Document:

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Exhibit 10.16

                                 AGREEMENT AMONG

(1)  PACIFICNET STRATEGIC INVESTMENT HOLDINGS LIMITED, AND PACIFICNET INC.
(2)  GUANGZHOU SunRoom INFORMATION INDUSTRIAL CO., LTD.
(3)  GUANGZHOU 3G INFORMATION TECHNOLOGY CO., LTD
(4)  PACIFIC 3G INFORMATION & TECHNOLOGY LIMITED
(5)  ASIAFAME INTERNATIONAL LIMITED
(6)  STARGAIN INTERNATIONAL LIMITED
(7)  TRILOGIC INVESTMENTS LIMITED

                     for the Sale and Purchase of Shares in
                   PACIFIC 3G INFORMATION & TECHNOLOGY LIMITED

THIS AGREEMENT is made on March 28, 2005.

AMONG:

(1)    PacificNet Strategic Investment Holdings Limited (Chinese Company Name),
       a company existing under the laws of the British Virgin Islands whose
       principal place of business is at Room 2710, Hong Kong Plaza, 188
       Connaught Road West, Hong Kong. (hereafter referred as the "Purchaser").
       The Purchaser is a wholly owned subsidiary of PacificNet Inc. ("PACT"), a
       company incorporated under the laws of the State of Delaware in the
       United States of America whose principal office is situate at 860 Blue
       Gentian Road, Suite 360, Eagan, MN 55121-1575, the United States of
       America, the shares of which are listed on the NASDAQ stock exchange in
       the United States of America under the trading symbol of "PACT".

(2)    Guangzhou Sunroom Information Industrial Co., Ltd. (Chinese Company
       Name), a company incorporated in Guangzhou, China whose principal place
       of business is 15/F, Huajian Building. No. 233, Tianfu Road. Tianhe
       Guangzhou 510630, China (Chinese Address (hereinafter referred to as the
       "Guangzhou SunRoom");

(3)    Guangzhou 3G Information Technology Co., Ltd. (Chinese Company Name), a
       company incorporated in Guangzhou, China whose principal place of
       business is 11 Caipin Road, Science City, High & New Technology
       Industrial Development Zone, Guangzhou, 510730, China (Chinese Address
       (hereinafter referred to as the "Company" or "Guangzhou 3G");

(4)    Pacific 3G Information & Technology Limited, a company existing under the
       laws of the British Virgin Islands whose principal place of business is
       15/F, Huajian Building. No. 233, Tianfu Road. Tianhe Guangzhou 510630,
       China (Chinese Address)" (hereinafter referred to as the "Holding
       Company");

(5)    Sun, Zhengquan "Sun Zhengquan"((PRC ID: 420111196801105655), (PRC ID:
       432503197202144812), and("Wong Yongchao")(PRC ID: 440823197306096917)
       residents of PRC, located at Room 201, No. 56 Tianhedong Road, Tianhe,
       Guangdong, China. at Suntek New Technology Research & Design Co, Ltd.,
       Nanda Road, Shipai Tianhe, Guangzhou, Guangdong, China O-D(1)u(1)aP. and
       Suntek New Technology Research & Design Co, Ltd., Nanda Road, Shipai
       Tianhe, Guangzhou, Guangdong, China, respectively (hereinafter jointly
       referred to as the "Warrantor"); and

(6)    ASIAFAME INTERNATIONAL LIMITED, STARGAIN INTERNATIONAL LIMITED, and
       TRILOGIC INVESTMENTS LIMITED Registered at OMC Chambers, P.O. Box, 3152,
       Road Town, Tortola, British Virgin Islands, respectively (hereinafter
       jointly referred to as the "Seller").

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WHEREAS:

A.     The Company is a private company incorporated under the laws of the
       People's Republic of China whose principal place of business is Guangzhou
       3G Information Technology Co., Ltd. (Chinese Name) at 11 Caipin Road,
       Science City, High & New Technology Industrial Development Zone,
       Guangzhou, 510730, China (Chinese Address).

B.     The Company has a paid-in capital of HK$1,000,000 representing the entire
       capital of the Company (the "Shares"), and is beneficially owned by
       shareholder as set out in Part I of Schedule 1.

C.     The Company, directly and through its various contractual arrangements
       and service/consulting agreements with Guangzhou SunRoom Information
       Industrial Co., Ltd. (Chinese Company Name: , a People's Republic of
       China limited liability corporation ("Guangzhou SunRoom") located at , is
       engaged in the business of providing value-added telecom services (VAS),
       internet and mobile entertainment application development, mobile game
       software design and development, mobile customer relationship management
       (CRM) services for China's telecom operators, mobile marketing and
       promotion services, management and consulting services, mobile internet
       information technology, mobile payment and mobile point of sale (POS)
       solutions, mobile consumer analytics, mobile data-mining, internet
       e-commerce and mobile commerce, mobile applications based on WAP, KJava,
       IVR, MS, MFLASH, short messaging services (SMS), multimedia messaging
       services (MMS), outsourced game development, and other mobile value-added
       services (VAS) in the PRC, and operates the following internet and mobile
       gaming web sites: www.vs366.com (the "Business");

D.     The Holding Company owns 100% of the Company. Therefore, the Company is a
       Wholly Owned Foreign Enterprise (WOFE) of the Holding Company. ASIAFAME
       INTERNATIONAL LIMITED, STARGAIN INTERNATIONAL LIMITED, and TRILOGIC
       INVESTMENTS LIMITED own 27.6(=13800/50000), 41.4%(=20700/50000),
       31%(=15500/50000) of the Holding Company, respectively.

E.     The Seller wishes to sell to the Purchaser, and the Purchaser wishes to
       purchase from the Seller, 23050 ordinary shares of the Holding Company
       (the "Sale Shares"); and, in addition, the Holding Company agrees to
       issue to the Purchaser, and the Purchaser agrees to subscribe from the
       Holding Company, 5000 ordinary shares of the Holding Company (the
       "Subscription Shares") (details of which are set out in Part III of
       Schedule 1), which in total represent 51% of the 55000 final shares
       amount of the Holding Company, all upon the terms and subject to the
       conditions set forth herein.

F.     The Purchaser requires the Warrantor, jointly and severally, to give such
       representations, warranties, covenants and undertakings as are set out
       herein as a condition to the Purchaser's entry into this Agreement.

       NOW, THEREFORE, in consideration of the promises and the mutual
       agreements and covenants hereinafter set forth, and intending to be
       legally bound hereby, the parties to this Agreement hereby agree as
       follows:

1.        INTERPRETATION

1.1    The Recitals and Schedules form part of this Agreement and shall have the
       same force and effect as if expressly set out in the body of this
       Agreement and any reference to this Agreement shall include the Recitals
       and Schedules.

1.2    In this Agreement except where the context otherwise requires the
       following words and expressions shall have the following meanings:

"BVI"                    The British Virgin Islands;

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"Completion"             completion of the sale and purchase of the Sale Shares
                         and the issuance and allotment of the Subscription
                         Shares to the Purchaser in accordance with Clause 5 of
                         this Agreement;

"Completion Date"        APRIL 30,  2005 on or before 6 p.m. Beijing Time (or
                        such later date as the  parties shall agree in writing);

"Conditions"             the conditions contained or referred to in Clause 4;

"Consideration"          the consideration payable for the sale and purchase of
                         the Sale Shares and the subscription of the
                         Subscription Shares of the Holding Company pursuant to
                         Clause 3 [as adjusted by clause 6];

"Hong Kong"              Hong Kong Special Administrative Region of the PRC;

"HK$"                    Hong Kong dollars

"RMB"                    Chinese Renminbi

"PACT Shares"            Ordinary shares of PACT;

"PRC"                    People's Republic of China;

"Sale                    Shares" the 23050 ordinary shares of US$1.00 each in
                         the capital of the Holding Company (being 23050/50000
                         of the Holding Company that represents 46.1%of the
                         Holding Company) such shares being beneficially owned
                         by and registered in the name of the Seller in the
                         proportions inter se set out in Part II of Schedule 1;

"Subscription            Shares" the 5000 new ordinary shares of US$1.00 each in
                         the capital of the Holding Company (being 5000/55000
                         which together with the Sale Shares, being 28050/55000
                         = 51% of entire issued share capital of the Holding
                         Company enlarged by the allotment and issue of the
                         Subscription Shares) to be issued to the Purchaser;

"US$"                    United States dollars;

"United States"          United States of America;

1.3    Words and phrases (not otherwise defined in this Agreement) the
       definitions of which are contained or referred to in the Companies
       Ordinance (Cap. 32) shall be construed as having the meanings thereby
       attributed to them.

1.4    References in this Agreement to ordinances and to statutory provisions
       shall be construed as references to those ordinances or statutory
       provisions as respectively as modified (on or before the date hereof) or
       re-enacted (whether before or after the date hereof) from time to time
       and to any orders, regulations, instruments or subordinate legislation
       made under the relevant ordinances or provisions thereof and shall
       include references to any repealed ordinance or provisions thereof which
       has been so re-enacted (with or without modifications).

1.5    The headings are for convenience only and shall not affect the
       construction of this Agreement.

1.6    All representations, undertakings, warranties, indemnities, covenants,
       agreements and obligations given or entered into by more than one person
       are given or entered into jointly and severally.

