Document:

Exhibit 10.4

 

THIRD AMENDMENT AND WAIVER TO CREDIT AGREEMENT

 

THIS THIRD AMENDMENT AND
WAIVER TO CREDIT AGREEMENT (this “Agreement”) is entered into to be effective
as of September 6, 2006, by and among GMH
COMMUNITIES, LP, a Delaware
limited partnership (“GMH Operating Partnership”), GMH
COMMUNITIES TRUST, a
Maryland real estate investment trust (the “Trust”), each
Subsidiary of the Trust that is a borrower pursuant to Section 2.16 of
the Credit Agreement defined below (individually, a “Subsidiary Borrower”
and collectively, “Subsidiary
Borrowers;” GMH Operating Partnership and Subsidiary Borrowers
are individually called a “Borrower”
and collectively called “Borrowers”),
each lender party to the Credit Agreement (collectively, the “Lenders” and
individually, a “Lender”),
and BANK OF AMERICA, N.A., as
Administrative Agent, Swing Line Lender and L/C Issuer.

 

R E  C  I  T  A  L
S

 

A.            Reference is hereby made to that certain
Credit Agreement dated as of November 8, 2004, executed by the Trust,
Borrowers, the Lenders, and Administrative Agent (as amended, the “Credit Agreement”).

 

B.            Capitalized terms used herein shall, unless
otherwise indicated, have the respective meanings set forth in the Credit
Agreement.

 

C.            The Trust, Borrowers, Administrative Agent,
and Lenders desire to waive and modify certain provisions contained in the
Credit Agreement, subject to the terms and conditions set forth herein.

 

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

 

1.             Waiver. The Trust and Borrower failed to comply
with Sections 7.10(b) and (c) (the “Coverage Ratios”) as of the fiscal
quarter ending June 30, 2006 (the “Subject Period”). Subject to the terms and
conditions set forth herein, Lenders waive compliance with the Coverage Ratios
solely for the Subject Period; provided that
this waiver is conditioned upon the Trust’s and Borrower’s compliance with the
Coverage Ratios, as amended hereby. No
waiver by Lenders under the Credit Agreement or any other Loan Document is
granted except as expressly set forth above, and Lenders expressly reserve the
right to require strict compliance with the terms of the Credit Agreement and
the other Loan Documents in all other respects.

 

1

 

2.             Amendments to the Credit
Agreement.

 

(a)           Section 1.01 of the Credit Agreement is hereby amended to
delete the definition of “Applicable Rate” in its entirety and replace
such definition with the following:

 

“Applicable Rate” means the following percentages per annum,
based upon the Leverage Ratio as set forth in the most recent Compliance
Certificate received by Administrative Agent pursuant to Section 6.02(b):

 

	
   

  	
   

  	
   

  	
   

  	
  Eurodollar

  Rate +

  	
   

  	
   

  	
   

  
	
  Pricing

  Level

  	
   

  	
  Leverage Ratio

  	
   

  	
  Letters of

  Credit

  	
   

  	
  Base Rate +

  	
   

  
	
  1

  	
   

  	
  <0.45:1

  	
   

  	
  1.625

  	
  %

  	
  0.75

  	
  %

  
	
  2

  	
   

  	
  >0.45:1 but £0.50:1

  	
   

  	
  1.750

  	
  %

  	
  1.00

  	
  %

  
	
  3

  	
   

  	
  >0.50:1 but <0.55:1

  	
   

  	
  1.875

  	
  %

  	
  1.25

  	
  %

  
	
  4

  	
   

  	
  >0.55:1 but <0.60:1

  	
   

  	
  2.125

  	
  %

  	
  1.50

  	
  %

  
	
  5

  	
   

  	
  >0.60:1 but <0.65:1

  	
   

  	
  2.375

  	
  %

  	
  1.75

  	
  %

  
	
  6

  	
   

  	
  >0.65:1

  	
   

  	
  2.625

  	
  %

  	
  2.00

  	
  %

  

 

Any increase
or decrease in the Applicable Rate resulting from a change in the Leverage
Ratio shall become effective as of the first (1st) Business Day
immediately following the date a Compliance Certificate is delivered pursuant
to Section 6.02(b); provided, however, that if a
Compliance Certificate is not delivered when due in accordance with such Section,
then Pricing Level 6 shall apply as of the first (1st) Business
Day after the date on which such Compliance Certificate was required to have
been delivered until and including the first (1st) Business Day
immediately following the date such Compliance Certificate is actually
delivered. The Applicable Rate in effect from the Third Amendment Effective
Date through the date of delivery of the next Compliance Certificate delivered
pursuant to Section 6.02(b) shall be determined based upon Pricing
Level 3.

 

(b)           Section 1.01 of the Credit Agreement is hereby amended to
delete the definition of “Consolidated EBITDA” in its entirety and
replace such definition with the following:

 

“Consolidated EBITDA” means, for any
period, for the Companies on a consolidated basis, an amount equal to
Consolidated Net Income for such period plus (a) the following to the
extent deducted in calculating such Consolidated Net Income: (i) Consolidated
Interest Charges for such period; (ii) the provision for Federal, state, local
and foreign income taxes payable by the Companies for such period; (iii)
depreciation and amortization expense; (iv) other non-recurring expenses of the
Companies reducing such Consolidated Net Income which do not represent a cash
item in such period or any future period; and (v) commencing with the period
ending June 30, 2006, all Special Investigation Expenses, minus (b)
the following to the extent included in calculating such Consolidated Net
Income: (i) Federal, state, local and foreign income tax credits of the
Companies for such period; and (ii) all non-cash items increasing Consolidated
Net Income for such period.

