
circumstances under which they were made. The Liens granted to Administrative
Agent, on behalf of itself and Lenders, pursuant to the Collateral Documents
will at all times be fully perfected first priority Liens in and to the
Collateral described therein, subject, as to priority, only to Permitted
Encumbrances. The projections included in such information are or will be based
on assumptions and estimates developed by management of the Credit Parties in
good faith and considered by the preparer to be reasonable as of the date such
projections are prepared and are delivered to Administrative Agent and/or
Lenders.

                                       25
<PAGE>

                  3.17 Environmental Matters.

                  (a) Except as set forth in the Disclosure Document, as of the
Closing Date: (i) the Real Estate is free of contamination from any Hazardous
Material except for such contamination that would not result in material
Environmental Liabilities; (ii) no Credit Party has caused or suffered to occur
any Release of Hazardous Materials on, at, in, under, above, to, from or about
any of its Real Estate; (iii) the Credit Parties are and have been in compliance
with all Environmental Laws, except for such noncompliance that would not result
in material Environmental Liabilities; (iv) the Credit Parties have obtained,
and are in compliance with, all Environmental Permits required by Environmental
Laws for the operations of their respective businesses as presently conducted or
as proposed to be conducted, except where the failure to so obtain or comply
with such Environmental Permits would not result in material Environmental
Liabilities, and all such Environmental Permits are valid, uncontested and in
good standing; (v) no Credit Party is involved in operations or knows of any
facts, circumstances or conditions, including any Releases of Hazardous
Materials, that are likely to result in any material Environmental Liabilities;
and no Credit Party has permitted any current or former tenant or occupant of
the Real Estate to engage in any such operations; (vi) there is no Litigation
arising under or related to any Environmental Laws, Environmental Permits or
Hazardous Material that seeks damages, penalties, fines, costs or expenses in
excess of $200,000 or injunctive relief against, or that alleges criminal
misconduct by, any Credit Party; and (vii) no notice has been received by any
Credit Party identifying it as a "potentially responsible party" or requesting
information under CERCLA or analogous state statutes, and to the knowledge of
the Credit Parties, there are no facts, circumstances or conditions that may
result in any Credit Party being identified as a "potentially responsible party"
under CERCLA or analogous state statutes.

                  (b) The Credit Parties have provided to Administrative Agent
copies of all existing environmental reports, reviews and audits and all written
information pertaining to actual or potential Environmental Liabilities
performed at the request of any Credit Party or otherwise received by any Credit
Party, in each case relating to any Credit Party.

                  (c) Each Credit Party hereby acknowledges and agrees that
Administrative Agent (i) is not now, and has not ever been, in control of any of
the Real Estate or any Credit Party's affairs, and (ii) is not authorized by the
Loan Documents or otherwise to influence any Credit Party's conduct with respect
to the ownership, operation or management of any of its Real Estate or
compliance with Environmental Laws or Environmental Permits.

                  3.18 Insurance. The Disclosure Document lists all insurance
policies of any nature maintained, as of the Closing Date, for current
occurrences by each Credit Party, as well as a summary of the terms of each such
policy.

                  3.19 Deposit and Disbursement Accounts. The Disclosure
Document lists all banks and other financial institutions at which any Credit
Party maintains deposit or other accounts as of the Closing Date, including any
Disbursement Accounts, and such Schedule correctly identifies the name, address
and telephone number of each depository, the name in which the account is held,
a description of the purpose of the account, and the complete account number
therefor.
                  3.20 Government Contracts. Except as set forth in the
Disclosure Document, as of the Closing Date, no Credit Party is a party to any
contract or agreement with any Governmental Authority and no Credit Party's
Accounts are subject to the Federal Assignment of Claims Act (31 U.S.C. Section
3727) or any similar state or local law.

                                       26
<PAGE>

                  3.21 Customer and Trade Relations. As of the Closing Date,
there exists no actual or, to the knowledge of any Credit Party, threatened
termination or cancellation of, or any material adverse modification or change
in: the business relationship of any Credit Party with any customer or group of
customers whose purchases during the preceding 12 months caused them to be
ranked among the ten largest customers of such Credit Party; or the business
relationship of any Credit Party with any supplier material to its operations.

                  3.22 Agreements and Other Documents.

                  (a) As of the Closing Date, each Credit Party has provided to
Administrative Agent or its counsel, on behalf of Lenders, accurate and complete
copies (or summaries) of all of the following agreements or documents to which
it is subject and each of which is listed in the Disclosure Document: servicing
agreements not terminable by such Credit Party within 60 days following written
notice issued by such Credit Party involving the collections of Accounts and
other Collateral and/or the receipt of any Payments or Collections during the
previous Fiscal Quarter of an amount equal to the Servicing Threshold (as
determined on an aggregate basis for all Credit Parties); leases of Equipment
having a remaining term of one year or longer and requiring aggregate rental and
other payments in excess of $500,000 per annum; licenses and permits held by the
Credit Parties, the absence of which could reasonably be expected to have a
Material Adverse Effect; instruments and documents evidencing any Indebtedness
or Guaranteed Indebtedness of such Credit Party (other than as to the
Obligations) and any Lien granted by such Credit Party with respect thereto; and
instruments and agreements evidencing the issuance of any equity securities,
warrants, rights or options to purchase equity securities of such Credit Party.

                  (b) Except as disclosed in the Disclosure Document, as of the
Closing Date, no significant servicer (or group of related servicers which in
the aggregate is significant) of the Credit Parties, taken as a whole, has given
them notice or, to the knowledge of the Credit Parties, has taken any other
action which has given any Credit Party any reason to believe that such servicer
(or group of related servicers) will materially reduce the amount of its
services to the Borrowers or materially adversely change the price or terms of
such services. For such purposes, a servicer (or group of related servicers)
shall be deemed "significant" if Collections of such servicer (or group of
related servicers) meet or exceed the Servicing Threshold during the past Fiscal
Quarter.

                  (c) Except as disclosed in the Disclosure Document, as of the
Closing Date, no significant servicer, supplier or vendor (or group of related
servicers, suppliers or vendors which in the aggregate is significant) of the
Credit Parties, taken as a whole, has given them notice or, to the knowledge of
the Credit Parties, has taken any other action which has given any Credit Party
any reason to believe that such servicer, supplier or vendor (or group of
related servicers, suppliers or vendors) will cease to supply or materially
restrict the amount supplied or materially adversely change its services, price
or terms to any Credit Party of any services, products or services. For such
purposes, a servicer, supplier or vendor (or group of related servicers,
suppliers or vendors) shall be deemed "significant" if Collections of such
servicer, supplier or vendor (or group of related servicers, suppliers or
vendors) meet or exceed the Servicing Threshold during the past Fiscal Quarter.

                                       27
<PAGE>

                  (d) The Disclosure Document reasonably identifies, as of the
Closing Date, all Servicing Agents involved in the collection of any Payments,
Accounts and Portfolios, except for any Servicing Agent whose collection of
Payments, Accounts and Portfolios, in the aggregate for all Credit Parties,
during any Fiscal Quarter, did not exceed $50,000, or whose collection of
Payments, Accounts and Portfolios are not reasonably expected by Borrowers to
exceed $50,000 during any Fiscal Quarter (hereinafter called a "Diminimus
Servicing Agent"); provided, however that the collection of Payments, Accounts
and Portfolios, in the aggregate for all Diminimus Servicing Agents, during any
Fiscal Quarter, shall not exceed $375,000.

                  3.23 Solvency. Both before and after giving effect to (a) the
Revolving Loan to be made or incurred on the Closing Date or such other date as
the Revolving Loan requested hereunder are made or incurred, (b) the
disbursement of the proceeds of the Revolving Loan pursuant to the instructions
of Borrower Representative; (c) the consummation of the other Related
Transactions; and (d) the payment and accrual of all transaction costs in
connection with the foregoing, each Borrower is and will be Solvent.

                  3.24 Restrictions on or Relating to Subsidiaries. There does
not exist any encumbrance or restriction on the ability of (a) any Borrower or
any Subsidiary of any Borrower to pay dividends or make any other distributions
on its Stock or any other interest or participation in its profits owned by any
Borrower or any Subsidiary of any Borrower, or to pay any Indebtedness owed to
any Borrower or any Subsidiary of any Borrower, (b) any Borrower or any
Subsidiary of any Borrower to make loans or advances to any Borrower or any
Subsidiary of any Borrower or (c) any Borrower or any Subsidiary of any Borrower
to transfer any of its properties or assets to any Borrower or any Subsidiary of
any Borrower, except for such encumbrances or restrictions existing under or by
reason of (i) applicable law, or (ii) the Loan Documents.

                  3.25 Disaster Recovery Plan. A brief description of the
Disaster Recovery Plan is set forth in the definition of Disaster Recovery Plan
in Annex A attached hereto. The Borrowers represent and warrant that the
Disaster Recovery Plan is sufficient to protect the Borrowers in the event of a
disaster. To the extent applicable, the Borrowers hereby collaterally assign to
the Administrative Agent, for the benefit of the Lenders, all of the Borrowers'
right, title and interest in the Disaster Recovery Plan and all agreements
related thereto. The Disaster Recovery Plan shall not be amended, changed,
modified or altered in any material respect without the prior written consent of
Administrative Agent, which consent shall not be unreasonably withheld or
delayed. Administrative Agent and its designees shall have a reasonable right of
access to all Critical Information generated by the business operations of the
Credit Parties, including the Critical Information stored at the New Jersey and
Pennsylvania physical facilities, and to the key employee(s) of the Credit
Parties who may be responsible for maintaining, storing and safeguarding the
Critical Information.

4. FINANCIAL STATEMENTS AND INFORMATION

                  4.1 Reports and Notices.

                  (a) Each Credit Party executing this Agreement hereby agrees
that from and after the Closing Date and until the Termination Date, it shall
deliver to Administrative Agent or to Administrative Agent and Lenders, as
required, the Financial Statements, notices and other information at the times,
to the Persons and in the manner set forth in Annex E.

                                       28
<PAGE>

                  (b) Each Credit Party executing this Agreement hereby agrees
that, from and after the Closing Date and until the Termination Date, it shall
deliver to Administrative Agent or to Administrative Agent and Lenders, as
required, the various Collateral Reports (including Borrowing Base Certificate
in the form of Exhibit 4.1(b) attached to the Disclosure Document) at the times,
to the Persons and in the manner set forth in Annex F.

                  4.2 Communication with Accountants. Each Credit Party
executing this Agreement authorizes (a) Administrative Agent, with consent of
Borrower Representative, and (b) so long as an Event of Default has occurred and
is continuing, Administrative Agent and each Lender, to communicate directly
with its independent certified public accountants, including Eisner, LLP, and
authorizes and, at Administrative Agent's request, shall request those
accountants to disclose and make available to Administrative Agent and each
Lender any and all Financial Statements and other supporting financial
documents, schedules and information relating to any Credit Party (including
copies of any issued management letters) with respect to the business, financial
condition and other affairs of any Credit Party.

5. AFFIRMATIVE COVENANTS

         Each Credit Party executing this Agreement jointly and severally agrees
as to all Credit Parties that from and after the date hereof and until the
Termination Date:

                  5.1 Maintenance of Existence and Conduct of Business. Each
Credit Party (other than Inactive Subsidiaries) shall: do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence and its rights and franchises; continue to conduct its business
substantially as now conducted or as otherwise permitted hereunder; at all times
maintain, preserve and protect all of its assets and properties useful in the
conduct of its business, and keep the same in good repair, working order and
condition in all material respects (taking into consideration ordinary wear and
tear) and from time to time make, or cause to be made, all necessary or
appropriate repairs, replacements and improvements thereto consistent with
industry practices; and except as permitted by Section 6.15, transact business
only in such corporate and trade names as are set forth in the Disclosure
Document.

                  5.2 Payment of Charges.

                  (a) Subject to Section 5.2(b), each Credit Party shall pay and
discharge or cause to be paid and discharged promptly all Charges payable by it
(other than Charges that it does not have knowledge of and which do not exceed
$250,000 in the aggregate), including (i) Charges imposed upon it, its income
and profits, or any of its property (real, personal or mixed) and all Charges
with respect to tax, social security and unemployment withholding with respect
to its employees, (ii) lawful claims for labor, materials, supplies and services
or otherwise, and (iii) all storage or rental charges payable to warehousemen or
bailees, in each case, before any thereof shall become past due.

                                       29
<PAGE>

                  (b) Each Credit Party may in good faith contest, by
appropriate proceedings, the validity or amount of any Charges, Taxes or claims
described in Section 5.2(a); provided, that (i) adequate reserves with respect
to such contest are maintained on the books of such Credit Party, in accordance
with GAAP; (ii) no Lien shall be imposed to secure payment of such Charges
(other than payments to warehousemen and/or bailees) that is superior to any of
the Liens securing the Obligations and such contest is maintained and prosecuted
continuously and with diligence and operates to suspend collection or
enforcement of such Charges; (iii) none of the Collateral becomes subject to
forfeiture or loss as a result of such contest; and (iv) such Credit Party shall
promptly pay or discharge such contested Charges, Taxes or claims and all
additional charges, interest, penalties and expenses, if any, and shall deliver
to Administrative Agent evidence reasonably acceptable to Administrative Agent
of such compliance, payment or discharge, if such contest is terminated or
discontinued adversely to such Credit Party or the conditions set forth in this
Section 5.2(b) are no longer met.

                  5.3 Books and Records. Each Credit Party shall keep adequate
books and records with respect to its business activities in which proper
entries, reflecting all financial transactions, are made in accordance with GAAP
and on a basis consistent with the Financial Statements described in or attached
to the Disclosure Document.

                  5.4 Insurance; Damage to or Destruction of Collateral.

                  (a) The Credit Parties shall, at their sole cost and expense,
maintain the policies of insurance described on the Disclosure Document as in
effect on the date hereof or otherwise in form and amounts and with insurers
reasonably acceptable to Administrative Agent. Copies of all such policies of
insurance shall be delivered to Administrative Agent within 30 days of the
Closing Date. Such policies of insurance (or the loss payable and additional
insured endorsements delivered to Administrative Agent) shall contain provisions
pursuant to which the insurer agrees to provide 30 days prior written notice to
Administrative Agent in the event of any non-renewal, cancellation or amendment
of any such insurance policy. If any Credit Party at any time or times hereafter
shall fail to obtain or maintain any of the policies of insurance required
above, or to pay all premiums relating thereto, Administrative Agent may at any
time or times thereafter that such insurance is not in effect obtain and
maintain such policies of insurance and pay such premiums. Administrative Agent
shall have no obligation to obtain insurance for any Credit Party or pay any
premiums therefor. By doing so, Administrative Agent shall not be deemed to have
waived any Default, which is not reasonably capable of being cured, or Event of
Default arising from any Credit Party's failure to maintain such insurance or
pay any premiums therefor. All sums so disbursed, including reasonable
attorneys' fees, court costs and other charges related thereto, shall be payable
on demand by Borrowers to Administrative Agent and shall be additional
Obligations hereunder secured by the Collateral.

                  (b) Each Credit Party shall deliver to Administrative Agent,
in form and substance reasonably satisfactory to Administrative Agent,
endorsements to (i) all "All Risk" and business interruption insurance naming
Administrative Agent, on behalf of itself and Lenders, as loss payee, and (ii)
all general liability and other liability policies naming Administrative Agent,
on behalf of itself and Lenders, as additional insured. Each Credit Party
irrevocably makes, constitutes and appoints Administrative Agent (and all
officers, employees or agents designated by Administrative Agent), so long as
any Default, which is not reasonably capable of being cured, or Event of Default
has occurred and is continuing, as such Credit Party's true and lawful agent and
attorney-in-fact for the purpose of making, settling and adjusting claims under
such "All Risk" policies of insurance, endorsing the name of such Credit Party
on any check or other item of payment for the proceeds of such "All Risk"
policies of insurance and for making all determinations and decisions with
respect to such "All Risk" policies of insurance. Administrative Agent shall
have no duty to exercise any rights or powers granted to it pursuant to the
foregoing power-of-attorney. Borrower Representative shall promptly notify
Administrative Agent of any loss, damage, or destruction to the Collateral in
the amount of $300,000 or more, whether or not covered by insurance or
reimbursable under condemnation provisions. After deducting from such proceeds
the expenses, if any, incurred by Administrative Agent in the collection or
handling thereof, Administrative Agent may, at its option, either (i) apply such
insurance or condemnation proceeds to the reduction of the Obligations in
accordance with Section 1.3(d) or (ii) permit the Credit Parties to replace,
restore, repair or rebuild the property on terms acceptable to Administrative
Agent in its sole discretion; provided that in the case of insurance or
condemnation proceeds pertaining to any Credit Party that is not a Borrower, (i)
such insurance or condemnation proceeds shall be applied ratably to all of the
Revolving Loan owing by each Borrower, or (ii) permit or require the applicable
Credit Party to use such money, or any part thereof, to replace, repair, restore
or rebuild the Collateral in a diligent and expeditious manner with materials
and workmanship of substantially the same quality as existed before the loss,
damage or destruction.

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<PAGE>

                  5.5 Compliance with Laws. Each Credit Party shall comply with
all federal, state, local and foreign laws and regulations applicable to it,
including those relating to consumer credit, collection laws, licensing
requirements, ERISA and labor matters and Environmental Laws and Environmental
Permits, except to the extent that the failure to comply, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.

                  5.6 Supplemental Disclosure. From time to time as may be
reasonably requested by Administrative Agent (which request will not be made
more frequently than once each year absent the occurrence and continuance of a
Default, which is not reasonably capable of being cured, or an Event of
Default), the Credit Parties shall supplement each disclosure contained in the
Disclosure Document, or any representation herein or in any other Loan Document,
with respect to any matter hereafter arising that, if existing or occurring at
the date of this Agreement, would have been required to be set forth or
described in the Disclosure Document or as an exception to such representation
or that is necessary to correct any information in the Disclosure Document or
representation which has been rendered inaccurate thereby (and, in the case of
any supplements to the Disclosure Document, such Disclosure Document shall be
appropriately marked to show the changes made therein); provided that (a) no
such supplement to the Disclosure Document or representation shall amend,
supplement or otherwise modify the term "Disclosure Document" as used herein or
any representation with respect thereto, or be or be deemed a waiver of any
Default or Event of Default resulting from the matters disclosed therein, except
as consented to by Administrative Agent and Requisite Lenders in writing, which
consent will not be unreasonably withheld or delayed, (b) no supplement shall be
required or permitted as to representations and warranties that relate solely to
the Closing Date and (c) the requirement to supplement the Disclosure Document
hereto shall be subject to any materiality and other qualifiers set forth in any
representation and warranty.

                  5.7 Intellectual Property. Each Credit Party will continue to
own or have rights to use all Intellectual Property necessary to continue to
conduct its business as now or heretofore conducted by it or proposed to be
conducted by it, and shall conduct its business and affairs without knowingly
infringing or interfering with any Intellectual Property of any other Person in
any material respect.

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<PAGE>

                  5.8 Environmental Matters. Each Credit Party shall and shall
cause each Person within its control to: (a) conduct its operations and keep and
maintain its Real Estate in compliance with all Environmental Laws and
Environmental Permits other than noncompliance that could not reasonably be
expected to have a Material Adverse Effect; (b) implement any and all
investigation, remediation, removal and response actions that are appropriate or
necessary to maintain the value and marketability of the Real Estate or to
otherwise comply with Environmental Laws and Environmental Permits pertaining to
the presence, generation, treatment, storage, use, disposal, transportation or
Release of any Hazardous Material on, at, in, under, above, to, from or about
any of its Real Estate; (c) notify Administrative Agent promptly after such
Credit Party becomes aware of any violation of Environmental Laws or
Environmental Permits or any Release on, at, in, under, above, to, from or about
any Real Estate that could reasonably be expected to result in any material
Environmental Liabilities; and (d) promptly forward to Administrative Agent a
copy of any order, notice, request for information or any communication or
report received by such Credit Party in connection with any such violation or
Release or any other matter relating to any Environmental Laws or Environmental
Permits that could reasonably be expected to result in material Environmental
Liabilities, in each case whether or not the Environmental Protection Agency or
any Governmental Authority has taken or threatened any action in connection with
any such violation, Release or other matter. If Administrative Agent at any time
has a reasonable basis to believe that there may be a violation of any
Environmental Laws or Environmental Permits by any Credit Party or any
Environmental Liability arising thereunder, or a Release of Hazardous Materials
on, at, in, under, above, to, from or about any of its Real Estate, that, in
each case, could reasonably be expected to have a Material Adverse Effect, then
each Credit Party shall, upon Administrative Agent's written request (i) cause
the performance of such environmental audits including subsurface sampling of
soil and groundwater, and preparation of such environmental reports, at
Borrowers' expense, as Administrative Agent may from time to time reasonably
request, which shall be conducted by reputable environmental consulting firms
reasonably acceptable to Administrative Agent and shall be in form and substance
reasonably acceptable to Administrative Agent, and (ii) permit Administrative
Agent or its representatives to have access to all Real Estate for the purpose
of conducting such environmental audits and testing as Administrative Agent
deems appropriate, including subsurface sampling of soil and groundwater.
Borrowers shall reimburse Administrative Agent for the costs of such audit and
tests and the same will constitute a part of the Obligations secured hereunder.

                  5.9 Landlords' Agreements, Mortgagee Agreements, Bailee
Letters and Real Estate Purchases. Each Credit Party shall obtain a landlord's
agreement or bailee letter, as applicable, from the lessor of each leased or
rented real property, mortgagee of owned real property or bailee with respect to
any warehouse facility or other location where Collateral (or evidence of
Collateral) having a value of $250,000 or more is stored or located as of the
Closing Date, which agreement or letter shall contain a waiver or subordination
of all Liens or claims that the landlord, mortgagee or bailee may assert against
the Collateral at that location, and shall expressly permit the Agents or their
designees to enter upon the premises for purposes of inspecting, monitoring,
examining, removing and rendering inoperable any such Collateral, and shall
otherwise be reasonably satisfactory in form and substance to Administrative
Agent. Each Credit Party shall notify Administrative Agent in writing of any
warehouse facility or other location where Collateral (or evidence of
Collateral) having a value of less than $250,000 is stored or located as of the
Closing Date. Each Credit Party shall timely and fully pay and perform its
obligations under all leases and other agreements with respect to each leased or
rented location or public warehouse where any Collateral is or may be located.
To the extent otherwise permitted hereunder, if any Credit Party proposes to
acquire a fee ownership interest in Real Estate after the Closing Date, it shall
first provide to Collateral Agent a mortgage or deed of trust granting
Collateral Agent, for the benefit of Lenders, a first priority Lien on such Real
Estate, subject to Permitted Encumbrances, together with environmental audits,
mortgage title insurance commitment, real property survey, local counsel
opinion(s), and, if required by Administrative Agent, supplemental casualty
insurance and flood insurance, and such other documents, instruments or
agreements reasonably requested by Administrative Agent, in each case, in form
and substance reasonably satisfactory to Administrative Agent.

                                       32
<PAGE>

                  5.10 ERISA. With respect to each Plan, each Credit Party shall
comply in all material respects with the applicable provisions of ERISA and the
IRC, except to the extent such failure to comply, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
The Credit Parties shall furnish to the Administrative Agent written notice
within 30 Business Days after any Credit Party knows or has reason to know of:
(a) a plan amendment that materially increases the benefits of any existing
Plan, the establishment of any new Plan providing material additional benefits,
or the commencement of material contributions to any Multiemployer Plan; or (b)
an ERISA Event or any event, whether an ERISA Event or not, that could
reasonably be expected to result in the imposition of a Lien against a Credit
Party or an ERISA Affiliate under Code Section 412 or ERISA Section 302 or 4068,
together with a statement of an officer setting forth the details of such Event
and action which the Credit Parties propose to take with respect thereto. Upon
Administrative Agent's written request, each Credit Party shall furnish to the
Administrative Agent, within 30 Business Days after the filing thereof with the
Department of Labor, IRS or PBGC, copies of each annual report (From 5500
series) filed for each Plan and the most recent actuarial report for each Title
IV Plan.

                  5.11 Servicing Agreements.

                  (a) Borrowers and the other Credit Parties shall deliver
irrevocable written instructions (the "Written Instructions") to any and all
Servicing Agents or other Persons (including any collection agent, agency or
attorney, but excluding account debtors of Consumer Loans) having responsibility
for Payments or Collections of Accounts and other Collateral and who transfer,
send, make payments or disburse any Payments, Collections or Proceeds or other
funds, sums or amounts (which Payments, Collections, Proceeds, other funds, sums
and amounts will be net of any collection costs and other fees permitted to be
deducted by the express terms of the servicing agreement that corresponds to
such Payments, Collections, Proceeds and other funds) to any Credit Party by
wire transfer of cash credit (whether on a regular or infrequent basis) to make
all payments owing to Credit Parties by wire transfer of cash credit directly
into a Blocked Account established and maintained by a Credit Party with
Administrative Agent. A copy of the Written Instructions shall be delivered to
Administrative Agent within a reasonable period of time after such Written
Instructions are given. Borrowers and the other Credit Parties shall provide
such Servicing Agents and other Persons with information relative to such
Blocked Account as is sufficient to permit such Servicing Agents and other
Persons to comply with the Written Instructions. None of the Credit Parties
shall amend, modify or terminate any of the Written Instructions without the
prior written consent of Administrative Agent.

                                       33
<PAGE>

                  (b) Each Borrower shall and shall cause its Affiliates,
officers, employees, agents (other than third party Servicing Agents), directors
or other Persons acting for or in concert with such Borrower (each a "Related
Person") to (i) hold in trust for Administrative Agent, for the benefit of
itself and Lenders, all checks, cash and other items of payment received by such
Borrower or any such Related Person, and (ii) within 2 Business Days after
receipt by such Borrower or any such Related Person (or in the event such
deposit is not practicable due to an Act of God, terrorism or other city-wide
catastrophe, the next day on which businesses generally are open) of any checks,
cash or other items of payment, deposit the same into a Blocked Account of such
Borrower or other blocked account with a Blocked Account Third-Party Bank (as
that term is defined in Annex C). Each Borrower and each Related Person thereof
acknowledges and agrees that all cash, checks or other items of payment
constituting proceeds of Collateral are part of the Collateral. All proceeds of
the sale or other disposition of any Collateral, shall be deposited directly
into the applicable Blocked Accounts or other blocked account with a Blocked
Account Third-Party Bank.

                  (c) Any and all servicing agreements entered into from and
after the Closing Date (and any modification of any servicing agreement in
effect as of the Closing Date) for the administration and/or collection of
Payments made by an Account Debtor with respect to Accounts and other Collateral
(a "New Servicing Agreement"), shall require the Servicing Agents and other
Persons (including any collection agent, agency or attorney) to pay Collections
(net of any collection costs and other fees permitted to be deducted from
Collections by the express terms of the corresponding New Servicing Agreement)
to the Credit Parties (or their designees) no later than 15 days after the last
day of each calendar month. Contemporaneously with the execution and delivery of
any New Servicing Agreement, the applicable Credit Party shall deliver to the
Servicing Agent under such New Servicing Agreement Written Instructions directed
to the Servicing Agent duly acknowledged by the Servicing Agent. Within a
reasonable period of time of entering into a new Servicing Agreement, the Credit
Party shall deliver to Administrative Agent a copy of the Written Instructions
duly executed by the corresponding Servicing Agent.

                  (d) Borrowers and the other Credit Parties shall cause any
Servicing Agent and other Person (including any collection agent, agency or
attorney) involved in the collection of Accounts and other Collateral and/or the
receipt of any Payments or Collections as of the Closing Date whose Collections
(net of any collection costs and other fees permitted to be deducted from
Collections by the express terms of the corresponding servicing agreement) in
the aggregate for all Credit Parties during the past Fiscal Quarter meet or
exceed the Servicing Threshold to deposit, transfer, and disburse all Payments,
Collections and other sums and amounts directly into a Blocked Account
established and maintained by a Credit Party with Administrative Agent promptly
after receipt thereof by Servicing Agent or other Person, but in no event later
than the date that is fifteen (15) calendar days after receipt thereof.

                                       34
<PAGE>

                  (e) Without limiting any provision, agreement, appointment or
power of attorney granted in any of the Collateral Documents, the Credit Parties
hereby irrevocably constitutes and appoints Administrative Agent with full power
of substitution, as Credit Parties' true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of Credit Parties and in
the name of Credit Parties or in its own name, from time to time in
Administrative Agent's discretion, to take any and all appropriate action and to
execute and deliver any and all documents and instruments which may be necessary
or desirable to notify and instruct all Servicing Agents and other Persons
(including any collection agent, agency or attorney) involved in the collections
of Accounts and other Collateral and/or the receipt of any Payments or
Collections to deposit, transfer, and disburse all Payments, Collections and
other sums and amounts directly into an account established and maintained by
Administrative Agent promptly after receipt thereof by Servicing Agent or other
Person, but in no event later than the date that is fifteen (15) calendar days
after receipt thereof. Administrative Agent agrees to exercise such
power-of-attorney only upon the occurrence and during the continuance of a
Default which is not reasonably capable of being cured, or an Event of Default.
Administrative Agent shall have no duty to exercise any rights or powers granted
to it pursuant to the foregoing power-of-attorney.

                  (f) Borrowers and the other Credit Parties shall deliver to
Administrative Agent true and correct fully-executed copies of any servicing
agreement or agreements by or between any Credit Party and any Servicing Agent,
pursuant to which such Servicing Agent is responsible for or involved in the
collections of Accounts and other Collateral and/or the receipt of any Payments
or Collections (net of any collection costs and other fees permitted to be
deducted from Collections by the express terms of the corresponding servicing
agreement) in the aggregate for all Credit Parties during any Fiscal Quarter
that meet or exceed the Servicing Threshold. At Administrative Agent's request,
upon the occurrence of a Default, which is not reasonably capable of being
cured, or an Event of Default, the applicable Credit Party shall give
irrevocable written instructions to such Servicing Agent to make all payments
owing to the Credit Party under the servicing agreement directly to
Administrative Agent upon receipt of written demand to do so, and shall assign
to Administrative Agent, as collateral, all of such Credit Party's right, title
and interest in and to such servicing agreements.

                  (g) Within 30 days of any acquisition of any Portfolio having
a purchase price greater than $5,000,000 by any Credit Party, such acquiring
Credit Party shall provide Administrative Agent with evidence (including a bill
of sale or assignment, if any) of such Credit Party's acquisition and ownership
of such Portfolio, free and clear of all Liens, except Permitted Encumbrances.
At any time (and from time to time) from and after the Closing Date, any Credit
Party owning any Portfolio having a purchase price greater than $5,000,000
shall, upon request of Administrative Agent, provide Administrative Agent with
evidence of such Credit Party's acquisition and ownership of such Portfolio,
free and clear of all Liens, except Permitted Encumbrances.