1.7    Except where the context otherwise requires words denoting the singular
       include the plural and vice versa; words denoting any one gender include
       all genders; words denoting persons include incorporations and firms and
       vice versa.

1.8    Reference to clauses, sub-clauses, paragraphs and schedules are (unless
       the context requires otherwise) to clauses, sub-clauses, paragraphs and
       schedules of this Agreement.

1.9    The expressions the "Holding Company", the "Company", the "Seller" and
       the "Purchaser" shall unless the context requires otherwise shall include
       their successors, personal representatives and permitted assigns.

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1.10      The schedules and appendices form part of this Agreement.

2.     SALE OF SHARES AND SUBSCRIPTION OF THE SUBSCRIPTION SHARES

2.1    Subject to the terms of this Agreement, the Seller shall sell as
       beneficial owner and the Purchaser (relying on the representations,
       warranties, agreements, covenants, undertakings and indemnities
       hereinafter referred to) shall purchase the Sale Shares free from all
       options, liens, charges, pledges, claims, agreements, encumbrances,
       equities and other third party rights of any nature whatsoever and
       together with all rights of any nature whatsoever now or hereafter
       attaching or accruing to it including all rights to any dividends or
       other distribution declared paid or made in respect of them after the
       date of this Agreement.

2.2    Subject to and upon the terms and conditions of this Agreement, the
       Purchaser shall subscribe for and the Company shall allot and issue the
       Subscription Shares free from all options, liens, charges, pledges,
       claims, agreements, encumbrances, equities and other third parties rights
       of any nature whatsoever subject to and upon the terms and conditions of
       this Agreement.

2.3    The Subscription Shares shall be allotted and issued fully paid, and
       shall rank pari passu in all respects among themselves and with the
       Shares in issue on the date of allotment and issue, including the right
       to receive all dividends, distributions and other payments made or to be
       made the record date for which falls on or after the date of such
       allotment and issue.

3.     CONSIDERATION

3.1    The Consideration below for the Sale Shares and Subscription Shares of
       the Holding Company shall be settled in accordance with the following
       provisions that the Purchaser will pay the Seller or the Holding Company
       as the case may be:
       a)     USD1,183,000 payable to the Seller in cash or wire transfer within
              30 days after the successful Completion as defined in Clause 5 of
              this Agreement, and ;
       b)     USD 4,182,000 payable in PACT Shares, equivalent to 522,750
              Restricted PACT Shares (the "Escrow Shares") based on a valuation
              of USD 8 per PACT share, payable to SELLER OR THEIR NOMINEE(S) for
              the Sale Shares (23050 ordinary shares out of a total of 55000
              shares of Holding Company), in accordance with the following:
              o      Within 30 days of the signing of this agreement, PURCHASER
                     shall deliver to the Escrow Agent (designated by the
                     Purchaser) the Escrow Shares, to be held under the terms of
                     an escrow agreement to be entered into with the Escrow
                     Agent, being all the purchase consideration.
              o      A Common Stock Purchase Warrant to purchase 100,000 shares
                     ("Warrant Shares") of PACT Common Stock, par value
                     USD0.0001 per share. The exercise price of one share of
                     Common Stock (the "Exercise Price") under this Warrant
                     shall be the 5-Day Volume Weighted Average Price of the
                     common stock of PACT before the signing date of this
                     Agreement, exercisable within 3 years from the date of
                     issuance.

              In exchange, Seller will transfer to the Purchaser 23050 out of a
              total of 55000 outstanding shares of the Holding Company;

       c)     USD 500,000 (approximately RMB 4,135,000 using exchange rate of
              1USD= 8.27 RMB) payable to the Holding Company for the
              Subscription Shares within 45 days after the Completion as defined
              in Clause 5 of this Agreement, and;

3.2    In the event that:

       (a)    the Purchaser fails to receive any required regulatory approvals
              by the US SEC, NASDAQ, or fails to receive the approval of the
              Shareholders of PACT if required; or
       (b)    the conditions set out in Clause 4 shall not have been fulfilled
              by the Completion Date or such other date as the parties hereto
              may agree in writing; or
       (c)    the transaction is not completed for any reason by APRIL 30, 2005;

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           the Escrow Agreement shall provide that the Escrow Shares shall be
           returned to the Purchaser within ten (10) days following the date on
           which the Purchaser provides that such conditions have not been met;
           and the Purchaser shall return the Seller 28050 shares of the Holding
           Company within ten (10) days following April 30,2005.

3.3    Escrow Arrangement for Escrow Shares

       Warrantor hereby agrees and acknowledges that the total Consideration
       payable by the Purchaser is based on Warrantor's warranty in respect of
       the Net Income of the Company as described in this section. In this
       regard Warrantor hereby agrees to allow the Purchaser to appoint the
       Escrow Agent upon the terms of the Escrow Agreement in the agreed terms
       to hold all the Escrow Shares to be issued in accordance with the Escrow
       Agreement and this Agreement on Completion and Warrantor undertakes that
       it shall not either sell, transfer, charge, encumber, grant options over
       or otherwise dispose of, or of any legal or beneficial interest in any of
       the Escrow Shares until such part of the Escrow Shares are released by
       the Escrow Agent to Warrantor in accordance with the following schedule :
<TABLE>
      ----------------------------------- ---------------------------- ------------------------------------------------
                                          Number of Shares to be       Release Criteria based on Accumulated Net
      Release Date                        Released                     Income
      ----------------------------------- -----------------------------------------------------------------------------
                                          (Assuming receipt by PACT Auditors of certification that the auditor's
                                          review relating to the Holding Company, the Company, and its business
                                          is acceptable and can be consolidated into PACT's audited accounts, balance
                                          sheet and financial statements, in accordance with the US GAAP.)
      ----------------------------------- ---------------------------------- ------------------------------------------
      <S>                                 <C>                                 <C>
      3.3.1.  45 days after closing.      130,050 restricted
                                          PACT Shares
      ----------------------------------- ---------------------------------- ------------------------------------------
      3.3.2. Within 30 days from the      98,175 restricte                   Company has achieved Cumulative Net
      receipt of the Auditors             PACT Shares                        Income for the 3 months ending on March
      certification of the Net Income                                        31, 2005 not less than USD 225,000.
      for the 3 months ending on March
      31, 2005.
      ----------------------------------- ---------------------------------- ------------------------------------------
      3.3.3. Within 30 days from the      98,175 restricted                  Company has achieved Cumulative Net
      receipt of the Auditors             PACT Shares plus any shortfall     Income for the 6 months ending on June
      certification of the Net Income     of unreleased restricted PACT      30, 2005 not less than USD 648,000.
      for the 6 months ending on June     Shares in 3.3.2
      30, 2005.
      ----------------------------------- ---------------------------------- ------------------------------------------
      3.3.4. Within 30 days from the      98,175 restricted                  Company has achieved Cumulative Net
      receipt of the Auditors             PACT Shares plus any shortfall     Income for the 9 months ending on
      certification of the Net Income     of unreleased restricted PACT      September 30, 2005 not less than USD
      for the 9 months ending on          Shares in 3.3.2 and 3.3.3          1,229,000.
      September 30, 2005.
      ----------------------------------- ---------------------------------- ------------------------------------------
      3.3.5. Within 30 days from the      98,175 restricted                  Company has achieved Cumulative Net
      receipt of the Auditors             PACT Shares plus any shortfall     Income for the 12 months ending on
      certification of the Net Income     unreleased restricted PACT         December 31, 2005 not less than USD
      for the 12 months ending on of      Shares in 3.3.2, 3.3.3 and 3.3.4   2,000,000.
      December 31, 2005.
      ----------------------------------- ---------------------------------- ------------------------------------------
      Total Number of PACT Shares to be   522,750 restricted                 Company will be entitled to the entire
      released from the Escrow            PACT Shares                        escrow shares if it has achieved Cumulative
                                                                             Net Income for the 12 months ending on
                                                                             December 31, 2005 not less than USD
                                                                             2,000,000.
      ----------------------------------- ---------------------------------- ------------------------------------------
</TABLE>

         Purchaser agrees that on the relevant release date (as referred to in
         the above schedule) THE SELLER OR ITS NOMINEE(S) will collect the
         relevant portion of the Escrow Shares from the Escrow Agent (if the
         respective Release Criteria has been fully met).
         The Seller hereby appoints Tony Tong and Victor Tong the proxy of the
         Seller for the period commencing on the date hereof and continuing for
         ten (10) years (the "Proxy Term"), with full power to vote all the PACT
         Shares owned by Sellers on any and all proposals brought before a
         meeting of the stockholders of PACT in such manner as they, in their
         sole discretion, deem proper. This proxy is irrevocable and coupled
         with an interest. At any time and from time to time during the Proxy

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         Term, the Seller shall execute and deliver to Tony Tong and Victor Tong
         such additional proxies or instruments as may be deemed by them
         necessary or desirable to effectuate the purposes of the proxy or
         further to evidence the right and powers granted hereby.

3.4    Net Income Warranty by Warrantor, Bonus Shares, and Penalty

       3.4.1  Warrantor warrants, represents and undertakes that:

              (i)    the total Net Income of the Company for the 12 months
                     ending on December 31, 2005 ("First Term") will not be less
                     than USD 2,000,000.
              (ii)   the total Net Income of the Company for the 12 months
                     ending on December 31, 2006 ("Second Term") will not be
                     less than USD 2,600,000.

