Document:

Exhibit 10.37

 

SECOND AMENDED
AND RESTATED SENIOR SUBORDINATION AGREEMENT

 

This SECOND AMENDED AND
RESTATED SENIOR SUBORDINATION AGREEMENT (this “Agreement”), dated as
of May 3, 2006 between Laurus Master Fund, Ltd., a Cayman Islands company
(the “Junior Creditor”) and Bank of America, N.A., formerly known as Fleet
Capital Corporation (the “Senior Lender”).

 

W I T N E S S E T H :

 

WHEREAS, the Senior
Lender, IWT Tesoro Corporation (“Parent”), International Wholesale Tile, Inc.
(“IWT”), the Tile Club, Inc. (“Tile Club”) and Import Flooring Group, Inc.
(“Import Flooring”, and together with Parent, IWT and Tile Club, each a “Borrower”
and collectively, “Borrowers”) are parties to a certain Amended and Restated
Loan and Security Agreement dated as of December 31, 2004 (as amended,
restated, supplemented, replaced or otherwise modified from time to time, the “Senior
Loan Agreement”) under which the Senior Lender has made or may make loans and
other financial accommodations to Borrowers; and

 

WHEREAS, pursuant to
the Senior Loan Agreement, Borrowers have granted in favor of the Senior Lender
a lien on and security interest in (collectively, the “Senior Lien”)
substantially all of the assets and property of Borrowers as security for their
obligations to the Senior Lender under the Senior Loan Agreement; and

 

WHEREAS, the Junior
Creditor and Borrowers are parties to (i) a certain Security Agreement dated
August 25, 2005 (as amended, supplemented or otherwise modified from time
to time, the “Security Agreement”), (ii) a Securities Purchase Agreement dated
February 10,  2006 (as amended,
supplemented or otherwise modified from time to time, the “Securities Purchase
Agreement”), (iii) a Securities Purchase Agreement dated May     ,
2006 (as amended, supplemented or otherwise modified from time to time, the “May Securities
Purchase Agreement”, together with the Security Agreement and the Securities
Purchase Agreement, individually and collectively, as amended, supplemented or
otherwise modified from time to time, the “Junior Agreement”) under which the
Junior Creditor has provided certain loans as evidenced by certain notes (“Promissory
Notes”) including, (i)a Secured Convertible Term Note dated February 10,
2006 (as amended, supplemented or otherwise modified from time to time, the “Secured
Convertible Term Note”) issued by Borrowers to the Junior Creditor, and (ii) a
Secured Term Note dated May 2, 2006 (as amended, supplemented or otherwise
modified from time to time, the “Secured Term Note”) (the Promissory Notes, including
the Secured Convertible Term Note and the Secured Term Note, individually and collectively,
the “Junior Note”); and

 

WHEREAS, pursuant to
the Junior Agreement and the Junior Note, Borrowers have granted in favor of
the Junior Creditor a lien on and security interest in (collectively, the “Junior
Lien”) substantially all of the assets and property of Borrowers as security
for their obligations to the Junior Creditor under the Junior Agreement; and

 

WHEREAS, the
transactions described above are prohibited by the Senior Loan Agreement and
Borrowers have requested the Senior Lender to provide, and the Senior Lender

 

 

has agreed to provide of even date herewith, a consent and waiver to
permit the consummation of such transactions (the “Senior Consent”); and

 

WHEREAS, it is a
condition precedent to the effectiveness of the Senior Consent that, among
other things, the Junior Creditor shall have executed and delivered this
Agreement subordinating its rights with respect to the Junior Obligations (as
defined below) to the rights of the Senior Lender with respect to the Senior
Obligations (as defined below) and that Borrowers shall have acknowledged this
Agreement;

 

NOW, THEREFORE, in
consideration of the promises contained herein and to induce the Senior Lender
to enter into the Senior Consent, the Junior Creditor hereby agrees as follows:

 

SECTION 1.                            Definitions.  Capitalized terms used but not defined herein
shall have the meanings given to them in the Senior Loan Agreement, and the rules of
usage set forth therein shall apply hereto.

 

SECTION 2.                            Subordination.

 

(a)                                  All Junior
Obligations, and all rights and remedies of the Junior Creditor with respect
thereto, are and shall continue at all times to be subject, subordinate and junior
in right of payment to the Senior Obligations including, without limitation,
all interest on the Senior Obligations at the rate stated in the Senior Loan
Agreement from the date of the filing by or against any Borrower of a petition
under any bankruptcy, insolvency or similar law or commencement of any
voluntary or involuntary bankruptcy, receivership or insolvency proceedings (“Insolvency
Event”) to the date of the indefeasible payment in full in cash of the Senior
Obligations (all such interest from and after an Insolvency Event, “Postpetition
Interest”) and the termination of the Commitment (as defined in Section 2(b) below).  The term “Junior Obligations,” as used in
this Agreement, shall mean and include the principal amount of and the premium,
if any, and interest (including without limitation all Postpetition Interest)
on any and all indebtedness and other monetary obligations of Borrowers to the
Junior Creditor together with all fees, costs and expenses relating thereto,
whether direct or contingent, now or hereafter existing, due or to become due
to, or held or to be held by, the Junior Creditor, whether created directly or
acquired by assignment or otherwise including, without limitation, all
principal of and premium, if any, and interest (including without limitation
all Postpetition Interest) on or under the Junior Agreement, the Junior Note
(including extensions, modifications, refinancings, renewals and refundings
thereof), and any other note or notes or any other agreement between Borrowers,
on the one hand, and the Junior Creditor, on the other hand (the Junior
Agreement, the Junior Note, and such other note or notes or other agreement
between Borrowers and the Junior Creditor and any and all other instruments,
agreements or documents executed or delivered in connection therewith, as any
of the foregoing may have been or may be amended, modified, extended, restated
or replaced from time to time, are referred to collectively herein as the “Junior
Documents”).  The term “Senior
Obligations,” as used in this Agreement, shall mean and include the principal
amount of and the premium, if any, and interest (including without limitation
Postpetition Interest) on all of the Obligations including, without limitation,
all fees, costs and expenses relating thereto, whether direct or contingent,
now or hereafter existing, due or to become due to, or held or to be held by,
the Senior Lender, whether created directly or

 

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acquired by assignment or otherwise (including increases, extensions,
modifications, refinancings, renewals and refundings thereof) specifically
including all such Obligations arising under and/or in relation to the Senior
Loan Agreement and the Note(s) issued thereunder, provided, however, the
principal amount of the Senior Obligations at any time shall not exceed an
amount equal to the sum of (i) the Borrowing Base determined by Senior
Lender in accordance with the terms of the Senior Loan Agreement as in effect
on the date hereof plus (ii) an amount equal to ten percent (10%) of the
Borrowing Base as determined by Senior Lender in accordance with the terms of the
Senior Loan Agreement as in effect on the date hereof and the amount by which
the principal amount of the Senior Obligations exceed such limitation being referred
to as the “Excluded Portion” (the Senior Loan Agreement, the Note(s) issued
thereunder, and other note or notes or other agreement between Borrower and the
Senior Lender and any and all other instruments, agreements or documents
executed or delivered in connection therewith, as any of the foregoing may have
been or may be amended, modified, extended, restated or replaced from time to
time, are referred to collectively herein as the “Senior Loan Documents”).