                  (h) Borrowers shall notify Administrative Agent in writing
promptly after any Servicing Agent or other Person (including any collection
agent, agency or attorney) under any servicing agreement with any Credit Party,
including, without limitation, the Servicing Agent under the Unifund Master
Servicing Agreement, is entitled (or claims to be entitled) to receive payment,
fees, premiums or other compensation (however characterized) in excess of 51% of
the Collections obtained by such Servicing Agent or other Person relating to any
Portfolio under any servicing agreement.

                                       35
<PAGE>

                  (i) In the event a deposit account control agreement or other
similar document is entered into by a Servicing Agent for the benefit of any
Credit Party with respect to any deposit account into which any Payments,
Collections or other Collateral will be deposited, the applicable Credit Party
shall cause Collateral Agent to be added (as co-beneficiary with such Credit
Party) to such deposit account control agreement or other similar document in a
manner reasonably acceptable to Administrative Agent. In the event the
applicable Credit Party is unable to add Collateral Agent as a co-beneficiary,
after using such Credit Party's best efforts to do so, the applicable Credit
Party shall make arrangements to protect and preserve Collateral Agent's Liens
and security interests in the Collateral, including, without limitation, such
Credit Party's right, title and interest under such deposit account control
agreement in a manner reasonably acceptable to Collateral Agent.

                  (j) With respect to each set of Written Instructions given to
a Servicing Agent whose Collections (net of any collection costs and other fees
permitted to be deducted from Collections by the express terms of the servicing
agreement that corresponds to such Servicing Agent) in the aggregate for all
Credit Parties during any Fiscal Quarter meet or exceed the Servicing Threshold,
the Credit Parties shall use best efforts (including, without limitation,
commencement of appropriate legal action) to enforce the terms of such Written
Instructions, including, without limitation, such Servicing Agent's duties to
make all payments owing to Credit Parties by wire transfer of cash credit
directly into a Blocked Account established and maintained by a Credit Party
with Administrative Agent and to deposit, transfer, and disburse all Payments,
Collections (net of any collection costs and other fees permitted to be deducted
from Collections by the express terms of the corresponding servicing agreement)
and other sums and amounts directly into a Blocked Account established and
maintained by a Credit Party with Administrative Agent promptly after receipt
thereof by Servicing Agent.

                  (k) The Credit Parties shall, on a Fiscal Quarter basis,
notify Administrative Agent in writing of any changes to the information
contained on the Disclosure Document that identifies the Servicing Agents
involved in the collection of any Payments, Accounts and Portfolios.

                  5.12 Inactive Subsidiaries. None of the Inactive Subsidiaries
will perform or conduct or attempt to perform or conduct any business activities
whatsoever, other than the collection or liquidation of currently owned assets,
the proceeds of which such Inactive Subsidiary shall promptly deliver to
Administrative Agent.

                  5.13 Further Assurances. Each Credit Party executing this
Agreement agrees that it shall and shall cause each other Credit Party to, at
such Credit Party's expense and upon request of Administrative Agent, duly
execute and deliver, or cause to be duly executed and delivered, to
Administrative Agent such further instruments and do and cause to be done such
further acts as may be necessary or proper in the reasonable opinion of
Administrative Agent to carry out more effectively the provisions and purposes
of this Agreement or any other Loan Document.

                                       36
<PAGE>

6. NEGATIVE COVENANTS

         Each Credit Party executing this Agreement jointly and severally agrees
as to all Credit Parties that from and after the date hereof until the
Termination Date:

                  6.1 Mergers, Subsidiaries, Etc. No Credit Party shall directly
or indirectly, by operation of law or otherwise, (a) form or acquire any
Subsidiary, except that the Borrowers may form Non-Credit Party Affiliates, and
Palisades and Asta Funding may form Subsidiaries that will become Credit
Parties, and Palisades and Asta Funding may form Subsidiaries for acquisitions
or investments made to the extent permitted by this Section 6, or (b) merge
with, consolidate with, acquire all or substantially all of the assets or Stock
of, or otherwise combine with or acquire, any Person, or all or substantially
all of the assets constituting the business of a division, branch or other unit
of operation of any Person, except that (i) any Borrower may merge with another
Borrower, provided that prior written notice of such merger shall be given to
Administrative Agent and further provided that Borrower Representative shall be
the survivor of any such merger to which it is a party, (ii) and any Inactive
Subsidiary may merge into a Credit Party, provided that such Credit Party shall
be the survivor of any such merger, (iii) any Borrower may acquire all or
substantially all of the assets of another Credit Party, and (iv) any Borrower
may form a wholly-owned Subsidiary to effectuate a change in its capital
structure as permitted under and in accordance with Section 6.5.

                  6.2 Investments; Revolving Loan and Advances. Except as
otherwise expressly permitted by this Section 6, no Credit Party shall make or
permit to exist any investment in, or make, accrue or permit to exist loans or
advances of money to, any Person, through the direct or indirect lending of
money, holding of securities or otherwise, except that: (a) Borrowers may hold
investments comprised of notes payable or other evidences of indebtedness, (b)
in addition to intercompany loans and advances permitted under Section 6.3,
Borrowers may make investments in Non-Credit Party Affiliates that are otherwise
permitted hereunder, (c) sales of Accounts on deferred payment terms in the
ordinary course of business that could not reasonably be expected to have a
Material Adverse Effect and, to the extent applicable, in compliance with
Section 6.8 hereof, (d) investments in consumer financial services companies of
up to $2,000,000 each (but in no event more than $10,000,000 in the aggregate
for all Credit Parties during the term of the Revolving Loan), (e) $2,000,000 in
the aggregate at any time outstanding for all Credit Parties during the term of
the Revolving Loan of other loans or credits, (f) investments in, or
acquisitions of, consumer financial services companies funded by stock of ASTA
Funding in accordance with the terms and provisions of Section 6.5 hereof, (g)
investments of proceeds from the issuance or sale of stock, warrants or other
securities pursuant to Section 6.5 in Cash Equivalent Investments and pledged to
Administrative Agent as additional Collateral until used in accordance with
Section 6.5, which pledge shall be perfected in a manner reasonably acceptable
to Administrative Agent.

                                       37
<PAGE>

                  6.3 Indebtedness.

                  (a) No Credit Party shall create, incur, assume or permit to
exist any Indebtedness (including Subordinated Debt), except (without
duplication) (i) Indebtedness secured by purchase money security interests and
Capital Leases permitted in Section 6.7(c), (ii) the Revolving Loan and the
other Obligations, (iii) unfunded pension fund and other employee benefit plan
obligations and liabilities to the extent they are permitted to remain unfunded
under applicable law, (iv) existing Indebtedness described in the Disclosure
Document and refinancings thereof or amendments or modifications thereto that do
not have the effect of increasing the principal amount thereof or changing the
amortization thereof (other than to extend the same) and that are otherwise on
terms and conditions no less favorable to any Credit Party, Administrative Agent
or any Lender, as determined by Administrative Agent, than the terms of the
Indebtedness being refinanced, amended or modified, (v) Indebtedness
specifically permitted under Sections 6.6 and, 6.17; (vi) Indebtedness
consisting of intercompany loans and advances made by any Credit Party to any
other Credit Party; provided, that: (A) each Credit Party shall have executed
and delivered to each other Credit Party, on the Closing Date, a demand note
(collectively, the "Intercompany Notes") to evidence any such intercompany
Indebtedness owing at any time by such Credit Party to such other Credit Party,
which Intercompany Notes shall be in form and substance reasonably satisfactory
to Administrative Agent and shall be pledged to Administrative Agent and the
originals of which shall be delivered to Administrative Agent pursuant to the
applicable Pledge Agreement or Security Agreement as additional collateral
security for the Obligations; (B) each Credit Party shall record all
intercompany transactions on its books and records in accordance with past
practice; (C) the obligations of each Credit Party under any such Intercompany
Notes shall be subordinated to the Obligations of such Credit Party hereunder as
set forth in Section 12.9 of this Agreement; and (D) at the time any such
intercompany loan or advance is made by any Credit Party to any other Credit
Party and after giving effect thereto, each such Credit Party shall be Solvent;
and (E) no Default, which is not reasonably capable of being cured, or Event of
Default would occur and be continuing after giving effect to any such proposed
intercompany loan; (vii) interest rate cap, swap or collar agreements, or
similar agreements or arrangements to provide protection against fluctuations in
interest rates or foreign currencies, on terms and in form reasonably acceptable
to Administrative Agent; (viii) the obligations of each Credit Party for the
deferred portion of the purchase price of a Portfolio; (ix) Subordinated Debt,
provided that (A) no Default, which is not reasonably capable of being cured, or
Event of Default would occur and be continuing after giving effect to any such
proposed Subordinated Debt, and (B) the Credit Parties shall have obtained the
prior written consent of Administrative Agent and the Requisite Lenders with
respect to such Subordinated Debt, which consent shall not be unreasonably
withheld or delayed; and (x) an amount not to exceed $3,750,000 in the aggregate
at any time outstanding for all Credit Parties during the term of the Revolving
Loan in unsecured Indebtedness owing to non-Affiliates.

                  (b) No Credit Party shall, directly or indirectly, voluntarily
purchase, redeem, defease or prepay any principal of, premium, if any, interest
or other amount payable in respect of any material Indebtedness or in respect of
any Indebtedness, the result of which could reasonably be expected to have a
Material Adverse Effect, other than (i) the Obligations; (ii) Indebtedness
secured by a Permitted Encumbrance if the asset securing such Indebtedness has
been sold or otherwise disposed of in accordance with Sections 6.8(b) or (c);
(iii) Indebtedness permitted by Section 6.3(a)(iv) upon any refinancing thereof
in accordance with Section 6.3(a)(iv); and (iv) as otherwise permitted in
Section 6.14.

                                       38
<PAGE>

                  6.4 Employee Loans and Affiliate Transactions.

                  (a) Except as otherwise expressly permitted in this Section 6
with respect to Affiliates, no Credit Party shall enter into or be a party to
any transaction with any other Credit Party or any Affiliate thereof except in
the ordinary course of and pursuant to the reasonable requirements of such
Credit Party's business and upon fair and reasonable terms that are no less
favorable to such Credit Party than would be obtained in a comparable arm's
length transaction with a Person not an Affiliate of such Credit Party. In
addition, if any such transaction or series of related transactions (other than
the transactions permitted under Section 6.4(b) below) involves payments in
excess of $750,000 in the aggregate, the terms of these transactions must be
disclosed in advance to Administrative Agent and Lenders. All such transactions
existing as of the date hereof are described in the Disclosure Document.

                  (b) In the event any Advance relates to a Portfolio to be
acquired by an Affiliate, irrespective of the Portfolio Acquisition Cost of such
Portfolio, prior to Lenders making such Advance, such Affiliate shall execute
and deliver Administrative Agent's form of joinder agreement relative to this
Agreement and the Collateral Documents, Affiliate Guaranty, Affiliate Security
Agreement, Affiliate Confirmation, UCC-1 Financing Statements and all such other
documents as Administrative Agent shall reasonably request, pursuant to which
such Affiliate shall become a Credit Party hereunder, including, evidence of the
good standing of such Affiliate and UCC Searches, all in form acceptable to
Lender.

                  (c) No Credit Party shall enter into any lending or borrowing
transaction with any employees or consultants of any Credit Party, except loans
to its respective employees and consultants in the ordinary course of business
up to a maximum, in the aggregate for all employees and consultants, at any one
time of $750,000.

                  6.5 Capital Structure and Business. No Credit Party shall (a)
make any changes in any of its business objectives, purposes or operations that
could reasonably be expected to materially adversely affect the repayment of the
Revolving Loan or any of the other Obligations or could reasonably be expected
to have or result in a Material Adverse Effect, (b) make any change in its
capital structure as described in the Disclosure Document, including the
issuance or sale of any shares of Stock, warrants or other securities
convertible into Stock or any revision of the terms of its outstanding Stock.

                                       39
<PAGE>

                  Notwithstanding the foregoing, and provided that no Default,
which is not reasonably capable of being cured, or Event of Default has occurred
and is continuing, a Credit Party may, upon prior written notice thereof to
Administrative Agent, issue or sell shares of Stock of such Credit Party,
warrants or other securities convertible into Stock of such Credit Party,
provided that the proceeds from the issuance or sale of such Stock, warrants or
other securities shall be applied to reduce the Revolving Loan or used by such
Credit Party only for the following additional purposes and subject to the
following additional requirements and conditions: (x) the proceeds from the
issuance or sale of such Stock, warrants or other securities may be used by such
Credit Party to acquire Eligible New Portfolios or Rejected Portfolios as to
which the Administrative Agent, on behalf of the Lenders has a first priority,
perfected Lien on the Accounts comprising such acquired Eligible New Portfolio
or Rejected Portfolio, as the case may be, subject only to Permitted
Encumbrances; or (y) the proceeds from the issuance or sale of such Stock,
warrants or other securities may be used by such Credit Party (subject to the
further limitations and prohibitions set forth in Section 6.1 hereof) to acquire
the assets of one or more existing consumer financial services businesses so
long as: (i) no more than Twenty Million Dollars ($20,000,000), taken as a
whole, in the aggregate for all Credit Parties for all issuances or sales of
Stock, warrants or other securities during the term of the Revolving Loan is
used to acquire the assets of existing consumer financial services businesses,
and (ii) no more than forty percent (40%) of the proceeds from all issuances or
sales of Stock, warrants or other securities, taken as a whole, in the aggregate
for all Credit Parties during the term of the Revolving Loan is used to acquire
the assets of existing consumer financial services businesses, and (iii) such
acquisitions are limited solely to the assets of one or more existing consumer
financial services businesses and no Credit Party acquires any Stock of any
Person, and (iv) Borrowers shall have notified Administrative Agent in writing
in each instance of any such acquisition on the earlier of: (aa) three (3) days
of the date on which any Credit Party executes any agreement, pursuant to which
such Credit Party agrees to such acquisition, and (bb) fifteen (15) calendar
days prior to such acquisition, and (v) prior to such Credit Party's acquisition
of the assets of any such business, Borrowers shall have provided Administrative
Agent with a written statement to Administrative Agent and Lenders (certified to
be true, correct and complete in all respects by Borrower Representative's Chief
Financial Officer or President) that no Default or Event of Default has occurred
under the Revolving Loan or any of the Loan Documents and that no Default or
Event of Default is anticipated, projected or contemplated to occur as a result
of such Credit Party's acquisition of the assets of any such business. Until the
proceeds from the issuance or sale of stock, warrants or other securities
pursuant to this Section 6.5 are used in accordance with this Section 6.5, the
applicable Credit Party may invest such proceeds in Cash Equivalent Investments
which are pledged to Administrative Agent as additional Collateral and perfected
in a manner reasonably acceptable to Administrative Agent.

                  Notwithstanding anything set forth herein to the contrary, a
Credit Party may change its capital structure from a corporation to a limited
liability company or from a limited liability company to a corporation provided
that (i) Administrative Agent shall have consented to such transaction, (ii) the
Credit Parties have executed any documentation and taken any steps reasonably
requested by Administrative Agent, including, any documentation required by
Administrative Agent to ensure Collateral Agent, for the benefit of the Agents
and Lenders, has a first priority lien on the Stock and assets of such Credit
Party after giving effect to any such change and (iii) Administrative Agent
shall have on or prior to such change received consolidated and consolidating
income statements, statements of cash flows and balance sheets of the Borrowers
which shall provide all required information both before and after giving effect
to such change and otherwise in form and substance satisfactory to
Administrative Agent to ensure that such change does not affect any of the
obligations of the Credit Parties under any Loan Document or any rights of
Agents or Lenders with respect to the Credit Parties. No Credit Party shall
engage in any business other than the businesses currently engaged in by it or
businesses reasonably related thereto.

                  6.6 Guaranteed Indebtedness. No Credit Party shall create,
incur, assume or permit to exist any Guaranteed Indebtedness except (a) by
endorsement of instruments or items of payment for deposit to the general
account of any Credit Party, and (b) for Guaranteed Indebtedness incurred for
the benefit of any other Credit Party if the primary obligation is expressly
permitted by this Agreement.

                                       40
<PAGE>

                  6.7 Liens; Lien Release. No Credit Party shall create, incur,
assume or permit to exist any Lien on or with respect to its Portfolios,
Accounts or any of its other properties or assets (whether now owned or
hereafter acquired) except for (a) Permitted Encumbrances; (b) Liens in
existence on the date hereof and summarized on the Disclosure Document securing
the Indebtedness described on the Disclosure Document and permitted
refinancings, extensions and renewals thereof, including extensions or renewals
of any such Liens; provided that the principal amount of the Indebtedness so
secured is not increased and the Lien does not attach to any other property; (c)
Liens created after the date hereof by conditional sale or other title retention
agreements (including Capital Leases) or in connection with purchase money
Indebtedness with respect to Equipment and Fixtures and other capital assets
acquired by any Credit Party in the ordinary course of business, involving the
incurrence of an aggregate amount of purchase money Indebtedness and Capital
Lease Obligations of not more than $2,000,000 outstanding at any one time for
all such Liens (provided that such Liens attach only to the assets subject to
such purchase money debt and such Indebtedness is incurred within 20 days
following such purchase and does not exceed 100% of the purchase price of the
subject assets), (d) Liens securing Indebtedness permitted under Section
6.3(a)(i) as provided for therein, (e) Liens arising from precautionary UCC-1
financing statements with respect to Equipment or Real Estate which is the
subject of an operating lease, (f) Liens against the assets of Non-Credit Party
Affiliates to secure loans in connection with the acquisition of Portfolios by
Non-Credit Party Affiliates which have been declined by the Lenders. In
addition, no Credit Party shall become a party to any agreement, note, indenture
or instrument, or take any other action, that would prohibit the creation of a
Lien on any of its properties or other assets in favor of Collateral Agent, on
behalf of itself and Lenders, as additional collateral for the Obligations,
except operating leases, Capital Leases or Licenses which prohibit Liens upon
the assets that are subject thereto, and (g) claims and other Liens of attorneys
and servicers in the ordinary course of business relating to Portfolios and
Accounts (and the Proceeds thereof) that they are collecting or servicing.

                  In connection with any disposition of Accounts, and subject to
the terms of this paragraph, Administrative Agent, on behalf of Collateral Agent
and the Lenders, hereby authorizes Borrower or its designees to file a partial
release of those (and only those) Liens and security interests of Collateral
Agent that are necessary to permit the applicable Credit Party to effect such
disposition in the ordinary course of business and in accordance with this
Agreement, which authorization shall become effective upon, and only upon,
satisfaction and performance of all of the following additional conditions
precedent: (i) at the time of such disposition and after giving effect thereto,
no Default, which is not reasonably capable of being cured, has occurred, and no
Event of Default shall have occurred and is continuing, (ii) the Net Sales
Proceeds generated from such disposition (whether in a single transaction or a
series of transactions that could reasonably be deemed to be part of the same
transaction) shall not exceed an amount equal to $7,500,000, (iii) the
applicable Credit Party proposing to dispose of such portion of a Portfolio
shall have notified Administrative Agent in writing of such proposed disposition
contemporaneously with such Credit Party's disposition, which notification shall
be in form and content reasonably acceptable to Administrative Agent, (iv)
Administrative Agent shall be entitled to immediately make appropriate
adjustments to the Collateral, the Borrowing Base and Borrowing Availability
based on the effect of such disposition, (v) the partial release of Collateral
Agent's Liens and security interests shall relate solely and exclusively to the
Accounts that are the subject of such disposition, and (vi) all cash proceeds
from the disposition of such portion of a Portfolio shall be deposited directly
into a Blocked Account established and maintained by Administrative Agent, net
of (A) commissions and other reasonable and customary transaction costs, fees
and expenses properly attributable to such transaction and payable by such
Credit Party in connection therewith (in each case, paid to non-Affiliates), and
(B) sales, transfer, and similar taxes payable by such Credit Party in
connection therewith.

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<PAGE>

                  In connection with any disposition of Accounts in which the
Net Sales Proceeds generated from the disposition of such Accounts, whether in a
single transaction or a series of transactions that could reasonably be deemed
to be part of the same transaction, exceeds an amount equal to $7,500,000,
Administrative Agent, on behalf of Collateral Agent and the Lenders shall (in a
separate writing made by Administrative Agent at the time of each such
disposition) either authorize Borrowers and the applicable Credit Parties (and
their designees) to file such partial releases of Collateral Agent's Liens and
security interests or confirm in writing Collateral Agent's partial release of
its Liens and security interests, as requested by the applicable Credit Party,
as are necessary to permit the applicable Credit Party to effect such
disposition, provided that: (i) at the time of such disposition and after giving
effect thereto, no Default, which is not reasonably capable of being cured, has
occurred, and no Event of Default has occurred and is continuing, (ii) the
applicable Credit Party proposing to dispose of such Portfolio shall have
notified Administrative Agent in writing of such proposed disposition at least
two (2) Business Days prior to the scheduled disposition of such Accounts and
shall have delivered to Collateral Agent the form of partial release to be filed
in connection with such disposition, (iii) Borrowers shall have provided
Administrative Agent with a proforma statement showing the effect of such
disposition on the Collateral, the Borrowing Base and Borrowing Availability,
(iv) Administrative Agent shall be entitled to immediately make appropriate
adjustments to the Collateral, the Borrowing Base and Borrowing Availability
based on the effect of such disposition, (v) the partial release of Collateral
Agent's Liens and security interests shall relate solely and exclusively to the
Accounts that are the subject of such disposition, and (vi) all cash proceeds
from the disposition of such Portfolio or portion thereof shall be deposited
directly into a Blocked Account established and maintained by Administrative
Agent, net of (A) commissions and other reasonable and customary transaction
costs, fees and expenses properly attributable to such transaction and payable
by such Credit Party in connection therewith (in each case, paid to non
Affiliates), and (B) sales, transfer, and similar taxes payable by such Credit
Party in connection therewith.

                  The Credit Parties shall have the right to transfer or dispose
of Accounts in which one or more Credit Parties agree to extend credit to such
Credit Party's purchaser or transferee for the acquisition of such Accounts,
provided such credit is secured by such Accounts and such Credit Party is given
a promissory note or Chattel Paper to evidence all or a portion of the sales
proceeds (hereinafter individually called a "Disposition on Credit" or
collectively, "Dispositions on Credit"), provided that the following conditions
precedent are satisfied and performed: (a) the outstanding obligations owed to
one or more Credit Parties under all Dispositions on Credit (whether or not
evidenced by such promissory notes, Chattel Paper or other similar instruments),
in the aggregate for all Credit Parties at any given time, shall not exceed an
amount equal to $20,000,000 and (b) no Default, which is not reasonably capable
of being cured, or Event of Default has occurred and is continuing.

                                       42
<PAGE>

                  In the event of any disposition of any Accounts, pursuant to
which the applicable Credit Party proposing to dispose of such Accounts is given
a promissory note, Chattel Paper or similar instrument to evidence all or a
portion of the sales proceeds, the applicable Credit Party disposing of such
Accounts shall perform the following: (A) in the case of a promissory note, (i)
the original promissory note or similar instrument delivered in connection with
such disposition shall be assigned and endorsed (on the face of such promissory
note in a conspicuous manner) to the order of Administrative Agent, as agent for
the Lenders, together with the following written indication: "This promissory
note has been assigned as collateral to ISRAEL DISCOUNT BANK OF NEW YORK, a New
York banking corporation, as Collateral Agent," (ii) at the reasonable request
of Collateral Agent, the original promissory note shall be delivered to
Collateral Agent, (iii) the applicable Credit Party shall be granted a
first-priority Lien and security interest in the Accounts which is the subject
of such disposition (and such security interest shall be perfected by filing a
UCC-1 Financing Statement in the appropriate office), (iv) the Lien and security
interest granted in favor of such applicable Credit Party in connection with the
disposition of such Accounts (together with the UCC-1 Financing Statement)
shall, if requested by Collateral Agent, be assigned to Collateral Agent for the
benefit of the Agents and Lenders in a manner reasonably acceptable to
Collateral Agent, and (v) the applicable Credit Party shall give written
instructions to the maker of such promissory note (with a copy thereof to
Collateral Agent) to make all payments under such promissory note to the Blocked
Account established and maintained by such Credit Party with Administrative
Agent; and (B) in the case of any tangible Chattel Paper, (i) such Credit Party
shall place or cause to be placed on the face of each individual item of
tangible Chattel Paper, in a conspicuous manner, the following written
indication or legend: "This document has been assigned as collateral to ISRAEL
DISCOUNT BANK OF NEW YORK, a New York banking corporation, as Collateral Agent,
and is subject to a lien and security interest granted in favor of Collateral
Agent," (ii) the applicable Credit Party shall be granted a first-priority Lien
and security interest in the Accounts which is the subject of such disposition
(and such security interest shall be perfected by filing a UCC-1 Financing
Statement in the appropriate office) and the Lien and security interest granted
in favor of such applicable Credit Party in connection with such Chattel Paper
(along with the UCC-1 Financing Statement) shall, if requested by Collateral
Agent, be assigned to Collateral Agent for the benefit of the Agents and Lenders
in a manner reasonably acceptable to Collateral Agent, (iii) the applicable
Credit Party shall give written instructions to the obligor under such item of
Chattel Paper (with a copy thereof to Collateral Agent) to make all payments
under such Chattel Paper to the Blocked Account established and maintained by
such Credit Party with Administrative Agent, and (iv) if reasonably requested by
Administrative Agent, such tangible Chattel Paper shall be delivered to
Administrative Agent; and (C) in the case of electronic Chattel Paper, (i) such
Credit Party shall indicate or cause to be indicated on each individual
electronic or intangible item constituting Chattel Paper, in a conspicuous
manner, the following electronic indication or legend: "This entry, information
and material and the rights arising thereunder have been assigned as collateral
to ISRAEL DISCOUNT BANK OF NEW YORK, a New York banking corporation, as
Collateral Agent, and is subject to a lien and security interest granted in
favor of Collateral Agent" (ii) the applicable Credit Party shall be granted a
first-priority Lien and security interest in the Accounts which is the subject
of such disposition (and such security interest shall be perfected by filing a
UCC-1 Financing Statement in the appropriate office) and the Lien and security
interest granted in favor of such applicable Credit Party in connection with
such Chattel Paper (along with the UCC-1 Financing Statement) shall, if
requested by Collateral Agent, be assigned to Collateral Agent for the benefit
of the Agents and Lenders in a manner reasonably acceptable to Collateral Agent,
(iii) the applicable Credit Party shall give written instructions to the obligor
under such item of Chattel Paper (with a copy thereof to Collateral Agent) to
make all payments under such Chattel Paper to the Blocked Account established
and maintained by such Credit Party with Administrative Agent, and (iv) if
reasonably requested by Collateral Agent, the applicable Credit Parties shall
enter into such agreements (in form reasonably acceptable to Collateral Agent),
such that Collateral Agent shall have control of the electronic Chattel Paper.
The applicable Credit Party agrees not to change any payment instructions given
to the maker of any promissory note or the obligor under any Chattel Paper,
without the prior written consent of Administrative Agent, which consent shall
not be unreasonably withheld.

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<PAGE>

                  6.8 Sale of Stock and Assets. No Credit Party shall sell,
transfer, convey, lease, assign or otherwise dispose of any of its properties or
other assets, including the Stock of any of its Subsidiaries (whether in a
public or a private offering or otherwise) or any of its Accounts, other than
(a) the sale of Portfolios and Accounts in the ordinary course of business in
accordance with the terms of this Agreement, (b) the sale, transfer, conveyance
or other disposition by a Credit Party of Equipment, Fixtures or Real Estate
that are obsolete or no longer used or useful in such Credit Party's business
and having an appraised value not exceeding $500,000 in any single transaction
or $1,000,000 in the aggregate in any Fiscal Year, (c) the sale, transfer,
conveyance or other disposition by a Credit Party of other Equipment and
Fixtures having a value not exceeding $500,000 in any single transaction or
$2,000,000 in the aggregate in any Fiscal Year, (d) the lease, sublease or
license of real property, provided that such real property is not necessary for
the operations of Borrowers' business, at the time thereof and after giving
effect thereto, no Default, which is not reasonably capable of being cured, or
Event of Default has occurred and is continuing, and (e) the transfer of assets
permitted under subsection (iii) of Section 6.1. With respect to any disposition
of assets or other properties permitted pursuant to Sections 6.8(b), (c) and (e)
above, subject to Section 1.2(b), Administrative Agent agrees on reasonable
prior written notice to release its Lien on such assets or other properties in
order to permit the applicable Credit Party to effect such disposition and shall
execute and deliver to Borrowers, at Borrowers' expense, appropriate UCC-3
termination statements or authorizations to file appropriate UCC-3 termination
statements and other releases as reasonably requested by Borrowers.

                  6.9 ERISA. No Credit Party shall, or shall cause or permit any
ERISA Affiliate to, cause or permit to occur an event that could result in the
imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of
ERISA or cause or permit to occur an ERISA Event to the extent such ERISA Event
could reasonably be expected to have a Material Adverse Effect.

                  6.10 Financial Covenants. Borrowers shall not breach or fail
to comply with any of the Financial Covenants.

                  6.11 Hazardous Materials. No Credit Party shall cause or
permit a Release of any Hazardous Material on, at, in, under, above, to, from or
about any of the Real Estate where such Release would (a) violate in any
material respect, or form the basis for any material Environmental Liabilities
under, any Environmental Laws or Environmental Permits or (b) otherwise
adversely impact the value or marketability of any of the Real Estate or any of
the Collateral, other than such violations or Environmental Liabilities that
could not reasonably be expected to have a Material Adverse Effect.

                                       44
<PAGE>

                  6.12 Sale-Leasebacks. No Credit Party shall engage in any
sale-leaseback, synthetic lease or similar transaction involving any of its
assets.

                  6.13 Cancellation of Indebtedness. No Credit Party shall
cancel any claim or debt owing to it, except (a) with respect to Accounts in the
ordinary course of the Credit Party's business, (b) for debt owing by employees
or consultants permitted under Section 6.4(b) which is cancelled and treated as
compensation expense and (c) for reasonable consideration negotiated on an arm's
length basis and in the ordinary course of its business consistent with past
practices.

                  6.14 Restricted Payments. No Credit Party shall make any
Restricted Payment, except (a) payments of principal and interest on
intercompany loans and advances between Borrowers to the extent permitted by
Sections 6.2 and 6.3, (b) so long as there is no unwaived or uncured Default,
which is not reasonably capable of being cured, or Event of Default, the Credit
Parties shall be permitted to pay dividends, and upon the occurrence of a
Default, which is not reasonably capable of being cured, or an Event of Default,
only dividends and distributions by Subsidiaries of any Borrower paid to such
Borrower, and (c) employee or consultant loans permitted under Section 6.4.