       3.4.2  Bonus Shares for Achieving Net Income Exceeding the Profit
              Guarantee:

              (i)    Subject to Completion having occurred and the terms of this
                     Agreement, after the end of First Term, within 30 days of
                     the Auditors certification that the audited financial
                     statements relating to Company and its business is
                     acceptable and can be consolidated into PACT's audited
                     accounts, balance sheet and financial statements, in
                     accordance with the US GAAP, the Warrantor shall be
                     entitled to subscribe for and be issued and allotted the
                     following number of Bonus Shares at par value based on the
                     Net Income of the Company, according to the following
                     formula: Number of Bonus Shares to be issued for First Term
                     = ( Net Income Amount in USD for First Term in excess of
                     USD 2,000,000) x 51% / ( 30-Day Volume Weighted Average
                     Price of the common stock of PACT beginning from the day
                     after the end of the First Term).
              (ii)   The Number of Bonus Shares must not exceed 100,000 shares
                     of the common stock of PACT.
              (iii)  Upon the Warrantor being entitled to subscribe for the
                     relevant number of Bonus Shares pursuant to the above
                     formula and payment of the par value on each Bonus Share to
                     PACT, the Purchaser shall procure PACT to issue the
                     relevant number of Bonus Shares to the Warrantor within 30
                     days of the Announcement of the First Term Result.

       3.4.3  Penalty in case of Shortfall of Net Income below USD 2,600,000 for
              the Second Term: In the event that the Company produces only a
              portion of the annual Net Income warranted by Warrantor for the
              Second Term, then Seller shall return to Purchaser the number of
              PACT shares equivalent to the dollar amount of the shortfall of
              the Net Income divided by USD 8 (the original per share price of
              the PACT stock at the closing).

3.5    In case of any stock split or reverse stock split by PACT, the number of
       PACT shares to be issued, awarded, or returned will be adjusted according
       to the stock split ratio.

3.6    Use of Proceeds: USD 500,000 of the cash from Purchaser to the Company
       will be used for general operation mainly to acquire hardware components
       and for market development. Purchaser will appoint financial controller
       to Company.

3.7    Preemptive Right for the Purchaser to Maintain 51% Ownership: All parties
       hereby agree that upon Completion, the Company shall have preemptive
       rights indefinitely to purchase additional shares at a price per share
       calculated at a net earning ratio of three, including new shares and
       preemptive shares, in order for the Purchaser to maintain a 51% ownership
       in the Company after the issuance of the new shares.

3.8    Repurchase Right of the Seller. The Purchaser has the right to subscribe
       for the other 49% equity interest of the Company at the price of USD 8
       per share of the common stock of PACT within two years upon completion.
       The purchase consideration for the remaining 49% of the Company:
          =  [Profit of the Company in the last fiscal year] x 5.5 x 49% , where
             5.5 = Price over Earning (PE) ratio.
       . The maximum purchase consideration will be less than 10% of the total
       outstanding shares of PACT. The Seller has the right to repurchase 2% out
       of the 51% of total shares of the Holding Company transferred to the
       Purchaser as contemplated in this Agreement at the price of USD 8 per
       share of the common stock of PACT if the purchaser decides not to
       subscribe for this part of equity interest of the Company two years
       later.

3.9    Realization value warranty by Purchaser

       (i)    The Escrow Shares (the 522,750 restricted PACT shares issued by
              PACT to the Seller) are subject to a one year holding period
              during which the Seller may not publicly dispose of the Shares,

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              which holding period shall commence on the date of release of the
              Escrow Shares. After the expiration of the applicable one year
              holding period, the PACT shares may be publicly disposed of by the
              Seller, subject to such sales of the PACT shares meeting the
              requirements for sale as set forth in Rule 144 of the Securities
              Act of 1933, as amended. The Seller may, at their discretion,
              subject to receiving an opinion from counsel reasonably
              satisfactory to the Purchaser that the PACT shares may be sold and
              subject to the volume limitations set forth in Rule 144, dispose
              of their PACT Shares. The Purchaser hereby acknowledges and
              agrees, that if the average price of the PACT shares sold by the
              Seller during the sixty calendar day period commencing immediately
              after the expiration of the one year holding period is less than
              USD$7.00, Purchaser shall issue up to a maximum of 400,000 PACT
              Shares to the Seller as compensation for the total amount of the
              shortfall from USD$7.00. Seller acknowledges and agrees that the
              Purchaser's obligation to compensate Seller for the shortfall
              shall only be in effect for the above mentioned sixty day period,
              and that after such period, Purchaser shall have no further
              obligation to compensate Seller for any such shortfall.
       (ii)   Seller acknowledges and agrees that in the event the sale price of
              any PACT Shares sold by Seller is more than USD$9.00 during such
              sixty-day period and beyond, Purchaser and Seller will share on an
              equal basis (50%/50%) the cash proceeds of such sale of PACT
              Shares by the Seller that is in excess of USD$9.00. Seller will
              repay the Purchaser the 50% cash proceeds within one month from
              the sale date
       (iii)  If there shall be any legal expenses, claims, liens, and
              liabilities related to the Representations, Warranties, and
              Undertakings described in Section 6 of this Agreement
              ("Liabilities"), the Seller agrees to return and the Purchaser
              will forfeit the value of the Escrow Shares equal to the amount of
              the Liabilities.

4      CONDITIONS

4.1    Any of the obligations of Purchaser hereunder is conditional upon:

       4.1.1  the Purchaser being satisfied in its sole and absolute discretion
              with the results of a legal and financial due diligence review to
              be conducted by it on the Holding Company, the Company, and
              Guangzhou SunRoom(the "Companies");

       4.1.2  if required, the relevant stock exchange, government and
              securities authority and regulator in the United States granting
              listing of the PACT Shares to be issued herein;

       4.1.3  if required, a resolution at a meeting of the Directors of PACT
              approving this Agreement, the purchase of the Sale Shares and the
              Subscription of the Subscription Shares, creating and giving
              authority for the issue of the Escrow Shares, the implementation
              of the transactions contemplated hereunder and all other matters
              incidental hereto in accordance with the provisions of PACT's
              articles of incorporation and Bylaws and such rules, regulations
              and laws in force from time to time in the United States and which
              apply to PACT;

       4.1.4  if required, the shareholders of PACT at a meeting of shareholders
              approving this Agreement, the purchase of the Sale Shares,
              creating and giving authority for the issue of the Escrow Shares,
              the implementation of the transactions contemplated hereunder and
              all other matters incidental hereto in accordance with the
              provisions of PACT's articles of incorporation and Bylaws and such
              rules, regulations and laws in force from time to time in the
              United States and which apply to PACT;

       4.1.5  all amounts outstanding to the Seller by the Companies have been
              either repaid to the Companies or otherwise waived; and

       4.1.6  the Purchaser being satisfied at its sole and absolute discretion
              that the accounts of the Companies can be consolidated into PACT's
              audited financial statement, including balance sheet and income
              statements in accordance with the US GAAP.

4.2    The Warrantor and the Companies undertake to disclose in writing to the
       Purchaser anything which will or may prevent any of the conditions from
       being satisfied at or prior to Completion, as applicable, immediately
       upon the Warrantor and/or the Companies becoming aware of such a
       situation.

4.3    From the date of this Agreement until Completion, except for the
       transactions described herein or otherwise with the prior written consent
       of the Purchaser:

       (a)    The Warrantor warrants and undertakes that they will cause the
              Companies to:

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<PAGE>

              (i)    conduct its Business in the ordinary course and consistent
                     with past practices;

              (ii)   use its best efforts to maintain in full force and effect
                     the existence of the Companies;

              (iii)  promptly and timely prepare and file any financial reports
                     and franchise tax returns and pay all taxes and
                     assessments, if any, required to maintain the existence of
                     the Companies;

              (iv)   keep records in which true and correct entries will be made
                     of all material transactions by and with the Companies;

              (v)    duly observe all material requirements of governmental
                     authorities unless contested in good faith by appropriate
                     proceedings with the consent of the Purchaser;

              (vi)   promptly pay and discharge, or cause to be paid and
                     discharged, when due and payable, all lawful taxes,
                     assessments and governmental charges or levies imposed upon
                     the income, profits, property or business of the Companies
                     unless contested in good faith by appropriate proceedings
                     with the consent of the Purchaser;

              (vii)  at all times comply with the provisions of all contracts,
                     agreements and leases to which the Companies is a party,
                     unless contested in good faith by appropriate proceedings
                     with the consent of the Purchaser; and

              (viii) to use best endeavors to procure that the employees of the
                     Companies at the date of this Agreement remain and continue
                     as employees after completion;

       (b)    The Warrantor warrants and undertakes to cause the Companies not
              to:

              (i)    modify its [Memorandum or Articles of Incorporation or]
                     [Bylaws];

              (ii)   cause or permit its liquidation or dissolution;

              (iii)  institute, or permit to be instituted against it, any
                     proceeding, which remains undismissed for a period of [30]
                     days after the filing thereof, seeking to adjudicate it as
                     bankrupt or insolvent, or seeking liquidation, winding-up,
                     reorganization, arrangement, adjustment, protection, relief
                     or composition of it or its debts under any law relating to
                     bankruptcy, insolvency or reorganization or relief of
                     debtors, or seeking the entry of any order or relief or the
                     appointment of receiver, trustee or other similar official
                     for it or for any substantial part of its property;

              (iv)   make a general assignment for the benefit of its creditors;

              (v)    except as agreed in this Agreement, declare or pay any
                     dividend or make any distribution to any of its
                     shareholders;

              (vi)   issue, redeem, sell or dispose of, or create any obligation
                     to issue, redeem, sell or dispose of, any shares of its
                     capital stock (whether authorized but unissued or held in
                     treasury);

              (vii)  effect any stock split, reclassification or combination;

              (viii) modify its agreements and other obligations with respect to
                     its long-term indebtedness, including but not limited to
                     its loan agreements, indentures, mortgages, debentures,
                     notes and security agreements.