 

(b)                                 Except for the
payments specified in Section 2(c), conversion of any of the Junior
Obligations into common stock of Parent and Reorganized Securities (as such
term is hereinafter defined), no Borrower shall make and the Junior Creditor
shall not receive or accept any payment on the Junior Obligations, whether as
principal, premium, interest or otherwise, unless and until all the Senior
Obligations including, without limitation, all Postpetition Interest, have been
indefeasibly paid in full in cash, and the obligation (the “Commitment”) of the
Senior Lender to make loans and advances under the Senior Loan Agreement has
been terminated.

 

(c)                                  The Junior Creditor
may receive, accept and retain (i) regularly scheduled monthly interest
payments under the Promissory Notes and the Security Agreement and payments of
principal under the Junior Note and the Security Agreement so that the
principal amount of the loans outstanding thereunder do not exceed the Formula
Amount (as such term is defined in the Security Agreement) at such date, and (ii) regularly
scheduled monthly principal and interest payments under the Secured Convertible
Term Note and the Secured Term Note, unless (i) (A) a payment default
has occurred under the Senior Loan Agreement (“Senior Payment Default”) and is
continuing with respect to which the Junior Creditor has received from the
Senior Lender a notice (“Senior Lender Payment Default Notice”) prohibiting the
Junior Creditor from receiving, collecting or accepting any of the foregoing
payments and from commencing any Enforcement Action (as defined below) and (B) the
Junior Creditor has not received a written notice from the Senior Lender
rescinding the Senior Lender Payment Default Notice or (ii) (A) a
default other than a Senior Payment Default has occurred under the Senior Loan
Agreement and is continuing with respect to which Junior Creditor has received
a notice (“Senior Non-Payment Default Notice”) and (B) the Junior Creditor
has not received a written notice from the Senior Lender rescinding the Senior
Lender Non-Payment Default Notice except that Junior Creditor shall be entitled
to receive payments in respect of the Junior Obligations that as of such time
would otherwise have been allowed had no Senior Lender Non-Payment Default
Notice shall have been given upon expiration of a period of 180 days from the
date of the Senior Lender Non-Payment Default Notice, provided that nothing in
this subsection (c) shall prohibit (x) the accrual (but not the
payment to the Junior Creditor) of interest on the Junior Obligations at the
default rate in accordance with the terms of the Junior Agreement or the Junior
Note

 

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following the occurrence of an event of default under the Junior
Agreement or the Junior Note and (y) the conversion of any of the Junior Obligations
into common stock of Parent.

 

(d)                                 If the Junior Creditor
shall receive any payment or prepayment (including from any account debtor
under any accounts receivable of any Borrower) on the Junior Obligations that
it is not entitled to receive under this Agreement, the Junior Creditor, will
hold any amount so received pursuant to an express trust for the Senior Lender
separate and segregated from any other funds and assets of the Junior Creditor
and shall, as soon as possible, turn over such payment to the Senior Lender in
the form received (together with any necessary endorsements) to be applied to
the Senior Obligations.  Notwithstanding
anything to the contrary contained in this Agreement, nothing in this Agreement
shall prohibit the conversion of any of the Junior Obligations into common
stock of Parent.

 

(e)                                  At any time when
Junior Creditor is prohibited from receiving payments with respect to the Junior
Obligations or taking an Enforcement Action, unless and until the Senior
Obligations shall have been indefeasibly paid in full in cash and the
Commitment has been terminated, the Junior Creditor will not accelerate the
maturity of the Junior Obligations or commence any action or proceeding against
any Borrower to recover all or any part of the Junior Obligations, or join with
any other creditor in doing so, unless (i) in the case of the acceleration
of the Junior Obligations, only if the Senior Lender has (x) accelerated the
Senior Obligations, (y) commenced exercising its rights and remedies against
any Borrower and/or the Collateral pursuant to such acceleration and (z) either the Senior Lender has
given its prior written consent to the Junior Creditor or the Junior Creditor
would irrevocably lose any legal rights against any Borrower and/or the Collateral
if it does not commence or join in any action or proceeding, or (ii) in
the case of any action or proceeding brought against any Borrower under any
bankruptcy, insolvency or similar law or any other proceeding the result of
which could give rise to an Insolvency Event (as defined below), the Senior
Lender shall have joined therein.  Notwithstanding
anything else to the contrary contained in this Agreement, (a) the Junior
Creditor shall not take any action with respect to the Collateral unless and until
it has provided the Senior Lender with ten (10) days advance written
notice except that Junior Creditor shall not be required to provide such ten (10) day
notice when the necessary equitable relief is being requested on an emergency
basis; provided, however, the Junior Credit shall provide notice to the Senior
Lender as soon as practicable in such cases and (b) the Junior Creditor
shall not take any action with respect to the Collateral if the Senior Lender
shall have given written notice to the Junior Creditor during such ten (10) day
period that such action would in the judgment of the Senior Lender impair the
proceeds that could be obtained from such Collateral.

 

(f)                                    Upon the occurrence
of (i) any Insolvency Event of Borrower, (ii) an assignment by any
Borrower for the benefit of its creditors or (iii) the admission by any
Borrower that it is unable to pay its debts as they come due, or in the event
of a sale of all or substantially all of the assets, or any other marshaling of
the assets and liabilities, or any recapitalization, refinancing or
reorganization, of any Borrower, the Senior Obligations shall first be
indefeasibly paid in full in cash and the Commitment terminated before the
Junior Creditor shall be entitled to receive any money, distributions or other
assets in any such proceeding (except for Reorganized Securities (as such term
is hereinafter defined)).  In any such
event, Junior Creditor shall retain the right to file a proof of claim, to vote
and to otherwise act in any

 

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proceeding relating thereto (including, without limitation, the right
to vote to accept or reject any plan proposed in any such proceeding),
provided, that Junior Creditor shall not vote with respect to any such plan or take
any other action in any way so as to (i) contest the validity,
enforceability or priority of the Senior Obligations or the Senior Liens, (ii) contest
the enforceability of any Senior Loan Agreement or this Agreement; or (iii) be
adverse to the interests of the Senior Lender, and provided, further, that in
the event that Junior Creditor fails to vote any claim in respect of any Junior
Debt in connection with any proceeding prior to fifteen (15) Business Days
before the expiration of the time to vote any such claim, then Senior Lender is
hereby irrevocably authorized to have the nonexclusive right (but not the
obligation) to vote such claim, and is hereby authorized to vote such claim for
and on behalf of Junior Creditor; provided, that if following any such vote by
Senior Lender, Junior Debtor timely votes such claim then such vote by Junior
Debtor shall be deemed to control and supercede any such previous vote by
Senior Lender and, upon the written request of Junior Creditor, Senior Lender
will withdraw such previous vote.  If
Junior Creditor does not file a proper claim, proof of debt, amendment of proof
of debt, petition or other document as shall be necessary in order to have such
Junior Debt allowed in any such proceeding and in the form required in any such
Proceeding prior to fifteen (15) Business Days before the expiration of the
time to file such claim, proof of debt, amendment of proof of debt, petition or
other document, then Senior Lender is hereby irrevocably authorized to have the
nonexclusive right (but not the obligation) to file, and is hereby authorized
to file, an appropriate claim, proof of debt, amendment for and on behalf of
such holder of Junior Debt, provided, that if following any filing of any such
claim, proof of debt or amendment, Junior Creditor timely files a proper claim,
proof of debt or amendment, then such filing by Junior Creditor shall be deemed
to control and supercede any such previous filing by Senior Lender and, upon
the written request of Junior Creditor, Senior Lender will withdraw such
previous filing.  In furtherance of the
foregoing, at the request of the Senior Lender, the Junior Creditor shall
execute and deliver to the Senior Lender a separate power of attorney and such
further powers and instruments as the Senior Lender may request to enable the
Senior Lender to enforce its rights under this subsection.  The Junior Creditor agrees it will not seek
participation or participate on any creditors’ committee without the prior
written consent of the Senior Lender.  In
the event the Senior Lender has consented to such participation, thereafter, at
the request of the Senior Lender, the Junior Creditor shall resign from such
committee.