                  6.15 Change of Corporate Name or Location; Change of Fiscal
Year. Except as expressly permitted under Section 6.5, no Credit Party shall (a)
change its name as it appears in official filings in the state of its
incorporation or other organization (b) change its chief executive office,
principal place of business, corporate offices or warehouses or locations at
which Collateral is held or stored, or the location of its records concerning
the Collateral, (c) change the type of entity that it is, (d) change its
organization identification number, if any, issued by its state of incorporation
or other organization, or (e) change its state of incorporation or organization,
in each case without at least 14 days prior written notice to Administrative
Agent and after Administrative Agent's written acknowledgment that any
reasonable action requested by Administrative Agent in connection therewith,
including to continue the perfection of any Liens in favor of Administrative
Agent, on behalf of Lenders, in any Collateral, has been completed or taken, and
provided that any such new location shall be in the continental United States.
No Credit Party shall change its Fiscal Year without Administrative Agent's
prior written consent, which consent will not be unreasonably withheld.

                  6.16 No Impairment of Intercompany Transfers. No Credit Party
shall directly or indirectly enter into or become bound by any agreement,
instrument, indenture or other obligation (other than this Agreement and the
other Loan Documents) that directly or indirectly restricts, prohibits or
requires the consent of any Person with respect to the payment of dividends or
distributions or the making or repayment of intercompany loans by a Subsidiary
of any Borrower to any Borrower or between Borrowers.

                  6.17 No Speculative Transactions. No Credit Party may engage
in any material transaction involving interest swaps, caps or collars, subject
to the Administrative Agent's prior written consent.

                                       45
<PAGE>

                  6.18 Leases; Real Estate Purchases. No Credit Party shall
enter into or be a party to any operating lease for Equipment or Real Estate, if
the aggregate of all such operating lease payments payable in any year for all
Credit Parties on a consolidated basis would exceed $3,000,000. No Credit Party
shall purchase a fee simple ownership interest in Real Estate unless (i)
Administrative Agent receives 10 days prior written notice of such purchase,
(ii) at its request, Administrative Agent shall have received a mortgage or
other similar instrument on such Real Estate, in form and substance satisfactory
to Administrative Agent, and (iii) the purchase of any Real Estate shall be on
terms reasonably satisfactory to Administrative Agent.

                  6.19 Changes Relating to Subordinated Debt; Material
Contracts. No Credit Party shall change or amend the terms of any Subordinated
Debt (or any indenture or agreement in connection therewith) if the effect of
such amendment is to: (i) increase the interest rate on, or fees in respect of,
such Subordinated Debt; (ii) change the dates upon which payments of principal
or interest are due on such Subordinated Debt other than to extend such dates;
(iii) change any covenant, default or event of default other than to delete or
make less restrictive any covenant, default or event of default provision
therein, or add any covenant, default or event of default with respect to such
Subordinated Debt; (iv) change the redemption or prepayment provisions of such
Subordinated Debt other than to extend the dates therefor or to reduce the
premiums payable in connection therewith; (v) grant any security or collateral
to secure payment of such Subordinated Debt; (vi) change any subordination or
intercreditor provisions of such Subordinated Debt; (vii) change any provisions
providing that payments of interest, principal or other obligations in respect
of such Subordinated Debt may not be made in cash or must be paid in a form
other than cash; or (viii) change or amend any other term if such change or
amendment would materially increase the obligations of the Credit Party
thereunder or confer additional material rights on the holder of such
Subordinated Debt in a manner adverse to any Credit Party, Administrative Agent
or any Lender.

                  6.20 Credit Parties Other than Borrowers. From and after the
Closing Date, none of the Credit Parties other than Borrowers shall engage in
any trade or business, or own any assets (other than Stock of their
Subsidiaries) or incur any Indebtedness or Guaranteed Indebtedness (other than
the Obligations), except that Asta Funding may acquire tangible assets in its
own name for use and operation by its Subsidiaries, and may acquire Portfolios
in its own name for purposes of promptly transferring and assigning such
Portfolios to a Borrower or other Credit Party. Notwithstanding the foregoing,
nothing herein shall limit any Credit Party from engaging in activities
incidental to (a) the maintenance of its corporate existence in compliance with
applicable law, and (b) legal, tax and accounting matters in connection with any
of the foregoing activities.

                  6.21 Adverse Transactions. No Credit Party shall enter into or
be a party to, or permit any of its Subsidiaries to enter into or be a party to,
any transaction the performance of which in the future does or could reasonably
be expected to result in a breach of any covenant contained herein or giving
rise to a Default, which is not reasonably capable of being cured, or Event of
Default.

                  6.22 Disaster Recovery Plan. The Borrowers agree that they
will not make any amendments, modifications or other changes to the Disaster
Recovery Plan or any agreements related thereto without the prior written
consent of the Administrative Agent, which consent will not be unreasonably
withheld or delayed.

                                       46
<PAGE>

                  6.23 Limitation on Collection Fees. No Credit Party shall
enter into any agreement to pay (and no Credit Party shall pay or permit to be
paid) any sums or amounts to any Servicing Agent or other Person (including any
collection agent, agency or attorney) as collection fees, collection charges,
contingent fees, premiums, compensation for services rendered or excess fees
(however characterized) in excess of an amount equal to fifty-one percent (51%)
of the Collections obtained by such Servicing Agent or other Person relating to
Portfolios, except after prior written notice to Administrative Agent.

                  6.24 No Amendment to Servicing Agreements. No Credit Party
shall amend, change, modify or alter (or permit to be amended, changed, modified
or altered) any agreement, including any servicing agreement, relating to the
collection or receipt of Payments, Collections or Proceeds of any Accounts of
any of the Credit Parties in any material respect in which the Collections (net
of any collection costs and other fees permitted to be deducted from Collections
by the express terms of the corresponding servicing agreement) in the aggregate
for all Credit Parties during any Fiscal Quarter meet or exceed the Servicing
Threshold, except if that Credit Party promptly provides a copy thereof to
Administrative Agent and the Lenders.

7. TERM

                  7.1 Termination. The financing arrangements contemplated
hereby shall be in effect until the Commitment Termination Date, and the
Revolving Loan and all other Obligations shall be automatically due and payable
in full on such date.

                  7.2 Survival of Obligations Upon Termination of Financing
Arrangements. Except as otherwise expressly provided for in the Loan Documents,
no termination or cancellation (regardless of cause or procedure) of any
financing arrangement under this Agreement shall in any way affect or impair the
obligations, duties and liabilities of the Credit Parties or the rights of
Administrative Agent and Lenders relating to any unpaid portion of the Revolving
Loan or any other Obligations, due or not due, liquidated, contingent or
unliquidated, or any transaction or event occurring prior to such termination,
or any transaction or event, the performance of which is required after the
Commitment Termination Date. Except as otherwise expressly provided herein or in
any other Loan Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon the Credit Parties, and all rights of
Administrative Agent and each Lender, all as contained in the Loan Documents,
shall not terminate or expire, but rather shall survive any such termination or
cancellation and shall continue in full force and effect until the Termination
Date; provided, that the provisions of Section 11, the payment obligations under
Sections 1.12 and 1.13, and the indemnities contained in the Loan Documents
shall survive the Termination Date.

8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES

                  8.1 Events of Default. The occurrence of any one or more of
the following events (regardless of the reason therefor) shall constitute an
"Event of Default" hereunder:

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<PAGE>

                  (a) Any Borrower (i) fails to make any payment of principal
of, or interest on, or Fees owing in respect of, the Revolving Loan or any of
the other Obligations when due and payable, or (ii) fails to pay or reimburse
Administrative Agent or Lenders for any expense reimbursable hereunder or under
any other Loan Document within 10 days following Administrative Agent's demand
for such reimbursement or payment of expenses.

                  (b) Any Credit Party fails or neglects to perform, keep or
observe any of the provisions of Sections 1.3, 1.5, 5.4(a) or 6, or any of the
provisions set forth in Annexes C or G, respectively, and the same shall remain
unremedied for 5 days or more, without any duty on the part of Administrative
Agent or Lenders to give notice to Borrowers of such failure or neglect.

                  (c) Any Borrower fails or neglects to perform, keep or observe
any of the provisions of Section 4 or any provisions set forth in Annexes E or
F, respectively, and the same shall remain unremedied for 10 days or more after
written notice of such failure or neglect.

                  (d) Any Credit Party fails or neglects to perform, keep or
observe any other provision of this Agreement or of any of the other Loan
Documents (other than any provision embodied in or covered by any other
subsection of this Section 8.1) and the same shall remain unremedied for 5 days
or more after written notice of such failure or neglect; provided, however, that
with respect to the provisions of Section 5.2(a), unless such failure or neglect
to perform could reasonably be expected to result in a Material Adverse Effect,
the Credit Parties shall in any event have 3 Business Days, commencing on the
date a Senior Executive or other Person with managerial responsibility has
knowledge of such failure or neglect, within which to cure or remedy such
failure or neglect.

                  (e) A default or breach occurs under any other agreement,
document or instrument to which any Credit Party is a party that is not cured
within any applicable grace period therefor, and such default or breach (i)
involves the failure to make any payment when due in respect of any Indebtedness
or Guaranteed Indebtedness (other than the Obligations) of any Credit Party in
excess of $2,000,000 in the aggregate (including (x) undrawn committed or
available amounts and (y) amounts owing to all creditors under any combined or
syndicated credit arrangements), or (ii) causes, or permits any holder of such
Indebtedness or Guaranteed Indebtedness or a trustee to cause, Indebtedness or
Guaranteed Indebtedness or a portion thereof in excess of $200,000 in the
aggregate to become due prior to its stated maturity or prior to its regularly
scheduled dates of payment, or cash collateral in respect thereof to be
demanded, in each case, regardless of whether such default is waived, or such
right is exercised, by such holder or trustee.

                  (f) Any information contained in any Borrowing Base
Certificate is untrue or incorrect in any respect, or any representation or
warranty herein or in any Loan Document is untrue or incorrect in any material
respect or any representation or warranty in any written statement, report,
financial statement or certificate (other than a Borrowing Base Certificate)
made or delivered to Administrative Agent or any Lender by any Credit Party is
untrue or incorrect in any material respect as of the date when made or deemed
made.

                  (g) Assets of any Credit Party, the aggregate fair market
value of which is $500,000 or more for all Credit Parties, are attached, seized,
levied upon or subjected to a writ or distress warrant, or come within the
possession of any receiver, trustee, custodian or assignee for the benefit of
creditors of any Credit Party and such condition continues for 30 days or more
(unless in the case of any attachment with respect to which the applicable
creditor does not have and no person for the benefit of such creditor has or
obtains physical possession of any assets of any Credit Party, and such claim is
being contested in good faith by such Credit Party or is fully bonded).

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                  (h) A case or proceeding is commenced against any Credit Party
seeking a decree or order in respect of such Credit Party (i) under the
Bankruptcy Code, or any other applicable federal, state or foreign bankruptcy or
other similar law, (ii) appointing a custodian, receiver, liquidator, assignee,
trustee or sequestrator (or similar official) for such Credit Party or for any
substantial part of any such Credit Party's assets, or (iii) ordering the
winding-up or liquidation of the affairs of such Credit Party, and such case or
proceeding shall remain undismissed or unstayed for 30 days or more or a decree
or order granting the relief sought in such case or proceeding shall be entered
by a court of competent jurisdiction.

                  (i) Any Credit Party (i) files a petition seeking relief under
the Bankruptcy Code, or any other applicable federal, state or foreign
bankruptcy or other similar law, (ii) consents to or fails to contest in a
timely and appropriate manner the institution of proceedings thereunder or the
filing of any such petition or the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar
official) for such Credit Party or for any substantial part of any such Credit
Party's assets, (iii) makes an assignment for the benefit of creditors, (iv)
takes any action in furtherance of any of the foregoing; or (v) admits in
writing its inability to, or is generally unable to, pay its debts as such debts
become due.

                  (j) A final judgment or judgments for the payment of an amount
in excess of $1,000,000 in the aggregate at any time is or are outstanding
against one or more of the Credit Parties and the same are not, within 30 days
after the entry thereof, discharged or execution thereof stayed or bonded
pending appeal, or such judgments are not discharged prior to the expiration of
any such stay; provided however, in the event such judgment relates to Accounts
for which such Credit Party has a right of indemnification from the originator
or seller of that Account, then a final judgment or judgments for the payment of
an amount in excess of $2,000,000 in the aggregate at any time is or are
outstanding against one or more of the Credit Parties and the same are not,
within 30 days after the entry thereof, discharged or execution thereof stayed
or bonded pending appeal, or such judgments are not discharged prior to the
expiration of any such stay, provided such judgment relates to Accounts for
which such Credit Party is fully indemnified by the originator or seller of that
Account.

                  (k) Any material provision of any Loan Document for any reason
ceases to be valid, binding and enforceable in accordance with its terms (or any
Credit Party shall challenge the enforceability of any Loan Document or shall
assert in writing, or engage in any action or inaction based on any such
assertion, that any provision of any of the Loan Documents has ceased to be or
otherwise is not valid, binding and enforceable in accordance with its terms),
or any Lien on any material assets created under any Loan Document ceases to be
a valid and perfected first priority Lien (except as otherwise permitted herein
or therein) in any of the Collateral purported to be covered thereby.

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                  (l) Any Change of Control occurs.

                  (m) Any default or breach by any Credit Party or any other
guarantor, grantor or pledgor in the observance or performance of any covenant
or agreement contained or incorporated by reference in any Collateral Document
and such default shall continue beyond the grace period, if any, provided in
such Collateral Document.

                  8.2 Remedies.

                  (a) If any Default, which is not reasonably capable of being
cured, or Event of Default has occurred and is continuing, Administrative Agent
may (and at the written request of the Requisite Lenders shall), without notice,
suspend the Revolving Loan facility with respect to additional Advances,
whereupon any additional Advances shall be made or incurred in the sole
discretion of the Requisite Lenders so long as such Default, which is not
reasonably capable of being cured, or Event of Default is continuing. If any
Default, which is not reasonably capable of being cured, or Event of Default has
occurred and is continuing, Administrative Agent may (and at the written request
of Requisite Lenders shall), without notice except as otherwise expressly
provided herein, increase the rate of interest applicable to the Revolving Loan
to the Default Rate.

                  (b) If any Event of Default has occurred and is continuing,
Administrative Agent and Collateral Agent (as applicable) may, and at the
written request of the Requisite Lenders, shall, without notice: (i) terminate
the Revolving Loan facility with respect to further Advances; (ii) declare all
or any portion of the Obligations, including all or any portion of any Revolving
Loan to be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are expressly waived by Borrowers and
each other Credit Party; or (iii) exercise any rights and remedies provided to
Administrative Agent or Collateral Agent (as applicable) under the Loan
Documents or at law or equity, including all remedies provided under the Code;
provided, that upon the occurrence of an Event of Default specified in Sections
8.1(h) or (i), the Revolving Loan facility shall be immediately terminated and
all of the Obligations, including the aggregate Revolving Loan, shall become
immediately due and payable without declaration, notice or demand by any Person.

                  8.3 Waivers by Credit Parties. Except as otherwise provided
for in this Agreement or by applicable law, each Credit Party waives (including
for purposes of Section 12), to the extent permitted by law: (a) presentment,
demand and protest and notice of presentment, dishonor, notice of intent to
accelerate, notice of acceleration, protest, default, nonpayment, maturity,
release, compromise, settlement, extension or renewal of any or all commercial
paper, accounts, contract rights, documents, instruments, chattel paper and
guaranties at any time held by Agents on which any Credit Party may in any way
be liable, and hereby ratifies and confirms whatever Agents may do in this
regard, (b) all rights to notice and a hearing prior to Agents' taking
possession or control of, or to Agents' replevin, attachment or levy upon, the
Collateral or any bond or security that might be required by any court prior to
allowing Agents to exercise any of their remedies, and (c) the benefit of all
valuation, appraisal, marshaling and exemption laws.

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9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT

                  9.1 Assignment and Participations.

                  (a) Subject to the terms of this Section 9.1, any Lender may
make an assignment to a Qualified Assignee of, or sell participations in, at any
time or times, the Loan Documents, Revolving Loan and any Commitment or any
portion thereof or interest therein, including any Lender's rights, title,
interests, remedies, powers or duties thereunder. Any assignment by a Lender
shall: (i) require the consent of Administrative Agent (which consent shall not
be unreasonably withheld or delayed with respect to a Qualified Assignee) and
the execution of an assignment agreement (an "Assignment Agreement")
substantially in the form attached hereto as Exhibit 9.1(a) attached to the
Disclosure Document and otherwise in form and substance reasonably satisfactory
to, and acknowledged by, Administrative Agent; (ii) be conditioned on such
assignee Lender representing to the assigning Lender and Administrative Agent
that it is purchasing the applicable Revolving Loan to be assigned to it for its
own account, for investment purposes and not with a view to the distribution
thereof; (iii) after giving effect to any such partial assignment, the assignee
Lender shall have Commitments in an amount at least equal to $5,000,000 and the
assigning Lender shall have retained Commitments in an amount at least equal to
$5,000,000, except that the limitations contained in this Section 9.1(a)(iii)
shall not apply to any assigning Lender having Commitments of less than
$10,000,000, so long as such assigning Lender, in connection with such
assignment, shall have assigned all, and not less than all, of such assigning
Lender's Commitments; (iv) with respect to any assignment of the Revolving Loan
Commitment or the Revolving Loan, be for a ratable portion of the assigning
Lender's interest in the Revolving Loan Commitment and the Revolving Loan; (v)
include a payment to Administrative Agent of an assignment fee of $3,500 by
either assignee Lender or assignor Lender; (vi) so long as no Event of Default
has occurred and is continuing, require the consent of Borrower Representative,
which shall not be unreasonably withheld or delayed; provided that no such
consent shall be required for an assignment to a Qualified Assignee and (vii)
unless such an assignment is to an Affiliate of such Lender, Lender shall give
notice to the other Lenders of any intent to assign. Such Lenders shall be
permitted to purchase such assignment on terms agreed to by assignor Lender and
assignee Lender. If more than one Lender wishes to purchase the Revolving Loan
or Commitments from the assigning Lender, such assignments to Lenders will be
allocated on a pro-rata basis. In the case of an assignment by a Lender under
this Section 9.1, the assignee shall have, to the extent of such assignment, the
same rights, benefits and obligations as all other Lenders hereunder. The
assigning Lender shall be relieved of its obligations hereunder with respect to
its Commitments or assigned portion thereof from and after the date of such
assignment. Each Borrower hereby acknowledges and agrees that any assignment
shall give rise to a direct obligation of Borrowers to the assignee and that the
assignee shall be considered to be a "Lender". In all instances, each Lender's
liability to make the Revolving Loan hereunder shall be several and not joint
and shall be limited to such Lender's Pro Rata Share of the applicable
Commitment. In the event Administrative Agent or any Lender assigns or otherwise
transfers all or any part of the Obligations, Administrative Agent or any such
Lender shall so notify Borrowers and Borrowers shall, upon the request of
Administrative Agent or such Lender, execute new Notes in exchange for the
Notes, if any, being assigned. Notwithstanding the foregoing provisions of this
Section 9.1(a), any Lender may at any time pledge the Obligations held by it and
such Lender's rights under this Agreement and the other Loan Documents to a
Federal Reserve Bank, and any Lender that is an investment fund may assign the
Obligations held by it and such Lender's rights under this Agreement and the
other Loan Documents to another investment fund managed by the same investment
advisor; provided, that no such pledge to a Federal Reserve Bank shall release
such Lender from such Lender's obligations hereunder or under any other Loan
Document. The Administrative Agent shall maintain at its address referred to in
Section 11.10 a copy of each Assignment Agreement delivered to and accepted by
it and a register of the recordation of the names and addresses of the Lenders
and the Commitments, and principal amounts thereunder owing to, each Lender from
time to time (the "Register"). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the Borrowers, the
Administrative Agent and the Lenders shall treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by any Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.

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                  (b) Any participation by a Lender of all or any part of its
Commitments shall be made with the understanding that all amounts payable by
Borrowers hereunder shall be determined as if that Lender had not sold such
participation, and that the holder of any such participation shall not be
entitled to require such Lender to take or omit to take any action hereunder
except actions directly affecting (i) any reduction in the principal amount of,
or interest rate or Fees payable with respect to, any Loan in which such holder
participates, (ii) any extension of the scheduled amortization of the principal
amount of any Loan in which such holder participates or the final maturity date
thereof, and (iii) any release of all or substantially all of the Collateral
(other than in accordance with the terms of this Agreement, the Collateral
Documents or the other Loan Documents). Solely for purposes of Sections 1.10,
1.12, 1.13 and 9.8, each Borrower acknowledges and agrees that a participation
shall give rise to a direct obligation of Borrowers to the participant and the
participant shall be considered to be a "Lender". Except as set forth in the
preceding sentence no Borrower or Credit Party shall have any obligation or duty
to any participant. Neither Administrative Agent nor any Lender (other than the
Lender selling a participation) shall have any duty to any participant and may
continue to deal solely with the Lender selling a participation as if no such
sale had occurred.

                  (c) Except as expressly provided in this Section 9.1, no
Lender shall, as between Borrowers and that Lender, or Administrative Agent and
that Lender, be relieved of any of its obligations hereunder as a result of any
sale, assignment, transfer or negotiation of, or granting of participation in,
all or any part of the Revolving Loan, the Notes or other Obligations owed to
such Lender.

                  (d) Each Credit Party executing this Agreement shall assist
any Lender permitted to sell assignments or participations under this Section
9.1 as reasonably required to enable the assigning or selling Lender to effect
any such assignment or participation, including the execution and delivery of
any and all agreements, notes and other documents and instruments as shall be
requested and, if requested by Administrative Agent, the preparation of
informational materials for, and the participation of management in meetings
with, potential assignees or participants. Each Credit Party executing this
Agreement shall certify the correctness, completeness and accuracy of all
descriptions of the Credit Parties and their respective affairs contained in any
selling materials provided by them and all other information provided by them
and included in such materials.

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<PAGE>

                  (e) Any Lender may furnish any information concerning Credit
Parties in the possession of such Lender from time to time to assignees and
participants (including prospective assignees and participants); provided that
such Lender shall obtain from assignees or participants confidentiality
covenants substantially equivalent to those contained in Section 11.8.

                  (f) So long as no Event of Default has occurred and is
continuing, no Lender shall assign or sell participations in any portion of its
Revolving Loan or Commitments to a potential Lender or participant, if, as of
the date of the proposed assignment or sale, the assignee Lender or participant
would be subject to capital adequacy or similar requirements under Section
1.13(a), increased costs under Section 1.13(b), an inability to fund LIBOR Loans
under Section 1.13(c), or withholding taxes in accordance with Section 1.12(a).

                  9.2 Appointment of Agents.

                  (a) Each Lender hereby appoints IDB to act on behalf of all
Lenders as (i) Administrative Agent under this Agreement and the other Loan
Documents and (ii) as Collateral Agent under this Agreement and the other Loan
Documents. In furtherance of the foregoing, each Lender hereby appoints the
Collateral Agent to act as the agent of such Lender for purposes of acquiring,
holding and enforcing any and all Liens on Collateral granted by any of the
Credit Parties to secure any of the Obligations, together with such powers and
discretion as are reasonably incidental thereto.

                  (b) The provisions of this Section 9.2 are solely for the
benefit of the Agents, and Lenders and no Credit Party nor any other Person
shall have any rights as a third party beneficiary of any of the provisions
hereof. In performing its functions and duties under this Agreement and the
other Loan Documents, the Agents shall act solely as agents of Lenders and do
not assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for any Credit Party or any other
Person. The Agents shall have no duties or responsibilities except for those
expressly set forth in this Agreement and the other Loan Documents. The duties
of the Agents shall be mechanical and administrative in nature and the Agents
shall not have, or be deemed to have, by reason of this Agreement, any other
Loan Document or otherwise a fiduciary relationship in respect of any Lender.
Except as expressly set forth in this Agreement and the other Loan Documents,
the Agents shall not have any duty to disclose, and shall not be liable for
failure to disclose, any information relating to any Credit Party or any of
their respective Subsidiaries or any Account Debtor that is communicated to or
obtained by IDB or any of its Affiliates in any capacity. Neither of the Agents
nor any of their Affiliates nor any of their respective officers, directors,
employees, agents or representatives shall be liable to any Lender for any
action taken or omitted to be taken by it hereunder or under any other Loan
Document, or in connection herewith or therewith, except for damages caused by
its or their own gross negligence or willful misconduct.

                  (c) If an Agent shall request instructions from Requisite
Lenders or all affected Lenders with respect to any act or action (including
failure to act) in connection with this Agreement or any other Loan Document,
then such Agent shall be entitled to refrain from such act or taking such action
unless and until it shall have received instructions from Requisite Lenders or
all affected Lenders, as the case may be, and such Agent shall not incur
liability to any Person by reason of so refraining. The Agents shall be fully
justified in failing or refusing to take any action hereunder or under any other
Loan Document (i) if such action would, in the opinion of the Agents, be
contrary to law or the terms of this Agreement or any other Loan Document, (ii)
if such action would, in the opinion of the Agents, expose them to Environmental
Liabilities or (iii) if the Agents shall not first be indemnified to its
satisfaction against any and all liability and expense which may be incurred by
it by reason of taking or continuing to take any such action. Without limiting
the foregoing, no Lender shall have any right of action whatsoever against an
Agent as a result of such Agent acting or refraining from acting hereunder or
under any other Loan Document in accordance with the instructions of Requisite
Lenders or all affected Lenders, as applicable.

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<PAGE>

                  9.3 Agent's Reliance, Etc. Neither of the Agents nor any of
their Affiliates nor any of their respective directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken by it or
them under or in connection with this Agreement or the other Loan Documents,
except for damages caused by its or their own gross negligence or willful
misconduct. Without limiting the generality of the foregoing, the Agents: (a)
may treat the payee of any Note as the holder thereof until Administrative Agent
receives written notice of the assignment or transfer thereof signed by such
payee and in form reasonably satisfactory to Administrative Agent; (b) may
consult with legal counsel, independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken by it in good faith in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations made in or in connection with this Agreement or the other Loan
Documents; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or the other Loan Documents on the part of any Credit Party or to
inspect the Collateral (including the books and records) of any Credit Party;
(e) shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
the other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto; and (f) shall incur no liability under or in respect of this
Agreement or the other Loan Documents by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telecopy, telegram,
cable or telex) believed by it to be genuine and signed or sent by the proper
party or parties.

                  9.4 Agents and Affiliates. With respect to its Commitments
hereunder, the Agents shall have the same rights and powers under this Agreement
and the other Loan Documents as any other Lender and may exercise the same as
though it were not an Agent; and the term "Lender" or "Lenders" shall, unless
otherwise expressly indicated, include IDB in its individual capacity. IDB and
its Affiliates may lend money to, invest in, and generally engage in any kind of
business with, any Credit Party, any of their Affiliates and any Person who may
do business with or own securities of any Credit Party or any such Affiliate,
all as if IDB were not an Agent and without any duty to account therefor to
Lenders. IDB and its Affiliates may accept fees and other consideration from any
Credit Party for services in connection with this Agreement or otherwise without
having to account for the same to Lenders. Each Lender acknowledges the
potential conflict of interest between IDB as a Lender holding disproportionate
interests in the Revolving Loan and IDB as an Agent. None of the Lenders
identified on the facing page or signature pages of this Agreement as a
"syndication agent", "documentation agent", "co-administrative agent" or
"arranger", if any, shall have any right, power, obligation, liability,
responsibility or duty under this Agreement other than those applicable to all
Lenders as such. Without limiting the foregoing, none of the Lenders so
identified as a "syndication agent", "documentation agent", "co-administrative
agent" or "arranger", if any, shall have or be deemed to have any fiduciary
relationship with any Lender. Each Lender acknowledges that it has not relied,
and will not rely, on any of the Lenders so identified in deciding to enter into
this Agreement or in taking or not taking action hereunder.

                                       54
<PAGE>

                  9.5 Intentionally Omitted.

                  9.6 Indemnification. Lenders agree to indemnify each Agent (to
the extent not reimbursed by Credit Parties and without limiting the obligations
of Borrowers hereunder), ratably according to their respective Pro Rata Shares,
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by, or asserted
against the Agents in any way relating to or arising out of this Agreement or
any other Loan Document or any action taken or omitted to be taken by
Administrative Agent in connection therewith; provided, that no Lender shall be
liable to an Agent for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from such Agent's gross negligence or willful misconduct. Without
limiting the foregoing, each Lender agrees to reimburse the Agents promptly upon
demand for its ratable share of any out-of-pocket expenses (including reasonable
counsel fees) incurred by the Agents in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement and each
other Loan Document, to the extent that the Agents are not reimbursed for such
expenses by Credit Parties.

                  9.7 Successor Agents. Any Agent may resign at any time by
giving not less than 30 days' prior written notice thereof to Lenders and
Borrower Representative. Upon any such resignation, the Requisite Lenders shall
have the right to appoint a successor Agent. If no successor Agent shall have
been so appointed by the Requisite Lenders and shall have accepted such
appointment within 30 days after the resigning Agent's giving notice of
resignation, then the resigning Agent may, on behalf of Lenders, appoint a
successor Agent, which shall be a Lender, if a Lender is willing to accept such
appointment, or otherwise shall be a commercial bank, commercial finance company
or financial institution or a subsidiary of a commercial bank, commercial
finance company or financial institution if such commercial bank, commercial
finance company or financial institution is organized under the laws of the
United States of America or of any State thereof and has a combined capital and
surplus of at least $300,000,000. If no successor Agent has been appointed
pursuant to the foregoing, within 30 days after the date such notice of
resignation was given by the resigning Agent, such resignation shall become
effective and the Requisite Lenders shall thereafter perform all the duties of
Agent hereunder until such time, if any, as the Requisite Lenders appoint a
successor Agent as provided above. Any successor Agent appointed by Requisite
Lenders hereunder shall be subject to the approval of Borrower Representative,
such approval not to be unreasonably withheld or delayed; provided that such
approval shall not be required if a Default, which is not reasonably capable of
being cured, or an Event of Default has occurred and is continuing. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall succeed to and become vested with all the rights, powers,
privileges and duties of the resigning Agent. Upon the earlier of the acceptance
of any appointment as Agent hereunder by a successor Agent or the effective date
of the resigning Agent's resignation, the resigning Agent shall be discharged
from its duties and obligations under this Agreement and the other Loan
Documents, except that any indemnity rights or other rights in favor of such
resigning Agent shall continue. After any resigning Agent's resignation
hereunder, the provisions of this Section 9 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was acting as Agent under
this Agreement and the other Loan Documents.