              (ix)   Negotiate or enter into an agreement with another party
                     related to the sale of the Companies.

4.4    Until Completion, the Warrantor, the Companies shall procure that the
       Purchaser, its agents and representatives are given reasonable access to
       such documents relating to the Companies, as the Purchaser shall request.
       The Companies will assist the Purchaser's auditor to complete the audit
       report of the Companies in accordance with the US GAAP by March 31, 2005.

                                       8
<PAGE>

4.5    The Warrantor warrants, represents and undertakes that there shall have
       been no Material Adverse Change in the assets or the business, prospects,
       financial condition or results of operations of the Companies.

4.6    The Purchaser shall be entitled to rescind this Agreement by notice in
       writing to the Seller, the Companies if prior to Completion it appears
       that any of the Warranties is not or was not true and accurate in all
       respects or if any act or event occurs which, had it occurred on or
       before the date of this Agreement, would have constituted a breach of any
       of the Warranties or if there is any material non fulfillment of any of
       the Warranties which (being capable of remedy) is not remedied prior to
       Completion.

5      COMPLETION

5.1    Subject to the terms of this Agreement and subject to the approval of the
       board of directors of the Purchaser, Completion shall take place pursuant
       to this clause at the offices of the Purchaser's Legal Counsel on the
       Completion Date.

5.2    Upon Completion the Seller and the Holding Company shall deliver to the
       Purchaser:

            (i)    duly completed and signed transfers of the Sale Shares by the
                   registered holders thereof in favor of the Purchaser or as it
                   may direct together with the relative bought/sold notes and
                   share certificates;

            (ii)   duly completed, executed and validly issued share
                   certificates of the Sale Shares and the Subscription Shares
                   in favor of the Purchaser or as it may direct;

            (iii)  certified true copies of the minutes of meetings of the
                   Holding Company's board of directors and shareholders
                   approving the transfer, assignment and allotment of the Sale
                   Shares to the Purchaser;

            (iv)   certified true copies of the minutes of meetings of the
                   Holding Company's board of directors and shareholders
                   approving this Agreement and all matters herein contemplated
                   and the transfer and assignment of its Sale Shares and the
                   issuance and allotment of the Subscription Shares to the
                   Purchaser.

5.3    Upon Completion the Purchaser shall deliver to the Seller and the Holding
       Company:

            (i)   a copy of resolutions of the board of directors of the
                  Purchaser approving this Agreement and other documents
                  necessary for the purpose of effecting this transaction and
                  authorizing a person or persons to execute the same (with
                  seal, where appropriate) for and on its behalf.

           (ii)   an application letter duly signed by the Purchaser for the
                  Subscription of the Subscription Share.

           (iii)  cheques in installments drawn for USD1,183,000 and made
                  payable to the Holding Company within 30 days of Completion.

6      REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS

6.1    The Companies, the Seller, and the Warrantor, jointly and severally,
       represent, warrant and undertake to the Purchaser (to the intent that the
       provisions of this clause shall continue to have full force and effect
       notwithstanding completion) that:

       6.1.1  each of the Warranties is true and accurate in all respects and
              not misleading at the date of this Agreement and will continue to
              be true and accurate in all respects and not misleading up to and
              including the Completion Date;

       6.1.2  the Companies and the Seller have and will have full power and
              authority to enter into and perform this Agreement and the Deed of
              Indemnity which constitute or when executed will constitute
              binding obligations on them in accordance with their respective
              terms;

                                       9
<PAGE>

       6.1.3  the Sale Shares and the Subscription Shares will constitute 51
              PERCENT of the entire issued and allotted capital of the Holding
              Company, enlarged by the allotment and issuance of the
              Subscription Shares, on a fully diluted basis,

       6.1.4  the Holding Company owns 100 PERCENT of the entire issued and
              allotted capital of the Company on a fully diluted basis;

       6.1.5  there have been no options, warrants, pledges, bonds or any
              instrument or agreement of the like whatsoever granted to any
              third party by any of the Seller in favor of any third party in
              respect of any shares in the Holding Company;

       6.1.6  there is and at completion will be no pledge, lien or other
              encumbrance on, over or affecting the Sale Shares and there is and
              at completion will be no agreement or arrangement to give or
              create any such encumbrance and no claim has been or will be made
              by any person to be entitled to any of the foregoing;

       6.1.7  the Seller will be entitled to transfer the full legal and
              beneficial ownership of the Sale Shares to the Purchaser on the
              terms of this Agreement without the consent of any third party and
              the Holding Company will be entitled to issue the Subscription
              Shares without any further consent or approval when issued, the
              subscription shares shall be dully issued and authorized;

       6.1.8  the Seller is an "accredited investor" as defined pursuant to
              Regulation D of the Securities Act of 1933, as amended. The Seller
              acknowledges that the Escrow Shares have not been registered and
              are "restricted securities";

       6.1.9  the Company listed in Part I of Schedule 2 are all the present
              subsidiaries of the Holding Company;

       6.1.10 the information in Schedule 2 relating to the Companies is true
              and accurate in all respects;

       6.1.11 the Holding Company is the 100% beneficial owner the shares in the
              Company free from any encumbrance, and the Seller is the 100%
              beneficial owner the shares in the Holding Company free from any
              encumbrance;

       6.1.12 the contents of the Disclosure Letter and of all accompanying
              documents are true and accurate in all respects and fully, clearly
              and accurately disclose every matter to which they relate;

       6.1.13 each of the Companies are duly incorporated and validly existing
              in its relevant jurisdiction of incorporation;

       6.1.14 each of the Companies will implement all the necessary financial
              control procedures, certification and representation letters, as
              required by PacificNet's management, audit committee, independent
              auditor, the US SEC, and the USA, Hong Kong and China governments.

7      RESTRICTIONS

7.1    The Companies, the Seller, and the Warrantor undertakes to the Purchaser
       that they shall not without the prior written consent of the Purchaser
       for a period of 2 YEARS after Completion either solely or jointly with or
       on behalf of any other person, firm, company, trust or otherwise whether
       as director, shareholder, employee, partner, agent or otherwise (The
       Purchaser shall permit and agree the continuing existence of the Seller's
       directorships and shareholdings in any other companies which have been
       established before the date on which this agreement is signed no matter
       whether those companies' business is in competition with the Company or
       not.) :

       (a)   carry on or be engaged or interested directly or indirectly in any
             capacity (except as the owner of shares or securities listed or
             dealt in on a stock exchange in Hong Kong, PRC, and USA or
             elsewhere held by way of investment only) in any business which
             shall be in competition within Greater China and USA with the
             Company or its subsidiaries in the current Business of the Company;

                                       10
<PAGE>

       (b)   solicit or entice or endeavor to solicit or entice away from the
             Company or its subsidiaries any employee, officer, manager,
             consultant (including employees who are directors) of the Company
             or its subsidiaries or any persons whose services are otherwise
             made available to the Company or its subsidiaries;

       (c)   deal with, canvass, solicit or approach or cause to be dealt with,
             canvassed or solicited or approached for business in respect of any
             trade or business carried on or service provided by the Company or
             its subsidiaries any person, firm or company who at Completion or
             within two years prior to Completion was a customer, supplier,
             client, representative, agent of or in the habit of dealing under
             contract with the Company or the Subsidiaries;

7.2    The Companies, the Seller, and the Warrantor further undertake to the
       Purchaser that:

       (a)   they will not at any time hereafter make use of or disclose or
             divulge to any person other than to officers or employees of the
             Companies whose province it is to know the same any information
             relating to the Companies or the subsidiaries other than any
             information properly available to the public or disclosed or
             divulged pursuant to an order of a court of competent jurisdiction;

       (b)   they will not at any time hereafter in relation to any trade,
             business or company use a name, or internet domain name including
             the word [or symbol, or logo design] SunRoom and VS366, or
             any similar word [or symbol] in such a way as to be capable of or
             likely to be confused with the name of the Companies [or any
             subsidiary] and shall use all reasonable endeavors to procure that
             no such name shall be used by any person, firm or company with
             which [it is/they are] connected;

       (c)   they will procure that its subsidiaries, holding company and any
             other affiliated companies and its employees will observe the
             restrictions contained in this Clause 7;

       (d)   they shall not do anything which might prejudice the goodwill of
             the Companies or its subsidiaries.

7.3    Each and every obligation under this clause shall be treated as a
       separate obligation and shall be severally enforceable as such and in the
       event of any obligation or obligations being or becoming unenforceable in
       whole or in part such part or parts as are unenforceable shall be deleted
       from this clause and any such deletion shall not affect the
       enforceability of all such parts of this clause as remain not so deleted.