 

(g)                                 The Senior Lender may,
at any time and from time to time, without the consent of or notice to the
Junior Creditor, without incurring responsibility or liability to the Junior
Creditor and without impairing or releasing any right or remedy of the Senior
Lender hereunder:

 

(i)                                     change
the manner, place or terms of payment of, change or extend the time of payment
of, or renew, increase or alter the Senior Obligations, or waive defaults under
or amend the Senior Loan Agreement or any other Loan Document in any manner or
enter into or amend in any manner or waive defaults under any other agreement
relating to the Senior Obligations;

 

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(ii)                                  sell,
exchange, release or otherwise deal with any property by whomsoever at any time
pledged to secure, or howsoever securing, the Senior Obligations;

 

(iii)                               release
any Person liable in any manner for the payment or collection of any of the
Senior Obligations;

 

(iv)                              exercise,
refrain from or delay in exercising any rights against Borrower or any other
Person; or

 

(v)                                 apply
any sums by whomsoever paid or however realized to the Senior Obligations.

 

(h)                                 The Junior Creditor
waives notice of acceptance of this Agreement.

 

(i)                                     The Junior
Creditor will cause each note or other instrument that evidences any Junior
Obligations (including, without limitation, the Junior Agreement and the Junior
Note) to bear upon its face a statement or legend to the effect that such note
or other instrument is subordinated to the Senior Obligations in the manner and
to the extent set forth in this Agreement. 
The Junior Creditor shall mark its books and records, including any
financial statements, to show that the Junior Obligations are so subordinated
to the Senior Obligations.

 

(j)                                     The Junior
Creditor will not (i) except for the default rate of interest as set forth
in the Junior Agreement and the Junior Note, increase the per annum rate of
interest or increase the scheduled payment of principal applicable to the
Junior Obligations as of the date of this Agreement or (ii) make any
covenant or event of default under the Junior Agreement or the Junior Note more
restrictive than such covenants and events of default thereunder as of the date
hereof.

 

(k)                                  Subject to the
indefeasible payment in full of the Senior Obligations in cash and the
termination of the Commitment, the Junior Creditor shall be subrogated to the
Senior Lender’s rights to receive payments or distributions in cash or property
applicable to the Senior Obligations, and no payment or distribution made to
the Senior Lender by virtue of this Agreement that otherwise would have been
made to the Junior Creditor shall be deemed to be a payment by any Borrower on
account of the Junior Obligations.

 

(1)                                  From time to time at
the request of the Senior Lender, the Junior Creditor will permit the Senior
Lender to inspect and make extracts from its books and records pertaining to
the Junior Obligations and to examine any instruments or records now or
hereafter held by the Junior Creditor creating or evidencing the Junior
Obligations.

 

(m)                               The Junior Creditor will
not sell, assign, transfer or otherwise dispose of all or any part of, or any
interest in, the Junior Obligations to any Person without having first obtained
(i) such Person’s agreement in writing to be bound as the Junior Creditor’s
successor by the terms of this Agreement or, in the case of an interest in the
Junior Obligations, an acknowledgment by such interest holder of the terms
hereof, or (ii) the Senior Lender’s prior

 

6

 

written consent.  The Senior
Lender may at any time and from time to time assign its rights and interests
under, in and to this Agreement in connection with any assignment by any of
them of any part of or interest in any of the Senior Obligations (and any such
assignment of any part or interest in any of the Senior Obligations may be made
only with notice to Junior Creditor).

 

(n)                                 The Junior Creditor
agrees that it will not exercise any right of setoff it may have against the
Junior Obligations in respect of any obligation owed by the Junior Creditor to
Borrower.

 

(o)                                 If any Borrower shall
become subject to a case under the Bankruptcy Code, and if the Senior Lender
desires to permit the use of cash collateral or to provide (or to permit
another Person to provide) financing to such Borrower under either Section 363
or Section 364 of the Bankruptcy Code, the Junior Creditor agrees as
follows: (i) adequate notice to the Junior Creditor shall be deemed to
have been given to the Junior Creditor if the Junior Creditor receives notice
at least five (5) Business Days prior to the hearing held by the
applicable bankruptcy court to consider entry of an order approving such use or
financing, provided that nothing in this subsection shall be deemed to
entitle the Junior Creditor to any notice not required by the Bankruptcy Code and
that no such notice need be given with respect to an interim order approving
such use or financing so long as the conditions in clause (ii) hereof to avoid
an objection by the Junior Creditor have been met, and (ii) no objection
will be raised by the Junior Creditor to any such use or financing on the
grounds of a failure to provide “adequate protection” of the Junior Lien or any
other ground if the Junior Creditor is granted, with the approval of the
applicable bankruptcy court, a lien on and security interest in the
post-petition Collateral to secure any claim that it may have on account of the
post-petition diminution in value of the Collateral, which lien shall be
subordinate to the Lien of the Senior Lender and any Liens to which the Lien of
the Senior Lender is subordinate.  For
purposes of this subsection, “Lien” shall mean any liens granted to the Senior
Lender pursuant to the Senior Loan Documents together with any post-petition
liens and/or super-priority claims for post-petition financing and adequate
protection of the Senior Lender’s pre-petition liens.  For purposes of this subsection, notice of a
proposed financing or use of cash collateral shall be deemed given when made in
the manner prescribed by this Agreement, or as the applicable bankruptcy court
may approve, or, actual notice is given to the Junior Creditor or its counsel,
whichever is soonest.

 

(p)                                 All liens, pledges and
security interests of any nature upon or in any Collateral, to the extent such
liens, pledges and security interests secure the Senior Obligations, have and
shall be senior and prior in right to the liens, pledges and security interests
of the Junior Creditor on the Collateral and such liens, pledges and security
interests of the Junior Creditor are and shall be junior and subordinate to the
liens, pledges and security interests of the Senior Lender to the extent such
liens, pledges and security interests secure the Senior Obligations.  To the extent the liens, pledges and security
interests of the Senior Lender secure the Excluded Portion, such liens, pledges
and security interests shall be junior and subordinate in all respects to the
liens, pledges and security interests of the Junior Creditor.

 

(q)                                 The Senior Lender may
take any judicial or nonjudicial action, including any action to enforce its
liens on or security interests in any or all of the Collateral, including,
without limitation, to foreclose, execute, levy upon, or collect or dispose of
any or all of the

 

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Collateral (each, an “Enforcement Action”) as it shall determine in its
sole and exclusive judgment.