                                       55
<PAGE>

                  9.8 Setoff and Sharing of Payments. In addition to any rights
now or hereafter granted under applicable law and not by way of limitation of
any such rights, upon the occurrence and during the continuance of any Event of
Default and subject to Section 9.9(f), each Lender is hereby authorized at any
time or from time to time, without notice to any Credit Party or to any other
Person, any such notice being hereby expressly waived, to offset and to
appropriate and to apply any and all balances held by it at any of its offices
for the account of any Borrower or Guarantor (regardless of whether such
balances are then due to such Borrower or Guarantor) and any other properties or
assets at any time held or owing by that Lender or that holder to or for the
credit or for the account of any Borrower or Guarantor against and on account of
any of the Obligations that are not paid when due. Subject to the application of
any amounts received as a result of this Section 9.8 in accordance with Section
1.15(b), any Lender exercising a right of setoff or otherwise receiving any
payment on account of the Obligations in excess of its Pro Rata Share thereof
shall purchase for cash (and the other Lenders or holders shall sell) such
participations in each such other Lender's or holder's Pro Rata Share of the
Obligations as would be necessary to cause such Lender to share the amount so
offset or otherwise received with each other Lender or holder in accordance with
their respective Pro Rata Shares (other than offset rights exercised by any
Lender with respect to Sections 1.10, 1.12 or 1.13). Each Credit Party that is a
Borrower or Guarantor agrees, to the fullest extent permitted by law, that (a)
any Lender may exercise its right to offset with respect to amounts in excess of
its Pro Rata Share of the Obligations and may sell participations in such
amounts so offset to other Lenders and holders and (b) any Lender so purchasing
a participation in the Revolving Loan made or other Obligations held by other
Lenders or holders may exercise all rights of offset, bankers' lien,
counterclaim or similar rights with respect to such participation as fully as if
such Lender or holder were a direct holder of the Revolving Loan and the other
Obligations in the amount of such participation. Notwithstanding the foregoing,
if all or any portion of the offset amount or payment otherwise received is
thereafter recovered from the Lender that has exercised the right of offset, the
purchase of participations by that Lender shall be rescinded and the purchase
price restored together with interest at such rate, if any, as such Lender is
required to pay to any Borrower or such other Person, without setoff,
counterclaim or deduction of any kind.

                  9.9 Advances; Payments; Non-Funding Lenders; Information;
Actions in Concert.

                  (a) Advances; Payments.

                      (i) Administrative Agent shall notify Revolving
Lenders, promptly after receipt of a Notice of Borrower and in any event prior
to 2:00 p.m. (New York time) on the date such notice is received, by telecopy,
telephone or other similar form of transmission. Each Revolving Lender shall
make the amount of such Lender's Pro Rata Share of such Revolving Credit Advance
available to Administrative Agent in same day funds by wire transfer to
Administrative Agent's account as set forth in Annex H not later than 3:00 p.m.
(New York time) on the requested funding date, in the case of a Base Rate Loan,
and not later than 1:00 p.m. (New York time) on the requested funding date, in
the case of a LIBOR Loan. After receipt of such wire transfers (or, in the
Administrative Agent's sole discretion, before receipt of such wire transfers),
subject to the terms hereof, Administrative Agent shall make the requested
Revolving Credit Advance to the Borrower designated by Borrower Representative
in the Notice of Borrowing. All payments by each Revolving Lender shall be made
without setoff, counterclaim or deduction of any kind. In the event
Administrative Agent makes any Advance (in accordance with Section 2.2 hereof)
available to Borrowers after 1:00 p.m. (New York time) on the requested funding
date, on behalf of any Lender who is unable to make the amount of such Lender's
Pro Rata Share of such Advance available to Administrative Agent in a timely
manner in accordance with this Agreement, then the Lender or Lenders on whose
behalf Administrative Agent makes such Advance shall repay the amount of such
Advance to Administrative Agent (prior to any other repayment or reimbursement
obligations arising under this Agreement) in full no later than the next
Business Day on the terms set forth in this Agreement, regardless of the
occurrence of any subsequent Default or Event of Default, and in such event
Administrative Agent shall be entitled to retain for its account all interest
accrued on such Advance until reimbursed by the applicable Revolving Lender.

                                       56
<PAGE>

                           (ii) On the 2nd Business Day of each calendar week or
more frequently at Administrative Agent's election (each, a "Settlement Date"),
Administrative Agent shall advise each Lender by telephone, or telecopy of the
amount of such Lender's Pro Rata Share of principal, interest and Fees paid for
the benefit of Lenders with respect to each applicable Loan. Provided that each
Lender has funded all payments or Advances required to be made by it and has
purchased all participations required to be purchased by it under this Agreement
and the other Loan Documents as of such Settlement Date, Administrative Agent
shall pay to each Lender such Lender's Pro Rata Share of principal, interest and
Fees paid by Borrowers since the previous Settlement Date for the benefit of
such Lender on the Revolving Loan held by it (promptly upon receipt by
Administrative Agent of such Borrowers' payments), except that with respect to a
LIBOR Loan, such principal and interest shall be paid on the last day of the
relevant LIBOR Period. To the extent that any Lender (a "Non-Funding Lender")
has failed to fund all such payments and Advances or failed to fund the purchase
of all such participations, Administrative Agent shall be entitled to set off
the funding shortfall against that Non-Funding Lender's Pro Rata Share of all
payments received from Borrowers. Such payments shall be made by wire transfer
to such Lender's account (as specified by such Lender in Annex H or the
applicable Assignment Agreement) not later than 2:00 p.m. (New York time) on the
next Business Day following each Settlement Date.

                  (b) Availability of Lender's Pro Rata Share. Administrative
Agent may assume that each Revolving Lender will make its Pro Rata Share of each
Revolving Credit Advance available to Administrative Agent on each funding date.
If such Pro Rata Share is not, in fact, paid to Administrative Agent by such
Revolving Lender when due, Administrative Agent will be entitled to recover such
amount on demand from such Revolving Lender without setoff, counterclaim or
deduction of any kind. If any Revolving Lender fails to pay the amount of its
Pro Rata Share forthwith upon Administrative Agent's demand, Administrative
Agent shall promptly notify Borrower Representative and Borrowers shall
immediately repay such amount to Administrative Agent. Nothing in this Section
9.9(b) or elsewhere in this Agreement or the other Loan Documents shall be
deemed to require Administrative Agent to advance funds on behalf of any
Revolving Lender or to relieve any Revolving Lender from its obligation to
fulfill its Commitments hereunder or to prejudice any rights that Borrowers may
have against any Revolving Lender as a result of any default by such Revolving
Lender hereunder. To the extent that Administrative Agent advances funds to any
Borrower on behalf of any Revolving Lender and is not reimbursed therefor on the
same Business Day as such Advance is made, Administrative Agent shall be
entitled to retain for its account all interest accrued on such Advance until
reimbursed by the applicable Revolving Lender.

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                  (c) Return of Payments.

                           (i) If Administrative Agent pays an amount to a
Lender under this Agreement in the belief or expectation that a related payment
has been or will be received by Administrative Agent from Borrowers and such
related payment is not received by Administrative Agent, then Administrative
Agent will be entitled to recover such amount from such Lender on demand without
setoff, counterclaim or deduction of any kind.

                           (ii) If Administrative Agent determines at any time
that any amount received by Administrative Agent under this Agreement must be
returned to any Borrower or paid to any other Person pursuant to any insolvency
law or otherwise, then, notwithstanding any other term or condition of this
Agreement or any other Loan Document, Administrative Agent will not be required
to distribute any portion thereof to any Lender. In addition, each Lender will
repay to Administrative Agent on demand any portion of such amount that
Administrative Agent has distributed to such Lender, together with interest at
such rate, if any, as Administrative Agent is required to pay to any Borrower or
such other Person, without setoff, counterclaim or deduction of any kind.

                  (d) Non-Funding Lenders. The failure of any Non-Funding Lender
to make any Revolving Credit Advance or any payment required by it hereunder on
the date specified therefor shall not relieve any other Lender (each such other
Revolving Lender, an "Other Lender") of its obligations to make such Advance or
purchase such participation on such date, but neither any Other Lender nor
Administrative Agent shall be responsible for the failure of any Non-Funding
Lender to make an Advance, purchase a participation or make any other payment
required hereunder. Notwithstanding anything set forth herein to the contrary, a
Non-Funding Lender shall not have any voting or consent rights under or with
respect to any Loan Document or constitute a "Lender" or a "Revolving Lender"
(or be included in the calculation of "Requisite Lenders" hereunder) for any
voting or consent rights under or with respect to any Loan Document. At Borrower
Representative's request, Administrative Agent or a Person reasonably acceptable
to Administrative Agent shall have the right with Administrative Agent's consent
and in Administrative Agent's sole discretion (but shall have no obligation) to
purchase from any Non-Funding Lender, and each Non-Funding Lender agrees that it
shall, at Administrative Agent's request, sell and assign to Administrative
Agent or such Person, all of the Commitments of that Non-Funding Lender for an
amount equal to the principal balance of the Revolving Loan held by such
Non-Funding Lender and all accrued interest and fees with respect thereto
through the date of sale, such purchase and sale to be consummated pursuant to
an executed Assignment Agreement.

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                  (e) Dissemination of Information. Administrative Agent shall
provide Lenders with any notice of Default or Event of Default received by
Administrative Agent from, or delivered by Administrative Agent to, any Credit
Party, with notice of any Event of Default of which Administrative Agent has
actually become aware and with notice of any action taken by Administrative
Agent following any Event of Default. Lenders acknowledge that Borrowers are
required to provide Financial Statements and Collateral Reports to Lenders in
accordance with Annexes E and F hereto and agree that Administrative Agent shall
have no duty to provide the same to Lenders.

                  (f) Actions in Concert. Anything in this Agreement to the
contrary notwithstanding, each Lender hereby agrees with each other Lender that
no Lender shall take any action to protect or enforce its rights arising out of
this Agreement or the Notes (including exercising any rights of setoff) without
first obtaining the prior written consent of Administrative Agent and Requisite
Lenders (except as otherwise provided below), it being the intent of Lenders
that any such action to protect or enforce rights under this Agreement and the
Notes shall be taken in concert and at the direction or with the consent of
Administrative Agent or Requisite Lenders, as applicable, in accordance with the
terms hereof; provided, however, that each Lender may, upon 15 Business Days'
prior written demand on Administrative Agent and Administrative Agent's failure
or refusal to commence to take commercially reasonable enforcement actions
within such 15-day period, commence an action against any Borrower or any
Guarantor and obtain a judgment against any such Person, but in no event shall
any Lender take any action to execute on such judgment or to enforce such
judgment in any manner, whether against any Borrower, any Guarantor or any
Collateral, without the prior written consent of Administrative Agent.

                  (g) Notice of Field Exams. Administrative Agent will give
Lenders at least 2 days' prior written notice of regularly scheduled field exams
of Borrowers' books, records and Accounts.

10. SUCCESSORS AND ASSIGNS

                  10.1 Successors and Assigns. This Agreement and the other Loan
Documents shall be binding on and shall inure to the benefit of each Credit
Party, Agents, Lenders and their respective successors and assigns (including,
in the case of any Credit Party, a debtor-in-possession on behalf of such Credit
Party), except as otherwise provided herein or therein. No Credit Party may
assign, transfer, hypothecate or otherwise convey its rights, benefits,
obligations or duties hereunder or under any of the other Loan Documents without
the prior express written consent of Administrative Agent and Lenders. Any such
purported assignment, transfer, hypothecation or other conveyance by any Credit
Party without the prior express written consent of Administrative Agent and
Lenders shall be void. The terms and provisions of this Agreement are for the
purpose of defining the relative rights and obligations of each Credit Party,
Agents and Lenders with respect to the transactions contemplated hereby and no
Person shall be a third party beneficiary of any of the terms and provisions of
this Agreement or any of the other Loan Documents.

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11. MISCELLANEOUS

                  11.1 Complete Agreement; Modification of Agreement. The Loan
Documents constitute the complete agreement between the parties with respect to
the subject matter thereof and may not be modified, altered or amended except as
set forth in Section 11.2. Any letter of interest, commitment letter or fee
letter (other than the Agent Fee Letter and Lenders' Fee Letters) or
confidentiality agreement, if any, between any Credit Party and Administrative
Agent or any Lender or any of their respective Affiliates, predating this
Agreement and relating to a financing of substantially similar form, purpose or
effect shall be superseded by this Agreement.

                  11.2 Amendments and Waivers.

                  (a) Except for actions expressly permitted to be taken by
Administrative Agent, no amendment, modification, termination or waiver of any
provision of this Agreement or any other Loan Document, or any consent to any
departure by any Credit Party therefrom, shall in any event be effective unless
the same shall be in writing and signed by Administrative Agent and Borrowers,
and by Requisite Lenders or all affected Lenders, as applicable. Except as set
forth in subsection (b) below, all such amendments, modifications, terminations
or waivers requiring the consent of any Lenders shall only require the written
consent of Requisite Lenders, Administrative Agent and Borrowers.

                  (b) (i) No modification, amendment or waiver of any provision
of this Agreement, the other Loan Documents or any other documents executed in
connection herewith or therewith and no consent by the Lenders or the
Administrative Agent to any departure therefrom by Borrowers or Guarantors shall
be effective unless such modification, amendment, waiver or consent shall be in
writing and signed by the Administrative Agent and all Requisite Lenders, and,
in the case of a modification or amendment other than those described in
subsection (z) of this Section 11.2(b)(i), by a duly authorized officer of the
Borrower Representative, and the same shall then be effective only for the
period and on the conditions and for the specific instances and purposes
specified in such writing; provided, however, that (x) no provision hereof which
expressly requires the consent, approval or waiver by all Lenders may be
amended, modified or waived except by all Lenders; (y) none of the following may
be amended, modified or waived except with the written consent of all Lenders
and the Administrative Agent: (i) the definition of "Collateral," (ii) the
definitions of "Revolving Loan Commitment", "Applicable Advance Rate" and
"Borrowing Base" as set forth herein, provided, however, that the foregoing
shall not limit the discretion of the Administrative Agent to the extent set
forth in this Agreement or in the definition of "Borrowing Base," (iii) the
definitions of "Commitment Termination Date", "Requisite Lenders", "Borrowing
Availability", "Loan Value of Eligible Existing Portfolio", "Loan Value of
Eligible New Portfolio", "Eligible Existing Portfolio" and "Eligible New
Portfolio," (iv) the provisions of this Section 11.2(b)(i), and (v) any
provision governing or providing for (A) the rate of interest payable on the
Advances, (B) mandatory prepayments of principal thereof, (C) fees or other
amounts payable to any of the Lenders or (D) the due date for payment of any
principal, interest or fees hereunder; and (z) none of the following shall
require the consent, authorization or approval of Borrowers: amendment or
modification of any agreement to which Borrowers are not a party. None of the
provisions governing or providing for fees or other amounts payable to the
Administrative Agent may be amended, modified or waived except with the written
consent of the Administrative Agent. No notice to or demand on Borrowers in any
case shall entitle Borrowers to any other or further notice or demand in similar
or other circumstances. No failure or delay by the Administrative Agent to
exercise any right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege preclude the
exercise of any other right, power or privilege.

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                  (ii) At the written request of Borrower Representative, and
upon approval by Administrative Agent (which approval may be withheld in the
sole and absolute discretion of Administrative Agent), from time to time
subsequent to the date hereof, additional Lenders may become parties to this
Agreement and to the other Loan Documents as additional Lenders (each, an
"Additional Lender") in order to increase the total Revolving Loan Commitment as
contemplated within the definition thereof, by executing a counterpart of this
Agreement substantially in the form of Annex L attached hereto. Administrative
Agent shall notify the Lenders of Administrative Agent's intention to add
Additional Lenders to this Agreement and the other Loan Documents. Each Lender
shall have a reasonable period of time after notice by Administrative Agent to
notify Administrative Agent of such Lender's desire and commitment to increase
its Revolving Loan Commitment, as may be increased from time to time in
accordance with this Section. In the event a Lender determines not to increase
its Revolving Loan Commitment, Administrative Agent shall be free to solicit
third-party Additional Lenders. Additional Lender shall execute and deliver to
Administrative Agent such additional agreements, confirmations and documents as
Administrative Agent may require in order to effectuate the addition of such
Additional Lender and to confirm Additional Lender's duties, obligations and
liabilities under this Agreement and the other Loan Documents. One or more
Additional Lenders may become parties to this Agreement and to the other Loan
Documents from time to time without the approval or consent of any of the
Lenders, and each Lender hereby waives any right to approve adding one or more
Additional Lenders. Upon delivery of any such counterpart to Administrative
Agent, each Additional Lender shall be a Lender and shall be as fully a party
hereto as if such Additional Lender were an original signatory hereto. Each
Borrower hereby acknowledges and agrees that any addition of any Additional
Lender to this Agreement shall give rise to a direct obligation of Borrowers to
such Additional Lender and that the Additional Lender shall be considered to be
a "Lender" and shall be entitled to all of the rights, remedies, as applicable,
benefits and privileges afforded all other Lenders hereunder. Each Borrower and
other Credit Party shall execute and deliver to Administrative Agent and Lenders
such agreements and documentation relative to the adding of such Additional
Lender and increase in the aggregate Revolving Loan Commitment as Administrative
Agent may reasonably require, including, without limitation, a Revolving Note
for each Additional Lender in the amount of such Additional Lender's Revolving
Loan Commitment, such amendments or additions to the other Loan Documents,
including the Collateral Documents, as Administrative Agent may reasonably
require to reflect the addition of the Additional Lender and the increase in the
aggregate Revolving Loan Commitment, and such other documents as Administrative
Agent may require to confirm all Credit Parties' duties and obligations under
this Section 11.2(b)(ii). Each Borrower and other Credit Party expressly agrees
that its obligations arising hereunder shall not be modified, affected or
diminished by the addition of any Additional Lender hereunder nor by any
election of Administrative Agent not to permit any Person to become an
Additional Lender hereunder. Upon the effective date of any increase in the
total Revolving Loan Commitments of all of the Lenders as a result of adding
Additional Lenders, each Lender's Pro Rata Share shall be adjusted to reflect
such Lender's Revolving Loan Commitment relative to the aggregate Revolving Loan
Commitment of all Lenders. Notwithstanding the foregoing, no increase in the
Maximum Amount or in any Revolving Loan Commitment shall be effective until such
time as there are no outstanding LIBOR Loans and in connection with any increase
in the Maximum Amount or any Revolving Loan Commitment, Borrowers' duties under
Section 1.10(b) of this Agreement shall apply.

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                  (c) If, in connection with any proposed amendment,
modification, waiver or termination (a "Proposed Change"):

                           (i) requiring the consent of all affected Lenders,
the consent of Requisite Lenders is obtained, but the consent of other Lenders
whose consent is required is not obtained (any such Lender whose consent is not
obtained as described in this clause (i) and in clause (ii) below being referred
to as a "Non-Consenting Lender"),

                           (ii) requiring the consent of Requisite Lenders, but
the consent of Requisite Lenders is not obtained,

then, so long as IDB is not a Non-Consenting Lender, at Borrower
Representative's request, Administrative Agent or a Person reasonably acceptable
to Administrative Agent shall have the right with Administrative Agent's consent
and in Administrative Agent's sole discretion (but shall have no obligation) to
purchase from such Non-Consenting Lenders, and such Non-Consenting Lenders agree
that they shall, upon Administrative Agent's request, sell and assign to
Administrative Agent or such Person, all of the Commitments of such
Non-Consenting Lenders for an amount equal to the principal balance of the
Revolving Loan held by the Non-Consenting Lenders and all accrued interest and
Fees with respect thereto through the date of sale, such purchase and sale to be
consummated pursuant to an executed Assignment Agreement.

                  (d) Upon payment in full in cash and performance of all of the
Obligations (other than indemnification Obligations), termination of the
Commitments and a release of all claims against Administrative Agent and
Lenders, and so long as no suits, actions, proceedings or claims are pending or
threatened against any Indemnified Person asserting any damages, losses or
liabilities that are Indemnified Liabilities, Administrative Agent shall deliver
to Credit Parties termination statements, mortgage releases and other documents
necessary or appropriate to evidence the termination of the Liens securing
payment of the Obligations including without limitation documents reasonably
requested by any Credit Party to terminate or release its rights under any
blocked account agreement, control account or agreements with, or direction
letters to, Servicing Agents.

                  11.3 Fees and Expenses. Borrowers shall reimburse the Agents
(and, with respect to subsections (c) and (d) and (e) below, all Lenders) for
all reasonable out-of-pocket fees, costs and expenses, including the reasonable
fees, costs and expenses of counsel, consultants, field examiners or other
advisors (including environmental and management consultants and appraisers),
incurred in connection with the negotiation and preparation of the Loan
Documents and incurred in connection with:

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                  (a) the forwarding to Borrowers or any other Person on behalf
of Borrowers by Administrative Agent of the proceeds of any Loan (including a
wire transfer fee, per wire transfer, at Administrative Agent's then prevailing
wire transfer fee rate);

                  (b) any amendment, modification or waiver of, consent with
respect to, or termination of, any of the Loan Documents or Related Transactions
Documents or advice in connection with the syndication and administration of the
Revolving Loan made pursuant hereto or its rights hereunder or thereunder;

                  (c) any litigation, contest, dispute, suit, proceeding or
action (whether instituted by any Agent, any Lender, any Borrower or any other
Person and whether as a party, witness or otherwise) in any way relating to the
Collateral, any of the Loan Documents or any other agreement to be executed or
delivered in connection herewith or therewith, including any litigation,
contest, dispute, suit, case, proceeding or action, and any appeal or review
thereof, in connection with a case commenced by or against any or all of the
Borrowers or any other Person that may be obligated to the Agents or the Lenders
by virtue of the Loan Documents; including any such litigation, contest,
dispute, suit, proceeding or action arising in connection with any work-out or
restructuring of the Revolving Loan during the pendency of one or more Events of
Default; provided that no Person shall be entitled to reimbursement under this
subsection (c) in respect of any litigation, contest, dispute, suit, proceeding
or action to the extent any of the foregoing results from such Person's gross
negligence or willful misconduct (as finally determined by a court of competent
jurisdiction);

                  (d) any attempt to enforce any remedies of the Agents or
Lenders against any or all of the Credit Parties or any other Person that may be
obligated to any Agent or any Lender by virtue of any of the Loan Documents,
including any such attempt to enforce any such remedies in the course of any
work-out or restructuring of the Revolving Loan during the pendency of one or
more Events of Default;

                  (e) any workout or restructuring of the Revolving Loan during
the pendency of one or more Events of Default; and

                  (f) subject to the provisions and terms contained in Section
1.11 hereof relative to the payment of costs incurred in conducting field
examinations, efforts to (i) monitor the Revolving Loan or any of the other
Obligations, (ii) evaluate, observe or assess any of the Credit Parties or their
respective affairs, and (iii) verify, protect, evaluate, assess, appraise,
collect, sell, liquidate or otherwise dispose of any of the Collateral, provided
that the costs relating to activities undertaken pursuant to the preceding items
(i), (ii) and (iii) shall not exceed an amount equal to $25,000 in any Fiscal
Year, except in the event of a Default, which is not reasonably capable of being
cured, or Event of Default, in which event the costs relating to activities
undertaken pursuant to the preceding items (i), (ii) and (iii) shall not be
limited in any manner;

including, as to each of subsections (a) through (f) above, all reasonable
attorneys' and other professional and service providers' fees arising from such
services and other advice, assistance or other representation, including those
in connection with any appellate proceedings, and all expenses, costs, charges
and other fees incurred by such counsel and others in connection with or
relating to any of the events or actions described in this Section 11.3, all of
which shall be payable, on demand, by Borrowers to such Agent or such Lender.
Without limiting the generality of the foregoing, such expenses, costs, charges
and fees may include: fees, costs and expenses of accountants, environmental
advisors, appraisers, investment bankers, management and other consultants and
paralegals; court costs and expenses; photocopying and duplication expenses;
court reporter fees, costs and expenses; long distance telephone charges; air
express charges; telegram or telecopy charges; secretarial overtime charges; and
expenses for travel, lodging and food paid or incurred in connection with the
performance of such legal or other advisory services.

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                  11.4 No Waiver. Any Agent's or any Lender's failure, at any
time or times, to require strict performance by the Credit Parties of any
provision of this Agreement or any other Loan Document shall not waive, affect
or diminish any right of such Agent or such Lender thereafter to demand strict
compliance and performance herewith or therewith. Any suspension or waiver of an
Event of Default shall not suspend, waive or affect any other Event of Default
whether the same is prior or subsequent thereto and whether the same or of a
different type. Subject to the provisions of Section 11.2, none of the
undertakings, agreements, warranties, covenants and representations of any
Credit Party contained in this Agreement or any of the other Loan Documents and
no Default or Event of Default by any Credit Party shall be deemed to have been
suspended or waived by any Agent or any Lender, unless such waiver or suspension
is by an instrument in writing signed by an officer of or other authorized
employee of such Agent and the Requisite Lenders, and directed to Borrowers
specifying such suspension or waiver.

                  11.5 Remedies. Agents' and Lenders' rights and remedies under
this Agreement shall be cumulative and nonexclusive of any other rights and
remedies that any Agent or any Lender may have under any other agreement,
including the other Loan Documents, by operation of law or otherwise. Recourse
to the Collateral shall not be required.

                  11.6 Severability. Wherever possible, each provision of this
Agreement and the other Loan Documents shall be interpreted in such a manner as
to be effective and valid under applicable law, but if any provision of this
Agreement or any other Loan Document shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity without invalidating the remainder of such provision
or the remaining provisions of this Agreement or such other Loan Document.

                  11.7 Conflict of Terms. Except as otherwise provided in this
Agreement or any of the other Loan Documents by specific reference to the
applicable provisions of this Agreement, if any provision contained in this
Agreement conflicts with any provision in any of the other Loan Documents, the
provision contained in this Agreement shall govern and control.

                  11.8 Confidentiality. Administrative Agent, Collateral Agent
and each Lender agree to use commercially reasonable efforts (equivalent to the
efforts Administrative Agent, Collateral Agent or such Lender applies to
maintaining the confidentiality of its own confidential information) to maintain
as confidential all confidential information provided to them by the Credit
Parties for a period of 2 years following receipt thereof, except that
Administrative Agent, Collateral Agent and any Lender may disclose such
information on a confidential "need to know" basis (a) to Persons employed or
engaged by Administrative Agent, Collateral Agent or such Lender; (b) to any
bona fide assignee or participant or potential assignee or participant that has
agreed to comply with the covenant contained in this Section 11.8 (and any such
bona fide assignee or participant or potential assignee or participant may
disclose such information to Persons employed or engaged by it as described in
subsection (a) above); (c) as required or requested by any Governmental
Authority or reasonably believed by Administrative Agent, Collateral Agent or
such Lender to be compelled by any court decree, subpoena or legal or
administrative order or process; (d) as, on the advice of Administrative
Agent's, Collateral Agent's or such Lender's counsel, is required by law; (e) in
connection with the exercise of any right or remedy under the Loan Documents or
in connection with any Litigation to which Administrative Agent, Collateral
Agent or such Lender is a party; (f) that ceases to be confidential through no
fault of Administrative Agent, Collateral Agent or any Lender; or (g) to Persons
that are approved in writing by Borrower Representative.

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                  Notwithstanding anything to the contrary set forth herein or
in any other agreement to which the parties hereto are parties or by which they
are bound, the obligations of confidentiality contained herein and therein, as
they relate to the transactions contemplated by the Agreement and the other loan
documents (the "Transaction"), shall not apply to the federal tax structure or
federal tax treatment of the Transaction, and each party hereto (and any
employee, representative, agent of any party hereto) may disclose to any and all
persons, without limitation of any kind, the federal tax structure and federal
tax treatment of the Transaction. The preceding sentence is intended to cause
the Transaction to be treated as not having been offered under conditions of
confidentiality for purposes of Section 1.6011-4(b)(3) (or any successor
provision) of the Treasury Regulations promulgated under Section 6011 of the
Internal Revenue Code of 1986, as amended, and shall be construed in a manner
consistent with such purpose. In addition, each party hereto acknowledges that
it has no proprietary or exclusive rights to the federal tax structure of the
Transaction or any federal tax matter or federal tax idea related to the
Transaction.

                  11.9 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
ANY OF THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
EACH CREDIT PARTY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS
LOCATED IN THE CITY OF NEW YORK, NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO
HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE CREDIT PARTIES, AGENTS AND
LENDERS PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO
ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS; PROVIDED, THAT AGENTS, LENDERS AND THE CREDIT PARTIES ACKNOWLEDGE
THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED
OUTSIDE OF NEW YORK COUNTY; PROVIDED FURTHER, THAT NOTHING IN THIS AGREEMENT
SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER
LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER
SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN
FAVOR OF AGENTS. EACH CREDIT PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO
SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH
CREDIT PARTY HEREBY WAIVES ANY OBJECTION THAT SUCH CREDIT PARTY MAY HAVE BASED
UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND
HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT. EACH CREDIT PARTY HEREBY WAIVES PERSONAL SERVICE OF
THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH CREDIT PARTY AT THE ADDRESS SET
FORTH IN ANNEX I OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF SUCH CREDIT PARTY'S ACTUAL RECEIPT THEREOF OR 5
DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID.

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                  11.10 Notices. Except as otherwise provided herein, whenever
it is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by any other parties, or whenever any of the parties desires to
give or serve upon any other parties any communication with respect to this
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and shall be deemed to have been validly
served, given or delivered: (a) upon the earlier of actual receipt and 5 days
after deposit in the United States Mail, registered or certified mail, return
receipt requested, with proper postage prepaid; (b) upon transmission, when sent
by telecopy or other similar facsimile transmission (with such telecopy or
facsimile promptly confirmed by delivery of a copy by personal delivery or
United States Mail as otherwise provided in this Section 11.10); (c) 1 Business
Day after deposit with a reputable overnight courier with all charges prepaid or
(d) when delivered, if hand-delivered by messenger, all of which shall be
addressed to the party to be notified and sent to the address or facsimile
number indicated in Annex I or to such other address (or facsimile number) as
may be substituted by notice given as herein provided. The giving of any notice
required hereunder may be waived in writing by the party entitled to receive
such notice. Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to any Person
(other than Borrower Representative or Administrative Agent) designated in Annex
I to receive copies shall in no way adversely affect the effectiveness of such
notice, demand, request, consent, approval, declaration or other communication.

                  11.11 Section Titles. The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.

                  11.12 Counterparts. This Agreement may be executed in any
number of separate counterparts, each of which shall collectively and separately
constitute one agreement.

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                  11.13 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES
DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.
THEREFORE, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE, AMONG AGENTS, LENDERS AND ANY CREDIT PARTY ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.