7.4    The restrictions contained in this clause 7 are considered reasonable by
       the parties but in the event that any such restriction shall be found to
       be void but would be valid if some part thereof were deleted or the area
       of operation or the period of application reduced such restriction shall
       apply with such modification as may be necessary to make it valid and
       effective.

7.5    Nothing in this Clause 7 shall apply to:

       (a)   the direct or indirect holding of any securities listed on a
             recognized stock exchange where the total voting rights exercisable
             at general meetings of the company concerned as represented by such
             holding do not exceed 10 per cent of the total voting rights
             attaching to the securities of the same class as that held by the
             Companies, the Seller, and the Warrantor; or

       (b)   the holding by the Companies, the Seller, and the Warrantor of any
             securities of any member of the Group; or

       (c)   the use or disclosure of any information which can be shown by
             Seller to be in the public domain (otherwise than in consequence of
             any breach by any of the Companies, the Seller, and the Warrantor
             of any provisions of this Agreement).

                                       11
<PAGE>

8      RIGHT OF FIRST REFUSAL

8.1    Before any shares in the Companies may be sold or otherwise transferred
       or disposed of by any of the Shareholders of the Companies ("Selling
       Shareholder", including but not limited to the Seller), the Purchaser
       shall have a right of first refusal ("Right of First Refusal") to
       purchase such shares ("Offered Securities") in accordance with Clauses
       (8.2) and (8.3) below.

8.2    Before the transfer or disposal of any Offered Securities, the Selling
       Shareholder shall deliver to the Purchaser and the Company a written
       notice ("Transfer Notice") stating:

       (a)    the Selling Shareholder's intention to sell or otherwise dispose
              of such Offered Securities;
       (b)    the name of each proposed purchaser or other transferee (a
              "Proposed Transferee");
       (c)    the number of Offered Securities to be transferred to each
              Proposed Transferee; and
       (d)    the cash price and/or other consideration for which the Selling
              Shareholder proposes to transfer the Offered Securities to the
              Proposed Transferee ("Offered Price").

       The Transfer Notice shall certify that the Selling Shareholder has
       received a firm offer from the Proposed Transferee(s) and in good faith
       believes a binding agreement for the Disposal is obtainable on the terms
       set forth in the Transfer Notice. The Transfer Notice shall also include
       a copy of any written proposal, term sheet or letter of intent or other
       agreement relating to the proposed disposal. The Transfer Notice shall
       constitute an irrevocable offer by the Selling Shareholder to sell the
       Offered Securities to the Purchaser.

8.3    The Purchaser shall have a right, upon notice to the Selling Shareholder
       at any time within 15 calendar days after receipt of the Transfer Notice,
       to purchase all, any or a portion of such Offered Securities at (a) such
       price per share of the Offered Securities as (i) determined by an
       independent international appraiser experienced in the valuation of such
       shares and business of the Company as chosen by the Purchaser or (ii) the
       Offered Price, which ever shall be lower ("Purchaser Offer Price"); and
       (b) upon the same terms (or as similar as reasonably possible), upon
       which the Selling Shareholder is proposing or is to dispose of such
       Offered Securities, save the sale/purchase price shall be the Purchaser
       Offer Price, and the Selling Shareholder shall, upon receipt of the
       notice of purchase from the Purchaser, sell such Offered Securities to
       the Purchaser pursuant to such terms, with such closing to take place
       within 45 calendar days after delivery of the Transfer Notice ("Purchase
       Right Period").

8.4    If any of the Offered Securities proposed in the Transfer Notice to be
       transferred are not purchased by the Purchaser, then after expiry of the
       Purchase Right Period, the Selling Shareholder may sell or otherwise
       transfer or dispose of such Offered Securities which have not been
       purchased by the Purchaser at the Offered Price or at a higher price,
       provided that such sale or other transfer shall be completed and
       consummated within 45 days after the expiry of Purchase Right Period, and
       provided further that the Proposed Transferee agrees in writing that the
       provisions of this Agreement and any shareholder's agreement between the
       Purchaser and the Seller regulating their respective rights within the
       Company (if any) shall continue to apply to the Offered Securities that
       are transferred to the Proposed Transferee. If the Offered Securities
       described in the Transfer Notice are not transferred to the Proposed
       Transferee within such 45 day period, such Selling Shareholder will not
       transfer or dispose of any Offered Securities unless such securities are
       first re-offered to the Purchaser in accordance with Clauses (8.2) and
       (8.3) above.

Notwithstanding the procedures set forth above, if one Party wishes to transfer
its ownership shares to its affiliate, the other Party shall promptly give
consent to such proposed transfer and waive the right of first refusal.
"Affiliate" shall mean any company which, through ownership of voting stock or
otherwise, is controlled by, under common control with, or in control of, a
Party; "control" shall mean ownership, directly or indirectly, of more than
fifty percent (50%) of the securities having the right to vote for the election
of directors in the case of a corporation, and more than fifty percent (50%) of
the beneficial interests in the capital in the case of a business entity other
than a corporation.

9      BOARD OF DIRECTORS, OPERATION AND MANAGEMENT

9.1    The board of directors of each of the Companies shall be the highest
       authority of their respective Companies and shall determine all major
       issues of the respective Companies, subjected to applicable law.

                                       12
<PAGE>

9.2    The board of directors of each of the Companies shall be nominated by
       their respective shareholders and composed of SEVEN (7) directors, 4
       directors, the Company Legal Representative, and the Company Financial
       Controller to be nominated by Purchaser and 3 directors to be nominated
       by the Warrantor.

9.3    The boards of directors shall meet at least once every quarter. A Board
       meeting may be called by any director.

9.4    Each of the Companies shall establish an operation and management
       structure to be responsible for the daily operation and management of the
       respective Companies. The officers of each of the Companies shall include
       one (1) General Manager, one (1) Vice General Manager, and one Chief
       Financial Officer.

9.5    The task of the General Manager shall be to carry out the various
       resolutions of the board of directors of the respective Companies and
       organize and direct the daily operation and management of the respective
       Company. The operation and management structure may consist of certain
       departments, the managers for which shall be responsible for the work of
       the relevant departments, handle matters delegated by the General Manager
       and the Vice General Manager, and report to the General Manager and the
       Vice General Manager.

9.6    In the event of graft or serious dereliction of duty, the General
       Manager, the Vice General Manager, and the Company Legal Representative
       may be removed and replaced by the board of directors of the respective
       Companies with a resolution at any time.

10     INDEMNITY

The Seller and the Warrantor will indemnify and will keep indemnified and save
harmless the Purchaser (for itself and as trustee for the Companies from and
against any and all losses, claims, damages (including lost profits,
consequential damages, interest, penalties, fines and monetary sanctions)
liabilities and costs incurred or suffered by the Purchaser by reason of,
resulting from, in connection with, or arising in any manner whatsoever out of
the breach of any Warranties or covenants or the inaccuracy of any
representation of the Seller or the Warrantor contained or referred to in this
Agreement or in any agreement, instrument or document delivered by or on behalf
of the Seller or the Warrantor in connection therewith including, but not
limited to, any dimunition in the value of the assets of and any payment made or
required to be made by the Purchaser or the Companies or any Subsidiary and any
costs and expenses incurred as a result of such breach provided that the
indemnity contained in this clause 9 shall be without prejudice to any other
rights and remedies available to the Purchaser;

11     COSTS

The Purchaser shall pay for all the due diligence costs, not exceeding USD
5,000, including auditing and valuation appraisal costs, fairness opinion
letter, legal costs, and expenses and other incidental costs and disbursements
in relation to the negotiations leading up to the purchase of the Sale Shares
and to the preparation, execution and carrying into effect of this Agreement.
The costs exceeding the amount of USD 5,000 shall be borne equally by the Seller
and the Purchaser.

12     COMPLETE AGREEMENT

This Agreement represents the entire and complete agreement between the parties
in relation to the subject matter hereof and supersedes any previous agreement
whether written or oral in relation thereto. No variations to this Agreement
shall be effective unless made or confirmed in writing and signed by all the
parties hereto.

13     SEVERABILITY

In the event that any provision of this Agreement is held to be unenforceable,
illegal or invalid by any court of competent jurisdiction, the validity,
legality or enforceability of the remaining provisions shall not be affected nor
shall any subsequent application of such provisions be affected. In lieu of any
such invalid, illegal or unenforceable provision, the parties hereto intend that
there shall be added as part of this Agreement a provision as similar in terms
to such invalid, illegal or unenforceable provision as may be possible and be
valid, legal and enforceable.

14     COUNTERPARTS

This Agreement may be executed in counterparts with the same force and effect as
if executed on a single document and all such counterparts shall constitute one
and the same instrument.