 

2

 

(c)           Section 1.01 of the Credit Agreement is hereby amended to
delete the definition of “Funds from Operations” in its entirety and
replace such definition with the following:

 

“Funds from Operations” means, for any Person for any period,
the sum of net earnings (or loss) after taxes of such Person, plus
depreciation and amortization expense (exclusive of amortization of financing
costs), all as determined in accordance with GAAP; provided that there
shall not be included in such calculation (a) any proceeds of any insurance
policy other than rental or business interruption insurance received by such
Person, (b) any gain or loss which is classified as “extraordinary” in
accordance with GAAP, or (c) any capital gains and taxes on capital gains. Funds
from Operations shall not be reduced by any Restricted Payment in respect of
any preferred Equity Interests of such Person or by any Special Investigation
Expenses.

 

(d)           Section 1.01 of the Credit Agreement is hereby amended to
add the following definition of “Special Investigation Expenses” in the proper alphabetical order:

 

“Special
Investigation Expenses” means, for any period, all non-recurring expenses
deducted from Consolidated Net Income and paid in cash or to be paid in cash by
Borrower in connection with (a) the investigative work conducted by the audit
committee of the Trust and Borrower in connection with the Borrower’s 2005
financial restatement, which shall include additional audit and legal fees and
expenses and any waiver fees paid in connection with the delivery of financial
statements and (b) formation and operations of the special committee of the
Trust and Borrower that is developing strategic alternatives for the Trust
and/or Borrower.

 

(e)           Section 1.01 of the Credit Agreement is hereby amended to
add the following definition of “Third Amendment Effective Date” in the proper alphabetical order:

 

“Third Amendment Effective Date” means September 6, 2006.

 

(f)            Section 1.01 of the Credit Agreement is hereby amended to
delete the definition of “Total
Asset Value” in its entirety
and replace such definition with the following:

 

“Total Asset Value” means the sum
of (a) as of any date of determination, the book value of the
Student Housing Projects plus accumulated depreciation on such Student Housing
Projects, as determined on a
consolidated basis in accordance with GAAP, unless an MAI Appraisal
Value is available, in which case
such amount shall be  lesser of (i) the book value of the Student
Housing Projects plus accumulated depreciation on such Student Housing Projects, as determined on a consolidated basis in
accordance with GAAP and (ii) the most recent MAI Appraisal Value of the
Student Housing Projects, plus
(b) Management Cash Flow Value, plus (c) the book value of other assets
(excluding owned real estate captured in clause (a) above) owned by the
Companies, as determined on a consolidated basis in accordance with GAAP; plus
(d) GMH Operating Partnership’s
and each Guarantor’s pro rata share of the book value of assets in joint
ventures of such Person that own student housing properties; provided  that,
current assets (as determined in accordance with GAAP) that are incurred in the
normal course of business shall be excluded from Total Asset Value; provided,
further  that, Management Cash Flow Value shall not exceed twenty
percent (20%) of Total Asset Value.

 

(g)           Section 1.01 of the Credit Agreement is hereby amended to
delete the definition of “Unencumbered Asset Value” in its entirety and replace such definition
with the following:

 

“Unencumbered Asset Value” means an amount equal (a) the sum
of (i) the aggregate book value of Unencumbered Properties plus (ii)
accumulated depreciation of such

 

3

 

Unencumbered
Properties, as determined on a consolidated
basis in accordance with GAAP, unless an MAI Appraisal Value is
available, in which case such
amount shall be the  lesser of (a) the sum of (i) the
aggregate book value of Unencumbered Properties plus (ii) accumulated
depreciation of such Unencumbered Properties, as determined on a consolidated basis in accordance with GAAP and
(b) the most recent MAI Appraisal Value of the Unencumbered Properties.

 

(h)           Section 7.10(e) of the Credit Agreement is hereby deleted in its
entirety and replaced with the following:

 

(e)           Leverage
Ratio. Permit the Leverage Ratio as
of the end of any fiscal quarter of the Trust to be greater than (i) from the
Third Amendment Effective Date through December 31, 2006, 70%, and
(ii) after December 31, 2006, 60%.

 

(i)          The Schedules attached to Exhibit D of the Credit Agreement
are hereby renumbered as Schedules 2, 3, and
4, and Schedule 2 and Schedule 4 to Exhibit D (as renumbered
hereby) of the Credit Agreement are hereby amended and replaced with Schedule 2 and Schedule 4 attached
hereto.

 

3.             Amendments to Credit
Agreement and Other Loan Documents.

 

(a)           All references in the Loan Documents to the
Credit Agreement shall henceforth include references to the Credit Agreement as
modified and amended by this Agreement, and as may, from time to time, be
further modified, amended, restated, extended, renewed, and/or increased.

 

(b)           Any and all of the terms and provisions of
the Loan Documents are hereby amended and modified wherever necessary, even
though not specifically addressed herein, so as to conform to the amendments
and modifications set forth herein.

 

4.             Ratifications. Each Loan Party that is a party hereto (a)
ratifies and confirms all provisions of the Loan Documents as amended by this
Agreement, (b) ratifies and confirms that all guaranties and assurances,
granted, conveyed, or assigned to the Administrative Agent and the Lenders
under the Loan Documents are not released, reduced, or otherwise adversely
affected by this Agreement and continue to guarantee and assure full payment
and performance of the present and future Obligations, and (c) agrees to
perform such acts and duly authorize, execute, acknowledge, deliver, file, and
record such additional documents and certificates as the Administrative Agent
or the Lenders may reasonably request in order to create, preserve and protect
those guaranties and assurances.