 

(r)                                    The Junior Creditor
agrees that, until all the Senior Obligations have been indefeasibly paid in
full in cash and the Commitment has been terminated, the Junior Creditor shall
not at any time when any Senior Lender Payment Default Notice shall be
effective, a Senior Payment Default has occurred and is continuing, an
Insolvency Event has occurred, or for 180 days after the Junior Creditor
receives a Senior Lender Non-Payment Default Notice commence or continue to
prosecute or otherwise proceed with an Enforcement Action, contact any account
debtor of any Borrower, or otherwise take any action that will impede,
interfere with, restrict or restrain the exercise by the Senior Lender of its
right and remedies under the Senior Loan Agreement or which is contrary,
prejudicial or inconsistent with the Senior Lender’s first priority secured
position in the Collateral provided, that notwithstanding the foregoing but otherwise
at all times subject to the terms of this Agreement, Junior Creditor shall not
be prohibited from (i) filing suit and obtaining a judgment on the Junior
Debt at any time after Senior Lender has filed suit to collect the Senior
Obligations or taken action to foreclose or enforce any Liens of Senior Lender
in the Collateral, provided such action is not adverse to the interests of
Senior Lender, or (ii) taking any action specifically permitted by this
Agreement.

 

(s)                                  The Junior Creditor
agrees not to seek to avoid, contest or bring (or join in) any action or
proceeding to contest the validity of any rights of the Senior Lender with
respect to the Collateral, or the validity or reasonableness of any actions
taken or omitted to be taken by the Senior Lender hereunder or in connection
herewith, under the Senior Loan Agreement or under any other Loan Document, or
in respect of any of the Collateral including, without limitation, (i) the
timing, method, or manner of collecting, disposing of or liquidating any of the
Collateral, (ii) the terms, including the price and percentage of
consideration received in cash, of any such disposition or liquidation, or (iii) the
failure to dispose of or liquidate any of the Collateral.  Without limitation of the foregoing, the
Junior Creditor hereby waives, to the fullest extent permitted by law, (A) any
right under Section 9-615(a) of the Uniform Commercial Code in effect
in the State of Connecticut (“Code”) with respect to the application of
disposition proceeds to the Senior Obligations, (B) any right to notice
and objection under Section 9-620 of the Code, promptness, diligence,
notice of acceptance, and any other notice with respect to any of the
obligations under the Junior Agreement or the Junior Note, and (C) any
requirement that the Senior Lender exhaust any right or take any action against
Borrower, any other Person, the Collateral, or any other collateral.  In addition, the Junior Creditor agrees that
the Senior Lender shall have no obligation to marshal any Collateral or to seek
recourse against or satisfaction of any of the Senior Obligations from one
source before seeking recourse against or satisfaction from another source.  The Junior Creditor further agrees that the
net cash proceeds resulting from the Senior Lender’s exercise of any right to
liquidate all or substantially all of the Collateral, including any and all
Collections (after deducting all of the Senior Lender’s expenses related
thereto), may be applied by the Senior Lender to such of the Senior Obligations
and in such order as the Senior Lender may elect in its sole and absolute
discretion, whether due or to become due. 
The Junior Creditor further agrees that all of the Senior Lender’s
remedies under the Loan Documents shall be cumulative, may be exercised
simultaneously against any Collateral or in such order and with respect to such
Collateral as the Senior Lender may deem desirable, and are not intended to be
exhaustive.

 

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(t)                                    Notwithstanding the
lack of perfection of any of the liens or security interests of the Senior
Lender with respect to any or all of the Collateral or any priority in time of
perfection of any of the liens or security interests of the Junior Creditor
over the liens or security interests of the Senior Lender with respect to any
or all of the Collateral, the liens and security interests of the Senior Lender
with respect to the Collateral to the extent set forth in Section 2(p)
shall be superior and prior in right of payment and enforcement to any liens
and security interests of the Junior Creditor with respect to the Collateral.

 

(u)                                 Junior Creditor agrees
that it will not make any assertion or claim in any action, suit or proceeding
of any nature whatsoever (including without limitation any bankruptcy,
receivership or similar insolvency proceeding) in any way challenging the
priority, validity or effectiveness of the Senior Lien.

 

(v)                                 Notwithstanding any
provision of this Agreement to the contrary, this Agreement shall not limit the
right of the Junior Creditor to receive any Reorganized Securities.  For purposes hereof, “Reorganized Securities”
shall mean securities of Borrower or any other Person (including those of
Borrower as reorganized) issued to the Junior Creditor in respect of all or a
part of the Junior Obligations and provided for by a plan of reorganization in
a proceeding under the Bankruptcy Code or in connection with an Insolvency
Event of Borrower, provided, that (i) such securities are (a) equity
securities or (b) debt securities subordinated to the Senior Obligations
(and any debt securities received by the holders of the Senior Obligations in
such proceeding) at least to the same extent as the Junior Obligations are
subordinated to the Senior Obligations pursuant to this Agreement and (ii) such
securities are authorized by a court of competent jurisdiction in a final order
or decree which, in the case of debt securities, gives effect to this proviso
and the subordination of such debt securities to the Senior Obligations (and
any debt securities received by the holders of the Senior Obligations in such
proceeding) on the terms set forth in this Agreement.

 

(w)                               Upon the sale of any
Collateral by or on behalf of the Senior Lender in connection with any
Enforcement Action by the Senior Lender, the Junior Lender shall be deemed to
have consented (and does hereby consent) to such sale and to have released (and
does hereby release) any Junior Lien in the Collateral being sold in such sale
and shall, at the request of the Senior Lender, take all action and, if
required, execute and deliver all documents reasonably requested by the Senior
Lender in connection therewith; provided that such release by the Senior Lender
shall not extend to or otherwise affect any rights of the Junior Creditor to
the proceeds from any such sale.  The
Senior Lender shall promptly apply such proceeds to the Senior Obligations and
after application to the Senior Obligations, the Senior Lender shall promptly
deliver any excess proceeds to Junior Creditor.  The Junior Lender hereby appoints and
constitutes the Senior Lender as its attorney in fact and authorizes the Senior
Lender to make any payment on or take any act necessary or desirable to protect
or preserve any of the Collateral and to terminate and release the Junior Lien
on the Collateral if the Senior Lender exercises any of its rights and remedies
under any of the Loan Documents.  This
power of attorney is coupled with an interest and is irrevocable.

 

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SECTION 3.                            Collateral
In Possession and Payments.  In
the event that the Senior Lender takes possession of or has “control” (as such
term is used in the Code as in effect in each applicable jurisdiction) over any
Collateral for purposes of perfecting its Lien therein, the Senior Lender shall
be deemed to be holding such Collateral as representative for the Junior
Creditor solely for purposes of perfection of its Lien under the Code.  Promptly following the indefeasible payment
in full in cash of the Senior Obligations and the termination of the
Commitment, the Senior Lender shall, upon the request of the Junior Creditor,
deliver the remainder of the Collateral, if any, in its possession to the
Junior Creditor, and to the extent permitted by the applicable documents,
assign to Junior Creditor the Senior Lender’s rights under cash management and
related account control or account pledge agreements relating to Borrowers (in
each case, except as may otherwise be required by applicable law or court
order) and take such other action reasonably requested by the Junior Creditor
to effectuate such assignment.  Following
the termination of the Commitment and the indefeasible payment in full in cash
of the Senior Obligations, the Senior Lender shall deliver to the Junior
Creditor or as a court of competent jurisdiction may otherwise direct any
remaining Collateral and any proceeds thereof held or received by the Senior
Lender, in the same form received, together with any necessary endorsements.  In connection with any transfer of possession
or control of any of the Collateral, the Senior Lender shall take all
reasonable actions in its power requested by the Junior Creditor (with all
costs and expenses (including reasonable legal fees) in connection therewith to
be paid by Borrowers and/or the Junior Creditor) to permit the Junior Creditor
to obtain a first priority Lien in the Collateral.