                                       13
<PAGE>

15     NOTICES

Any notice required to be given under this Agreement shall be sufficiently given
if delivered in person, forwarded by registered post or sent by overnight
international couriers or facsimile transmission to the relevant party at its
address, or fax number set out below (or such other address as the addressee has
by five days prior written notice specified to the other parties) :

             To the Purchaser      :
             Attn:    Victor Tong, President
                      PacificNet Strategic Investment Holdings Limited and
                              PacificNet Inc.
                      860 Blue Gentian Road, Suite 360, Eagan, MN 55121, USA

             To the Company and Guangzhou SunRoom:
             Attn:    Mr. Wang, Yongchao, Chairman of the Board
                      Guangzhou Sunroom Informaiton Industrial Co., Ltd

             15/F, Huajian Building. No. 233, Tianfu Road. Tianhe Guangzhou
             510630, China (Chinese Address)

             To the Holding Company, the Seller, and the Warrantor:
             Attn:    Mr. Sun Zhengquan,
             15/F, Huajian Building. No. 233, Tianfu Road. Tianhe Guangzhou
             510630, China (Chinese Address)
                      Mr. Liao, Mengjiang
             15/F, Huajian Building. No. 233, Tianfu Road. Tianhe Guangzhou
             510630, China (Chinese Address)and
                      Mr. Wang, Yongchao
             15/F, Huajian Building. No. 233, Tianfu Road. Tianhe Guangzhou
             510630, China (Chinese Address)

                                       14
<PAGE>

16     SETTLEMENT OF DISPUTES

16.1   The formation of this Agreement and its Appendices and related
       agreements, and the validity, interpretation, performance and settlement
       of disputes thereof shall be governed by the laws of the Hong Kong SAR.

16.2   Any disputes arising out of or in connection with this Agreement shall be
       resolved through friendly consultations by the Parties; if no agreement
       can be reached through consultations within thirty (30) days after the
       occurrence of such dispute, either Party shall have the right to submit
       such dispute to the International Economic and Trade Arbitration
       Commission Hong Kong Branch for arbitration in Hong Kong in accordance
       with its procedures of arbitration. The arbitral award shall be final and
       binding upon both Parties.

17     GOVERNING LAW AND JURISDICTION

This Agreement shall be governed by and construed in accordance with the laws of
Hong Kong. The parties hereto hereby irrevocably submit to the non-exclusive
jurisdiction of the courts of Hong Kong.

            IN WITNESS WHEREOF, each of the Purchaser, the Holding Company, the
Company, Guangzhou SunRoom, the Seller, and the Warrantor has duly executed, or
has caused to be duly executed by their respective officers thereunto duly
authorized, this Agreement as of the date first written above.

THE PURCHASER: PacificNet Strategic Investment Holdings Limited and PacificNet
Inc.

                        By:
                                     ------------------------------------------
                        Name:        Victor Tong
                        Title:       President
GUANGZHOU SunRoom: Guangzhou Sunroom Information Industrial Co., Ltd.
                        By:
                                     ------------------------------------------
                        Name:        Mr. Wang, Yongchao
                        Title:       General Manager
THE COMPANY:  Guangzhou 3G Information Technology Co., Ltd
                        By:
                                     ------------------------------------------
                        Name:        Mr. Liao, Mengjiang(1)u(C)s|?
                        Title:       Director

THE HOLDING COMPANY (Pacific 3G Information & Technology Limited), THE SELLER,
AND THE WARRANTOR:

                        By:
                                     -------------------------------------------
                        Name:        Mr. Sun Zhengquan      Mr. Liao, Mengjiang

                        By:
                                     -------------------------------------------
                        Name:        Mr. Wang, Yongchao
                                     -------------------------------------------
                        By:

<TABLE>
<S>     <C>
                                     ---------------------------------------------------------------
                        Name:        ASIAFAME INTERNATIONAL LIMITED   STARGAIN INTERNATIONAL LIMITED
                                     ---------------------------------------------------------------

                        By:
                                     ---------------------------------------------------------------
                        Name:        TRILOGIC INVESTMENTS LIMITED
</TABLE>

                                       15
<PAGE>
<TABLE>
<S>     <C>

SCHEDULE 1

          PART I
          THE COMPANY SHAREHOLDERS AND SHARES

Company Name:  Guangzhou 3G Information Technology Co., Ltd

NAME OF SHAREHOLDER (1)                             PERCENTAGE OF SHARES HELD BY THE SHAREHOLDER
-----------------------                             --------------------------------------------
Pacific 3G Information & Technology Limited         100%

          PART II
          THE HOLDING COMPANY SHAREHOLDERS AND SHARES

Company Name:  Pacific 3G Information & Technology Limited

                                                                                       NUMBER OF SHARES HELD BY THE
NAME OF SHAREHOLDER (3)            ADDRESS                                             SHAREHOLDER (50000)
-----------------------            -------                                             -------------------
                                   OMC Chambers, P.O. Box, 3152, Road Town, Tortola,
ASIAFAME INTERNATIONAL LIMITED     British Virgin Islands                              13800
                                   OMC Chambers, P.O. Box, 3152, Road Town, Tortola,
STARGAIN INTERNATIONAL LIMITED     British Virgin Islands                              20700
                                   OMC Chambers, P.O. Box, 3152, Road Town, Tortola,
TRILOGIC INVESTMENTS LIMITED       British Virgin Islands                              15500

      PART III
      The Sale Shares
      23050ordinary shares of US$1.00 each of Pacific 3G Information & Technology Limited

      The Subscription Shares
      5000 ordinary shares of US$1.00 each of Pacific 3G Information & Technology Limited
</TABLE>

                                       16
<PAGE>

          SCHEDULE 2

          PART I
          THE COMPANY

Name                     :       Guangzhou 3G Information Technology Co., Ltd

Incorporated in          :       People's Republic of China

Registered capital       :       HK$1,000,000

Paid-in Capital          :       HK$1,000,000

Registered Office        :       11 Caipin Road, Science City, High & New
                                 Technology Industrial Development Zone,
                                 Guangzhou, 510730, China

Phone/Fax                :       +86-20-8561 3455
Web Site                 :       www.vs366.com

Beneficial Shareholders  :      Pacific 3G Information & Technology Limited

Registered Shareholders  :      Pacific 3G Information & Technology Limited

Legal Representative     :     Sun ,Zhengquan

Directors                :     Sun ,Zhengquan
                               Liao Mengjiang
                               Wang Yongchao

                                       17
<PAGE>

          PART II
          THE HOLDING COMPANY

Name                       :      Pacific 3G Information & Technology Limited

Incorporated in            :      British Virgin Islands

Authorized Share Capital   :      US$50,000

No. Issued Shares          :      50,000 Shares
Nominal Share Value        :      US$1
Issued Share Capital       :      US$50,000

Registered Office          :      15/F, Huajian Building. No. 233, Tianfu Road.
                                  Tianhe Guangzhou 510630, China

Beneficial Shareholders    :     ASIAFAME INTERNATIONAL LIMITED
                                 STARGAIN INTERNATIONAL LIMITED
                                 TRILOGIC INVESTMENTS LIMITED

Registered Shareholders    :     ASIAFAME INTERNATIONAL LIMITED
                                 STARGAIN INTERNATIONAL LIMITED
                                 TRILOGIC INVESTMENTS LIMITED

Directors                  :     Sun ,Zhengquan
                                 Liao, Mengjiang
                                 Wang, Yongchao

                                       18
<PAGE>

          PART III
          Guangzhou SunRoom

Name                         :     Guangzhou SunRoom Information Industrial Co.,
                                   Ltd.

Incorporated in              :     GuangZhou , People's Republic of China

Authorized Share Capital     :     RMB(pound)* 32,000,000

No. Issued Shares :                32,000,000 Shares Nominal Share Value : RMB
                                   (pound)*1.00
                                   Issued Share Capital : RMB (pound)*32,000,000

Registered Office            :     15/F, Huajian Building. No. 233, Tianfu Road.
                                   Tianhe Guangzhou 510630, China

Beneficial Shareholders      :     Sun ,Zhengquan
                                   Liao, Mengjiang
                                   Wang, Yongchao

Registered Shareholders      :     Sun ,Zhengquan
                                   Liao, Mengjiang
                                   Wang, Yongchao

Directors                    :     Sun ,Zhengquan
                                   Liao, Mengjiang
                                   Wang, Yongchao

Legal Representative         :     Sun, Zhengquan

                                       19
<PAGE>

SCHEDULE 3

        CONFIDENTIALITY, NON-COMPETITION, AND NON-CIRCUMVENTION AGREEMENT

                        Dated this 28 day of March, 2005

Company Name:  GUANGZHOU 3G INFORMATION TECHNOLOGY CO., LTD

Company Address:11 Caipin Road, Science City, High & New Technology Industrial
Development Zone, Guangzhou, 510730, China

     This Confidentiality and Non-Circumvent Agreement (hereby referred to as
the Agreement) is made effective on the abovementioned date (the Effective Date)
between the abovementioned Company and PacificNet Inc., with an office located
at 860 Blue Gentian Road, Suite 360, Eagan, MN 55121 (hereby know as the
Parties).

CONFIDENTIALITY
---------------

     It is Agreed and Understood that PacificNet own certain confidential and
proprietary information that the Company, from time to time, may need or may
have acquired in order to explore business or investment opportunity of mutual
interest.

     Confidential Information means any information and/or material which is
proprietary to PacificNet, whether or not owned or developed by PacificNet,
which is not generally know other than by PacificNet, and which either Party may
obtain through any direct or indirect contact with the other Party. Confidential
Information will be conspicuously identified when, or soon after, it is
originally disclosed, as "Confidential" or "Proprietary".