                  11.14 Press Releases and Related Matters. Each Credit Party
executing this Agreement agrees that neither it nor its Affiliates will in the
future issue any press releases or other public disclosure (i) using the name of
IDB or its affiliates or, (ii) other than standard disclosures associated with
its financial reporting or other similar, ordinary course of business
disclosures, referring to this Agreement, the other Loan Documents or the
Related Transactions Documents without at least 2 Business Days' prior notice to
IDB and without obtaining IDB's prior written consent unless (and only to the
extent that) such Credit Party or Affiliate is required to do so under law and
then, in any event, such Credit Party or Affiliate will consult with IDB before
issuing such press release or other public disclosure. Each Credit Party
consents to the publication by Administrative Agent or any Lender of a tombstone
or similar advertising material relating to the financing transactions
contemplated by this Agreement. Administrative Agent reserves the right to
provide to industry trade organizations information necessary and customary for
inclusion in league table measurements.

                  11.15 Reinstatement. This Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against any Borrower for liquidation or reorganization, should any Borrower
become insolvent or make an assignment for the benefit of any creditor or
creditors or should a receiver or trustee be appointed for all or any
significant part of any Borrower's assets, and shall continue to be effective or
to be reinstated, as the case may be, if at any time payment and performance of
the Obligations, or any part thereof, is, pursuant to applicable law, rescinded
or reduced in amount, or must otherwise be restored or returned by any obligee
of the Obligations, whether as a "voidable preference," "fraudulent conveyance,"
or otherwise, all as though such payment or performance had not been made. In
the event that any payment, or any part thereof, is rescinded, reduced, restored
or returned, the Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.

                  11.16 Advice of Counsel. Each of the parties represents to
each other party hereto that it has discussed this Agreement and, specifically,
the provisions of Sections 11.9 and 11.13, with its counsel.

                  11.17 No Strict Construction. 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.

                                       67
<PAGE>

                  11.18 Administrative Agent for Service. Each Credit Party
hereby appoints, and Borrower Representative hereby accepts the appointment of,
Borrower Representative, located at 210 Sylvan Avenue, Englewood Cliffs, New
Jersey 07632 as the agent for service of process for such Credit Party solely in
connection with the Loan Documents. Such appointment shall not be terminated by
Borrower Representative or any Credit Party without the prior written consent of
Administrative Agent.

12. CROSS-GUARANTY; SUBORDINATION

                  12.1 Cross-Guaranty. Each Borrower hereby agrees that such
Borrower is jointly and severally liable for, and hereby absolutely and
unconditionally guarantees to Agents and Lenders and their respective successors
and assigns, the full and prompt payment (whether at stated maturity, by
acceleration or otherwise) and performance of, all Obligations owed or hereafter
owing to Agents and Lenders by each other Borrower. Each Borrower agrees that
its guaranty obligation hereunder is a continuing guaranty of payment and
performance and not of collection, that its obligations under this Section 12
shall not be discharged until payment and performance, in full, of the
Obligations has occurred, and that its obligations under this Section 12 shall
be absolute and unconditional, irrespective of, and unaffected by,

                  (a) the genuineness, validity, regularity, enforceability or
any future amendment of, or change in, this Agreement, any other Loan Document
or any other agreement, document or instrument to which any Borrower is or may
become a party;

                  (b) the absence of any action to enforce this Agreement
(including this Section 12) or any other Loan Document or the waiver or consent
by Agents and Lenders with respect to any of the provisions thereof;

                  (c) the existence, value or condition of, or failure to
perfect its Lien against, any security for the Obligations or any action, or the
absence of any action, by Agents and Lenders in respect thereof (including the
release of any such security);

                  (d) the insolvency of any Credit Party; or

                  (e) any other action or circumstances that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor.

Each Borrower shall be regarded, and shall be in the same position, as principal
debtor with respect to the Obligations guaranteed hereunder.

                  12.2 Waivers by Borrowers. Each Borrower expressly waives all
rights it may have now or in the future under any statute, or at common law, or
at law or in equity, or otherwise, to compel Agents or Lenders to marshal assets
or to proceed in respect of the Obligations guaranteed hereunder against any
other Credit Party, any other party or against any security for the payment and
performance of the Obligations before proceeding against, or as a condition to
proceeding against, such Borrower. It is agreed among each Borrower, Agents and
Lenders that the foregoing waivers are of the essence of the transaction
contemplated by this Agreement and the other Loan Documents and that, but for
the provisions of this Section 12 and such waivers, Agents and Lenders would
decline to enter into this Agreement.

                                       68
<PAGE>

                  12.3 Benefit of Guaranty. Each Borrower agrees that the
provisions of this Section 12 are for the benefit of Agents and Lenders and
their respective successors, transferees, endorsees and assigns, and nothing
herein contained shall impair, as between any other Borrower and Agents or
Lenders, the obligations of such other Borrower under the Loan Documents.

                  12.4 Subordination of Subrogation, Etc. Notwithstanding
anything to the contrary in this Agreement or in any other Loan Document, and
except as set forth in Section 12.7, each Borrower hereby expressly and
irrevocably subordinates to payment of the Obligations any and all rights at law
or in equity to subrogation, reimbursement, exoneration, contribution,
indemnification or set off and any and all defenses available to a surety,
guarantor or accommodation co-obligor until the Obligations are indefeasibly
paid in full in cash. Each Borrower acknowledges and agrees that this
subordination is intended to benefit Agents and Lenders and shall not limit or
otherwise affect such Borrower's liability hereunder or the enforceability of
this Section 12, and that Agents, Lenders and their respective successors and
assigns are intended third party beneficiaries of the waivers and agreements set
forth in this Section 12.4.

                  12.5 Election of Remedies. If Agents or any Lender may, under
applicable law, proceed to realize its benefits under any of the Loan Documents
giving Agents or such Lender a Lien upon any Collateral, whether owned by any
Borrower or by any other Person, either by judicial foreclosure or by
non-judicial sale or enforcement, Agents or any Lender may, at its sole option,
determine which of its remedies or rights it may pursue without affecting any of
its rights and remedies under this Section 12. If, in the exercise of any of its
rights and remedies, Agents or any Lender shall forfeit any of its rights or
remedies, including its right to enter a deficiency judgment against any
Borrower or any other Person, whether because of any applicable laws pertaining
to "election of remedies" or the like, each Borrower hereby consents to such
action by Agents or such Lender and waives any claim based upon such action,
even if such action by Agents or such Lender shall result in a full or partial
loss of any rights of subrogation that each Borrower might otherwise have had
but for such action by Agents or such Lender. Any election of remedies that
results in the denial or impairment of the right of Agents or any Lender to seek
a deficiency judgment against any Borrower shall not impair any other Borrower's
obligation to pay the full amount of the Obligations. In the event Agents or any
Lender shall bid at any foreclosure or trustee's sale or at any private sale
permitted by law or the Loan Documents, Agents or such Lender may bid all or
less than the amount of the Obligations and the amount of such bid need not be
paid by Agents or such Lender but shall be credited against the Obligations
owing to it. The amount of the successful bid at any such sale, whether Agents,
Lender or any other party is the successful bidder, shall be conclusively deemed
to be the fair market value of the Collateral and the difference between such
bid amount and the remaining balance of the Obligations shall be conclusively
deemed to be the amount of the Obligations guaranteed under this Section 12,
notwithstanding that any present or future law or court decision or ruling may
have the effect of reducing the amount of any deficiency claim to which Agents
or any Lender might otherwise be entitled but for such bidding at any such sale.

                                       69
<PAGE>

                  12.6 Limitation. Notwithstanding any provision herein
contained to the contrary, each Borrower's liability under this Section 12
(which liability is in any event in addition to amounts for which such Borrower
is primarily liable under Section 1) shall be limited to an amount not to exceed
as of any date of determination the amount that could be claimed by
Administrative Agent and Lenders from such Borrower under this Section 12
without rendering such claim void or voidable under Section 548 of Chapter 11 of
the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer
Act, Uniform Fraudulent Conveyance Act or similar statute or common law after
taking into account, among other things, such Borrower's right of contribution
and indemnification from each other Borrower under Section 12.7.

                  12.7 Contribution with Respect to Guaranty Obligations.

                  (a) To the extent that any Borrower shall make a payment under
this Section 12 of all or any of the Obligations (other than the Revolving Loan
made to that Borrower for which it is primarily liable) (a "Guarantor Payment")
that, taking into account all other Guarantor Payments then previously or
concurrently made by any other Borrower, exceeds the amount that such Borrower
would otherwise have paid if each Borrower had paid the aggregate Obligations
satisfied by such Guarantor Payment in the same proportion that such Borrower's
"Allocable Amount" (as defined below) (as determined immediately prior to such
Guarantor Payment) bore to the aggregate Allocable Amounts of each of the
Borrowers as determined immediately prior to the making of such Guarantor
Payment, then, following indefeasible payment in full in cash of the Obligations
and termination of the Commitments, such Borrower shall be entitled to receive
contribution and indemnification payments from, and be reimbursed by, each other
Borrower for the amount of such excess, pro rata based upon their respective
Allocable Amounts in effect immediately prior to such Guarantor Payment.

                  (b) As of any date of determination, the "Allocable Amount" of
any Borrower shall be equal to the maximum amount of the claim that could then
be recovered from such Borrower under this Section 12 without rendering such
claim void or voidable under Section 548 of Chapter 11 of the Bankruptcy Code or
under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent
Conveyance Act or similar statute or common law.

                  (c) This Section 12.7 is intended only to define the relative
rights of Borrowers and nothing set forth in this Section 12.7 is intended to or
shall impair the obligations of Borrowers, jointly and severally, to pay any
amounts as and when the same shall become due and payable in accordance with the
terms of this Agreement, including Section 12.1. Nothing contained in this
Section 12.7 shall limit the liability of any Borrower to pay the Revolving Loan
made directly or indirectly to that Borrower and accrued interest, Fees and
expenses with respect thereto for which such Borrower shall be primarily liable.

                  (d) The parties hereto acknowledge that the rights of
contribution and indemnification hereunder shall constitute assets of the
Borrower to which such contribution and indemnification is owing.

                  (e) The rights of the indemnifying Borrowers against other
Credit Parties under this Section 12.7 shall be exercisable upon the full and
indefeasible payment of the Obligations and the termination of the Commitments.

                                       70
<PAGE>

                  12.8 Liability Cumulative. The liability of Borrowers under
this Section 12 is in addition to and shall be cumulative with all liabilities
of each Borrower to Administrative Agent and Lenders under this Agreement and
the other Loan Documents to which such Borrower is a party or in respect of any
Obligations or obligation of the other Borrower, without any limitation as to
amount, unless the instrument or agreement evidencing or creating such other
liability specifically provides to the contrary.

                  12.9 Subordination.

                  (a) Each Credit Party executing this Agreement covenants and
agrees that the payment of all indebtedness, principal, interest (including
interest which accrues after the commencement of any case or proceeding in
bankruptcy, or for the reorganization of any Credit Party), fees, charges,
expenses, attorneys' fees and any other sum, obligation or liability owing by
any other Credit Party to such Credit Party, including any intercompany trade
payables or royalty or licensing fees (collectively, the "Intercompany
Obligations"), is subordinated, to the extent and in the manner provided in this
Section 12.9, to the prior payment in full of all Obligations (herein, the
"Senior Obligations") and that the subordination is for the benefit of the
Agents and Lenders, and Agents may enforce such provisions directly, provided
that regularly scheduled payments under Intercompany Obligations may be made so
long as no Default, which is not reasonably capable of being cured, or Event of
Default has occurred and is continuing.

                  (b) Each Credit Party executing this Agreement hereby (i)
authorizes Administrative Agent to demand specific performance of the terms of
this Section 12.9, whether or not any other Credit Party shall have complied
with any of the provisions hereof applicable to it, at any time when such Credit
Party shall have failed to comply with any provisions of this Section 12.9 which
are applicable to it and (ii) irrevocably waives any defense based on the
adequacy of a remedy at law, which might be asserted as a bar to such remedy of
specific performance.

                  (c) Upon any distribution of assets of any Credit Party in any
dissolution, winding up, liquidation or reorganization (whether in bankruptcy,
insolvency or receivership proceedings or upon an assignment for the benefit of
creditors or otherwise):

                           (i) The Agents and Lenders shall first be entitled to
receive payment in full in cash of the Senior Obligations before any Credit
Party is entitled to receive any payment on account of the Intercompany
Obligations.

                           (ii) Any payment or distribution of assets of any
Credit Party of any kind or character, whether in cash, property or securities,
to which any other Credit Party would be entitled except for the provisions of
this Section 12.9(c), shall be paid by the liquidating trustee or agent or other
Person making such payment or distribution directly to the Administrative Agent,
to the extent necessary to make payment in full of all Senior Obligations
remaining unpaid after giving effect to any concurrent payment or distribution
or provisions therefor to the Agents and Lenders.

                                       71
<PAGE>

                           (iii) In the event that notwithstanding the foregoing
provisions of this Section 12.9(c), any payment or distribution of assets of any
Credit Party of any kind or character, whether in cash, property or securities,
shall be received by any other Credit Party on account of the Intercompany
Obligations before all Senior Obligations are paid in full, such payment or
distribution shall be received and held in trust for and shall be paid over to
the Administrative Agent for application to the payment of the Senior
Obligations until all of the Senior Obligations shall have been paid in full,
after giving effect to any concurrent payment or distribution or provision
therefor to the Agents and Lenders.

                  (d) No right of the Agents and Lenders or any other present or
future holders of any Senior Obligations to enforce the subordination provisions
herein shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of any Credit Party or by any act or failure to act,
in good faith, by any such holder, or by any noncompliance by any Credit Party
with the terms hereof, regardless of any knowledge thereof which any such holder
may have or be otherwise charged with.

                           [Signature Pages to Follow]

                                       72
<PAGE>

         IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.

BORROWERS:                              ASTA FUNDING ACQUISITION I, LLC
                                        ASTA FUNDING ACQUISITION II, LLC
                                        PALISADES COLLECTION, L.L.C.
                                        CLIFFS PORTFOLIO ACQUISITION I, LLC
                                        PALISADES ACQUISITION I, LLC
                                        PALISADES ACQUISITION II, LLC
                                        PALISADES ACQUISITION IV, LLC
                                        PALISADES ACQUISITION V, LLC
                                        PALISADES ACQUISITION VI, LLC
                                        PALISADES ACQUISITION VII, LLC
                                        PALISADES ACQUISITION VIII, LLC
                                        PALISADES ACQUISITION IX, LLC
                                        PALISADES ACQUISITION X, LLC
                                        SYLVAN ACQUISITION I, LLC
                                        OPTION CARD, LLC

                                        By: /s/Gary Stern
                                           ------------------------------------
                                        Name: Gary Stern
                                        Title: Manager

GUARANTORS:                             ASTA FUNDING, INC.

                                        By: /s/ Gary Stern
                                           ------------------------------------
                                        Name: Gary Stern
                                        Title: President

                                        COMPUTER FINANCE, LLC
                                        ASTAFUNDING.COM, LLC
                                        ASTA COMMERCIAL, LLC
                                        VATIV RECOVERY SOLUTIONS, LLC

                                        By: /s/ Gary Stern
                                           ------------------------------------
                                        Name: Gary Stern
                                        Title: Manager

<PAGE>

AGENTS:                                 ISRAEL DISCOUNT BANK OF NEW YORK,
                                        AS ADMINISTRATIVE AGENT, COLLATERAL
                                        AGENT AND CO-LEAD ARRANGER

                                        By:   /s/ James Jordan
                                           ------------------------------------
                                        Name:  James Jordan
                                             ----------------------------------
                                        Title:  Vice President
                                               --------------------------------

                                        By:   /s/ Roy Grossman
                                           ------------------------------------
                                        Name:    Roy Grossman
                                             ----------------------------------
                                        Title:  Senior Vice President
                                               --------------------------------

<PAGE>

                                        MERRILL LYNCH BUSINESS FINANCIAL
                                        SERVICES INC., AS CO-ADMINISTRATIVE
                                        AGENT AND CO-LEAD ARRANGER

                                        By:   /s/Patrick McCarthy
                                           ------------------------------------
                                        Name:  Patrick McCarthy
                                             ----------------------------------
                                        Title:  Vice President
                                               --------------------------------

<PAGE>

LENDERS:                                ISRAEL DISCOUNT BANK OF NEW YORK,
                                        AS LENDER

                                        By:   /s/ James Jordan
                                           ------------------------------------
                                        Name:   James Jordan
                                             ----------------------------------
                                        Title:  Vice President
                                               --------------------------------

                                        By:   /s/ Roy Grossman
                                           ------------------------------------
                                        Name:   Roy Grossman
                                             ----------------------------------
                                        Title:  Senior Vice President
                                               --------------------------------

<PAGE>

                                        MERRILL LYNCH BUSINESS FINANCIAL
                                        SERVICES INC., AS LENDER

                                        By:   /s/ Patrick McCarthy
                                           ------------------------------------
                                        Print Name:    Patrick McCarthy
                                                   ----------------------------
                                        Print Title: Vice President
                                                    ---------------------------

<PAGE>

                                        HARRIS N.A., AS LENDER

                                        By:   /s/ Robert G. Bomben
                                             ----------------------------------
                                        Print Name:    Robert G. Bomben
                                                   ----------------------------
                                        Print Title:   Vice President
                                                    ---------------------------

<PAGE>

                                        BANK LEUMI USA, AS LENDER

                                        By:   /s/ Mary Ellen Bianco
                                           ------------------------------------
                                        Print Name:    Mary Ellen Bianco
                                                   ----------------------------
                                        Print Title:   Vice President
                                                    ---------------------------

<PAGE>

                                        THE BERKSHIRE BANK, AS LENDER

                                        By:   /s/ Ira A. Mermelstein
                                           ------------------------------------
                                        Print Name:    Ira A. Mermelstein
                                                   ----------------------------
                                        Print Title:   Vice President
                                                    ---------------------------

<PAGE>

                                        JPMORGAN CHASE BANK, N.A., AS LENDER

                                        By:   /s/ Deborah Winkler
                                           ------------------------------------
                                        Print Name:    Deborah Winkler
                                                   ----------------------------
                                        Print Title:   Vice President
                                                    ---------------------------

<PAGE>

                                        NORTH FORK BANK, AS LENDER

                                        By:   /s/ Michael S. Burns
                                           ------------------------------------
                                        Print Name:    Michael S. Burns
                                                   ----------------------------
                                        Print Title:   Sr. Vice President
                                                    ---------------------------

<PAGE>

                               ANNEX A (RECITALS)
                                       TO
                           FOURTH AMENDED AND RESTATED
                                 LOAN AGREEMENT

                                   DEFINITIONS

                  Capitalized terms used in the Loan Documents shall have
(unless otherwise provided elsewhere in the Loan Documents) the following
respective meanings, and all references to Sections, Exhibits, Schedules or
Annexes in the following definitions shall refer to Sections, Exhibits,
Schedules or Annexes of or to the Agreement:

                  "Account Debtor" means any Person who may become obligated to
any Credit Party under, with respect to, or on account of, an Account, Chattel
Paper, Instruments or General Intangibles (including a payment intangible).

                  "Accounting Changes" has the meaning ascribed thereto in Annex
G.

                  "Accounts" means all "accounts," as such term is defined in
the Code, now owned or hereafter acquired by any Credit Party, including (a) all
accounts receivable, other receivables, book debts, consumer accounts and other
forms of obligations (including any such obligations that may be characterized
as an account or contract right under the Code), (b) all of each Credit Party's
rights in, to and under all services, (c) all rights to payment due to any
Credit Party for property sold, leased, licensed, assigned or otherwise disposed
of, for a policy of insurance issued or to be issued, for a secondary obligation
incurred or to be incurred, for energy provided or to be provided, for the use
or hire of a vessel under a charter or other contract, arising out of the use of
a credit card or charge card, or for services rendered or to be rendered by such
Credit Party or in connection with any other transaction (whether or not yet
earned by performance on the part of such Credit Party), (d) all health care
insurance receivables and (e) all collateral security of any kind, given by any
Account Debtor or any other Person with respect to any of the foregoing. The
term Accounts shall also include forms of obligations evidenced by Chattel Paper
or Instruments and Accounts relating to Auto Loans and Consumer Loans.

                  "Administrative Agent" means IDB in its capacity as
Administrative Agent for Lenders or its successor appointed pursuant to Section
9.7.

                  "Advance" or "Advances" has the meaning ascribed to it in
Section 1.1(a).

                  "Affected Lender" has the meaning ascribed to it in Section
1.13(d).

                  "Affiliate" means, with respect to any Person, (a) each Person
that, directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, 10% or more of the Stock having ordinary
voting power in the election of directors of such Person, (b) each Person that
controls, is controlled by or is under common control with such Person, (c) each
of such Person's officers, directors, joint venturers (except with respect to
the joint venturer, EMCC, Inc., and any other joint venture approved by
Administrative Agent, which approval shall not be unreasonably withheld) and
partners (d) in the case of Borrowers, the immediate family members, spouses and
lineal descendants of individuals who are Affiliates of any Borrower, and (e) an
entity that is wholly owned by Asta Funding and is engaged in the business of
acquiring and/or managing Portfolios and executes and delivers to Lender an
Affiliate Guaranty, an Affiliate Security Agreement and an Affiliate
Confirmation. For the purposes of this definition, "control" of a Person shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of voting
securities, by contract or otherwise; provided, however, that the term
"Affiliate" shall specifically exclude Administrative Agent and each Lender.

                                      A-1
<PAGE>

                  "Affiliate Confirmation" means the agreement executed by each
Affiliate in form of Exhibit C annexed to the Disclosure Document.

                  "Affiliate Guaranty" means a guaranty, in form acceptable to
Administrative Agent at the time of execution, executed by an Affiliate of all
of the Obligations.

                  "Affiliate Security Agreement" means a security agreement, in
form acceptable to Administrative Agent at the time of execution, executed by an
Affiliate granting to Collateral Agent a security interest in and lien on its
Collateral.

                  "Agent Fee Letter" means that certain letter dated as of the
date hereof, between Agents, Merrill Lynch and Borrower Representative with
respect to certain Fees to be paid from time to time by Borrowers to Agents and
Merrill Lynch.

                  "Agents" means, collectively and individually, the
Administrative Agent and the Collateral Agent.

                  "Aging Report" means an aged summary report and a non-aged
listing report for each Portfolio, each in detail reasonably satisfactory to
Lender with respect to the outstanding Portfolios as of the last day of each
month, and setting forth the name of each Portfolio, the original amount and
date of each Portfolio and aggregate Payments with respect to each Portfolio.

                  "Agreement" means this Fourth Amended and Restated Loan
Agreement by and among Borrowers, the other Credit Parties party hereto, IDB, as
Administrative Agent and Lender, and the other Lenders from time to time party
thereto, as the same may be amended, supplemented, restated or otherwise
modified from time to time.

                  "Allocable Amount" has the meaning ascribed to it in Section
12.7(a).

                  "Appendices" has the meaning ascribed to it in the recitals to
the Agreement.

                  "Applicable Advance Rate" means, as of any date of
determination by Agent from time to time, as to each Eligible New Portfolio
acquired by a Borrower:

                  (a) during the first three months such Eligible New Portfolio
         is owned by that Borrower, 75%; and

                                      A-2
<PAGE>

                  (b) during the fourth through twenty-fourth months such
         Eligible New Portfolio is owned by that Borrower, 75% less (i) 3.57%
         per month four through and including month twenty-three and (ii) 3.60%
         for month twenty-four.

                  "Applicable Base Rate Margin" means the per annum interest
rate margin from time to time in effect and payable in addition to the Base Rate
applicable to the Revolving Loan, as determined by reference to Section 1.4(a).

                  "Applicable LIBOR Margin" means the per annum interest rate
from time to time in effect and payable in addition to the LIBOR Rate applicable
to the Revolving Loan, as determined by reference to Section 1.4(a).

                  "Applicable Margins" means collectively the Applicable Base
Rate Margin and the Applicable LIBOR Margin.

                  "Assignment Agreement" has the meaning ascribed to it in
Section 9.1(a).

                  "Asta Funding" means Asta Funding, Inc.

                  "Auto Contract" means any agreement or contract or other
evidence of debt executed by an Account Debtor in connection with an Auto Loan
and any amendments thereto.

                  "Auto Loan" means all automobile loans or leases presently and
hereafter owned by Borrowers, set forth in a written report or in computer
discs, from time to time, delivered to Administrative Agent, which computer
discs shall be in the current format or any other format acceptable to
Administrative Agent, together with each Auto Contract, chattel paper,
instrument, document, general intangible, guarantee and all collateral security
held with respect to such loans.

                  "Average Collections" shall mean the average monthly amount of
the actual Collections (net of any collection costs and other fees permitted to
be deducted from Collections by the express terms of the servicing agreement
that corresponds to such Collections) with respect to an Eligible Portfolio in
the three (3) full calendar months immediately preceding the date of computation
or determination. Average Collections shall exclude Proceeds from the sale of
Portfolios.

                  "Bankruptcy Code" means the provisions of Title 11 of the
United States Code, 11 U.S.C. ss.ss.101 et seq.

                  "Base Rate" means, for any day, a floating rate equal to the
rate established from time to time by IDB its "Prime Rate". Each change in any
interest rate provided for in the Agreement based upon the Base Rate shall take
effect at the time of such change in the Base Rate.

                  "Base Rate Loan" means a Revolving Loan or portion thereof
bearing interest by reference to the Base Rate.

                                      A-3
<PAGE>

                  "Blocked Accounts" has the meaning ascribed to it in Annex C.

                  "Books and Records" means all records, in any format
whatsoever and the computer software, programs and access codes, relating to
each Consumer Loan and the Collateral.

                  "Borrower Representative" means Palisades in its capacity as
Borrower Representative pursuant to the provisions of Section 1.1(b).

                  "Borrowers" and "Borrower" have the respective meanings
ascribed thereto in the preamble to the Agreement.

                  "Borrowing Availability" means as of any date of determination
as to all Borrowers, the lesser of (i) the Maximum Amount and (ii) the Borrowing
Base, in each case, less the Revolving Loan then outstanding.

                  "Borrowing Base" means, as of any date of determination by
Agent from time to time, an amount equal to the sum at such time of:

                  (a) the Applicable Advance Rate times the Loan Value of
          Eligible New Portfolios, plus

                  (b) the lesser of:

                           (i) the sum of the Loan Value of Eligible Existing
          Portfolios, or

                           (ii)     $20,000,000;

in each case, less any Reserves established by Administrative Agent at such
time; and provided, that, at no time shall Advances against (1) Telecom
Receivables exceed thirty-five percent (35%) of the sum of (a) and (b) of this
definition at the date of determination, (2) any receivables or receivable
classes relating to payments by consumers for computers and furniture exceed
twenty percent (20%) of the sum of (a) and (b) of this definition, or (3) any
other receivables or receivables class not specifically permitted under this
Agreement exceed twenty percent (20%) of the sum of (a) and (b) of this
definition.

                  "Borrowing Base Certificate" means a certificate to be
executed and delivered from time to time by Borrower Representative with respect
to the Borrowing Base in the form attached to the Disclosure Document as Exhibit
4.1(b)- 2.

                  "Business Day" means any day that is not a Saturday, a Sunday
or a day on which banks are required or permitted to be closed in the State of
New York and in reference to LIBOR Loans shall mean any such day that is also a
LIBOR Business Day.

                  "Capital Expenditures" means, with respect to any Person, all
expenditures (by the expenditure of cash or the incurrence of Indebtedness) by
such Person during any measuring period for any fixed assets or improvements or
for replacements, substitutions or additions thereto that have a useful life of
more than one year and that are required to be capitalized under GAAP.

                                      A-4
<PAGE>

                  "Capital Lease" means, with respect to any Person, any lease
of any property (whether real, personal or mixed) by such Person as lessee that,
in accordance with GAAP, would be required to be classified and accounted for as
a capital lease on a balance sheet of such Person.

                  "Capital Lease Obligation" means, with respect to any Capital
Lease of any Person, the amount of the obligation of the lessee thereunder that,
in accordance with GAAP, would appear on a balance sheet of such lessee in
respect of such Capital Lease.

                  "Cash Collateral Account" has the meaning ascribed to it Annex
B.

                  "Cash Flow Leverage Ratio" means, with respect to Borrowers,
on a consolidated basis, the ratio of (a) Funded Debt, to (b) Free Cash Flow for
the twelve months ending on that date of determination.

                  "Cash Equivalent Investments" means investments deposited with
a Lender which can easily, readily and quickly be converted into cash, including
Treasury bills (T-bills), money market funds, short-term certificates of
deposit, U.S. Government Securities, and savings accounts.

                  "Cash Management Systems" has the meaning ascribed to it in
Section 1.5.

                  "Certificate of Exemption" has the meaning ascribed to it in
Section 1.12(c).

                  "Change of Control" means any event, transaction or occurrence
as a result of which (a) Asta Funding ceases to own and control all of the
economic and voting rights associated with all of the outstanding capital Stock
of the Borrowers, except Cliffs, (b) Palisades ceases to own and control all of
the economic and voting rights associated with all of the outstanding capital
Stock of Cliffs, (c) during any period of twelve consecutive calendar months,
individuals who at the beginning of such period constituted the board of
directors of Asta Funding (together with any new directors whose election by the
board of directors of Asta Funding or whose nomination for election by the
Stockholders of Asta Funding was approved by a vote of the majority of the
directors then still in office who either were directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason other than death or disability to constitute a
majority of the directors then in office, (d) Gary Stern shall no longer be
acting as the president, chief executive officer or manager of the Borrowers
having substantially the same duties and responsibilities as on the Closing
Date, unless the Borrowers shall have within a reasonable period of time not to
exceed 180 days obtained a successor of at least comparable background,
experience and ability who is reasonably acceptable to the Requisite Lenders, or
(e) any two of the Senior Executives shall no longer be members of the
Borrowers' senior management having substantially the same duties and
responsibilities as on the Closing Date, unless the Borrowers shall have within
a reasonable period of time not to exceed 180 days obtained successors of at
least comparable background, experience and ability who are reasonably
acceptable to the Requisite Lenders. For the purposes of this definition,
"control" of a Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of its management or policies, whether
through the ownership of voting securities, by contract or otherwise.

                                      A-5
<PAGE>

                  "Charges" means all federal, state, county, city, municipal,
local, foreign or other governmental taxes (including taxes owed to the PBGC at
the time due and payable), levies, assessments, charges, liens, claims or
encumbrances upon or relating to (a) the Collateral, (b) the Obligations, (c)
the employees, payroll, income or gross receipts of any Credit Party, (d) any
Credit Party's ownership or use of any properties or other assets, or (e) any
other aspect of any Credit Party's business.

                  "Chattel Paper" means any "chattel paper," as such term is
defined in the Code, including electronic chattel paper, now owned or hereafter
acquired by any Credit Party.

                  "Cliffs" means Cliffs Portfolio Acquisition I, LLC.

                  "Closing Checklist" means the schedule, including all
appendices, exhibits or schedules thereto, listing certain documents and
information to be delivered in connection with the Agreement, the other Loan
Documents and the transactions contemplated thereunder, substantially in the
form attached hereto as Annex D.

                  "Closing Date" means July 10, 2006.