 

SECTION 4.                            Further
Assurances.  The Junior Creditor
shall, at any time and from time to time, at Borrowers’ expense, promptly
execute and deliver all further instruments and documents and take all further
action that the Senior Lender may request to protect any right or interest
granted or purported to be granted hereby or to enable the Senior Lender to
exercise and enforce its rights and remedies hereunder.

 

SECTION 5.  Obligations Unimpaired.  Nothing in this
Agreement shall impair as between any Borrower, on the one hand, and the Senior
Lender or the Junior Creditor, on the other hand, the obligations of Borrowers
to the Senior Lender or the Junior Creditor, as the case may be.

 

SECTION 6.                            Termination:
Reinstatement.

 

(a)                                  This Agreement shall
terminate and cease to be of any further force or effect ninety (90) days after
the later of (i) the termination of the Commitment and (ii) the indefeasible
payment in full in cash of the Senior Obligations.

 

(b)                                 If, at any time, all
or part of any payment with respect to the Senior Obligations theretofore made
by any Borrower or any other Person is rescinded or must otherwise be returned
by the Senior Lender for any reason whatsoever (including, without limitation,
as a result of any Borrower or any other Person becoming the subject of an
Insolvency Event), this Agreement shall continue to be effective or be
reinstated, as the case may be, all as though such payment had not been made.

 

10

 

SECTION 7.  Benefit of Agreement.  Except as expressly
provided in Section 4, nothing in this Agreement, express or implied,
shall give or be construed to give to any Person including, without limitation,
any Borrower (but excluding the Senior Lender) any legal or equitable right,
remedy or claim under this Agreement or under any covenant or provision
contained herein, all such covenants and provisions being for the sole and
exclusive benefit of the Senior Lender.

 

SECTION 8.                            Representations
and Warranties of Junior Creditor.  Junior
Creditor hereby represents and warrants as follows:

 

(a)                                  it has full power,
authority and legal right to execute, deliver and perform this Agreement, and
the execution, delivery and performance of this Agreement will not violate any
provision of law, governmental regulation, order or decree or any provision of
any indenture, mortgage, contract or other agreement to which the it is party
or by which it is bound;

 

(b)                                 no consent, license,
approval or authorization of, or registration or declaration with, any
governmental instrumentality, domestic or foreign, is required in connection
with the execution, delivery and performance by it of this Agreement;

 

(c)                                  this Agreement
constitutes its legal, valid and binding obligation enforceable against its in
accordance with the terms hereof.

 

SECTION 9.                            Notices.

 

(a)                                  All notices and other
communications hereunder shall be in writing and sent by certified or
registered mail, return receipt requested, by overnight delivery service, with
all charges prepaid, by hand delivery, or by telecopier followed by a hard copy
sent by regular mail, if to the Senior Lender, then to Bank of America, N.A.,
One Landmark Square, 2nd Floor, CT EH 42202A, Stamford, Connecticut 06901
Attention: Deirdre Z. Sikora (Telecopier: (203) 964-9038); if to Borrower, then
to IWT Tesoro Corporation, 191 Post Road West, Westport, Connecticut 06880,
Attention: Henry J. Boucher, Jr., CEO (Telecopier: (203) 221-2770) and if
to the Junior Creditor, then to Laurus Master Fund, Ltd. c/o Laurus Capital
Management, LLC, 825 Third Avenue, New York, New York 10022, Attention: John E.
Tucker, Esq., (Telecopier: (212) 541-5800); and in each case, to such
other address as a party may specify to the other parties in the manner
required hereunder.  All such notices and
correspondence shall be deemed given (i) if sent by certified or
registered mail, three (3) Business Days after being postmarked, (ii) if
sent by overnight delivery service or by hand delivery, when received at the
above stated addresses or when delivery is refused, and (iii) if sent by
telecopier transmission, when such transmission is confirmed.

 

(b)                                 The Senior Lender
shall provide the Junior Creditor and the Junior Creditor shall provide the
Senior Lender with a copy of each notice of default (to the extent permitted
hereunder) sent to Borrowers concurrently with the sending thereof and promptly
notify the Junior Creditor or the Senior Lender, respectively, in the event
that the default which is the subject of such default notice is cured or
waived, provided that the failure to give any such notice shall not limit or
otherwise affect any party’s rights under this Agreement.

 

11

 

SECTION 10.                     Amendments
and Waivers.  No amendment or
waiver of any provision of this Agreement, or consent to any departure by the
Junior Creditor, or any Borrower therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Senior Lender, Borrowers
and the Junior Creditor.

 

SECTION 11.  Delays: Partial Exercise of Remedies.  No delay or omission
of the Senior Lender to exercise any right or remedy hereunder shall impair any
such right or operate as a waiver thereof. 
No single or partial exercise by the Senior Lender of any right or
remedy shall preclude any other or further exercise thereof, or preclude any
other right or remedy.

 

SECTION 12.  Counterparts: Telecopied Signatures.  This Agreement and
any waiver or amendment related hereto may be executed in counterparts and by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all of which shall together constitute one
and the same instrument.  This Agreement
may be executed and delivered by telecopier or other facsimile transmission all
with the same force and effect as if the same were a fully executed and
delivered original manual counterpart.

 

SECTION 13.  Severability.  If any provision in
or obligation under this Agreement shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.

 

SECTION 14.  Entire Agreement: Successors and Assigns.  This Agreement
constitutes the entire agreement among the parties with respect to the subject
matter hereof, supersedes any prior written and verbal agreements among them
with respect to the subject matter hereof, and shall bind and benefit the
parties (including, without limitation, the Senior Lender) and their respective
successors and permitted assigns.  Borrowers
and Junior Creditor each acknowledge and agree that Senior Lender at any time
and from time to time may sell, assign or grant participating interests in or
transfer all or any part of its rights or obligations under this Agreement, the
Senior Obligations, the Collateral and/or the Loan Documents to one or more
other persons, including, without limitation, financial institutions (each such
transferee, assignee or purchaser, a “Transferee”).  In such case, the Transferee shall have all
of the rights and benefits with respect to the portion of such Senior
Obligations, the Collateral, this Agreement and/or the Loan Documents, as the
case may be, held by it as fully as if such Transferee were the original holder
thereof (including, without limitation, rights of set off and recoupment), and
shall become vested with all of the powers and rights given to Lender hereunder
with respect thereto, and shall be deemed to be the “Senior Lender” for all
purposes hereunder, the predecessor Senior Lender shall thereafter be forever
released and fully discharged from any liability or responsibility hereunder
with respect to the rights and interests so assigned, and either the Senior
Lender or any Transferee may be designated as the sole agent to manage the
transactions and obligations contemplated herein.

 

SECTION 15.  Conflict.  In the event of any
express conflict between any term, covenant or condition of this Agreement and
any term, covenant or condition of any of the

 

12

 

Senior Loan Agreement, the other Loan Documents, the Junior Agreement,
the Junior Note or the other Junior Documents, the provisions of this Agreement
shall control.