     Confidential Information includes without limitation, business records and
plans, customer and partner lists, investor and investee lists, bank and lending
lists, trade secrets, pricing structures, business sources, computer programs,
names and expertise of employees and consultant and other technical, business,
financial, customer and product development plans, forecasts, strategies and
information. Confidential information does not include: matters of public
knowledge; information rightfully received by the Company from a third Party
without a duty of confidentiality; information independently developed by either
Party; information disclosed by operation of law; information disclosed by
PacificNet with the prior written consent of the Company; and any other
information that PacificNet agrees in writing is not confidential.

     The Company understands and acknowledges that Confidential Information has
been developed or obtained by PacificNet by the investment of significant time,
effort and expense, and that the Confidential Information is a valuable, special
and unique asset of the respective Parties. Therefore, the Company agree to hold
in confidence and not to disclose the Confidential Information to any person,
employee or entity [including their affiliates, subsidiaries, stockholders,
partners, trading partners and other associated organizations (herein referred
to as affiliates)] without the prior written consent of the other Party that
owns the Confidential Information for a period of three (3) years from the
Effective Date hereof unless Parties enter into a Relationship, in which case,
this Agreement remains in effect for the term of the partnering agreement and
after the termination of said partnering agreement or when all Confidential
Information has been returned to its owner, whichever occur first.

     Immediately upon the earlier of (i) the written request of the disclosing
party or (ii) the termination of this Agreement, the receiving party will return
to the disclosing party all Confidential Information of the disclosing party and
all documents or media containing any such Confidential Information and any and
all copies or extracts thereof, which remain the property of the disclosing
party at all times.

                                       20
<PAGE>

NON-CIRCUMVENTION
-----------------

     Both Parties agree that neither Party shall circumvent the other Party with
regards to any transaction resulting from the disclosure of Confidential
Information from one Party to the other Party. Specifically, but without
limitation, the Company will not approach PacificNet's business partner(s),
potential investor(s) and investee(s) in circumvention of PacificNet. Each Party
undertake not to directly contact deal with transact Business with or otherwise
be involved with any Corporation, Partnership, Proprietorship, Trust,
Individual, Affiliate, or other Entity introduced by either Party without the
specific written permission of the Introducing Party. In the event of
circumvention of this agreement by either party, directly or indirectly, the
circumvented party shall be entitled to legal monetary penalty equal to the
maximum potential investment return and service it should realize from such a
transaction plus any and all expenses, including, but nut limited to, all legal
costs and expenses to recover the lost revenue.

GENERAL PROVISIONS
------------------

     This Agreement sets forth the entire understanding of the Parties regarding
confidentiality and non-circumvention. Any amendments must be in writing and
signed by both Parties. Each Party shall take reasonable steps to ensure that
their Employees, Agents, Representatives, Officers, Independent Contractors
Shareholders, Principals, Affiliates, and other Third Parties- also - abide by
the provisions of this Agreement. This Agreement shall not be assignable by
either Party, and neither Party may delegate its duties under this Agreement,
without prior written consent of the other Party. This Agreement shall remain in
effect until canceled in writing by both Parties. This agreement creates no
obligation to purchase, sell, develop, research or disclose anything. It grants
no license or right to use proprietary technology. It creates no agency or
partnership. This agreement is governed by Minnesota and the US law. Injunctive
relief can be granted for any breach of the agreement, as money damages would
not cure the harm from the breach. It supersedes all prior nondisclosure or
similar agreements between the parties as to the Proprietary Information
disclosed after the Effective Date. It binds the parties, their heirs,
successors, subsidiaries, associates, affiliates, and assignees. Any controversy
or claim arising out of this Agreement, which could not be settled amicably
between the Parties themselves, shall be decided by arbitration in accordance
with the International Chamber of Commerce (ICC) Rules of Arbitration and the
Non-Circumvention and Non-Disclosure Laws and Provisions, in the nearest
Regional ICC Court of Administration. In any proceedings to interpret or enforce
the agreement, the prevailing party shall receive from the other party costs and
reasonable attorney fees, including costs and fees incurred in preparation
therefore and on appeal therefrom.

AGREED and ACCEPTED, by

Signature: ____________________

Name: VICTOR TONG, PRESIDENT

Company: PACIFICNET INC.

Pacific 3G Information & Technology Limited  and
Guangzhou 3G Information Technology Co., Ltd

Signature: ____________________       Signature:__________________________

Name: Sun, Zhengquan                  Name: Liao, Mengjiang

Title: GENERAL MANAGER                Title: DIRECTOR

SIGNATURE:_____________________

Director: Wang, Yongchao

Title: Director

                                       21QuickLinks
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Exhibit 4.5    
    

 
 

SECURITY AGREEMENT    
    

        This SECURITY AGREEMENT, dated as of April 22, 2004 (as amended, supplemented, amended and restated or otherwise modified from time to time, this
"Agreement"), is made by ATLANTIC EXPRESS TRANSPORTATION CORP., a New York corporation (the "Issuer")
and each Subsidiary (such capitalized term and other terms used in this Agreement to have the meanings set forth in Section 1) of the Issuer from
time to time party to this Security Agreement (the "Subsidiary Guarantors" and, together with the Issuer, the
"Debtors"), in favor of THE BANK OF NEW YORK, a New York banking corporation, in its capacity as collateral agent (together with any successor(s)
thereto in such capacity, the "Collateral Agent") for the benefit of the Trustee and the Noteholders (the Collateral Agent, the Trustee and the
Noteholders are hereinafter referred to as the "Secured Parties"). 

 
 

W I T N E S S E T H    
    

        WHEREAS, the Issuer has entered into an Indenture, dated as of the date hereof (as amended, supplemented, amended and restated or otherwise modified from time to
time, the "Indenture") with The Bank of New York, a New York banking corporation, as Trustee (in such capacity, the
"Trustee"), pursuant to which the Issuer is issuing, as of the date hereof, 105,000 Units consisting of 12% Senior Secured Notes due 2008 in the
original aggregate principal amount of $105,000,000 and 105,000 Common Stock Purchase Warrants and 10,000 Units, consisting of Senior Secured Floating Rate Notes due 2008 in the original aggregate
principal amount of $10,000,000 and 10,000 Common Stock Purchase Warrants (collectively with any exchange notes issued in exchange thereof as contemplated by the Registration of Rights Agreement,
dated as of April 22, 2004, among the Issuer and the Initial Purchasers (as defined therein) and any additional notes issued from time to time under such Indenture, the
"Notes"); 

        WHEREAS,
pursuant to the Indenture, each Debtor is required to execute and deliver this Agreement; 

        WHEREAS,
each Debtor (other than the Issuer) is a Subsidiary of the Issuer, and each Debtor will derive substantial direct and indirect benefit from the proceeds of the issuance of the
Notes; 

        WHEREAS,
the Debtors will enter into a Second Amended and Restated Loan and Security Agreement, dated as of the date hereof (as amended, supplemented, amended and restated or otherwise
modified from time to time, the "Loan Agreement"), with the Revolving Loan Lenders and the Revolving Loan Agent, pursuant to which the Debtors will
incur Indebtedness, which Indebtedness will be secured by certain of the Collateral; 

        WHEREAS,
in connection with the incurrence of such Indebtedness, the Revolving Loan Agent and the Collateral Agent will enter into an Intercreditor Agreement, dated the date hereof (as
amended, supplemented, amended and restated or otherwise modified from time to time, the "Intercreditor Agreement"); and 

        WHEREAS,
pursuant to the terms of the Indenture and subject to the terms of the Intercreditor Agreement, if any, the Collateral Agent has agreed to accept the pledge and assignment and
the grant of a security interest under this Agreement as security for the Noteholder Debt. 

        NOW,
THEREFORE, in consideration of the mutual conditions and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and in order to induce the Trustee to enter into the Indenture and to induce potential 

 

purchasers
to purchase the Notes, each Debtor agrees with the Collateral Agent for the benefit of the Secured Parties as follows: 

        SECTION
1.    DEFINITIONS    

        Unless
otherwise defined herein, terms used in this Agreement, including its preamble and recitals, have the meanings provided in the Intercreditor Agreement or, if not defined in the
Intercreditor Agreement as in effect on the date hereof, then the Indenture. 

        1.1   "Accounts" shall mean all present and future rights of any Debtor to payment of a monetary obligation, whether or not
earned by performance, which is not evidenced by chattel paper or an instrument, (a) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of,
(b) for services rendered or to be rendered, (c) for a secondary obligation incurred or to be incurred, or (d) arising out of the use of a credit or charge card or information
contained on or for use with the card. 

        1.2   "Agreement" is defined in the preamble. 

        1.3   "Collateral" is defined in Section 2.1. 

        1.4   "Collateral Access Agreement" shall mean a Collateral Access Agreement in form and substance satisfactory to the
Collateral Agent, as amended, supplemented, amended and restated or otherwise modified from time to time. 

        1.5   "Collateral Agent" is defined in the preamble. 

        1.6   "Debtors" is defined in the preamble. 

        1.7   "Deposit Account Control Agreement" shall mean a Deposit Account Control Agreement substantially in form of
Exhibit A (with such changes as are acceptable to the Collateral Agent), as amended, supplemented, amended and restated or otherwise modified from time to time. 

        1.8   "Discharge of Noteholder Debt" shall mean (a) (i) the defeasance of the Notes in accordance with Article Eight of
the Indenture or (ii) payment in full in cash of the principal of and interest and premium, if any, on all Noteholder Debt and (b) the payment in full in cash of any other Noteholder
Debt that is due and payable or otherwise accrued and owing at or prior to the time of determination. 