                  "Code" means the Uniform Commercial Code as the same may, from
time to time, be enacted and in effect in the State of New York; provided, that
to the extent that the Code is used to define any term herein or in any Loan
Document and such term is defined differently in different Articles or Divisions
of the Code, the definition of such term contained in Articles or Divisions 1
and 9 shall govern; provided further, that in the event that, by reason of
mandatory provisions of law, any or all of the attachment, perfection or
priority of, or remedies with respect to, Administrative Agent's or any Lender's
Lien on any Collateral is governed by the Uniform Commercial Code as enacted and
in effect in a jurisdiction other than the State of New York, the term "Code"
shall mean the Uniform Commercial Code as enacted and in effect in such other
jurisdiction solely for purposes of the provisions thereof relating to such
attachment, perfection, priority or remedies and for purposes of definitions
related to such provisions.

                  "Collateral" means the property covered by the Security
Agreement and the other Collateral Documents and any other property, real or
personal, tangible or intangible, now existing or hereafter acquired, that may
at any time be or become subject to a security interest or Lien in favor of
Collateral Agent, for the benefit of the Agents and Lenders, to secure the
Obligations.

                  "Collateral Agent" means IDB in its capacity as Collateral
Agent for Lenders or its successor appointed pursuant to Section 9.7.

                  "Collateral Documents" means the Security Agreement, the
Pledge Agreements, the Guaranties, and all similar agreements entered into
guaranteeing payment of, or granting a Lien upon property as security for
payment of, the Obligations.

                                      A-6
<PAGE>

                  "Collateral Reports" means the reports with respect to the
Collateral referred to in Annex F.

                  "Collection Account" means that certain account of
Administrative Agent, account number 03-3360-6 in the name of Administrative
Agent at Administrative Agent in New York, New York ABA No. 026009768, or such
other account as may be specified in writing by Administrative Agent as the
"Collection Account".

                  "Collection Report" means a report in detail satisfactory to
Administrative Agent as to all Collections received during each month and the
Account or Consumer Loan to which it applies.

                  "Collections" mean all Payments actually received and
collected by or on behalf of the Borrowers, any Credit Party or any Servicing
Agent with respect to any Consumer Loan, which is included in the Collateral and
is remitted to the Administrative Agent as provided in this Agreement.

                  "Collections Multiple Value" means the Average Collections for
an Eligible Existing Portfolio, multiplied by six (6).

                  "Commitment Termination Date" means the earliest of (a) July
10, 2009, (b) the date of termination of Lenders' obligations to make Advances
or permit the existing Revolving Loan to remain outstanding pursuant to Section
8.2(b), and (c) the date of indefeasible prepayment in full by Borrowers of the
Revolving Loan, and the permanent reduction of all Commitments to zero dollars
($0).

                  "Commitments" means (a) as to any Lender, the aggregate of
such Lender's Revolving Loan Commitment as set forth on Annex J to the Agreement
or in the most recent Assignment Agreement executed by such Lender and (b) as to
all Lenders, the aggregate of all Lenders' Revolving Loan Commitments, as to
each of clauses (a) and (b), as such Commitments may be reduced, amortized or
adjusted from time to time in accordance with the Agreement.

                  "Compliance Certificate" has the meaning ascribed to it in
Annex E.

                  "Concentration Accounts" has the meaning ascribed to it in
Annex C.

                  "Consumer Loans" means all Credit Card Receivables, Auto
Loans, Telecom Receivables and any other type of consumer loan acceptable to
Administrative Agent now or hereafter owned or held by the Borrowers.

                  "Contracts" means all "contracts," as such term is defined in
the Code, now owned or hereafter acquired by any Credit Party, in any event,
including all contracts, undertakings, or agreements (other than rights
evidenced by Chattel Paper, Documents or Instruments) in or under which any
Credit Party may now or hereafter have any right, title or interest, including
any agreement relating to the terms of payment or the terms of performance of
any Account.

                                      A-7
<PAGE>

                  "Copyright License" means any and all rights now owned or
hereafter acquired by any Credit Party under any written agreement granting any
right to use any Copyright or Copyright registration.

                  "Copyrights" means all of the following now owned or hereafter
adopted or acquired by any Credit Party: (a) all copyrights (whether registered
or unregistered), all registrations and recordings thereof, and all applications
in connection therewith, including all registrations, recordings and
applications in the United States Copyright Office or in any similar office or
agency of the United States, any state or territory thereof, or any other
country or any political subdivision thereof, and (b) all reissues, extensions
or renewals thereof.

                  "Credit Card Receivables" means each of the performing and
non-performing credit card receivables and/or loans presently and hereafter
owned by Borrowers, as fully set forth in a computer disc delivered to
Administrative Agent, which shall be in a format acceptable to the
Administrative Agent, whether such is deemed to consist of accounts or general
intangibles under the Code, together with any chattel paper, instrument,
document, general intangible, guarantee and other collateral security held by
Borrowers with respect to such receivables and/or loans, together with the
proceeds thereof.

                  "Credit Party Pledge Agreement" means the Pledge Agreement
dated on or about May 11, 2004 executed by each of the Credit Parties, except
Non-Credit Party Affiliates, in favor of Administrative Agent, on behalf of
itself and Lenders, pledging all Stock of its Subsidiaries, if any, and all
Intercompany Notes owing to or held by it.

                  "Credit Parties" means each Guarantor, each Borrower, and each
of their respective Subsidiaries, except Non-Credit Party Affiliates.

                  "Default" means any event that, with the passage of time or
notice or both, would, unless cured or waived, become an Event of Default.

                  "Default Rate" has the meaning ascribed to it in Section
1.4(d).

                  "Deposit Accounts" means all "deposit accounts" as such term
is defined in the Code, now or hereafter held in the name of any Credit Party.

                  "Disaster Recovery Plan" means the plan, pursuant to which all
records, books, accounts, entries, and other information (financial and
otherwise) regarding the business activities and operations of the Credit
Parties, including, without limitation, past and up-to-date information
regarding the Collateral, the Accounts, the Portfolios, the Payments, and the
Collections (collectively, the "Critical Information"), is maintained in
electronic format at the physical facilities of Credit Parties located in the
States of New Jersey and Pennsylvania. All Critical Information generated by the
business operations of the Credit Parties at the New Jersey physical facility is
saved and backed up on a daily basis for safeguarding and safekeeping at the New
Jersey physical facility, and all Critical Information generated by the business
operations of the Credit Parties at the Pennsylvania physical facility is saved
and backed up on a daily basis for safeguarding and safekeeping at the
Pennsylvania physical facility. All Critical Information generated by the
business operations of the Credit Parties at the New Jersey physical facility
(including all Critical Information stored at such physical facility) is saved
and backed up on a daily basis for safeguarding and safekeeping at the
Pennsylvania physical facility, and all Critical Information generated by the
business operations of the Credit Parties at the Pennsylvania physical facility
(including all Critical Information stored at such physical facility) is saved
and backed up on a daily basis for safeguarding and safekeeping at the New
Jersey physical facility. All Critical Information generated by the business
operations of the Credit Parties at the New Jersey and Pennsylvania physical
facilities and all Critical Information saved or backed up at the New Jersey and
Pennsylvania physical facilities (including all Critical Information stored at
such physical facilities) is copied in electronic format in duplicate, and one
copy is stored at the New Jersey facility in a fire-proof safe and the other is
removed on a daily basis from such physical facilities and kept at a safe
location, which location may include the residence of a key employee of the
Credit Parties.

                                      A-8
<PAGE>

                  "Disbursement Accounts" has the meaning ascribed to it in
Annex C.

                  "Disclosure Document" means the document dated as of the date
hereof by Borrowers and all other Credit Parties signatory to the Agreement with
respect to certain disclosures made to Administrative Agent and Lenders in the
Agreement, as may be modified from time to time as provided in the Agreement.
All disclosures, representations and warranties contained in the Disclosure
Document shall be acceptable to Administrative Agent.

                  "Documents" means all "documents," as such term is defined in
the Code, now owned or hereafter acquired by any Credit Party, wherever located.

                  "Dollars" or "$" means lawful currency of the United States of
America.

                  "EBITDA" means, with respect to any Person for any fiscal
period, without duplication, net income minus extraordinary gains plus interest,
depreciation, amortization, income taxes, accrued stock option compensation
expense and extraordinary losses.

                  "Effective Date" means the date on which the Agreement shall
become effective, which shall be the date on which (i) Borrowers and Guarantors,
along with the Agents, Merrill Lynch and the Lenders shall have executed and
delivered the Agreement and the other Loan Documents, and (ii) all of the
conditions precedent to the effectiveness of the Agreement, including, without
limitation, the conditions precedent set forth in Section 2 of the Agreement,
and the conditions set forth in Annex C attached to the Agreement, shall have
been satisfied and performed in a manner reasonably acceptable to Administrative
Agent and Lenders.

                  "Eligible Existing Portfolio" shall mean an Existing Portfolio
as to which (i) the Administrative Agent, on behalf of the Lenders has a first
priority, perfected lien on the Accounts comprising the Portfolio and there are
no recorded or unrecorded Liens against the Accounts for the benefit of any
party other than the Administrative Agent, and (ii) the Borrower's rights to
Collections or sales proceeds generated by the Portfolio are not limited by the
contract rights of a third party, other than Liens pursuant to servicing and
collection agreements entered into in the ordinary course of business in
accordance with the terms, conditions and provisions of the Agreement.

                                      A-9
<PAGE>

                  "Eligible New Portfolio" shall mean a New Portfolio as to
which (i) the Administrative Agent, on behalf of the Lenders has a first
priority, perfected lien on the Accounts comprising the Portfolio and there are
no recorded or unrecorded Liens against the Accounts for the benefit of any
party other than the Administrative Agent, and (ii) the Borrower's rights to
Collections or sales proceeds generated by the Portfolio are not limited by the
contract rights of a third party, other than Liens pursuant to servicing and
collection agreements entered into in the ordinary course of business in
accordance with the terms, conditions and provisions of the Agreement,
including, without limitation, the provisions of Section 6.23 of the Agreement.

                  "Eligible Portfolios" means collectively and individually,
Eligible Existing Portfolios and Eligible New Portfolios.

                  "Environmental Laws" means all applicable federal, state,
local and foreign laws, statutes, ordinances, codes, rules, and regulations in
effect, and any applicable judicial or administrative interpretation thereof,
including any applicable judicial or administrative order, consent decree, order
or judgment, imposing liability or standards of conduct for or relating to the
regulation and protection of human health, safety, the environment and natural
resources (including ambient air, surface water, groundwater, wetlands, land
surface or subsurface strata, wildlife, aquatic species and vegetation).
Environmental Laws include the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (42 U.S.C. ss.ss. 9601 et seq.)
("CERCLA"); the Hazardous Materials Transportation Authorization Act of 1994 (49
U.S.C. ss.ss. 5101 et seq.); the Federal Insecticide, Fungicide, and Rodenticide
Act (7 U.S.C. ss.ss. 136 et seq.); the Solid Waste Disposal Act (42 U.S.C.
ss.ss. 6901 et seq.); the Toxic Substance Control Act (15 U.S.C. ss.ss. 2601 et
seq.); the Clean Air Act (42 U.S.C. ss.ss. 7401 et seq.); the Federal Water
Pollution Control Act (33 U.S.C. ss.ss. 1251 et seq.); the Occupational Safety
and Health Act (29 U.S.C. ss.ss. 651 et seq.); and the Safe Drinking Water Act
(42 U.S.C. ss.ss. 300(f) et seq.), and any and all regulations promulgated
thereunder, and all analogous state, local and foreign counterparts or
equivalents and any transfer of ownership notification or approval statutes.

                  "Environmental Liabilities" means, with respect to any Person,
all liabilities, obligations, responsibilities, response, remedial and removal
costs, investigation and feasibility study costs, capital costs, operation and
maintenance costs, losses, damages, punitive damages, property damages, natural
resource damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts
and consultants), fines, penalties, sanctions and interest incurred as a result
of or related to any claim, suit, action, investigation, proceeding or demand by
any Person, whether based in contract, tort, implied or express warranty, strict
liability, criminal or civil statute or common law, including any arising under
or related to any Environmental Laws, Environmental Permits, or in connection
with any Release or threatened Release or presence of a Hazardous Material
whether on, at, in, under, from or about or in the vicinity of any real or
personal property.

                  "Environmental Permits" means all permits, licenses,
authorizations, certificates, approvals or registrations required by any
Governmental Authority under any Environmental Laws.

                                      A-10
<PAGE>

                  "Equipment" means all "equipment," as such term is defined in
the Code, now owned or hereafter acquired by any Credit Party, wherever located
and, in any event, including all such Credit Party's machinery and equipment,
including processing equipment, conveyors, machine tools, data processing and
computer equipment, including embedded software and peripheral equipment and all
engineering, processing and manufacturing equipment, office machinery,
furniture, materials handling equipment, tools, attachments, accessories,
automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor
vehicles, rolling stock and other equipment of every kind and nature, trade
fixtures and fixtures not forming a part of real property, together with all
additions and accessions thereto, replacements therefor, all parts therefor, all
substitutes for any of the foregoing, fuel therefor, and all manuals, drawings,
instructions, warranties and rights with respect thereto, and all products and
proceeds thereof and condemnation awards and insurance proceeds with respect
thereto.

                  "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any regulations promulgated thereunder.

                  "ERISA Affiliate" means, with respect to any Credit Party, any
trade or business (whether or not incorporated) that, together with such Credit
Party, are treated as a single employer within the meaning of Sections 414(b),
(c), (m) or (o) of the IRC.

                  "ERISA Event" means, with respect to any Credit Party or any
ERISA Affiliate, (a) any event described in Section 4043(c) of ERISA with
respect to a Title IV Plan; (b) the withdrawal of any Credit Party or ERISA
Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan
year in which it was a substantial employer, as defined in Section 4001(a)(2) of
ERISA; (c) the complete or partial withdrawal of any Credit Party or any ERISA
Affiliate from any Multiemployer Plan; (d) the filing of a notice of intent to
terminate a Title IV Plan or the treatment of a plan amendment as a termination
under Section 4041 of ERISA; (e) the institution of proceedings to terminate a
Title IV Plan or Multiemployer Plan by the PBGC; (f) the failure by any Credit
Party or ERISA Affiliate to make when due required contributions to a
Multiemployer Plan or Title IV Plan unless such failure is cured within 30 days;
(g) any other event or condition that could reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Title IV Plan or Multiemployer Plan or for the
imposition of liability under Section 4069 or 4212(c) of ERISA; (h) the
termination of a Multiemployer Plan under Section 4041A of ERISA or the
reorganization or insolvency of a Multiemployer Plan under Section 4241 or 4245
of ERISA; or (i) the revocation or threatened revocation of a Qualified Plan's
qualification or tax exempt status; or (j) the termination of a Plan described
in Section 4064 of ERISA; but in each such case, only if and to the extent it
could be reasonably be expected to result (directly or indirectly, individually
or in the aggregate) in a Material Adverse Effect.

                  "ESOP" means a Plan that is intended to satisfy the
requirements of Section 4975(e)(7) of the IRC.

                  "Event of Default" has the meaning ascribed to it in Section
8.1.

                  "Existing Debt" has the meaning ascribed to it in the recitals
to the Agreement.

                                      A-11
<PAGE>

                  "Existing Portfolio" shall mean a Portfolio that a Borrower
has owned for more than twenty four (24) months as to which such Borrower has
all right, title and interest in the Accounts comprising the Portfolio.

                  "Fair Labor Standards Act" means the Fair Labor Standards Act,
 29 U.S.C. ss.201 et seq.

                  "Federal Funds Rate" means, for any day, a floating rate equal
to the weighted average of the rates on overnight Federal funds transactions
among members of the Federal Reserve System, as determined by Administrative
Agent in its sole discretion, which determination shall be final, binding and
conclusive (absent manifest error).

                  "Federal Reserve Board" means the Board of Governors of the
Federal Reserve System.

                  "Fees" means any and all fees payable to Administrative Agent
or any Lender pursuant to the Agreement or any of the other Loan Documents.

                  "Financial Covenants" means the financial covenants set forth
in Annex G.

                  "Financial Statements" means the consolidated (together with
consolidating worksheets) income statements, statements of cash flows and
balance sheets of Asta Funding delivered in accordance with Section 3.4 and
Annex E.

                  "First Adjustment Date" has the meaning assigned to it in
Section 1.4(a).

                  "Fiscal Month" means any of the monthly accounting periods of
Borrowers.

                  "Fiscal Quarter" means any of the quarterly accounting periods
of Borrowers, ending on March 31, June 30, September 30 and December 31 of each
year.

                  "Fiscal Year" means any of the annual accounting periods of
Borrowers ending on September 30 of each year, subject to any change in the
Fiscal Year permitted under the Agreement.

                  "Fixed Charges" means, with respect to any Person for any
fiscal period, the sum of interest, scheduled payments of principal (if any),
capital expenditures, cash taxes and dividends.

                  "Fixed Charge Coverage Ratio" means, with respect to any
Person for any fiscal period, the ratio of EBITDA to Fixed Charges.

                  "Fixtures" means all "fixtures" as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party.

                  "Foreign Lender" has the meaning ascribed to it in Section
1.12(c).

                                      A-12
<PAGE>

                  "Foreign Person" has the meaning ascribed to it in Section
1.12(c).

                  "Free Cash Flow" means as of any date of determination the sum
of (a) the amount of all Collections reported as principal collected on Accounts
acquired for liquidation (as reported in the most recent statement of cash flow
in the financial statements delivered to Administrative Agent and Lenders, but
excluding Collections of Accounts relating to Non-Recourse Debt), plus (b) net
income (but excluding net income of all Non-Credit Party Affiliates), less (c)
dividends paid, less (d) Capital Expenditures.

                  "Funded Debt" means, with respect to any Person, without
duplication, all Indebtedness for borrowed money evidenced by notes, bonds,
debentures, or similar evidences of Indebtedness, and specifically including
Capital Lease Obligations, current maturities of long-term debt, revolving
credit and short-term debt, and also including, in the case of Borrowers, the
Obligations and, without duplication, Guaranteed Indebtedness consisting of
guaranties of Funded Debt of other Persons. The term Funded Debt shall not
include Non-Recourse Debt.

                  "GAAP" means generally accepted accounting principles in the
United States of America consistently applied, as such term is further defined
in Annex G to the Agreement.

                  "General Intangibles" means all "general intangibles," as such
term is defined in the Code, now owned or hereafter acquired by any Credit
Party, including all right, title and interest that such Credit Party may now or
hereafter have in or under any Contract, all payment intangibles, customer
lists, Licenses, Copyrights, Trademarks, Patents, and all applications therefor
and reissues, extensions or renewals thereof, rights in Intellectual Property,
interests in partnerships, joint ventures and other business associations,
including, without limitation, Non-Recourse Investments, licenses, permits,
copyrights, trade secrets, proprietary or confidential information, inventions
(whether or not patented or patentable), technical information, procedures,
designs, knowledge, know-how, software, data bases, data, skill, expertise,
experience, processes, models, drawings, materials and records, goodwill
(including the goodwill associated with any Trademark or Trademark License), all
rights and claims in or under insurance policies (including insurance for fire,
damage, loss and casualty, whether covering personal property, real property,
tangible rights or intangible rights, all liability, life, key man and business
interruption insurance, and all unearned premiums), uncertificated securities,
choses in action, deposit, checking and other bank accounts, rights to receive
tax refunds and other payments, rights to receive dividends, distributions,
cash, Instruments and other property in respect of or in exchange for pledged
Stock and Investment Property, rights of indemnification, all books and records,
correspondence, credit files, invoices and other papers, including without
limitation all tapes, cards, computer runs and other papers and documents in the
possession or under the control of such Credit Party or any computer bureau or
service company from time to time acting for such Credit Party.

                  "Goods" means all "goods" as defined in the Code, now owned or
hereafter acquired by any Credit Party, wherever located, including embedded
software to the extent included in "goods" as defined in the Code, manufactured
homes, standing timber that is cut and removed for sale and unborn young of
animals.

                                      A-13
<PAGE>

                  "Governmental Authority" means any nation or government, any
state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.

                  "Guaranteed Indebtedness" means as to any Person, any
obligation of such Person guaranteeing, providing comfort or otherwise
supporting any Indebtedness, lease, dividend, or other obligation ("primary
obligation") of any other Person (the "primary obligor") in any manner,
including any obligation or arrangement of such Person to (a) purchase or
repurchase any such primary obligation, (b) advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency or any balance sheet condition of the primary obligor, (c)
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, (d) protect the beneficiary of such
arrangement from loss (other than product warranties given in the ordinary
course of business) or (e) indemnify the owner of such primary obligation
against loss in respect thereof. The amount of any Guaranteed Indebtedness at
any time shall be deemed to be an amount equal to the lesser at such time of (x)
the stated or determinable amount of the primary obligation in respect of which
such Guaranteed Indebtedness is incurred and (y) the maximum stated or
determinable amount for which such Person may be liable pursuant to the terms of
the instrument embodying such Guaranteed Indebtedness, or, if not stated or
determinable, the maximum reasonably anticipated liability (assuming full
performance) in respect thereof.

                  "Guaranty" means the guaranty dated on or about May 11, 2004,
as amended from time to time, executed by Asta Funding and each Subsidiary of a
Borrower in favor of Administrative Agent and Lenders.

                  "Guaranties" means the Guaranty and any other guaranty
executed by any Guarantor in favor of Administrative Agent and Lenders in
respect of the Obligations.

                  "Guarantors" means each Guarantor described in the preamble to
this Agreement, each Subsidiary of any Borrower that is not a Borrower, and each
other Person, if any, that executes a guaranty or other similar agreement in
favor of Administrative Agent, for itself and the ratable benefit of Lenders, in
connection with the transactions contemplated by the Agreement and the other
Loan Documents.

                  "Guarantor Payment" has the meaning ascribed to it in Section
12.7(a).

                  "Hazardous Material" means any substance, material or waste
that is regulated by, or forms the basis of liability now or hereafter under,
any Environmental Laws, including any material or substance that is (a) defined
as a "solid waste," "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste," "restricted hazardous waste,"
"pollutant," "contaminant," "hazardous constituent," "special waste," "toxic
substance" or other similar term or phrase under any Environmental Laws, or (b)
petroleum or any fraction or by-product thereof, asbestos, polychlorinated
biphenyls (PCB's), or any radioactive substance.

                                      A-14
<PAGE>

                  "IDB" means Israel Discount Bank of New York, a New York
banking corporation.

                  "Inactive Subsidiaries" means Asta Auto Receivables Company,
E.R. Receivables Corp., LLC, RAC Acceptance Corp., LLC, Asta Funding Acquisition
III, LLC, AstaFunding.Com, LLC, Topps Promotion, LLC, and Asta Commercial, LLC.

                  "Indebtedness" means, with respect to any Person, without
duplication, (a) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property payment for which is deferred 6 months or
more, but excluding obligations to trade creditors incurred in the ordinary
course of business that are unsecured and not overdue by more than 6 months
unless being contested in good faith, (b) all reimbursement and other
obligations with respect to letters of credit, bankers' acceptances and surety
bonds, whether or not matured, (c) all obligations evidenced by notes, bonds,
debentures or similar instruments, (d) all indebtedness created or arising under
any conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all Capital Lease Obligations and the present
value (discounted at the Base Rate as in effect on the Closing Date) of future
rental payments under all synthetic leases, (f) all obligations of such Person
under commodity purchase or option agreements or other commodity price hedging
arrangements, in each case whether contingent or matured, (g) all obligations of
such Person under any foreign exchange contract, currency swap agreement,
interest rate swap, cap or collar agreement or other similar agreement or
arrangement designed to alter the risks of that Person arising from fluctuations
in currency values or interest rates, in each case whether contingent or
matured, (h) all Indebtedness referred to above secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien upon or in property or other assets (including accounts
and contract rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness, and (i) the
Obligations.

                  "Indemnified Liabilities" has the meaning ascribed to it in
Section 1.10.

                  "Indemnified Person" has the meaning ascribed to in Section
1.10.

                  "Instruments" means all "instruments," as such term is defined
in the Code, now owned or hereafter acquired by any Credit Party, wherever
located, and, in any event, including all certificated securities, all
certificates of deposit, and all promissory notes and other evidences of
indebtedness, other than instruments that constitute, or are a part of a group
of writings that constitute, Chattel Paper.

                  "Intellectual Property" means any and all Licenses, Patents,
Copyrights, Trademarks, and the goodwill associated with such Trademarks.

                  "Intercompany Notes" has the meaning ascribed to it in Section
6.3.

                  "Intercompany Obligations" has the meaning ascribed to it in
Section 12.9(a).

                                      A-15
<PAGE>

                  "Interest Expense" means, with respect to any Person for any
fiscal period, interest expense (whether cash or non-cash) of such Person
determined in accordance with GAAP for the relevant period ended on such date,
including, interest expense with respect to any Funded Debt of such Person and
interest expense for the relevant period that has been capitalized on the
balance sheet of such Person.

                  "Interest Payment Date" means (a) as to any Base Rate Loan,
the first Business Day of each month to occur while such Loan is outstanding,
and (b) as to any LIBOR Loan, the last day of the applicable LIBOR Period;
provided that, in the case of a LIBOR Loan having a six (6) month Interest
Period, also on the three (3) month anniversary of the first day of such
Interest Period, and provided further that, in addition to the foregoing, each
of (x) the date upon which all of the Commitments have been terminated and the
Revolving Loan have been paid in full and (y) the Commitment Termination Date
shall be deemed to be an "Interest Payment Date" with respect to any interest
that has then accrued under the Agreement.

                  "Inventory" means all "inventory," as such term is defined in
the Code, now owned or hereafter acquired by any Credit Party, wherever located,
and in any event including inventory, merchandise, goods and other personal
property that are held by or on behalf of any Credit Party for sale or lease or
are furnished or are to be furnished under a contract of service, or that
constitute raw materials, work in process, finished goods, returned goods, or
materials or supplies of any kind, nature or description used or consumed or to
be used or consumed in such Credit Party's business or in the processing,
production, packaging, promotion, delivery or shipping of the same, including
all supplies and embedded software.

                  "Investment Property" means all "investment property" as such
term is defined in the Code now owned or hereafter acquired by any Credit Party,
wherever located, including (i) all securities, whether certificated or
uncertificated, including stocks, bonds, interests in limited liability
companies, partnership interests, treasuries, certificates of deposit, and
mutual fund shares; (ii) all securities entitlements of any Credit Party,
including the rights of any Credit Party to any securities account and the
financial assets held by a securities intermediary in such securities account
and any free credit balance or other money owing by any securities intermediary
with respect to that account; (iii) all securities accounts of any Credit Party;
(iv) all commodity contracts of any Credit Party; and (v) all commodity accounts
held by any Credit Party.

                  "IRC" means the Internal Revenue Code of 1986 and all
regulations promulgated thereunder.

                  "IRS" means the Internal Revenue Service.

                  "Lenders" means IDB, the other Lenders named on the signature
pages of the Agreement, and, if any such Lender shall decide to assign all or
any portion of the Obligations, such term shall include any assignee of such
Lender.

                  "Lenders' Fee Letter" means that certain letter dated as of
the date hereof, between Administrative Agent, for itself and as Administrative
Agent for the Lenders, and Borrower Representative with respect to certain Fees
to be paid from time to time by Borrowers to Lenders.

                                      A-16
<PAGE>

                  "Leverage Ratio" means, with respect to Asta Funding, on a
consolidated basis, the ratio of (a) Total Liabilities, to (b) Tangible Net
Worth on the date of determination.

                  "LIBOR Business Day" means a Business Day on which banks in
the City of London are generally open for interbank or foreign exchange
transactions.

                  "LIBOR Loan" means a Loan or any portion thereof bearing
interest by reference to the LIBOR Rate.

                  "LIBOR Period" means, with respect to any LIBOR Loan, each
period commencing on a LIBOR Business Day selected by Borrower Representative
pursuant to the Agreement and ending one, two, three or six months thereafter,
as selected by Borrower Representative's irrevocable notice to Administrative
Agent as set forth in Section 1.5(e); provided, that the foregoing provision
relating to LIBOR Periods is subject to the following:

                  (a) if any LIBOR Period would otherwise end on a day that is
         not a LIBOR Business Day, such LIBOR Period shall be extended to the
         next succeeding LIBOR Business Day unless the result of such extension
         would be to carry such LIBOR Period into another calendar month in
         which event such LIBOR Period shall end on the immediately preceding
         LIBOR Business Day;

                  (b) no LIBOR Period may extend beyond the Commitment
         Termination Date;

                  (c) any LIBOR Period that begins on the last LIBOR 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 LIBOR
         Period) shall end on the last LIBOR Business Day of a calendar month;

                  (d) Borrower Representative shall select LIBOR Periods so as
         not to require a payment or prepayment of any LIBOR Loan during a LIBOR
         Period for such Loan; and

                  (e) Borrower Representative shall select LIBOR Periods so that
         there shall be no more than 5 separate LIBOR Loans in existence at any
         one time.

                  "LIBOR Rate" means for each LIBOR Period, a rate of interest
determined by Administrative Agent equal to:

                  (a) the offered rate for deposits in United States Dollars for
the applicable LIBOR Period that appears on Telerate Page 3750 as of 11:00 a.m.
(London time), on the second full LIBOR Business Day next preceding the first
day of such LIBOR Period (unless such date is not a Business Day, in which event
the next succeeding Business Day will be used); divided by

                  (b) a number equal to 1.0 minus the aggregate (but without
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day that is 2 LIBOR Business Days prior to the
beginning of such LIBOR Period (including basic, supplemental, marginal and
emergency reserves under any regulations of the Federal Reserve Board or other
Governmental Authority having jurisdiction with respect thereto, as now and from
time to time in effect) for Eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of the Federal Reserve Board that are
required to be maintained by a member bank of the Federal Reserve System.

                                      A-17
<PAGE>

                  If such interest rates shall cease to be available from
Telerate News Service, the LIBOR Rate shall be determined from such financial
reporting service or other information as shall be mutually acceptable to
Administrative Agent and Borrower Representative with notice to the Lenders.

                  "License" means any Copyright License, Patent License,
Trademark License or other license of rights or interests now held or hereafter
acquired by any Credit Party.

                  "Lien" means any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security interest
under the Code or comparable law of any jurisdiction).

                  "Litigation" has the meaning ascribed to it in Section 3.13.

                  "Loan" means any Revolving Loan.

                  "Loan Account" has the meaning ascribed to it in Section 1.9.