 

5.             Representations. Each Loan Party that is a party hereto
represents and warrants to Lenders that as of the date of this Agreement:
(a) this Agreement has been duly authorized, executed, and delivered by
each such Loan Party; (b) no action of, or filing with, any Governmental
Authority is required to authorize, or is otherwise required in connection
with, the execution, delivery, and performance by each such Loan Party of this
Agreement; (c) the Loan Documents, as amended by this Agreement, are valid
and binding upon each Loan Party that is a party thereto and are enforceable
against each Loan Party in accordance with their respective terms, except as
limited by Debtor Relief Laws and general principles of equity; (d) the
execution, delivery, and performance by each Loan Party that is a party hereto
of this Agreement do not require the consent of any other Person and do not and
will not constitute a violation of any Laws, order of any Governmental
Authority, or material agreements to which any such Loan Party that is a party
or by which any such Loan Party is bound; (e) all representations and
warranties in the Loan Documents are true and correct in all material respects
on and as of the date of this Agreement, except to the extent that (i) any
of them speak to a different specific date, or (ii) the facts on which any
of them were based have been changed by transactions contemplated or permitted
by the

 

4

 

Credit Agreement; and (f) both before
and after giving effect to this Agreement, no Default or Event of Default
exists.

 

6.             Conditions. This Agreement shall not be effective unless
and until:

 

(a)           this Agreement is executed by each Borrower,
the Trust, each Guarantor, Administrative Agent, and the Required Lenders;

 

(b)           the representations and warranties in this
Agreement are true and correct in all material respects on and as of the date
of this Agreement, except to the extent that (i) any of them speak to a
different specific date, or (ii) the facts on which any of them were based have
been changed by transactions contemplated or permitted by the Credit Agreement;

 

(c)           both before and after giving effect to this
Agreement, no Default or Event of Default exists; and

 

(d)           Administrative Agent shall have received, for
the benefit of the applicable Lenders, an amendment fee equal to 0.20% times
the Commitment of each Lender that executes this Agreement.

 

7.             Continued Effect. Except to the extent amended hereby or by any
documents executed in connection herewith, all terms, provisions, and
conditions of the Credit Agreement and the other Loan Documents, and all
documents executed in connection therewith, shall continue in full force and
effect and shall remain enforceable and binding in accordance with their
respective terms.

 

8.             Miscellaneous. Unless stated otherwise (a) the singular
number includes the plural and vice versa
and words of any gender include each other gender, in each case, as
appropriate, (b) headings and captions may not be construed in interpreting
provisions, (c) this Agreement shall be construed — and its performance
enforced — under New York law, (d) if any part of this Agreement is for any
reason found to be unenforceable, all other portions of it nevertheless remain
enforceable, and (e) this Agreement may be executed in any number of
counterparts with the same effect as if all signatories had signed the same
document, and all of those counterparts must be construed together to
constitute the same document.

 

9.             Parties. This Agreement binds and inures to each of
the parties hereto and their respective successors and permitted assigns.

 

10.          ENTIRETIES. THE CREDIT
AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED BY THIS AGREEMENT, REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES ABOUT THE SUBJECT MATTER OF THE CREDIT
AGREEMENT AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.

 

[Remainder of Page Intentionally Left Blank; Signature Pages
to Follow.]

 

5

 

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

 

 

	
   

  	
  BANK OF
  AMERICA, N.A., a
  national banking

  association, as Administrative Agent, L/C Issuer, Swing

  Line Lender, and a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ron
  Odlozil

  	
   

  
	
   

  	
   

  	
  Ron Odlozil

  
	
   

  	
   

  	
  Senior Vice
  President

  

 

 

 

Signature Page to Second Amendment and Waiver to Credit Agreement

 

 

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

 

 

	
   

  	
  JPMORGAN
  CHASE BANK, N.A.,
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Donald
  Shokrian

  
	
   

  	
   

  	
  Name:

  	
  Donald Shokrian

  
	
   

  	
   

  	
  Title:

  	
  Managing
  Director

  
					

 

 

 

Signature Page to Third Amendment and Waiver to Credit Agreement

 

 

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

 

 

	
   

  	
  MERRILL
  LYNCH CAPITAL CORPORATION, as a

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Chantal
  Simon

  
	
   

  	
   

  	
  Name:

  	
  Chantal
  Simon

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President

  
					

 

 

 

Signature Page to Third Amendment and Waiver to Credit Agreement

 

 

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

 

 

	
   

  	
  MORGAN
  STANLEY BANK, as a
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Daniel
  Twenge

  
	
   

  	
   

  	
  Name:

  	
  Daniel
  Twenge

  
	
   

  	
   

  	
  Title:

  	
  Authorized
  Signatory Morgan Stanley Bank

  
					

 

 

 

Signature Page to Third Amendment and Waiver to Credit Agreement

 

 

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

 

 

	
   

  	
  DEUTSCHE
  BANK TRUST COMPANY AMERICAS, as a

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brenda
  Casey

  
	
   

  	
   

  	
  Name:

  	
  Brenda Casey

  
	
   

  	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joanna
  Soliman

  
	
   

  	
   

  	
  Name:

  	
  Joanna
  Soliman

  
	
   

  	
   

  	
  Title:

  	
  Assistant
  Vice President

  
						

 

 

 

Signature Page to Third Amendment and Waiver to Credit Agreement

 

 

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

 

	
   

  	
  BANK
  MIDWEST, N.A., as a
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy
  B. Kenney

  
	
   

  	
   

  	
  Name:

  	
  Timothy B.
  Kenney

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice
  President

  
					

 

 

 

Signature Page to Third Amendment and Waiver to Credit Agreement

 

 

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

 

	
   

  	
  GMH COMMUNITIES, LP, a Delaware limited
  partnership,

  as Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  GMH
  COMMUNITIES GP TRUST, a Delaware trust,

  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Joseph M. Macchione

  	
   

  
	
   

  	
   

  	
   

  	
  Joseph M. Macchione

  
	
   

  	
   

  	
   

  	
  Vice President

  

 

 

 

Signature Page to Third Amendment and Waiver to Credit Agreement

 

 

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

 

 

	
   

  	
  GMH COMMUNITIES
  TRUST,a Maryland real estate

  investment trust, as a
  Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph
  Macchione