 

SECTION 16.  Statement of Indebtedness.  Upon demand by the
Senior Lender, the Junior Creditor will furnish to the Senior Lender a
statement of indebtedness owing from Borrowers to the Junior Creditor.  The Senior Lender may rely without further
investigation upon any such statement.  Upon
demand by Junior Creditor, the Senior Lender will furnish to the Junior Creditor
a statement of indebtedness owing from Borrowers to the Senior Lender.  The Junior Creditor may rely without further
investigation upon any such statement.

 

SECTION 17.  SPECIFIC PERFORMANCE.  THE SENIOR LENDER IS
HEREBY AUTHORIZED TO DEMAND SPECIFIC PERFORMANCE OF THIS AGREEMENT AT ANY TIME
WHEN THE JUNIOR CREDITOR SHALL HAVE FAILED TO COMPLY WITH ANY OF THE PROVISIONS
OF THIS AGREEMENT APPLICABLE TO IT.  THE
JUNIOR CREDITOR HEREBY IRREVOCABLY W AWES ANY DEFENSE BASED ON THE ADEQUACY OF
A REMEDY AT LAW THAT MIGHT BE ASSERTED AS A BAR TO SUCH REMEDY OF SPECIFIC
PERFORMANCE.

 

SECTION 18.  GOVERNING LAW.  THE VALIDITY,
INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT AND ANY DISPUTE ARISING OUT OF
OR IN CONNECTION WITH THIS AGREEMENT, WHETHER SOUNDING IN CONTRACT, TORT OR
EQUITY OR OTHERWISE, SHALL BE GOVERNED BY THE INTERNAL LAWS AND DECISIONS (AS
OPPOSED TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF CONNECTICUT.

 

SECTION 19.  SUBMISSION TO JURISDICTION.  ALL DISPUTES BETWEEN
OR AMONG ANY OF THE PARTIES HERETO, WHETHER SOUNDING IN CONTRACT, TORT OR
EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED
IN THE STATE OF CONNECTICUT AND THE COURTS TO WHICH AN APPEAL THEREFROM MAY BE
TAKEN; PROVIDED, HOWEVER, THAT THE SENIOR LENDER SHALL HAVE THE RIGHT, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE JUNIOR
CREDITOR ENFORCE THE PROVISIONS HEREOF IN ANY OTHER COURT OF COMPETENT
JURISDICTION OR VENUE.  EACH OF THE
JUNIOR CREDITOR,  AND EACH BORROWER
WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF ANY SUCH COURT IN
WHICH THE SENIOR LENDER HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON
CONVENIENS.

 

SECTION 20.  JURY TRIAL.  EACH OF THE PARTIES
HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO (I) THIS AGREEMENT OR (II) ANY CONDUCT, ACT OR
OMISSION OF THE JUNIOR CREDITOR, ANY BORROWER, THE SENIOR LENDER OR ANY OF
THEIR RESPECTIVE DIRECTORS, OFFICERS,

 

13

 

EMPLOYEES, AGENTS, ATTORNEYS OR OTHER AFFILIATE, IN EACH CASE WHETHER
SOUNDING IN CONTRACT, TORT OR EQUITY OR OTHERWISE.

 

SECTION 21.  EFFECT OF THIS AGREEMENT.  THIS AGREEMENT HAS BEEN ENTERED INTO BY THE
JUNIOR CREDITOR AND SENIOR LENDER TO AMEND AND RESTATE THAT CERTAIN AMENDED AND
RESATED SENIOR SUBORDINATION AGREEMENT BY AND BETWEEN JUNIOR CREDITOR AND
SENIOR LENDER AND DATED FEBUARY 10, 2006 (“AMENDED AND RESATED SENIOR SUBORDINATION
AGREEMENT”), WHICH AMENDED AND RESTATED THAT CERTAIN SENIOR SUBORDINATION
AGREEMENT BY AND BETWEEN JUNIOR CREDITOR AND FLEET CAPITAL CORPORATION NOW
KNOWN AS BANK OF AMERICA, N.A. AND DATED AUGUST 25, 2005.

 

[Signature Page Follows]

 

14

 

IN WITNESS
WHEREOF, the undersigned has caused this Agreement to
be executed by its proper and duly authorized officer or general partner as of
the date first set forth above.

 

	
   

  	
  BANK OF AMERICA, N.A.,

  
	
   

  	
  successor to Fleet Capital Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Deirdre Z. Sikora

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LAURUS MASTER FUND, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

[Signature Page to Senior Subordination
Agreement]

 

15

 

ACKNOWLEDGMENT

 

The undersigned hereby acknowledges the
provisions of the foregoing Senior Subordination Agreement, consents to the terms
thereof and agrees to abide by the terms thereof.

 

	
   

  	
  IWT TESORO CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  INTERNATIONAL WHOLESALE TILE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  THE TILE CLUB, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  IMPORT FLOORING GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

16Exhibit 10.1

AMENDED AND RESTATED MASTER MANAGEMENT AGREEMENT

THIS AMENDED AND RESTATED MASTER MANAGEMENT
AGREEMENT (this “Agreement”)
is made and entered into as of the January 1, 2006, by and among Reit
Management and Research LLC, a Delaware limited liability company (“Managing
Agent”), and HRPT Properties Trust, a Maryland real estate investment
trust, on behalf of itself and those of its subsidiaries as may from time to
time own properties subject to this Agreement (each, an “Owner” and, “collectively,
“Owners”).

W
I T N E S S E T H :

WHEREAS, Owners are the owners of various office, industrial
and other commercial properties and will, in the future, acquire additional
such properties (collectively, the “Managed Premises”); and

WHEREAS, pursuant to a Master Management Agreement, dated as
of January 1, 1998, Owners have engaged Managing Agent to manage certain
of the Managed Premises; and

WHEREAS, Owners and Managing Agent wish to amend and restate
the terms of the Master Management Agreement in their entirety;

NOW, THEREFORE, in consideration of the premises and the agreements
herein contained, Owners and Managing Agent hereby agree as follows:

1.             Engagement. Subject to the terms
and conditions hereinafter set forth, Owners hereby employ Managing Agent with
respect to the Managed Premises. Managing Agent hereby accepts such employment
as managing agent and agrees to devote such time, attention and effort as may
be appropriate to operate and manage the Managed Premises in a diligent,
orderly and efficient manner. Managing Agent may, with Owners’ consent,
subcontract out some or all of its obligations hereunder to third party
managers; provided, however, that, in any such event, Managing
Agent shall be and remain primarily liable to Owners for performance hereunder.

Notwithstanding anything to the contrary set forth in this Agreement,
the services to be provided by Manager hereunder shall exclude all services
(including, without limitation, any garage management or cafeteria management
services) whose performance by an advisor to any Owner could give rise to an

Owner’s receipt of “impermissible tenant service
income” as defined in §856(d)(7) of the Internal Revenue Code (as amended
or superseded hereafter) or could in any other way jeopardize an Owner’s federal
or state tax classification as a real estate investment trust. Manager shall
not perform any such service and if, in any event, Manager shall inadvertently
perform any such service, no compensation therefor shall be paid or payable
hereunder.