                  "Loan Documents" means the Agreement, the Notes, the
Collateral Documents and all other agreements, instruments, documents and
certificates identified in the Closing Checklist executed and delivered to, or
in favor of, Administrative Agent or any Lenders (including, without limitation,
the Disclosure Document and all exhibits attached thereto or referred to
therein) and including all other pledges, powers of attorney, consents,
assignments, contracts, notices, and all other written matter whether
heretofore, now or hereafter executed by or on behalf of any Credit Party, or
any employee of any Credit Party, and delivered to Administrative Agent or any
Lender in connection with the Agreement or the transactions contemplated
thereby. Any reference in the Agreement or any other Loan Document to a Loan
Document shall include all appendices, exhibits or schedules thereto, and all
amendments, restatements, supplements or other modifications thereto, and shall
refer to the Agreement or such Loan Document as the same may be in effect at any
and all times such reference becomes operative.

                  "Loan Value of Eligible Existing Portfolio" means its
Collections Multiple Value, provided that in no event shall the Loan Value of
Eligible Existing Portfolio exceed an amount equal to the original cost of
acquiring such Existing Portfolio less the proceeds from the sale of any
Accounts in such Existing Portfolio to third parties.

                                      A-18
<PAGE>

                  "Loan Value of Eligible New Portfolio" means the Borrowers'
cost basis in the Eligible New Portfolio after taking into account the original
purchase cost of such Eligible New Portfolio less subsequent sales.

                  "Lock Boxes" has the meaning ascribed to it in Annex C.

                  "Margin Stock" has the meaning ascribed to in Section 3.10.

                  "Material Adverse Effect" means a material adverse effect on
(a) the business, assets, operations, prospects or financial or other condition
of the Credit Parties considered as a whole (but not on the Credit Parties'
industry generally, except to the extent of a direct effect on the Credit
Parties as provided above), (b) Borrowers' ability to pay the Revolving Loan or
any of the other Obligations in accordance with the terms of the Agreement, (c)
the Collateral or Administrative Agent's Liens, on behalf of itself and Lenders,
on the Collateral or the priority of such Liens, or (d) Administrative Agent's
or any Lender's rights and remedies under the Agreement and the other Loan
Documents.

                  "Maximum Amount" means, as of any date of determination, an
amount equal to the Revolving Loan Commitment of all Lenders as of that date.

                  "Maximum Lawful Rate" has the meaning ascribed to it in
Section 1.4(f).

                  "Merrill Lynch" means Merrill Lynch Capital, a Division of
Merrill Lynch Business Financial Services Inc.

                  "Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA, and to which any Credit Party or ERISA Affiliate
is making, is obligated to make or has or could reasonably be expected to have a
direct or indirect liability under Title IV of ERISA or under Section 412 of the
IRC.

                  "Net Sales Proceeds" means the total gross sales proceeds
generated from the disposition of Accounts or a Portfolio or any portion
thereof, less (A) commissions and other reasonable and customary transaction
costs, fees and expenses properly attributable to such transaction and payable
by such Credit Party in connection therewith (in each case, paid to non
Affiliates), and (B) sales, transfer, and similar taxes payable by such Credit
Party in connection therewith.

                  "Net Worth" means, with respect to any Person as of any date
of determination, the book value of the assets of such Person, minus the sum of
(a) reserves applicable thereto, and (b) all of such Person's liabilities on a
consolidated basis (including accrued and deferred income taxes), all as
determined in accordance with GAAP.

                  "New Line of Credit" has the meaning ascribed to it in the
recitals to the Agreement.

                                      A-19
<PAGE>

                  "New Portfolio" shall mean a Portfolio that any Borrower has
owned for twenty four (24) months or less as to which such Borrower has all
right, title and interest in the Accounts comprising the Portfolio.

                  "Non-Consenting Lender" has the meaning ascribed to it in
Section 11.2(c)(i).

                  "Non-Credit Party Affiliate" means an entity that is wholly
owned by Asta Funding or another Credit Party that is not required by the
Administrative Agent and the Lenders to execute and deliver an Affiliate
Guaranty, an Affiliate Security Agreement and an Affiliate Confirmation pursuant
to Section 6.4(b) of this Agreement and that may incur debt on a non-recourse
basis for the purposes of acquiring portfolios subject to the following
conditions:

                  (a) The Borrower Representative has given the Administrative
         Agent written notification of the formation of a Non-Credit Party
         Affiliate prior to the incurrence of non-recourse financing.

                  (b) Lenders shall have declined to exercise their right of
         first refusal on financing any portfolios being acquired by a
         Non-Credit Party Affiliate.

                  (c) The Non-Credit Party Affiliate is not a Borrower or a
         Guarantor.

                  (d) No Borrower or Guarantor is obligated with respect to such
         non-recourse financing in a guarantee, indemnity, put agreement,
         participation agreement or other agreement, except for servicing
         obligations and customary representations and warranties (and the
         indemnities relating to such representations and warranties or
         servicing obligations) by Asta Funding or another Borrower or Guarantor
         to the non-recourse lender.

                  (e) The maximum aggregate amount of Non-Recourse Debt at any
         time shall not exceed an amount equal to $200,000,000, without the
         prior written consent of Required Lenders.

                  "Non-Recourse Debt" shall mean in the aggregate all
Non-Recourse Non-Credit Party Loans.

                  "Non-Recourse Investment" means any funds invested or advanced
by any Credit Party or a Subsidiary of any Credit Party in or to a Non-Credit
Party Affiliate in a non-recourse transaction, provided that: (a) the maximum
aggregate amount of Non-Recourse Investments at any time shall not exceed an
amount equal to ten percent (10%) of the consolidated Tangible Net Worth of Asta
Funding at any time, and (b) such Non-Credit Party Affiliate shall be a legally
separate entity created for a limited purpose and with limited activities,
formed, incorporated or organized and maintained as a special purpose entity,
and such Non-Credit Party Affiliate shall take steps to ensure that the
separateness of such Non-Credit Party Affiliate will be recognized by the courts
in the event of a filing or entry of a petition, decree or order seeking relief
under the Bankruptcy Code, or any other applicable federal, state or foreign
bankruptcy or other similar law, of any Affiliate of such Non-Credit Party
Affiliate, and the inclusion of "separateness representations, warranties and
covenants" in the organizational and governing documents of such Non-Credit
Party Affiliate.

                                      A-20
<PAGE>

                  "Non-Recourse Non-Credit Party Loan" shall mean a loan or
other extension of credit made by anyone other than the Lenders to a Non-Credit
Party Affiliate for the purpose of acquiring a Rejected Portfolio, provided that
such Non-Credit Party Affiliate delivers to Administrative Agent a true and
complete copy of all loan documentation relating to such transaction promptly
after the closing thereof and that any such indebtedness shall comply with
Section 1.1(a)(iii) hereof.

                  "Non-Funding Lender" has the meaning ascribed to it in Section
9.9(a)(ii).

                  "Notes" means, collectively, the Revolving Notes.

                  "Notice of Borrowing" has the meaning ascribed to it in
Section 1.1(a).

                  "Notice of Conversion/Continuation" has the meaning ascribed
to it in Section 1.4(e).

                  "Obligations" means all loans, advances, debts, liabilities
and obligations for the performance of covenants, tasks or duties or for payment
of monetary amounts (whether or not such performance is then required or
contingent, or such amounts are liquidated or determinable) owing by any Credit
Party to Agents or any Lender, and all covenants and duties regarding such
amounts, of any kind or nature, present or future, whether or not evidenced by
any note, agreement or other instrument, arising under the Agreement or any of
the other Loan Documents and under all interest rate caps, swaps or collar
agreements, or similar agreements or arrangements to provide protection against
fluctuations in interest rates. This term includes all principal, interest
(including all interest that accrues after the commencement of any case or
proceeding by or against any Credit Party in bankruptcy, whether or not allowed
in such case or proceeding), Fees, Charges, expenses, attorneys' fees and any
other sum chargeable to any Credit Party under the Agreement or any of the other
Loan Documents.

                  "Other Lender" has the meaning ascribed to it in Section
9.9(d).

                  "Palisades" means Palisades Collection, L.L.C.

                  "Payment Intangibles" shall have the meaning given such term
in the UCC.

                  "Payments" means the payments of whatsoever nature made by
each Account Debtor with respect to the Accounts relating to such Account Debtor
and/or the payments made by any obligor with respect to any Account.

                  "PBGC" means the Pension Benefit Guaranty Corporation.

                  "Pension Plan" means a Plan described in Section 3(2) of
ERISA.

                  "Permitted Acquisition" has the meaning ascribed to it in
Section 6.1.

                                      A-21
<PAGE>

                  "Permitted Encumbrances" means the following encumbrances: (a)
Liens for taxes or assessments or other governmental Charges not yet due and
payable or which are being contested in accordance with Section 5.2(b); (b)
pledges or deposits of money securing statutory obligations under workmen's
compensation, unemployment insurance, social security or public liability laws
or similar legislation (excluding Liens under ERISA); (c) pledges or deposits of
money securing bids, tenders, contracts (other than contracts for the payment of
money) or leases to which any Credit Party is a party as lessee made in the
ordinary course of business; (d) inchoate and unperfected workers', mechanics',
or similar liens arising in the ordinary course of business, so long as such
Liens attach only to Equipment, Fixtures and/or Real Estate; (e) carriers',
warehousemen's, suppliers' or other similar possessory liens arising in the
ordinary course of business and securing liabilities in an outstanding aggregate
amount not in excess of $100,000 at any time, so long as such Liens attach only
to Inventory; (f) inchoate and unperfected bailees' and landlord liens with
respect to locations in which a bailee or landlord waiver is not required, and
which arise in the ordinary course of business, so long as such Liens attach
only to assets located on the applicable Real Estate; (g) deposits securing, or
in lieu of, surety, appeal or customs bonds in proceedings to which any Credit
Party is a party; (h) any attachment or judgment lien not constituting an Event
of Default under Section 8.1(j); (i) with respect to any Real Estate, the
permitted exceptions set forth on an Exhibit of any mortgage granted to
Administrative Agent, on behalf of Lenders, applicable to such Real Estate, and
zoning restrictions, easements, licenses, or other restrictions on the use of
any Real Estate or other minor irregularities in title (including leasehold
title) thereto, so long as the same do not materially impair the use, value, or
marketability of such Real Estate; (j) presently existing or hereafter created
Liens in favor of Administrative Agent, on behalf of Lenders; and (k) Liens
expressly permitted under Section 6.7 (other than subsection (a) thereto) of the
Agreement.

                  "Permitted Formation" has the meaning ascribed to it in
Section 6.1.

                  "Person" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, public benefit corporation,
other entity or government (whether federal, state, county, city, municipal,
local, foreign, or otherwise, including any instrumentality, division, agency,
body or department thereof).

                  "Plan" means, at any time, an "employee benefit plan", as
defined in Section 3(3) of ERISA (other than a Multiemployer Plan), that any
Credit Party or ERISA Affiliate maintains, contributes to or has an obligation
to contribute to or has or could reasonably be expected to have a direct or
indirect liability under Title IV of ERISA or under Section 412 of the IRC.

                  "Pledge Agreement" means the Pledge Agreement dated on or
about May 11, 2004 executed by each Credit Party in favor of Collateral Agent,
for the benefit of itself, the Agents and Lenders, pledging all of the Stock of
the Subsidiaries of each Credit Party.

                  "Pledge Agreements" means the Pledge Agreement and any pledge
agreements entered into after May 11, 2004 by any Credit Party (as required by
the Agreement or any other Loan Document).

                                      A-22
<PAGE>

                  "Portfolio" means each group or pool of Consumer Loans
acquired by any of the Borrowers from a single Seller (or a single Seller and
its affiliates) in a single purchase transaction, which Consumer Loans are
recorded and administered in the Books and Records of the Borrower acquiring
same as a separate group or pool of Consumer Loans.

                  "Portfolio Acquisition Cost" means the actual or final amount
to be paid to the Seller of a Portfolio pursuant to the terms of the applicable
Portfolio Acquisition Documents.

                  "Portfolio Acquisition Documents" means the purchase and other
agreements between a Credit Party and the Seller of each Portfolio, as each may
be amended.

                  "Portfolio Bid" means the specific amount or the maximum of a
range of amounts, which are to be bid to acquire a Portfolio.

                  "Portfolio Loans" means the Consumer Loans, which comprise
each Portfolio, as more specifically detailed in the applicable Portfolio
Proposal.

                  "Portfolio Proposal" means a written proposal presented by
Borrowers or any other Credit Party with respect to a Portfolio that such party
intends to submit to a Seller for the purchase of such Portfolio, which shall
set forth in sufficient detail the (i) Portfolio Bid and the terms of payment
thereof, (ii) nature of the Consumer Loans comprising the Portfolio, (iii) a
computer disc or written report containing a detailed description of the
Consumer Loans, and (iv) name of the Seller.

                  "Proceeds" means "proceeds," as such term is defined in the
Code, including (a) any and all proceeds of any insurance, indemnity, warranty
or guaranty payable to any Credit Party from time to time with respect to any of
the Collateral, (b) any and all payments (in any form whatsoever) made or due
and payable to any Credit Party from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any Governmental Authority (or any Person acting under
color of governmental authority), (c) any claim of any Credit Party against
third parties (i) for past, present or future infringement of any Patent or
Patent License, or (ii) for past, present or future infringement or dilution of
any Copyright, Copyright License, Trademark or Trademark License, or for injury
to the goodwill associated with any Trademark or Trademark License, (d) any
recoveries by any Credit Party against third parties with respect to any
litigation or dispute concerning any of the Collateral including claims arising
out of the loss or nonconformity of, interference with the use of, defects in,
or infringement of rights in, or damage to, Collateral, (e) all amounts
collected on, or distributed on account of, other Collateral, including
dividends, interest, distributions and Instruments with respect to Investment
Property and pledged Stock, and (f) any and all other amounts, rights to payment
or other property acquired upon the sale, lease, license, exchange or other
disposition of Collateral and all rights arising out of Collateral.

                  "Proposed Change" has the meaning ascribed to it in Section
11.2(c).

                  "Pro Rata Share" means with respect to all matters relating to
any Lender, (a) with respect to the Revolving Loan, the percentage obtained by
dividing (i) the Revolving Loan Commitment of that Lender by (ii) the aggregate
Revolving Loan Commitments of all Lenders, (b) with respect to the Revolving
Loan on and after the Commitment Termination Date, the percentage obtained by
dividing (i) the aggregate outstanding principal balance of the Revolving Loan
held by that Lender, by (ii) the outstanding principal balance of the Revolving
Loan held by all Lenders.

                                      A-23
<PAGE>

                  "Qualified Plan" means a Pension Plan that is intended to be
tax-qualified under Section 401(a) of the IRC.

                  "Qualified Assignee" means (a) any Lender, any Affiliate of
any Lender and, with respect to any Lender that is an investment fund that
invests in commercial loans, any other investment fund that invests in
commercial loans and that is managed or advised by the same investment advisor
as such Lender or by an Affiliate of such investment advisor, and (b) any
commercial bank, savings and loan association or savings bank or any other
entity which is an "accredited investor" (as defined in Regulation D under the
Securities Act of 1933) which extends credit or buys loans as one of its
businesses, including insurance companies, mutual funds, lease financing
companies and commercial finance companies, in each case, which has a rating of
BBB or higher from S&P and a rating of Baa2 or higher from Moody's at the date
that it becomes a Lender and which, through its applicable lending office, is
capable of lending to Borrowers without the imposition of any withholding or
similar taxes.

                  "Real Estate" has the meaning ascribed to it in Section 3.6.

                  "Recency Aging Value" means for an Eligible Existing Portfolio
the contractual amount owed on each Account included in such Eligible Existing
Portfolio for which there has been Collections in the previous ninety (90) days.

                  "Refinancing" means the transaction contemplated by the
Agreement by which the proceeds of the Loan shall be used to refinance, amend
and restate the Prior Lender Obligations.

                  "Register" has the meaning ascribed to it in Section 9.1(a).

                  "Rejected Portfolio" means a Portfolio as to which the
Administrative Agent or Requisite Lenders, as the case may be, decline to make
an Advance to finance its acquisition by a Credit Party.

                  "Related Transactions" means the initial borrowing under the
Revolving Loan on the Closing Date and the payment of all fees, costs and
expenses associated with all of the foregoing and the execution and delivery of
all of the Related Transactions Documents.

                  "Related Transactions Documents" means the Loan Documents and
all other agreements or instruments executed in connection with the Related
Transactions.

                  "Release" means any release, threatened release, spill,
emission, leaking, pumping, pouring, emitting, emptying, escape, injection,
deposit, disposal, discharge, dispersal, dumping, leaching or migration of
Hazardous Material in the indoor or outdoor environment, including the movement
of Hazardous Material through or in the air, soil, surface water, ground water
or property.

                                      A-24
<PAGE>

                  "Replacement Lender" has the meaning ascribed to it in Section
1.13(d).

                  "Reports" mean the Aging Reports and the Collection Reports,
including the computer discs containing all of the information contained
therein.

                  "Requisite Lenders" means Lenders having (a) more than 66 2/3%
of the Commitments of all Lenders, or (b) if the Commitments have been
terminated, more than 66 2/3% of the aggregate outstanding amount of the
Revolving Loan.

                  "Reserves" means any reserves that Administrative Agent may,
in its reasonable credit judgment, establish or impose from time to time that
relate to a specific Portfolio as a result of the occurrence of a material
adverse change in the performance or value of that Portfolio. For purposes of
this definition, the phrase "material adverse change in the performance or value
of any Portfolio" shall mean any decrease or diminution in value of ten percent
(10%) or more in the performance or value of any Portfolio, including, without
limitation, any decrease or diminution in value of 10% or more of the Loan Value
of Eligible Existing Portfolio or Loan Value of Eligible New Portfolio, as the
case may be, of any Portfolio during any period, all as reasonably determined by
Administrative Agent. Without limiting the foregoing, Administrative Agent may
establish or impose Reserves at such time as any Servicing Agent for any
Portfolio is entitled (or claims to be entitled) to receive payments, fees,
premiums or compensation (however characterized) for services rendered in excess
of the amount set forth in Section 6.23 of the Agreement relative to such
Portfolio. In connection with the establishment or imposition of Reserves,
Administrative Agent shall, in advance of establishing any Reserves, discuss
with Borrower's Representative Administrative Agent's intention to establish
such Reserves and, upon request of Borrower's Representative, provide Borrower's
Representative with such information and analysis as are reasonably necessary to
explain Administrative Agent's reasons for such Reserves, but in no event shall
Credit Parties have any right to approve or withhold approval of Administrative
Agent's determination or alter the timing of such Reserves, so long as such
determination is made in accordance with the terms of the Agreement and this
definition.

                  "Restricted Payment" means, with respect to any Credit Party
(a) the declaration or payment of any dividend or the incurrence of any
liability to make any other payment or distribution of cash or other property or
assets in respect of Stock; (b) any payment on account of the purchase,
redemption, defeasance, sinking fund or other retirement of such Credit Party's
Stock or any other payment or distribution made in respect thereof, either
directly or indirectly; (c) any payment or prepayment of principal of, premium,
if any, or interest, fees or other charges on or with respect to, and any
redemption, purchase, retirement, defeasance, sinking fund or similar payment
and any claim for rescission with respect to, any Subordinated Debt; (d) any
payment made to redeem, purchase, repurchase or retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire Stock
of such Credit Party now or hereafter outstanding; (e) any payment of a claim
for the rescission of the purchase or sale of, or for material damages arising
from the purchase or sale of, any shares of such Credit Party's Stock or of a
claim for reimbursement, indemnification or contribution arising out of or
related to any such claim for damages or rescission; (f) any payment, loan,
contribution, or other transfer of funds or other property to any Stockholder of
such Credit Party other than payment of compensation in the ordinary course of
business and in accordance with past practices, to Stockholders who are
employees or consultants of such Person; and (g) any payment of management fees
(or other fees of a similar nature) by such Credit Party to any Stockholder of
such Credit Party or its Affiliates.

                                      A-25
<PAGE>

                  "Retiree Welfare Plan" means, at any time, a Welfare Plan that
provides for continuing coverage or benefits for any participant or any
beneficiary of a participant after such participant's termination of employment,
other than continuation coverage provided pursuant to Section 4980B of the IRC
or other applicable law or coverage through the last day of the month of a
participant's termination of employment.

                  "Revolving Lender" or "Revolving Lenders" means, as of any
date of determination, Lenders having a Revolving Loan Commitment.

                  "Revolving Loan" means, at any time, the aggregate amount of
Advances outstanding to Borrower.

                  "Revolving Loan Commitment" means (a) as to any Lender, the
aggregate commitment of such Lender to make Advances as set forth on Annex J to
the Agreement or in the most recent Assignment Agreement executed by such Lender
and (b) as to all Lenders, the aggregate commitment of all Lenders to make
Advances which aggregate commitment shall be ONE HUNDRED SEVENTY-FIVE MILLION
DOLLARS ($175,000,000) on the Closing Date, as such amount may be permanently
increased by an additional Fifty Million Dollars ($50,000,000) upon written
request by Borrower Representative and at Lenders' written consent, which
consent may be given or denied in the sole discretion of Lenders.

                  "Revolving Note" has the meaning ascribed to it in Section
1.1(a)(iv).

                  "Security Agreement" means, collectively and individually,
those certain Security Agreements dated on or about May 11, 2004, as amended
from time to time, by and among Collateral Agent, on behalf of itself, the
Agents and Lenders, and each Credit Party that is a signatory thereto.

                  "Seller" means the party (or parties) which has agreed to sell
Portfolio Loans to a Credit Party.

                  "Senior Executive" means each of Gary Stern and Mitchell
Cohen.

                  "Senior Obligations" has the meaning ascribed to it in Section
12.9(a).

                  "Servicing Agent" shall mean any third-party engaged or
utilized by any Credit Party for the purpose of administrating and/or collecting
Payments made by an Account Debtor with respect to Accounts.

                                      A-26
<PAGE>

                  "Servicing Threshold" shall mean an amount equal to ten
percent (10%) or more of Collections, Proceeds and Payments (net of any
collection costs and other fees permitted to be deducted therefrom by the
express terms of the servicing agreement that corresponds to such Collections,
Proceeds and Payments), taken as a whole for the Credit Parties, reported by
such Credit Parties during the Fiscal Quarter prior to the date of
determination.

                  "Settlement Date" has the meaning ascribed to it in Section
9.9(a)(ii).

                  "Software" means all "software" as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, other than software
embedded in any category of Goods, including all computer programs and all
supporting information provided in connection with a transaction related to any
program.

                  "Solvent" means, with respect to any Person on a particular
date, that on such date (a) the fair value of the property of such Person is
greater than the total amount of liabilities, including contingent liabilities,
of such Person; (b) the present fair salable value of the assets of such Person
is not less than the amount that will be required to pay the probable liability
of such Person on its debts as they become absolute and matured; (c) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature; and (d) such Person is not engaged in a business or transaction, and is
not about to engage in a business or transaction, for which such Person's
property would constitute an unreasonably small capital. The amount of
contingent liabilities (such as litigation, guaranties and pension plan
liabilities) at any time shall be computed as the amount that, in light of all
the facts and circumstances existing at the time, represents the amount that can
be reasonably be expected to become an actual or matured liability.

                  "Stock" means all shares, options, warrants, general or
limited partnership interests, membership interests or other equivalents
(regardless of how designated) of or in a corporation, partnership, limited
liability company or equivalent entity whether voting or nonvoting, including
common stock, preferred stock or any other "equity security" (as such term is
defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934).

                  "Stockholder" means, with respect to any Person, each holder
of Stock of such Person.

                  "Subordinated Debt" means any Indebtedness of any Credit Party
subordinated to the Obligations in a manner and form satisfactory to
Administrative Agent and Lenders in their sole discretion, as to right and time
of payment and as to any other rights and remedies thereunder.

                  "Subsidiary" means, with respect to any Person, (a) any
corporation of which an aggregate of more than 50% of the outstanding Stock
having ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, Stock of any other class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time, directly or indirectly,
owned legally or beneficially by such Person or one or more Subsidiaries of such
Person, or with respect to which any such Person has the right to vote or
designate the vote of more than 50% of such Stock whether by proxy, agreement,
operation of law or otherwise, and (b) any partnership or limited liability
company in which such Person and/or one or more Subsidiaries of such Person
shall have an interest (whether in the form of voting or participation in
profits or capital contribution) of more than 50% or of which any such Person is
a general partner or may exercise the powers of a general partner. Unless the
context otherwise requires, each reference to a Subsidiary shall be a reference
to a Subsidiary of a Borrower.

                                      A-27
<PAGE>

                  "Supporting Obligations" means all "supporting obligations" as
such term is defined in the Code, including letters of credit and guaranties
issued in support of Accounts, Chattel Paper, Documents, General Intangibles,
Instruments, or Investment Property.

                  "Tangible Net Worth" means, with respect to any Person at any
date, the Net Worth of such Person at such date, excluding, however, from the
determination of the total assets at such date, (a) all goodwill, capitalized
organizational expenses, capitalized research and development expenses,
trademarks, trade names, copyrights, patents, patent applications, licenses and
rights in any thereof, and other intangible items, (b) all unamortized debt
discount and expense, (c) treasury Stock, and (d) any write-up in the book value
of any asset resulting from a revaluation thereof.

                  "Taxes" means taxes, levies, imposts, deductions, Charges or
withholdings, and all liabilities with respect thereto, excluding taxes imposed
on or measured by the net income of Administrative Agent or a Lender by the
jurisdictions under the laws of which Administrative Agent and Lenders are
organized or conduct business or maintain a permanent establishment or any
political subdivision thereof.

                  "Tax Returns" has the meaning ascribed to it in Section 3.11

                  "Telecom Receivables" means each of the performing and
non-performing receivables presently and hereafter owned by Borrowers, which
have been purchased from telecommunication service providers.

                  "Termination Date" means the date on which (a) the Revolving
Loan has been indefeasibly repaid in full, (b) all other Obligations under the
Agreement and the other Loan Documents have been completely discharged and (c)
none of Borrowers shall have any further right to borrow any monies under the
Agreement.

                  "Title IV Plan" means a Pension Plan (other than a
Multiemployer Plan), that is covered by Title IV of ERISA, and that any Credit
Party or ERISA Affiliate maintains, contributes to or has an obligation to
contribute to on behalf of participants who are or were employed by any of them.

                  "Total Liabilities" means, with respect to any Person as of
any date of determination, the total liabilities of such Person as determined as
determined in accordance with GAAP.

                                      A-28
<PAGE>

                  "Trademark License" means rights under any written agreement
now owned or hereafter acquired by any Credit Party granting any right to use
any Trademark.

                  "Trademarks" means all of the following now owned or hereafter
existing or adopted or acquired by any Credit Party: (a) all trademarks, trade
names, corporate names, business names, service marks, logos, all registrations
and recordings thereof, and all applications in connection therewith, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
state or territory thereof, or any other country or any political subdivision
thereof; (b) all reissues, extensions or renewals thereof; and (c) all goodwill
associated with or symbolized by any of the foregoing.

                  "Transaction" has the meaning ascribed to it in Section 11.8.

                  "Unfunded Pension Liability" means, at any time, the aggregate
amount, if any, of the sum of (a) the amount by which the present value of all
accrued benefits under each Title IV Plan exceeds the fair market value of all
assets of such Title IV Plan allocable to such benefits in accordance with Title
IV of ERISA, all determined as of the most recent valuation date for each such
Title IV Plan using the actuarial assumptions for funding purposes in effect
under such Title IV Plan, and (b) for a period of 5 years following a
transaction which might reasonably be expected to be covered by Section 4069 of
ERISA, the liabilities (whether or not accrued) that could be avoided by any
Credit Party or any ERISA Affiliate as a result of such transaction.

                  "Welfare Plan" means a Plan described in Section 3(i) of
ERISA.

                  Rules of construction with respect to accounting terms used in
the Agreement or the other Loan Documents shall be as set forth in Annex G. All
other undefined terms contained in any of the Loan Documents shall, unless the
context indicates otherwise, have the meanings provided for by the Code to the
extent the same are used or defined therein; in the event that any term is
defined differently in different Articles or Divisions of the Code, the
definition contained in Articles or Divisions 1 and 9 shall control. Unless
otherwise specified, references in the Agreement or any of the Appendices to a
Section, subsection or clause refer to such Section, subsection or clause as
contained in the Agreement. The words "herein," "hereof" and "hereunder" and
other words of similar import refer to the Agreement as a whole, including all
Annexes, Exhibits and Schedules, as the same may from time to time be amended,
restated, modified or supplemented, and not to any particular section,
subsection or clause contained in the Agreement or any such Annex, Exhibit or
Schedule.

                  Wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, feminine and neuter genders. The words "including",
"includes" and "include" shall be deemed to be followed by the words "without
limitation"; the word "or" is not exclusive; references to Persons include their
respective successors and assigns (to the extent and only to the extent
permitted by the Loan Documents) or, in the case of governmental Persons,
Persons succeeding to the relevant functions of such Persons; and all references
to statutes and related regulations shall include any amendments of the same and
any successor statutes and regulations. Whenever any provision in any Loan
Document refers to the knowledge (or an analogous phrase) of any Credit Party,
such words are intended to signify that such Credit Party has actual knowledge
or awareness of a particular fact or circumstance or that such Credit Party, if
it had exercised reasonable diligence, would have known or been aware of such
fact or circumstance.

                                      A-29
<PAGE>

                              ANNEX C (SECTION 1.8)
                                       TO
                           FOURTH AMENDED AND RESTATED
                                 LOAN AGREEMENT

                             CASH MANAGEMENT SYSTEM

                  Each Borrower shall, and shall cause its Subsidiaries to,
establish and maintain the Cash Management Systems described below:

                  (a) On or before the Closing Date and until the Termination
Date, each Borrower shall (i) establish blocked accounts ("Blocked Accounts") at
Administrative Agent, and (ii) deposit and cause its Subsidiaries to deposit or
cause to be deposited promptly, and in any event no later than the second
Business Day after the date of receipt thereof (or in the event such deposit is
not practicable due to an Act of God, terrorism or other city-wide catastrophe,
the next day on which businesses generally are open), all cash, checks, drafts
or other similar items of payment relating to or constituting payments made in
respect of any and all Collateral into one or more Blocked Accounts in such
Borrower's name or any such Subsidiary's name at Administrative Agent, except
for items of payment that are not material that are being held temporarily, or
are to be returned, in the ordinary course of business due to a dispute or
irregularity. On or before the Closing Date, each Borrower shall have
established a concentration account in its name (each a "Concentration Account"
and collectively, the "Concentration Accounts") at Administrative Agent and at
the bank or banks that shall be designated as the Concentration Account bank for
each such Borrower in the Disclosure Document (each a "Concentration Account
Bank" and collectively, the "Concentration Account Banks"), which banks shall be
reasonably satisfactory to Administrative Agent. Borrowers may establish and
maintain a blocked account with such banks as are reasonably satisfactory to
Administrative Agent (a "Blocked Account Third-Party Bank"), provided that on or
before the Closing Date, each Blocked Account Third-Party Bank shall have
entered into a tri-party blocked account agreement with Administrative Agent,
for the benefit of itself and Lenders, and the applicable Borrower and
Subsidiaries thereof, as applicable, in form and substance reasonably acceptable
to Administrative Agent, which shall become operative on or prior to the Closing
Date. Each such blocked account agreement with any Blocked Account Third-Party
Bank shall provide, among other things, that (a) all items of payment deposited
in such account and proceeds thereof deposited in the applicable blocked account
are held by such bank as agent or bailee-in-possession for Administrative Agent,
on behalf of itself and Lenders, (b) the Blocked Account Third-Party Bank
executing such agreement has no rights of setoff or recoupment or any other
claim against such account, as the case may be, other than for payment of its
service fees and other charges directly related to the administration of such
account and for returned checks or other items of payment, and (c) from and
after the Closing Date with respect to each blocked account, such Blocked
Account Third-Party Bank agrees to immediately forward all amounts received in
the applicable blocked account to the Collection Account through daily sweeps
from such blocked account into the Collection Account (except for amounts which
do not exceed $100,000 at any time in the blocked account established with Bank
of America, N.A. Collection Account as account no. 4158012504 (the "BofA Blocked
Account")). Except for the BofA Blocked Account, no Borrower shall, or shall
cause or permit any Subsidiary thereof to, accumulate or maintain cash in any
blocked account with any Blocked Account Third-Party Bank in excess of checks
outstanding against such accounts as of that date and amounts necessary to meet
minimum balance requirements, except as otherwise specifically permitted in
Section 6.2 of the Agreement.