  
	
   

  	
   

  	
  Name:

  	
  Joseph
  Macchione

  
	
   

  	
   

  	
  Title:

  	
  EVP and
  General Counsel

  
					

 

 

 

Signature Page to Third Amendment and Waiver to Credit Agreement

 

 

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

 

	
   

  	
  COLLEGE PARK MANAGEMENT TRS, INC.,

  
	
   

  	
  a Delaware
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph
  M. Macchione

  	
   

  
	
   

  	
   

  	
  Joseph M.
  Macchione

  
	
   

  	
   

  	
  Vice
  President and Secretary

  

 

 

 

Signature Page to Third Amendment and Waiver to Credit Agreement

 

 

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

 

 

	
   

  	
  GMH
  MILITARY HOUSING, LLC,

  
	
   

  	
  a Delaware
  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph
  M. Macchione

  	
   

  
	
   

  	
   

  	
  Joseph M.
  Macchione

  
	
   

  	
   

  	
  Vice
  President and Secretary

  

 

 

 

Signature Page to Third Amendment and Waiver to Credit Agreement

 

 

To induce the Credit Parties
to enter into this Agreement, the undersigned jointly and severally
(a) consent and agree to this letter’s execution and delivery, (b) ratify
and confirm that all guaranties, assurances, and Liens granted, conveyed, or
assigned to the Credit Parties under the Loan Documents are not released,
diminished, impaired, reduced, or otherwise adversely affected by this
Agreement and continue to guarantee, assure, and secure the full payment and
performance of all present and future Obligations (except to the extent
specifically limited by the terms of such guaranties, assurances, or Liens),
and (c) waive notice of acceptance of this consent and agreement, which consent
and agreement binds the undersigned and their successors and permitted assigns
and inures to the Credit Parties and their respective successors and permitted
assigns.

 

	
   

  	
  GMH
  COMMUNITIES TRUST,a Maryland real estate

  investment trust, as a
  Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph
  Macchione

  
	
   

  	
   

  	
  Name:

  	
  Joseph
  Macchione

  
	
   

  	
   

  	
  Title:

  	
  EVP and
  General Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GMH COMMUNITIES LP, a Delaware limited
  partnership, as

  a Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  GMH COMMUNITIES GP TRUST, a Delaware trust,

  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Joseph
  Macchione

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Joseph
  Macchione

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Secretary

  
								

 

 

 

Signature Page to Third Amendment and Waiver to Credit Agreement

 

 

	
   

  	
  SOUTH CAROLINA
  ASSOCIATES, LLC, a
  Delaware

  limited liability company, as a Guarantor

  
	
   

  	
   

  
	
   

  	
  CROYDEN
  AVENUE ASSOCIATES, LLC,
  a Delaware

  limited liability company, as a Guarantor

  
	
   

  	
   

  
	
   

  	
  MONKS
  ROAD ASSOCIATES, LLC,
  a Delaware limited

  liability company, as a Guarantor

  
	
   

  	
   

  
	
   

  	
  LUBBOCK
  TWO ASSOCIATES, LLC,
  a Delaware limited

  liability company, as a Guarantor

  
	
   

  	
   

  
	
   

  	
  DENTON
  ASSOCIATES, LLC, a
  Delaware limited liability

  company, as a Guarantor

  
	
   

  	
   

  
	
   

  	
  SAVOY
  VILLAGE ASSOCIATES, LLC, a Delaware limited

  liability company, as a Guarantor

  
	
   

  	
   

  
	
   

  	
  RENO
  ASSOCIATES, LLC, a
  Delaware limited liability

  company, as a Guarantor

  
	
   

  	
   

  
	
   

  	
  COLLEGE
  PARK INVESTMENTS LLC,
  a Delaware limited

  liability company, as a Guarantor

  
	
   

  	
   

  
	
   

  	
  COLLEGE
  PARK MANAGEMENT LLC,
  a Delaware

  limited liability company, as a Guarantor

  
	
   

  	
   

  
	
   

  	
  GMH
  MILITARY HOUSING LLC,
  a Delaware limited

  liability company, as a Guarantor

  
	
   

  	
   

  
	
   

  	
  GMH
  MILITARY HOUSING INVESTMENTS LLC, a

  Delaware limited liability company, as a Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph
  Macchione

  
	
   

  	
   

  	
  Name:

  	
  Joseph
  Macchione

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
					

 

 

 

Signature Page to Third Amendment and Waiver to Credit Agreement

 

 

	
   

  	
  COLLEGE
  PARK MANAGEMENT TRS, INC., a Delaware

  corporation, as a Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph
  M. Macchione

  	
   

  
	
   

  	
   

  	
  Joseph M.
  Macchione

  
	
   

  	
   

  	
  Vice
  President and Secretary

  

 

 

 

Signature Page to Third Amendment and Waiver to Credit Agreement

 

 

For the Quarter/Year ended                            (“Statement
Date”)

 

SCHEDULE 2
to the Compliance Certificate

($ in 000’s)

 

	
  I.

  	
   

  	
  Section 7.10(a) – Minimum Net
  Worth.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  A.

  	
   

  	
  GAAP Net Worth:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B.

  	
   

  	
  Intangible Assets

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  C.

  	
   

  	
  Accumulated
  Depreciation and Amortization

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  D.

  	
   

  	
  Consolidated Tangible
  Net Worth (Line I.A. – Line I.B. + Line I.C.)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  E.

  	
   

  	
  75% of Net Proceeds of
  Equity Issuances after date of the Agreement:

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  F.

  	
   

  	
  Minimum required Net
  Worth ($275,000,000 + Line I.E.):

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  G.

  	
   

  	
  Excess or (deficiency)
  for covenant compliance (Line I.D. – I.F.):

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  II.