2.             General Parameters. Any or all
services may be performed or goods purchased by Managing Agent under
arrangements jointly with or for other properties owned or managed by Managing
Agent and the costs shall be reasonably apportioned. Managing Agent may employ
personnel who are assigned to work exclusively at the Managed Premises or
partly at the Managed Premises and other buildings owned and/or managed by
Managing Agent. Wages, benefits and other related costs of centralized
accounting personnel and employees employed by Managing Agent and assigned to
work exclusively or partly at the Managed Premises shall be fairly apportioned
and reimbursed, pro rata, by Owners in addition to the Fee and Construction
Supervision Fee (as defined in Section 5).

3.             Duties. Without limitation,
Managing Agent agrees to perform the following specific duties:

(a) 
To seek tenants for the Managed Premises in accordance with the rental schedule
established by the applicable Owner and to negotiate leases including renewals
thereof and to lease in the applicable Owner’s name space on a lease form
approved by such Owner, only to tenants, at rentals, and for periods of
occupancy all as are approved in each case by the applicable Owner. To employ
appropriate means in order that the availability of rental space is made known
to potential tenants; provided, however, that such means shall
not include the employment of brokers unless otherwise agreed by the applicable
Owner. The legal expenses of negotiating such leases and leasing such space
shall be approved and paid by the applicable Owner.

(b) 
To collect all rents and other income from the Managed Premises and to give
receipts therefor, both on behalf of Owners, and deposit such funds in such
banks and such accounts as are named, from time to time, by Owners, in agency
accounts for and under the name of Owners. Managing Agent shall be empowered to
sign disbursement checks on these accounts.

 2
 

(c) 
To make contracts for and to supervise any repairs and/or alterations to the
Managed Premises, including tenant improvements and decoration of rental space,
as may be approved by the applicable Owner.

(d) 
For Owners’ account and at its expense, to hire, supervise and discharge
employees as required for the efficient operation and maintenance of the
Managed Premises.

(e) 
To obtain, at Owners’ expense, appropriate insurance for the Managed Premises
protecting Owners and Managing Agent while acting on behalf of Owners against
all normally insurable risks relating to the Managed Premises and complying
with the requirements of Owners’ mortgagee, if any, and, upon approval thereof,
to cause the same to be provided and maintained by all tenants with respect to
the Managed Premises to the extent required by the terms of such tenants’
leases.

(f) 
To promptly notify the applicable Owner and its insurance carriers, as required
by the applicable policies, of any casualty or injury to person or property at
the Managed Premises, and complete customary reports in connection therewith.

(g) 
To procure seasonably all supplies and other materials necessary for the proper
operation of the Managed Premises, at Owners’ expense.

(h) 
To pay promptly from rental receipts, other income derived from the Managed
Premises, or other monies made available by Owners for such purpose, all costs
incurred in the operation of the Managed Premises which are expenses of Owners
hereunder, including wages or other payments for services rendered, invoices
for supplies or other items furnished in relation to the Managed Premises, and
pay over forthwith the balance of such rental receipts, income and monies to
Owners or as Owners shall from time to time direct. (In the event that the sum
of the expenses to operate and the compensation due the Managing Agent exceed
gross receipts in any month and no excess funds from prior months are available
for payment of such excess, Owners shall pay promptly the amount of the
deficiency thereof to Managing Agent upon receipt of statements therefor.)

(i) 
To advise Owners promptly of any material developments in the operation of the
Managed Premises that

 3
 

might affect the profitable operation of the Managed
Premises.

(j) 
To establish, in Owners’ name and with Owners’ approval, reasonable rules and
regulations for tenants of the Managed Premises.

(k) 
At the direction of the applicable Owner and with counsel selected by such
Owner, to institute or defend, as the case may be, any and all legal actions or
proceedings (in the name of such Owner if necessary) relating to operation of
the Managed Premises.

(l) 
To maintain the books and records of Owners reflecting the management and
operation of the Managed Premises, making available for reasonable inspection
and examination by Owners or its representatives, all books, records and other
financial data relating to the Managed Premises.

(m) 
To prepare and deliver seasonably to tenants of the Managed Premises such
statements of expenses or other information as shall be required on the
landlord’s part to be delivered to such tenants for computation of rent,
additional rent, or any other reason.

(n) 
To aid, assist and cooperate with Owners in matters relating to taxes and
assessments and insurance loss adjustments, notify the Owners of any tax
increase or special assessments relating to the Managed Premises and, with
Owners’ approval, to enter into contracts for tax abatements services.

(o) 
To provide such emergency services as may be required for the efficient
management and operation of the Managed Premises on a 24-hour basis.

(p) 
To enter into contracts for utilities (including, without limitation, water,
fuel, electricity and telephone) and for building services (including, without
limitation, cleaning of windows, common areas and tenant space, ash, rubbish
and garbage  hauling, snow plowing,
landscaping, carpet cleaning and vermin extermination), and for other services
as are appropriate to first class office space.

(q) 
To seek the lowest competitive price commensurate with desired quality for all
items purchased or services contracted by it under this Agreement.

 4
 

(r) 
To take such action generally consistent with the provisions of this Agreement,
as Owners might with respect to the Managed Premises if personally present.

4.             Authority. Owners give to Managing
Agent the authority and powers to perform the foregoing duties on behalf of
Owners subject, however, to Owners’ approval as specified. Owners further
authorize Managing Agent to incur such reasonable expenses, specifically
contemplated in Section 2, on behalf of Owners as are necessary in
the performance of those duties.

5.             Special Authority of Agent. In
addition to, and not in limitation of, the duties and authority of Managing
Agent contained herein, Managing Agent shall perform the following duties, but
only with Owners’ prior approval in each case:

(a) 
Terminate tenancies and sign and serve in the name of Owners such notices
therefor as may be required for the proper management of the Managed Premises.

(b) 
With counsel selected by Owners, and at Owners’ expense, institute and
prosecute actions to evict tenants and recover possession of rental space, and
recover rents and other sums due; and when expedient, settle, compromise and
release such actions or suits or reinstate such tenancies.

6.             Compensation.

(a) 
In consideration of the services to be rendered by the Managing Agent
hereunder, Owners agree to pay and the Managing Agent agrees to accept as its
sole compensation (i) a management fee (the “Fee”) equal to three
percent (3%) of the gross collected rents actually received by Owners from the
Managed Premises, such gross rents to include all fixed rents, percentage
rents, additional rents, operating expense and tax escalations, and any other
charges paid to Owners in connection with occupancy of the Managed Premises,
but excluding any amounts collected from tenants to reimburse  Owners for the cost of capital improvements
or for expenses incurred in curing any tenant default or in enforcing any
remedy against any tenant; and (ii) a construction supervision fee (the “Construction
Fee”) in connection with all interior and exterior construction renovation
or repair activities at the Managed Premises, including, without limitation,
all tenant and capital improvements in, on or about the Managed Premises,
undertaken during the term of this Agreement,

 5
 

other than ordinary maintenance and repair, equal to
five percent (5%) of the cost of such construction which shall include the
costs of all related professional services and the cost of general conditions.

(b) 
The Fee shall be due and payable monthly, in arrears based on a reasonable
annual estimate or budget with an annual reconciliation within thirty (30) days
after the end of each calendar year. The Construction Fee shall be due and
payable periodically, as agreed by Managing Agent and Owners, based on actual
costs incurred to date.