                                      C-1
<PAGE>

                  (b) Each Borrower may maintain, in its name, an account (each
a "Disbursement Account" and collectively, the "Disbursement Accounts") at
Administrative Agent into which Administrative Agent shall, from time to time,
deposit proceeds of Advances made to such Borrower pursuant to Section 1.1 for
use by such Borrower solely in accordance with the provisions of Section 1.2.

                  (c) On or before the Closing Date (or such later date as
Administrative Agent shall consent to in writing), each Concentration Account
Bank, shall have entered into tri-party blocked account agreements with
Administrative Agent, for the benefit of itself and Lenders, and the applicable
Borrower and Subsidiaries thereof, as applicable, in form and substance
reasonably acceptable to Administrative Agent, which shall become operative on
or prior to the Closing Date. Each such blocked account agreement shall provide,
among other things, that (i) all items of payment deposited in such account and
proceeds thereof deposited in the applicable Concentration Account are held by
such bank as agent or bailee-in-possession for Administrative Agent, on behalf
of itself and Lenders, (ii) the bank executing such agreement has no rights of
setoff or recoupment or any other claim against such account, as the case may
be, other than for payment of its service fees and other charges directly
related to the administration of such account and for returned checks or other
items of payment, and (iii) from and after the Closing Date with respect to each
Concentration Account Bank, such bank agrees to immediately forward all amounts
received in the applicable Concentration Account to the Collection Account
through daily sweeps from such Concentration Account into the Collection
Account. Except for amounts which do not exceed $100,000 in any one account and
$250,000 in the aggregate for all Borrowers, no Borrower shall, or shall cause
or permit any Subsidiary thereof to, accumulate or maintain cash in Disbursement
Accounts or payroll accounts as of any date of determination in excess of checks
outstanding against such accounts as of that date and amounts necessary to meet
minimum balance requirements.

                  (d) So long as no Default, which is not reasonably capable of
being cured, or Event of Default has occurred and is continuing, Borrowers may
amend the Disclosure Document to add or replace a Blocked Account or to replace
any Concentration Account; provided, that (i) Administrative Agent shall have
consented in writing in advance to the opening of such account with the relevant
bank and (ii) prior to the time of the opening of such account, the applicable
Borrower or its Subsidiaries, as applicable, and such bank shall have executed
and delivered to Administrative Agent a tri-party blocked account agreement, in
form and substance reasonably satisfactory to Administrative Agent. Borrowers
shall close any of their accounts (and establish replacement accounts in
accordance with the foregoing sentence) promptly and in any event within 30 days
following notice from Administrative Agent that the creditworthiness of any bank
holding an account is no longer acceptable in Administrative Agent's reasonable
judgment, or as promptly as practicable and in any event within 60 days
following notice from Administrative Agent that the operating performance, funds
transfer or availability procedures or performance with respect to accounts of
the bank holding such accounts or Administrative Agent's liability under any
tri-party blocked account agreement with such bank is no longer acceptable in
Administrative Agent's reasonable judgment.

                                      C-2
<PAGE>

                  (e) The Blocked Accounts, Disbursement Accounts and the
Concentration Accounts shall be cash collateral accounts, with all cash, checks
and other similar items of payment in such accounts securing payment of the
Revolving Loan and all other Obligations, and in which each Borrower and each
Subsidiary thereof shall have granted a Lien to Administrative Agent, on behalf
of itself and Lenders, pursuant to the Security Agreement.

                  (f) All amounts deposited in the Collection Account shall be
deemed received by Administrative Agent in accordance with Section 1.7 and shall
be applied (and allocated) by Administrative Agent in accordance with Section
1.8. In no event shall any amount be so applied unless and until such amount
shall have been credited in immediately available funds to the Collection
Account.

                  (g) Each Borrower shall and shall cause its Affiliates,
officers, employees, agents, directors or other Persons acting for or in concert
with such Borrower (each a "Related Person") to (i) hold in trust for
Administrative Agent, for the benefit of itself and Lenders, all checks, cash
and other items of payment received by such Borrower or any such Related Person,
and (ii) within 1 Business Day after receipt by such Borrower or any such
Related Person (or in the event such deposit is not practicable due to an Act of
God, terrorism or other city-wide catastrophe, the next day on which businesses
generally are open)of any checks, cash or other items of payment, deposit the
same into a Blocked Account of such Borrower. Each Borrower and each Related
Person thereof acknowledges and agrees that all cash, checks or other items of
payment constituting proceeds of Collateral are part of the Collateral. All
proceeds of the sale or other disposition of any Collateral, shall be deposited
directly into the applicable Blocked Accounts.

                                      C-3
<PAGE>

                            ANNEX D (SECTION 2.1(A))
                                       TO
                           FOURTH AMENDED AND RESTATED
                                 LOAN AGREEMENT

                                CLOSING CHECKLIST

In addition to, and not in limitation of, the conditions described in Section
2.1 of the Agreement, pursuant to Section 2.1(a), the following items must be
received by Administrative Agent in form and substance satisfactory to
Administrative Agent on or prior to the Closing Date (each capitalized term used
but not otherwise defined herein shall have the meaning ascribed thereto in
Annex A to the Agreement):

                  A. Appendices. All Appendices to the Agreement, in form and
substance satisfactory to Administrative Agent.

                  B. Revolving Notes. Duly executed originals of the Revolving
Notes for each applicable Lender, dated the Closing Date.

                  C. Opinions of Counsel. Duly executed originals of opinions of
Lowenstein Sandler PC, counsel for the Credit Parties (including with respect to
New York and New Jersey law and Delaware corporate law matters, together with
existing regulatory counsel opinions rendered in connection with Asta Funding's
last public offering) reasonably requested by Administrative Agent, each in form
and substance reasonably satisfactory to Administrative Agent and its counsel,
dated the Closing Date, and each accompanied by a letter addressed to such
counsel from the Credit Parties, authorizing and directing such counsel to
address its opinion to Administrative Agent, on behalf of Lenders, and to
include in the opinion of Lowenstein Sandler PC, an express statement to the
effect that Administrative Agent and Lenders are authorized to rely on such
opinion.

                  D. Disclosure Document. The Credit Parties shall execute and
deliver to Administrative Agent for the benefit of Administrative Agent and
Lenders the Disclosure Document and the exhibits attached thereto, all of which
shall be in form and substance acceptable to Administrative Agent.

                  E. Fee Letters. Duly executed originals of the Agent Fee
Letter and Lenders' Fee Letter.

                  F. Charter and Good Standing. For each Credit Party, such
Person's (a) charter, and all amendments thereto, (b) good standing certificates
in its state of formation, (c) good standing certificates and certificates of
qualification to conduct business in each jurisdiction where its ownership or
lease of property or the conduct of its business requires such qualification,
each dated a recent date prior to the Closing Date and certified by the
applicable Secretary of State or other authorized Governmental Authority.

                  G. Bylaws and Resolutions. For each Credit Party, (a) such
Person's bylaws or operating agreement, as applicable, together with all
amendments thereto and (b) resolutions of such Person's Board of Directors or
Members, as applicable, approving and authorizing the execution, delivery and
performance of the Loan Documents to which such Person is a party and the
transactions to be consummated in connection therewith, each certified as of the
Closing Date by such Person's corporate secretary or an assistant secretary or
Members, as applicable, as being in full force and effect without any
modification or amendment.

                                       D-1
<PAGE>

                  H. Officer's Certificate. Administrative Agent shall have
received duly executed originals of a certificate of the Chief Executive Officer
or Chairman of the Board of Borrower Representative, dated the Closing Date,
stating that to such officer's knowledge, since May 11, 2004 (a) no event or
condition has occurred or is existing which could reasonably be expected to have
a Material Adverse Effect; (b) there has been no material adverse change in the
industry in which any Borrower operates; (c) no Litigation has been commenced
which, if successful, could reasonably be expected to have a Material Adverse
Effect or which challenges any of the transactions contemplated by the Agreement
and the other Loan Documents; (d) there have been no Restricted Payments made by
any Credit Party in violation of the Agreement other than in connection with the
Related Transactions; and (e) there has been no material increase in
liabilities, liquidated or contingent (other than in connection with the Related
Transactions), and no material decrease in assets of any Borrower or any of its
Subsidiaries.

                  Furthermore, Administrative Agent shall have received duly
executed originals of a certificate of the Chief Executive Officer or Chairman
of the Board of Borrower Representative, dated the Closing Date, stating that to
such officer's knowledge, no changes have been made in the business operations
or activities or the licensing requirements of any Credit Party that would
reasonably require any changes to be made to the facts expressed in the existing
regulatory counsel opinions rendered in connection with Asta Funding's last
public offering in order for such existing regulatory counsel opinion and the
facts shown therein to continue to be true, complete and correct in all material
respects as of the Closing Date (or, if such changes would reasonably be
required, then setting forth in reasonable detail such changes) and stating that
to the best of his knowledge and belief, after having made reasonable
investigations, Palisades Collection, L.L.C., is the only Credit Party required
by applicable law to be licensed to conduct the consumer debt collection
business operations and activities of the Borrowers and the other Credit
Parties.

                  G. Other Documents. Such other certificates, documents and
agreements respecting any Credit Party as Administrative Agent may, in its
reasonable discretion, request.

                                      D-2
<PAGE>

                            ANNEX E (SECTION 4.1(A))
                                       TO
                           FOURTH AMENDED AND RESTATED
                                 LOAN AGREEMENT

                        FINANCIAL STATEMENTS -- REPORTING

                  Borrowers shall deliver or cause to be delivered to
Administrative Agent or to Administrative Agent and Lenders, as indicated, the
following:

                  (a) Quarterly Financials. To Administrative Agent and Lenders,
within 45 days after the end of each Fiscal Quarter, either the Form 10Q that
Asta Funding filed for that Fiscal Quarter with the Securities and Exchange
Commission or, in the event Asta Funding has not filed its Form 10Q on a timely
basis (without taking into consideration any extensions granted for the filing
of such Form 10Q), the following (hereinafter referred to as the "Alternative
Financial Information") consolidated financial information regarding Asta
Funding, its Subsidiaries, and Borrowers (in each case, together with
consolidating worksheets in the event a Non-Credit Party Affiliate has
Indebtedness or owns assets of any material nature), including (A) unaudited
balance sheets as of the close of such Fiscal Quarter and the related statements
of income and cash flow for that portion of the Fiscal Year ending as of the
close of such Fiscal Quarter, and (B) unaudited statements of income and cash
flows for such Fiscal Quarter, in each case setting forth in comparative form
the figures for the corresponding period in the prior year and the figures
contained in the Projections for such Fiscal Year, all prepared in accordance
with GAAP (subject to normal year-end adjustments). In any event, Borrowers
shall deliver to Administrative Agent and Lender a copy of any and all Form 10Q
that Asta Funding files with the Securities and Exchange Commission within 15
days after making any such filing. Such Form 10Q or Alternative Financial
Information, as the case may be, shall be accompanied by (A) a statement in
reasonable detail (each, a "Compliance Certificate") showing the calculations
used in determining compliance with a Compliance Certificate in respect of each
of the Financial Covenants that is tested on a quarterly basis and (B) the
certification of the Chief Financial Officer or other senior officer of Borrower
Representative that (i) such financial information presents fairly in accordance
with GAAP (subject to normal year-end adjustments) the financial position,
results of operations and statements of cash flows of Asta Funding, Borrowers
and their Subsidiaries, on a consolidated basis (together with consolidating
worksheets in the event a Non-Credit Party Affiliate has Indebtedness or owns
assets of any material nature), as at the end of such Fiscal Quarter and for
that portion of the Fiscal Year then ended, (ii) any other information presented
is true, correct and complete in all material respects and that there was no
Default, which is not reasonably capable of being cured, or Event of Default in
existence as of such time or, if a Default, which is not reasonably capable of
being cured, or Event of Default has occurred and is continuing, describing the
nature thereof and all efforts undertaken to cure such Default, which is not
reasonably capable of being cured, or Event of Default. In addition, Asta
Funding and Borrowers shall deliver to Administrative Agent and Lenders, within
45 days after the end of each Fiscal Quarter, a statement of the intercompany
loan balance of all Intercompany Notes as of the end of such Fiscal Quarter.

                                      E-1
<PAGE>

                  (b) Annual Audited Financials. To Administrative Agent and
Lenders, within 90 days after the end of each Fiscal Year, audited Financial
Statements for Asta Funding, Borrowers and their Subsidiaries on a consolidated
basis (together with consolidating worksheets), consisting of balance sheets and
statements of income and retained earnings and cash flows, setting forth in
comparative form in each case the figures for the previous Fiscal Year, which
Financial Statements shall be prepared in accordance with GAAP and certified
without qualification, by an independent certified public accounting firm of
national standing or otherwise reasonably acceptable to Administrative Agent.
Such Financial Statements shall be accompanied by (i) a statement prepared in
reasonable detail showing the calculations used in determining compliance with
each of the Financial Covenants, (ii) a report from such accounting firm to the
effect that, in connection with their audit examination, nothing has come to
their attention to cause them to believe that the Asta Funding and/or Borrowers
have failed to comply with the terms, covenants, provisions or conditions of
Section 5.3, Section 6.2 through Section 6.8 inclusive, Section 6.10, Section
6.12, through Section 6.16 inclusive, of this Agreement (or specifying any
non-compliance that they became aware of), it being understood that such audit
examination extended only to financial and accounting matters and that no
special investigation was made with respect to the existence of any such
non-compliance, (iii) from Asta Funding and the Borrowers, the annual letters to
such accountants in connection with their audit examination detailing contingent
liabilities and material litigation matters, and (iv) the certification of the
Chief Executive Officer or Chief Financial Officer of Asta Funding and the
Borrowers that all such Financial Statements present fairly in all material
respect in accordance with GAAP the financial position, results of operations
and statements of cash flows of Asta Funding, Borrowers and their Subsidiaries
on a consolidated basis (together with consolidating worksheets), as at the end
of such Fiscal Year and for the period then ended, and that there was no Default
or Event of Default in existence as of such time or, if a Default, which is not
reasonably capable of being cured, or Event of Default has occurred and is
continuing, describing the nature thereof and all efforts undertaken to cure
such Default or Event of Default.

                  (c) Management Letters. To Administrative Agent and Lenders,
within 5 Business Days after receipt thereof by any Credit Party, copies of all
management letters, exception reports or similar letters or reports received by
such Credit Party from its independent certified public accountants.

                  (d) Default Notices. To Administrative Agent and Lenders, as
soon as practicable, and in any event within 2 Business Days after an executive
officer of any Borrower has actual knowledge of the existence of any Default,
Event of Default or other event that has had a Material Adverse Effect,
telephonic or telecopied notice specifying the nature of such Default or Event
of Default or other event, including the anticipated effect thereof, which
notice, if given telephonically, shall be promptly confirmed in writing on the
next Business Day.

                  (e) SEC Filings and Press Releases. To Administrative Agent
and Lenders, promptly upon their becoming available, copies of: (i) all
Financial Statements, reports, notices and proxy statements made publicly
available by any Credit Party to its security holders; (ii) all regular
(including, without limitation, all 10Ks and 10Qs) and periodic reports and all
registration statements and prospectuses, if any, filed by any Credit Party with
any securities exchange or with the Securities and Exchange Commission or any
governmental or private regulatory authority; and (iii) all press releases and
other statements made available by any Credit Party to the public concerning
material changes or developments in the business of any such Person.

                                      E-2
<PAGE>

                  (f) [Intentionally Omitted].

                  (g) Supplemental Schedules. To Administrative Agent (and upon
the request of any Lender, such Lender), supplemental disclosures, if any,
required by Section 5.6.

                  (h) Litigation. To Administrative Agent (and upon the request
of any Lender, such Lender) in writing, promptly upon learning thereof, notice
of any Litigation commenced or threatened against any Credit Party that (i)
seeks damages in excess of $250,000 (except that in the case of Litigation
relating to Accounts, any Litigation that seeks damages in excess of $500,000
with respect to claims for which the applicable Credit Party has no right of
indemnification from the originator or seller of any such Account, or Litigation
that seeks damages in excess of $1,000,000 with respect to claims for which the
applicable Credit Party has a right of indemnification from the originator or
seller of any such Account), (ii) seeks injunctive relief, (iii) is asserted or
instituted against any Plan, its fiduciaries or its assets or against any Credit
Party or ERISA Affiliate in connection with any Plan (iv) alleges criminal
misconduct by any Credit Party, (v) alleges the violation of any law regarding,
or seeks remedies in connection with, any Environmental Liabilities or (vi)
involves any consumer credit violations.

                  (i) Insurance Notices. To Administrative Agent (and upon the
request of any Lender, such Lender), disclosure of losses or casualties required
by Section 5.4.

                  (j) Lease Default Notices. To Administrative Agent (and upon
the request of any Lender, such Lender), within 2 Business Days after receipt
thereof, copies of (i) any and all default notices received under or with
respect to any leased location or public warehouse where Collateral is located,
and (ii) such other notices or documents as Administrative Agent may reasonably
request.

                  (k) Lease Amendments. To Administrative Agent (and upon the
request of any Lender, such Lender), within 2 Business Days after receipt
thereof, copies of all material amendments to real estate leases.

                  (l) Other Documents. To Administrative Agent and Lenders, such
other financial and other information respecting any Credit Party's business or
financial condition as Administrative Agent or any Lender shall from time to
time reasonably request.

                                      E-3
<PAGE>

                            ANNEX F (SECTION 4.1(B))
                                       TO
                           FOURTH AMENDED AND RESTATED
                                 LOAN AGREEMENT

                               COLLATERAL REPORTS

                  Borrowers shall deliver or cause to be delivered the
following:

Monthly Reports. To Administrative Agent and Lenders, within 20 days after the
end of each Fiscal Month, a Borrowing Base Certificate as of the last business
day of the previous Fiscal Month, prepared by and certified by the chief
financial officer of each Borrower, together with a payment in reduction of the
Obligations of an amount equal to the Advances, if any, in excess of the
Borrowing Base in such Borrowing Base Certificate, and together with each
Borrowing Base Certificate a reporting package setting forth the following as of
the last business day of the previous Fiscal Month:

         Borrowing Base Calculation by Portfolio
         Accounts Receivable Roll Forward
         Collection History by Portfolio
         Schedule of Sales Adjustments to Portfolio Acquisition Cost
         Recency Summary Aging by Portfolio
         Recency Detail Aging by Portfolio (delivered electronically) (this
         report will only be delivered to the Administrative Agent)
         Schedule of all Portfolio sales and leases

Quarterly Reports. To Administrative Agent and Lenders, within 20 days after the
end of each Fiscal Quarter, a reasonably detailed report of any and all
Servicing Agents or other Persons (including any collection agent, agency or
attorney) who, in the aggregate, are contractually responsible for the
collection of Accounts and other Collateral in excess of an amount equal to ten
percent (10%) of all Accounts and other Collateral of all Credit Parties,
together with a reasonable description of all Accounts and other Collateral for
which such Servicing Agent or other Person is responsible, and the collection
history of such Accounts and other Collateral during that Fiscal Quarter.

Furthermore, Borrowers shall deliver or cause to be delivered to Administrative
Agent and Lenders (within a reasonable period of time after request therefor)
such additional reports, summaries and information relating to the Portfolios,
the Collateral, the Accounts, the business operations and activities of the
Credit Parties, the transactions and other matters contemplated by the
Agreement, the Loan Documents, and the Obligations, as Administrative Agent
shall reasonably request from time to time.

                                      F-1
<PAGE>

                             ANNEX G (SECTION 6.10)
                                       TO
                           FOURTH AMENDED AND RESTATED
                                 LOAN AGREEMENT

                               FINANCIAL COVENANTS

                  Borrowers shall not breach or fail to comply with any of the
following financial covenants, each of which shall be calculated in accordance
with GAAP consistently applied:

                  (a) Minimum Fixed Charge Coverage Ratio. Asta Funding and its
Subsidiaries shall have on a consolidated basis at the end of each Fiscal
Quarter a Fixed Charge Coverage Ratio for the 12-month period then ended of not
less than 1.50 to 1.0.

                  (b) Minimum Tangible Net Worth. Asta Funding and its
Subsidiaries on a consolidated basis shall maintain at all times during each
Fiscal Quarter a minimum Tangible Net Worth of not less than $92,000,000 plus
fifty percent (50%) of cumulative net income reported after December 31, 2003.

                  (c) Maximum Cash Flow Leverage Ratio. Asta Funding and its
Subsidiaries shall have on a consolidated basis at the end of each Fiscal
Quarter a Cash Flow Leverage Ratio of not more than 1.25 to 1.0.

                  (d) No Net Loss. Asta Funding and its Subsidiaries shall have
no net loss on a consolidated basis during any Fiscal Year. For purposes of
computing net loss of Asta Funding and its Subsidiaries, the net income of any
Non-Credit Party Affiliate (to the extent such net income is greater than zero)
shall be excluded from such computation.

                  Unless otherwise specifically provided herein, any accounting
term used in the Agreement shall have the meaning customarily given such term in
accordance with GAAP, and all financial computations hereunder shall be computed
in accordance with GAAP consistently applied. That certain items or computations
are explicitly modified by the phrase "in accordance with GAAP" shall in no way
be construed to limit the foregoing. If any "Accounting Changes" (as defined
below) occur and such changes result in a change in the calculation of the
financial covenants, standards or terms used in the Agreement or any other Loan
Document, then Borrowers, Administrative Agent and Lenders agree to enter into
negotiations in order to amend such provisions of the Agreement so as to
equitably reflect such Accounting Changes with the desired result that the
criteria for evaluating Borrowers' and their Subsidiaries' financial condition
shall be the same after such Accounting Changes as if such Accounting Changes
had not been made; provided, however, that the agreement of Requisite Lenders to
any required amendments of such provisions shall be sufficient to bind all
Lenders. "Accounting Changes" means (i) changes in accounting principles
required by the promulgation of any rule, regulation, pronouncement or opinion
by the Financial Accounting Standards Board of the American Institute of
Certified Public Accountants (or successor thereto or any agency with similar
functions), (ii) changes in accounting principles concurred in by any Borrower's
certified public accountants; (iii) purchase accounting adjustments under A.P.B.
16 or 17 and EITF 88-16, and the application of the accounting principles set
forth in FASB 109, including the establishment of reserves pursuant thereto and
any subsequent reversal (in whole or in part) of such reserves; and (iv) the
reversal of any reserves established as a result of purchase accounting
adjustments. All such adjustments resulting from expenditures made subsequent to
the Closing Date (including capitalization of costs and expenses or payment of
pre-Closing Date liabilities) shall be treated as expenses in the period the
expenditures are made and deducted as part of the calculation of EBITDA in such
period. If Administrative Agent, Borrowers and Requisite Lenders agree upon the
required amendments, then after appropriate amendments have been executed and
the underlying Accounting Change with respect thereto has been implemented, any
reference to GAAP contained in the Agreement or in any other Loan Document
shall, only to the extent of such Accounting Change, refer to GAAP, consistently
applied after giving effect to the implementation of such Accounting Change. If
Administrative Agent, Borrowers and Requisite Lenders cannot agree upon the
required amendments within 30 days following the date of implementation of any
Accounting Change, then all Financial Statements delivered and all calculations
of financial covenants and other standards and terms in accordance with the
Agreement and the other Loan Documents shall be prepared, delivered and made
without regard to the underlying Accounting Change. For purposes of Section 8.1,
a breach of a Financial Covenant contained in this Annex G shall be deemed to
have occurred as of any date of determination by Administrative Agent or as of
the last day of any specified measurement period, regardless of when the
Financial Statements reflecting such breach are delivered to Administrative
Agent.

                                      G-1
<PAGE>

                            ANNEX H (Section 9.9(a))
                                       to
                           FOURTH AMENDED AND RESTATED
                                 LOAN AGREEMENT

                            WIRE TRANSFER INFORMATION

                  Name: Palisades Collections LLC

                  Israel Discount Bank of New York
                  511 Fifth Avenue
                  New York City, N.Y. 10017
                  ABA# 026009768

                  Accounts Payable-ABL
                  Account #: 355397901611
                  Attention:
                  Re: Palisades Collection LLC

                                      H-1
<PAGE>

                             ANNEX I (Section 11.10)
                                       to
                           FOURTH AMENDED AND RESTATED
                                 LOAN AGREEMENT

                                NOTICE ADDRESSES

(A)      If to Administrative Agent:
         Israel Discount Bank of New York
         511 Fifth Avenue
         New York, NY 10017
         Attention:        Mark Reiner, First Vice President
                           James M. Jordon, Vice President
         Telecopier No.:  (212) 551-8567
         Telephone No.:  (212) 551-8552

         with copies to (which shall not constitute notice):

         Greenberg Traurig, LLP
         200 Park Avenue
         P.O. Box 677 Florham Park, NJ 07932
         Attention: Thomas P. Duignan, Esq.
         Telecopier No.: (973) 301-8410
         Telephone No.: (973) 360-7941

(B) If to any Borrower, any Credit Party, or any Guarantor, to Borrower
Representative, at

         Palisades Collection, L.L.C.
         210 Sylvan Avenue
         Englewood Cliffs, NJ  07632
         Attention:        Gary Stern
                           Mitchell Cohen
         Telecopier No.:
         Telephone No.:  (201) 567-5648, extension 213

         with copies to (which shall not constitute notice):

         Lowenstein Sandler PC
         65 Livingston Avenue
         Roseland, NJ 07068
         Attention:  Daniel J. Barkin, Esq.
         Telecopier No.:  (973) 597-2307
         Telephone No.:  (973) 597-2306

                                       I-1
<PAGE>

                 ANNEX J (from Annex A - Commitments definition)
                                       to
                           FOURTH AMENDED AND RESTATED
                                 LOAN AGREEMENT

<TABLE>
<CAPTION>
            ------------------------------------------------------------- --------------------------
            LENDER                                                        REVOLVING LOAN COMMITMENT
            ------------------------------------------------------------- --------------------------
<S>                                                                                    <C>
            Israel Discount Bank of New York                                            $50,000,000
            ------------------------------------------------------------- --------------------------
            Merrill Lynch Business Financial Services Inc.                               30,000,000
            ------------------------------------------------------------- --------------------------
            Bank Leumi USA                                                               20,000,000
            ------------------------------------------------------------- --------------------------
            Harris N.A.                                                                  25,000,000
            ------------------------------------------------------------- --------------------------
            The Berkshire Bank                                                           10,000,000
            ------------------------------------------------------------- --------------------------
            JPMorgan Chase Bank, N.A.                                                    25,000,000
            ------------------------------------------------------------- --------------------------
            North Fork Bank                                                              15,000,000
            ------------------------------------------------------------- --------------------------

            ------------------------------------------------------------- --------------------------
            TOTAL                                                                      $175,000,000
            ------------------------------------------------------------- --------------------------
</TABLE>

                                       J-1
<PAGE>

                                  SCHEDULE 1.1

                             AGENTS' REPRESENTATIVE

Name:    Virginia Leamon, Operations Manager
         Israel Discount Bank of New York
         511 Fifth Avenue
         New York, NY 10017
         Telephone:        (212) 551-8505
         Telecopier:       (212) 986-4786

                                      K-1
<PAGE>

                                SCHEDULE 1.1 (b)

<TABLE>
<CAPTION>
------------------------- ------------------------- ------------------- -------------- --------------- ------------------
         Owner                   Borrower/            Description of        Cert.        Number of     % of Outstanding
                                Credit Party         Pledged Interest      No.(s)        Interests         Interests
                                                      and Operating
                                                        Agreement
------------------------- ------------------------- ------------------- -------------- --------------- ------------------
<S>                       <C>                       <C>                 <C>            <C>             <C>

------------------------- ------------------------- ------------------- -------------- --------------- ------------------
Asta Funding, Inc.        Palisades Collection,     Membership                                         100%
                          L.L.C.                    Interests
------------------------- ------------------------- ------------------- -------------- --------------- ------------------
Asta Funding, Inc.        Asta Funding              Membership                                         100%
                          Acquisition I, LLC        Interests
------------------------- ------------------------- ------------------- -------------- --------------- ------------------
Asta Funding, Inc.        Asta Funding              Membership                                         100%
                          Acquisition II, LLC       Interests
------------------------- ------------------------- ------------------- -------------- --------------- ------------------
Asta Funding, Inc.        Asta Funding.com, LLC     Membership                                         100%
                                                    Interests
------------------------- ------------------------- ------------------- -------------- --------------- ------------------
Asta Funding, Inc.        Asta Commercial, LLC      Membership                                         100%
                                                    Interests
------------------------- ------------------------- ------------------- -------------- --------------- ------------------
Asta Funding, Inc.        Computer Finance, LLC     Membership                                         100%
                                                    Interests
------------------------- ------------------------- ------------------- -------------- --------------- ------------------
Asta Funding, Inc.        Palisades                 Membership                                         100%
                          Acquisition I, LLC        Interests
------------------------- ------------------------- ------------------- -------------- --------------- ------------------
Asta Funding, Inc.        Palisades                 Membership                                         100%
                          Acquisition II, LLC       Interests
------------------------- ------------------------- ------------------- -------------- --------------- ------------------
Asta Funding, Inc.        Palisades                 Membership                                         100%
                          Acquisition IV, LLC       Interests
------------------------- ------------------------- ------------------- -------------- --------------- ------------------
Asta Funding, Inc.        E.R.  Receivables Corp.,  Membership                                         100%
                          LLC                       Interests
------------------------- ------------------------- ------------------- -------------- --------------- ------------------
</TABLE>

                                      L-1

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