  	
   

  	
  Section
  7.10(b) –Interest Coverage Ratio.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  A.

  	
  Consolidated EBITDA (See Schedule
  4)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  B.

  	
  Capital Expenditure
  Reserve

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  C.

  	
  Adjusted EBITDA (Line
  II.A. – Line II.B.)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  D.

  	
  Interest Expense

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  E.

  	
  Ratio of Line II.C. to
  II.D.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum Required

  	
   

  	
  2.0 to 1.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  III.

  	
   

  	
  Section
  7.10(c) –Fixed Charge Coverage Ratio.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  A.

  	
  Consolidated EBITDA (See Schedule
  4)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  B.

  	
  Capital Expenditure
  Reserve

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  C.

  	
  Adjusted EBITDA (Line
  III.A. – Line III.B.)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  D.

  	
  Interest Expense

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  E.

  	
  Preferred Stock Dividends

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  F.

  	
  Scheduled Principal
  Payments (excluding balloon payments)

  	
   

  	
  $

  	
   

  	
   

  

 

Third Amendment and Waiver To Credit Agreement

 

 

	
   

  	
   

  	
  G.

  	
  Fixed Charges (Line III.D.
  + Line III.E + Line III.F.)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  H.

  	
  Ratio of III.C. to III.G.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum Required

  	
   

  	
  1.75 to 1.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  IV.

  	
   

  	
  Section
  7.10(d) –Unsecured Interest Coverage Ratio.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  A.

  	
  NOI from Unencumbered
  Properties (See Schedule 4)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  B.

  	
  Consolidated
  EBITDA from operation of Military Housing Projects

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  C.

  	
  Consolidated
  EBITDA from operation of Student Housing Projects owned by third parties

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  D.

  	
  Capital
  Expenditure Reserve

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  E.

  	
  Adjusted Borrowing Base
  Cash Flow (Line IV.A. + Line IV.B. + Line IV.C. – Line IV.D.)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  F.

  	
  Interest Expense on
  Indebtedness which is not Secured Debt

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  G.

  	
  Ratio of IV.E. to IV.F.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum Required

  	
   

  	
  2.25 to 1.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  V.

  	
   

  	
  Section
  7.10(e) – Leverage Ratio.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  A.

  	
  Total Debt

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  B.

  	
  Total Asset Value (See Schedule
  3)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  C.

  	
  Ratio of V.A. to V.B.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Maximum Allowed

  	
   

  	
  [60% after
  December 31, 2006]

  	
   

  
	
   

  	
   

  	
  [70% through
  December 31, 2006]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  VI.

  	
   

  	
  Section
  7.10(f) –Total Recourse Debt.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  A.

  	
  Actual
  Recourse Debt (including the Obligations)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  B.

  	
  Borrowing
  Base Value (See Schedule 3)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  C.

  	
  (Excess) or
  deficiency for covenant compliance (Line VI.A. – VI.B.):

  	
   

  	
  $

  	
   

  	
   

  
											

 

Third Amendment and Waiver To Credit Agreement

 

 

	
  VII.

  	
   

  	
  Section
  7.03(f)(i) – Secured Recourse Debt other than the Obligations.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  A.

  	
  Actual Secured Recourse Debt (excluding the Obligations)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  B.

  	
  Maximum
  Permitted

  	
   

  	
  $

  	
  25,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  C.

  	
  (Excess) or
  deficiency for covenant compliance (Line VII.A. – VII.B.):

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  VIII.

  	
   

  	
  Section
  7.03(f)(ii) - – Unsecured Recourse Debt other than the Obligations.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  A.

  	
  Actual Unsecured Recourse Debt (excluding the Obligations)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  B.

  	
  Maximum
  Permitted

  	
   

  	
  $

  	
  125,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  C.

  	
  Complies
  with the provision of Section 7.03(f)(ii)(A)-(E)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  C.

  	
  (Excess) or
  deficiency for covenant compliance (Line VII.A. – VII.B.):

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  IX.

  	
   

  	
  Section
  7.05(d) and (e) –Restricted Payments.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  A.

  	
  GMH Operating Partnership:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (i)

  	
  Funds from Operations

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (ii)

  	
  Distributions

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (iii)

  	
  Percent (ii) / (i) (not to
  exceed 95%)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  B.

  	
  Trust:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (i)

  	
  Funds from Operations

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (ii)

  	
  Distributions

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (iii)

  	
  Percent (ii) / (i) (not to
  exceed 95%)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  X.

  	
   

  	
  Section
  7.02(b) – Investments

  	
   

  	
   

  	
   

  
												

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Total Asset

  	
   

  	
  Maximum

  	
   

  
	
  Investments

  	
   

  	
  Amount

  	
   

  	
  Value

  	
   

  	
  Allowed

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (i)

  	
   

  	
  Investments
  in raw land

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
  %

  	
  10

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (ii)

  	
   

  	
  Investments
  in Properties under construction

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
  %

  	
  20

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (iii)

  	
   

  	
  Unconsolidated
  Affiliates

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
  %

  	
  20

  	
  %

  

 

Third Amendment and Waiver To Credit Agreement

 

 

	
  (iv)

  	
   

  	
  Other
  Non-Real Estate Investments

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
  %

  	
  10

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (v)

  	
   

  	
  Indebtedness
  secured by Real Property

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
  %

  	
  10

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (vi)

  	
   

  	
  All
  Investments described in (i) through (v) above

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
  %

  	
  30

  	
  %

  

 

	
  XI.

  	
   

  	
  Section
  7.10(g) – Maximum Unhedged Variable Rate Debt

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  A.

  	
  Actual Variable Rate Debt

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  B.

  	
  Total
  Indebtedness

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  C.

  	
  Ratio of
  Line X.A. to Line X.B.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  D.