(c) 
Notwithstanding anything herein to the contrary, Owners shall reimburse
Managing Agent for reasonable travel expenses incurred when traveling to and
from the Managed Premises while performing its duties in accordance with this
Agreement; provided, however, that, reasonable travel expenses
shall not include expenses incurred for travel to and from the Managed Premises
by personnel assigned to work exclusively at the Premises.

(d) 
Managing Agent shall also receive the amount of any lump sum reimbursables paid
by tenants of the Managed Premises to the extent amounts paid exceed costs
incurred by Owners for work performed with respect thereto.

(e) 
Managing Agent shall be entitled to no other additional compensation, whether
in the form of commission, bonus or the like for its services under this
Agreement. Except as otherwise specifically provided herein with respect to
payment by Owners of legal fees, accounting fees, salaries, wages, fees and
charges of parties hired by the Managing Agent on behalf of Owners to perform
operating and maintenance functions in the Managed Premises, and the like, if
Managing Agent hires third parties to perform services required to be performed
hereunder by Managing Agent without additional charge to Owners, Managing Agent
shall (except to the extent the same are reasonably attributable to an
emergency at the Managed Premises) be responsible for the charges of such third
parties. Managing Agent shall not, however, hire any third party without Owners’
prior written consent, which consent shall not be unreasonably withheld.

7.             Contracts. Managing Agent shall
not, without the prior consent of Owners, enter into any contracts on behalf of
Owners which extend beyond the then current term of this Agreement.

 6
 

8.             Term of Agreement. The term of this
Agreement shall begin on the date hereof and, unless sooner terminated as
herein provided, shall end on that date which is thirty (30) days following
written notice of termination given by either Owners or Managing Agent to the
other. This Agreement may be terminated with respect to less than all of the
properties comprising the Managed Premises.

9.             Termination or Expiration. Upon
termination or expiration of this Agreement with respect to any of the Managed
Premises for any reason whatsoever, Managing Agent shall promptly turn over to
Owners all books, papers, funds, records, keys and other items relating to the
management and operation of such Managed Premises, including, without
limitation, all leases in the possession of the Managing Agent and shall render
to Owners a final accounting with respect thereto through the date of
termination.

10.           Assignment of Rights and
Obligations.

(a) 
Without Owners’ prior written consent, Managing Agent shall not sell, transfer,
assign or otherwise dispose of or mortgage, hypothecate or otherwise encumber
or permit or suffer any encumbrance of all or any part of its rights and
obligations hereunder, and any transfer, encumbrance or other disposition of an
interest herein made or attempted in violation of this paragraph shall be void
and ineffective, and shall not be binding upon Owners.

(b) 
Owners, without Managing Agent’s consent, may assign its rights and obligations
hereunder to any mortgagee with respect to, or successor Owners of, the Managed
Premises, but not otherwise.

(c) 
Consistent with the foregoing paragraphs (a) and (b), the terms “Owners”
and “Managing Agent” as used in this Agreement shall mean the original parties
hereto and their respective mortgagees, successors, assigns, heirs and legal
representatives.

11.           Fidelity Bond. Owners, at Owners’
expense, may require that employees of Managing Agent who handle or are
responsible for Owners’ money to be bonded by a fidelity bond in an amount
sufficient in Owners’ determination to cover any loss which may occur in the
management and operation of the Managed Premises or that Managing Agent obtain
a fiduciary policy of insurance.

 7
 

12.           Indemnification and
Insurance.

(a) 
Owners agree to defend, indemnify and hold harmless Managing Agent from and
against all costs, claims, expenses and liabilities (including reasonable
attorneys’ fees) arising out of Managing Agent’s performance of its duties in
accordance with this Agreement including, without limitation, injury or damage
to persons or property occurring in, on or about the Managed Premises and
violations or alleged violations of any law, ordinance, regulation or order of
any governmental authority regarding the Managed Premises except any injury,
damage or violation resulting from Managing Agent’s default hereunder, or from
Managing Agent’s fraud, gross negligence or willful misconduct in the
performance of its duties hereunder.

(b) 
Owners agrees that required insurance shall include, at Owners’ expense, public
liability and workmen’s compensation insurance upon the following terms and
conditions:

(i) 
policies shall be so written as to protect the Managing Agent in the manner and
to the same extent as Owners.

(ii) 
Workmen’s compensation policies shall be written to comply with applicable
legal requirements.

(iii) 
The public liability insurance shall be written in limits of not less than One
Million Dollars ($1,000,000) per occurrence for bodily injury and Five Hundred
Thousand Dollars ($500,000) per occurrence for property damage.

(iv) 
Such public liability insurance shall include the standard extensions of
liability coverage as may be mutually agreed upon from time to time, and shall
name both parties and their respective employees as additional insureds.

13.           Notices. Whenever notice is to be
sent pursuant to this Agreement to either party to this Agreement, it is
expressly understood that same shall be sent postage prepaid, certified mail,
return receipt requested to either party at 400 Centre Street, Newton,
Massachusetts  02458, or to any such
address that either party may hereinafter designate.

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14.           Limitation of Liability.

(a) 
Neither Owners nor Managing Agent shall be personally liable hereunder, all
such liability being limited in the case of Owners to the interest of Owners in
the Managed Premises and in the case of Managing Agent, to its interest
hereunder.

(b)  The
Declarations of Trust establishing some Owners, a copy of which, together with
all amendments thereto (the “Declarations”), is duly filed with the
Department of Assessments and Taxation of the State of Maryland, provides that
the names of such Owners refers to the trustees under such Declarations
collectively as trustees, but not individually or personally, and that no
trustee, officer, shareholder, employee or agent of such Owners shall be held
to any personal liability, jointly or severally, for any obligation of, or
claim against, such Owners. All persons dealing with such Owners, in any way,
shall look only to the respective assets of such Owners for the payment of any
sum or the performance of any obligation of such Owners. In any event, all
liability of such Owners hereunder is limited to the interest of such Owners in
the Managed Premises and, in the case of Managing Agent, to its interest
hereunder.

(c)  It is the intention
of the parties hereto that each Owner be liable hereunder only with respect to
the Managed Premises owned by such Owner and that each Owner be solely
responsible for liabilities incurred with respect only to its properties and
receive all income therefrom.

15.           Modification of Agreement. This
Agreement may not be modified, altered or amended in manner except by an
amendment in writing, duly executed by the parties hereto. This Agreement
amends and restates the Master Management Agreement dated as of January 1,
1998 in its entirety.

16.           Independent Contractor. This
Agreement is not one of general agency by Managing Agent for Owners, but one
with Managing Agent engaged as an independent contractor. Nothing in this
Agreement is intended to create a joint venture, partnership, tenancy-in-common
or other similar relationship between Owners and Managing Agent for any
purposes whatsoever.

17.           Law Governing. This Agreement shall
be governed by and in accordance with the laws of The Commonwealth of
Massachusetts.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as a
sealed instrument as of the date above first written.

	
   

  	
  MANAGING AGENT:

  
	
   

  	
   

  
	
   

  	
  REIT
  MANAGEMENT & RESEARCH LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David J.
  Hegarty

  
	
   

  	
   

  	
  Its President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  OWNERS:

  
	
   

  	
   

  
	
   

  	
  HRPT
  PROPERTIES TRUST, on its own behalf and on behalf of its subsidiaries

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John C.
  Popeo

  
	
   

  	
   

  	
  Its Treasurer

  

 

 10

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