  	
  Maximum
  Permitted

  	
   

  	
  30

  	
  %

  

 

Third Amendment and Waiver To Credit Agreement

 

 

SCHEDULE 4

 

TO COMPLIANCE CERTIFICATE

 

($ in 000’s)

 

	
  NOI from

  Unencumbered

  Properties

  	
   

  	
  Most Recent Fiscal Quarter

  Annualized

  	
   

  
	
  rental,
  management, and operating income from Student Housing Projects

  	
   

  	
  $

  	
   

  	
   

  
	
  -

  	
   

  	
  property
  operating expenses

  	
   

  	
  $

  	
   

  	
   

  
	
  -

  	
   

  	
  real estate
  taxes

  	
   

  	
  $

  	
   

  	
   

  
	
  -

  	
   

  	
  bad debt
  expense

  	
   

  	
  $

  	
   

  	
   

  
	
  -

  	
   

  	
  other
  operating expenses and property charges related to operation of Student
  Housing Projects

  	
   

  	
  $

  	
   

  	
   

  
	
  +

  	
   

  	
  debt service

  	
   

  	
  $

  	
   

  	
   

  
	
  +

  	
   

  	
  income taxes
  paid

  	
   

  	
  $

  	
   

  	
   

  
	
  +

  	
   

  	
  depreciation,
  amortization, and other non-cash expenses

  	
   

  	
  $

  	
   

  	
   

  
	
  =

  	
   

  	
  NOI from
  Unencumbered Properties

  	
   

  	
  $

  	
   

  	
   

  

 

	
  Consolidated

  EBITDA

  	
   

  	
  Most Recent Fiscal Quarter

  Annualized

  	
   

  
	
  Consolidated Net Income

  	
   

  	
  $

  	
   

  	
   

  
	
  +

  	
   

  	
  Consolidated
  Interest Charges

  	
   

  	
  $

  	
   

  	
   

  
	
  +

  	
   

  	
  income taxes

  	
   

  	
  $

  	
   

  	
   

  
	
  +

  	
   

  	
  depreciation
  expense

  	
   

  	
  $

  	
   

  	
   

  
	
  +

  	
   

  	
  amortization
  expense

  	
   

  	
  $

  	
   

  	
   

  
	
  +

  	
   

  	
  non-recurring
  non-cash expenses

  	
   

  	
  $

  	
   

  	
   

  
	
  +

  	
   

  	
  Special
  Investigation Expenses (commencing with the period ending June 30, 2006)

  	
   

  	
  $

  	
   

  	
   

  
	
  -

  	
   

  	
  income tax
  credits

  	
   

  	
  $

  	
   

  	
   

  
	
  -

  	
   

  	
  non-cash
  income

  	
   

  	
  $

  	
   

  	
   

  
	
  =

  	
   

  	
  Consolidated
  EBITDA

  	
   

  	
  $

  	
   

  	
   

  

 

Third Amendment and Waiver To Credit AgreementExhibit
10.28

EMPLOYMENT
AGREEMENT

This
Employment Agreement (the “Agreement”), dated as of the 13th day of September 2006, and effective as of the
7th day of August 2006, is entered into by and
between CardioTech International, Inc., a Massachusetts corporation having its
principal place of business at 229 Andover Street, Wilmington, Massachusetts
01887 (the “Company”), and Michael F. Adams, an individual with an address at
505 Tremont Street, Residence 208, Boston, Massachusetts 02116 (the “Executive”).

TERMS
OF AGREEMENT

In
consideration of this Agreement and the continued employment of the Executive
by the Company, the parties agree as follows:

1.         Employment.  The Company hereby employs the Executive, on
a full-time basis, to act as Chief Executive Officer and President of the
Company and to perform such acts and duties and furnish such services to the
Company in connection with and related to that position as is customary for
persons with similar positions in like companies, and as the Board of Directors
of the Company (the “Board”) shall from time to time reasonably direct.  The Executive shall be an officer of the
Company.  The Executive hereby accepts
said employment.  The Executive shall use
his best and most diligent efforts to promote the interests of the Company;
shall discharge his duties in a highly competent manner; and shall devote his
full business time and his best business judgment, skill and knowledge to the
performance of his duties and responsibilities hereunder.  The Executive shall report directly to the
Board.  Nothing contained herein shall
preclude the Executive from devoting incidental and insubstantial amounts of
time to activities other than the business of the Company.

2.         Term of Employment.  The Company agrees to employ the Executive
for the period commencing on August 7, 2006 and ending on August 6, 2008 (the “Employment
Period”).  Notwithstanding the foregoing,
both the Executive and the Company shall have the right to terminate the
Executive’s employment under this Agreement upon thirty (30) days written
notice to the other party, subject to the Company’s obligation to pay severance
benefits under certain circumstances as provided in Sections 3.6 and 3.7
hereof.  If the Executive shall remain in
the employ of the Company beyond the Employment Period, in the absence of any
other express agreement between the parties, this Agreement shall be deemed to
continue on a month-to-month basis (the “Extended Employment Period”).

3.         Compensation and Benefits;
Disability.

3.1           Salary.  During the Executive’s employment, the
Company shall pay the Executive an annualized base salary of Two Hundred and
Fifty Thousand Dollars ($250,000.00) (the “Base Salary”), payable in equal
installments pursuant to the Company’s customary payroll policies in force at
the time of payment (but in no event less frequently than monthly), less
required payroll deductions and state and federal withholdings.  The Base Salary may be adjusted from time to
time in the sole discretion of the Board, except that the Executive, if a
Director, shall not be entitled to vote thereon.  The Base Salary shall be reviewed annually by
the Board.

3.2           Bonus
Payment.  During the Employment
Period, the Executive may receive, in the sole discretion of the Compensation
Committee of the Board (the “Compensation Committee”), an annual bonus payment
in an amount, if any, to be determined by the Compensation Committee, except
that the Executive, if a member of the Compensation Committee, shall not be
entitled to vote thereon.

3.3           Executive
Benefits.  During the Employment
Period, the Executive shall receive such benefits as are customarily provided
to other officers and employees of the Company, including but not limited to
the following benefits:

3.3.1                        Health
Insurance.  Non-contributory health insurance
pursuant to a health policy or substantially similar policy; and

3.3.2                        Life
Insurance.  Life insurance on the
life of the Executive with an Executive-directed beneficiary in the amount of
two hundred percent (200%) of the Base Salary.

3.4           Vacation.  The Executive may take six (6) weeks of paid
vacation during each year at such times as shall be consistent with the Company’s
vacation policies and, in the Board’s judgment, with the Company’s vacation
schedule for officers and other employees.

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3.5           Disability
or Death.  If during the Employment
Period, the Executive shall (i) become ill, disabled or otherwise incapacitated
so as to be unable to perform his usual duties (a) for a period in excess of
one hundred twenty (120) consecutive days or (b) for more than one hundred
eighty (180) days in any consecutive twelve (12) month period, or (ii) die,
then the Company shall have the right to terminate this Agreement, in
accordance with applicable laws, on thirty (30) days written notice to the
Executive or his estate.

3.6           Severance
Payment.  In the event (i) the
Company terminates this Agreement without Cause (i.e., other than pursuant to
Section 3.5 or Section 4 hereof) at any time (including during the Extended
Employment Period), or (ii) the Executive terminates his employment for Good
Reason following a Change in Control of the Company, or (iii) the Company fails
to renew this Agreement within two (2) years following the occurrence of a
Change in Control, the Company shall pay the Executive a severance payment
equal to the Executive’s then current Base Salary multiplied by 2.00; such
severance payment to be adjusted to the extent necessary to avoid such payment
being treated as an ‘excess parachute payment’ for purposes of Section 280G of
the Internal Revenue Code of 1986.

“Good
Reason” shall mean, during the nine (9) month period following a Change in
Control, (1) a good faith determination by the Executive that as a result of
such Change in Control he is not able to discharge his duties effectively or (2)
without the Executive’s express written consent, the occurrence of any of the
following circumstances: (a) the assignment to the Executive of any duties
inconsistent (except in the nature of a promotion) with the position in the
Company that he held immediately prior to the Change in Control or a
substantial adverse alteration in the nature or status of his position or
responsibilities or the conditions of his employment from those in effect
immediately prior to the Change in Control; (b) a reduction by the Company in
the Base Salary as in effect on the date of the Change in Control; (c) the
Company’s requiring the Executive to be based more than twenty-five (25) miles
from the Company’s offices at which he was principally employed immediately
prior to the date of the Change in Control except for required travel on the
Company’s business to an extent substantially consistent with his present
business travel obligations; or (d) the failure by the Company to continue in
effect any material compensation or benefit plan in which the Executive
participates immediately prior to the Change in Control unless an equitable
arrangement (embodied in an ongoing substitute or alternative plan) has been
made with respect to such plan, or the failure by the Company to continue the
Executive’s participation therein (or in such substitute or alterative plan) on
a basis not materially less favorable, both in terms of the amount of benefits
provided and the level of his participation relative to other participants,
than existed at the time of the Change in Control.  The Executive’s continued employment shall
not constitute consent to, or a waiver of rights with respect to, any
circumstance constituting Good Reason hereunder.

For
purposes of this Agreement, a “Change in Control” shall occur or be deemed to
have occurred only if any of the following events occur:  (i) any “person,” as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), (other than any majority owned subsidiary thereof, the
Company, any trustee or other fiduciary holding securities under an employee
benefit plan of the Company, any trustee or other fiduciary of a trust treated
for federal income tax purposes as a grantor trust of which the Company is the
grantor, or any corporation owned directly or indirectly by the stockholders of
the Company in substantially the same proportion as their ownership of stock of
the Company) is or becomes the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company’s then
outstanding securities on any matter which could come before its stockholders
for approval; (ii) individuals who, as of the date hereof, constitute the Board
(the “Incumbent Board”) cease for any reason to constitute at least a majority
of the Board, provided that any person becoming a director subsequent to the
date hereof whose election, or nomination for election by the Company’s
stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual
or threatened election contest relating to the election of the directors of the
Company, as such terms are used in Rule 14a-11 of Regulation 14A under the
Exchange Act) shall be, for purposes of this Agreement, considered as though
such person were a member of the Incumbent Board; (iii) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than (A) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 80% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or (B) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no “person” (as hereinabove defined) acquires
more than 50% of the 

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combined
voting power of the Company’s then outstanding securities; or (iv) the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company’s assets.

3.7           Benefits
After Termination.  Except as
otherwise required by law, the Executive shall not be entitled to any employee
benefits provided under Section 3.3 hereof after termination of the employment
of the Executive, whether or not severance pay is being provided, except that
if the Executive is entitled to the severance payment described in Section 3.6
of this Agreement, (i) the Company shall continue in full force and effect, at
its expense, the life insurance provided for in Section 3.3.2 hereof for a
period of one (1) year after termination of the Executive’s employment
hereunder or until the Executive becomes employed, whichever first occurs, and
(ii) during the six (6) month period following the termination of the Executive’s
employment, the Company shall reimburse the Executive for out-of-pocket health
insurance expenses incurred by the Executive pursuant to the Consolidated
Omnibus Budget Reconciliation Act of 1986 (“COBRA”).  If the Executive elects not to maintain
health insurance pursuant to COBRA, the Company is under no obligation to
reimburse the Executive for his otherwise elected coverage.  The Executive shall be obligated to give the
Company prompt notice of his employment.

4.         Discharge for Cause.  The Company may discharge the Executive and
terminate his employment under this Agreement for Cause without further
liability to the Company by a majority vote of the Board, except that
Executive, if a Director, shall not be entitled to vote thereon.  As used in this Agreement, “Cause” shall mean
any or all of the following:

4.1           misconduct
of the Executive during the course of his employment which is materially
injurious to the Company and which is brought to the attention of the Executive
promptly after discovery by the Company, including but not limited to, theft or
embezzlement from the Company, the intentional provision of services to
competitors of the Company, or improper disclosure of proprietary information,
but not including any act or failure to act by the Executive that he believed in
good faith to be proper conduct not adverse to his duties hereunder;

4.2           willful
disregard or neglect by the Executive of his duties or of the Company’s
interests that continues after being brought to the attention of the Executive;

4.3           unavailability
(except as provided in Section 3.5 hereof) of the Executive to substantially
perform the duties provided for herein;

4.4           conviction
of a fraud or felony or any criminal offense involving dishonesty, breach of
trust or moral turpitude during the Executive’s employment;

4.5           the
Executive’s breach of any of the material terms of this Agreement (including
the failure of the Executive to discharge his duties in a highly competent
manner) or any of the agreements executed in connection herewith as enumerated
in Section 10.1 hereof.

In
the event the Company exercises its right to terminate the Executive’s
employment under this Section 4, the Executive shall not be entitled to receive
any severance pay or other termination benefits, except as required by law.

5.         Termination Without Cause.  The Company may terminate this Agreement
without Cause, without further liability to the Company except as set forth in
Sections 3.6 and 3.7 hereof, by a majority vote of the Board.  The Executive, if a Director, shall not be
entitled to vote on the termination of this Agreement without Cause.

6.         Expenses.  Pursuant to the Company’s customary policies
in force at the time of payment, the Executive shall be promptly reimbursed,
against presentation of vouchers or receipts therefor, for all authorized
expenses properly incurred by him on the Company’s behalf in the performance of
his duties hereunder.

7.         Additional Agreements.  The Executive has executed and delivered to
the Company a Non-Disclosure and Invention Assignment Agreement, dated August
7, 2006, which shall survive the expiration of or termination of this Agreement
and the termination of Executive’s employment with the Company for any reason.

8.         Arbitration.  All disputes and claims relating to this
Agreement and the rights, obligations and performance of the parties hereto
shall be settled by a single arbitrator sitting in Boston, Massachusetts under
the applicable rules of the American Arbitration Association.

9.         Notices.  Any notice of communication given by any
party hereto to the other party or parties shall be in writing and personally
delivered, mailed by certified mail, return receipt requested, postage prepaid,
or delivered by a recognized overnight carrier, to the addresses provided
above. All notices shall be deemed given when actually 

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received.
Any person entitled to receive notice (or a copy thereof) may designate in
writing, by notice to the others, another address to which notices to such
person shall thereafter be sent.

10.       Miscellaneous:

10.1         Entire
Agreement.  This Agreement contains
the entire understanding of the parties in respect of its subject matter and
supersedes all prior agreements and understandings between the parties with
respect to such subject matter; provided, however, that nothing in this Agreement
shall affect the Executive’s or the Company’s obligations under the
Non-Disclosure and Invention Assignment Agreement, dated August 7, 2006,
between the parties hereto.

10.2         Amendment;
Waiver.  This Agreement may not be
amended, supplemented, cancelled or discharged, except by written instrument
executed by the party affected thereby. 
No failure to exercise, and no delay in exercising, any right, power or
privilege hereunder shall operate as a waiver thereof.  No waiver of any breach of any provision of this
Agreement shall be deemed to be a waiver of any preceding or succeeding breach
of the same or any other provisions.

10.3         Binding
Effect; Assignment.  The rights and
obligations of this Agreement shall bind and inure to the benefit of any
successor of the Company by reorganization, merger or consolidation, or any
assignee of all or substantially all of the Company’s business and
properties.  The Executive’s rights or
obligations under this Agreement may not be assigned by the Executive; except
that the Executive’s right to compensation to the earlier of the date of death,
disability pursuant to Section 3.5 hereof, or termination of actual employment,
shall pass to the Executive’s executor or administrator.

10.4         Headings.  The headings contained in this Agreement are
for reference purposes only and shall not affect the meaning or interpretation
of this Agreement.

10.5         Governing
Law; Interpretation.  This Agreement
shall be construed in accordance with and governed for all purposes by the laws
and public policy of the Commonwealth of Massachusetts applicable to contracts
executed and to be wholly performed within such Commonwealth. Service of
process in any dispute shall be effective (a) upon the Company, if service is
made on any officer of the Company other than the Executive; (b) upon the
Executive, if served at the Executive’s residence last known to the Company
with an information copy to the Executive at any other residence, or in care of
a subsequent employer of which the Company may be aware.

10.6         Further
Assurances.  Each of the parties
agrees to execute, acknowledge, deliver and perform, or cause to be executed,
acknowledged, delivered or performed, at any time, or from time to time, as the
case may be, all such further acts, deeds, assignments, transfers, conveyances,
powers of attorney and assurances as may be necessary or proper to carry out
the provisions or intent of this Agreement.

10.7         Severability.  If any one or more of the terms, provisions,
covenants or restrictions of this Agreement shall be determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated.  If, moreover, any one or
more of the provisions contained in this Agreement shall for any reason be
determined by a court of competent jurisdiction to be excessively broad as to
duration, geographical scope, activity or subject, it shall be construed by
limiting or reducing it so as to be enforceable to the extent compatible with
then applicable law.

EXECUTION

IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as a sealed instrument on the day and year first written above,
whereupon it became binding in accordance with its terms.

	
  

  	
  CARDIOTECH INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ W. J. O’Neill, Jr.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  William J. O’Neill, Jr.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Chairman of the Board of Directors

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  EXECUTIVE

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael Adams

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Michael Adams

  	
   

  

 

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