        1.9   "Equipment" shall mean all of any Debtor's now owned and hereafter acquired equipment, wherever located, including
machinery, data processing and computer equipment and computer hardware and software, whether owned or licensed, and including embedded software, vehicles, tools, furniture, fixtures, all attachments,
accessions and property now or hereafter affixed thereto or used in connection therewith, and substitutions and replacements thereof, wherever located. 

        1.10 "Event of Default" is defined in Section 6.1. 

        1.11 "Excluded Assets" means each of the following: 

        (a)   any
lease, license, contract, property right or agreement to which any Debtor is a party or any of its rights or interests thereunder if and only for so long as the
grant of a security interest under this Agreement shall constitute or result in a breach, termination or default under any such lease, license, contract, property right or agreement (other than to the
extent that any such term would be rendered ineffective pursuant to Section 9-406, 9-407, 9-408 or 9-409 of the UCC of any relevant jurisdiction
or any other applicable law or principles of equity) or shall violate applicable law; provided that such lease, license, contract, property right or
agreement shall be an Excluded Asset only to the extent and for so long as the consequences specified above shall result and shall cease to be an Excluded Asset and shall become subject to the
security interest granted under this Agreement, immediately and automatically, at such time as such consequences shall no longer result; 

2

 

        (b)   real
property owned or leased by any Debtor (other than the Pledged Real Estate); 

        (c)   the
Capital Stock of any Domestic Subsidiary, Foreign Subsidiary or other Affiliate of any Debtor, except as required under  Section 4.14 of the Indenture; and 

        (d)   any
other property or assets not described in clauses (a) through (c) above (other than the Motor Vehicles and any deposit account that is not solely used
for payroll purposes) in which a security interest cannot be perfected by the filing of a financing statement under the UCC of the relevant jurisdiction, so long as the aggregate Fair Market Value of
all property excluded under this clause (d) does not at any one time exceed $1.0 million plus, in the case of any such property comprised of deposit accounts that is used solely for
payroll purposes, the dollar amount of any payments expected to be disbursed by the Issuer or the applicable Debtor from such deposit account for payroll within three business days following deposit
therein. 

        1.12 "Indenture" is defined in the first recital. 

        1.13 "Information Certificate" shall mean the Information Certificate of any Debtor constituting  Exhibit B hereto containing material information with respect to such
Debtor, its business and assets provided by or on behalf of such Debtor to
the Collateral Agent in connection with the preparation of this Agreement and the other Noteholder Agreements and the financing arrangements provided for herein. 

        1.14 "Intellectual Property" shall mean any Debtor's now owned and hereafter arising or acquired: patents, patent rights,
patent applications, copyrights, works which are the subject matter of copyrights, copyright registrations, trademarks, trade names, trade styles, trademark and service mark applications, and licenses
and rights to use any of the foregoing; all extensions, renewals, reissues, divisions, continuations, and continuations-in-part of any of the foregoing; all rights to sue for
past, present and future infringement of any of the foregoing; inventions, trade secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys, reports, manuals, and operating
standards; goodwill (including any goodwill associated with any trademark or the license of any trademark); customer and other lists in whatever form maintained; and trade secret rights, copyright
rights, rights in works of authorship, domain names and domain name registrations; software and contract rights relating to software, in whatever form created or maintained. 

        1.15 "Intercreditor Agreement" is defined in the fifth recital. 

        1.16 "Inventory" shall mean all of any Debtor's now owned and hereafter existing or acquired goods, wherever located, which
(a) are leased by any Debtor as lessor; (b) are held by any Debtor for sale or lease or to be furnished under a contract of service; (c) are furnished by any Debtor under a
contract of service; or (d) consist of raw materials, work in process, finished goods or materials used or consumed in its business. 

        1.17 "Investment Property Control Agreement" shall mean an Investment Property Control Agreement in form and substance
satisfactory to the Collateral Agent, as amended, supplemented, amended and restated or otherwise modified from time to time. 

        1.18 "Issuer" is defined in the preamble. 

        1.19 "Loan Agreement" is defined in the fourth recital. 

        1.20 "Motor Vehicles" shall mean all motor vehicles, tractors, trailers and other like property, whether or not title thereto
is governed by a certificate of title or ownership, other than motor vehicles classified as assets of discontinued operations on the Issue Date or which are subject to Purchase Money Indebtedness. 

        1.21 "Noteholder Agreements" shall mean, collectively, the Indenture, this Agreement, the Notes and all guarantees, security
agreements and other agreements, documents and instruments now or at 

3

 

any
time hereafter executed and/or delivered by the Issuer, any Debtor or any other Obligor in connection with the Indenture, as the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated, refinanced, replaced or restructured. 

        1.22 "Noteholder Debt" shall mean any and all obligations, liabilities and indebtedness of every kind, nature and description
owing by Debtors or any other Obligor to the Noteholders, the Trustee and the Collateral Agent under the Noteholder Agreements, including, principal, interest, charges, fees, premiums, indemnities and
expenses, however evidenced, whether as principal, surety, endorser, a Debtor or otherwise, whether arising under this Agreement or otherwise, whether now existing or hereafter arising (including the
payment of interest which would accrue and become due but for the commencement of such case, whether or not a claim for such amounts is allowed or allowable in whole or in part in such case), whether
direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, secured or unsecured, and whether arising directly or howsoever acquired
by the Noteholders. 

        1.23 "Noteholder" shall mean the Person in whose name a Note is registered on the registrar's books; sometimes being referred
to herein collectively as "Noteholders". 

        1.24 "Notes" is defined in the first recital. 

        1.25 "Obligors" shall mean, individually and collectively, any person liable on or in respect of the Noteholder Debt, and its
successors and assigns, including, without limitation, a receiver, trustee or debtor-in-possession on behalf of such person or on behalf of any such successor or assign. 

        1.26 "Perfection Agent" shall mean (i)(x) during the effectiveness of the Intercreditor Agreement and prior to the
payment in full of the Revolving Loan Priority Amount, (y) solely with respect to the Revolving Loan Collateral, the Revolving Lender Agent (including, with respect to any Collateral delivered
to or held by the Perfection Agent hereunder, in its capacity as bailee for the Secured Parties under the Intercreditor Agreement) and (ii) otherwise, the Collateral Agent;  provided that if at any
time the Revolving Lender Agent fails, following a written request from the Collateral Agent or any Obligor, to take any action
permitted to be taken by it as Perfection Agent, then the Collateral Agent has the power to be the Perfection Agent. 

        1.27 "Real Property" shall mean all now owned and hereafter acquired real property of a Debtor, including leasehold
interests, together with all buildings, structures, and other improvements located thereon and all licenses, easements and appurtenances relating thereto, wherever located. 

        1.28 "Receivables" shall mean all of the following now owned or hereafter arising or acquired property of a Debtor:
(a) all Accounts; (b) all interest, fees, late charges, penalties, collection fees and other amounts due or to become due or otherwise payable in connection with any Account;
(c) all payment intangibles of any Debtor and other contract rights, chattel paper, instruments, notes, and other forms of obligations owing to any Debtor, whether from the sale and lease of
goods or other property, licensing of any property (including Intellectual Property or other general intangibles), rendition of services or from loans or advances by any Debtor or to or for the
benefit of any third person (including loans or advances to any affiliates or subsidiaries of any Debtor) or otherwise associated with any Accounts, Inventory or general intangibles of any Debtor
(including, without limitation, choses in action, causes of action, tax refunds, tax refund claims, any funds which may become payable to any Debtor in connection with the termination of any employee
benefit plan and any other amounts payable to any Debtor from any employee benefit plan, rights and claims against carriers and shippers, rights to indemnification, business interruption insurance and
proceeds thereof, casualty or any similar types of insurance and any proceeds thereof and proceeds of insurance covering the lives of employees on which any Debtor is a beneficiary). 

        1.29 "Records" shall mean all of any Debtor's present and future books of account of every kind or nature, purchase and sale
agreements, invoices, ledger cards, bills of lading and other shipping 

4

 

evidence,
statements, correspondence, memoranda, credit files and other data relating to the Collateral or any account debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the foregoing are stored (including any rights of any Debtor with respect to the foregoing maintained with or by any other
person). 

        1.30 "Revolving Loan Agent" shall mean, at any time, the Person serving at such time as the "Administrative Agent" under the
Loan Agreement or any other representative of the lenders then most recently designated by a majority of the lenders under the Loan Agreement in a written notice delivered to the Collateral Agent and
the Trustee. 

        1.31 "Secured Parties" is defined in the preamble. 

        1.32 "Subsidiary Guarantors" is defined in the preamble. 

        1.33 "Trustee" is defined in the first recital. 

        1.34 "UCC" shall means the Uniform Commercial Code as in effect from time to time in the State of New York;  provided that if, with respect to any financing statement or by
reason of any provisions of law, the perfection or the effect of perfection or
non-perfection of the security interests granted to the Collateral Agent pursuant to the applicable Noteholder Agreement is governed by the Uniform Commercial Code as in effect in a
jurisdiction of the United States other than New York, UCC means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions of each Noteholder
Agreement and any financing statement relating to such perfection or effect of perfection or non-perfection. 

        SECTION
2.    GRANT OF SECURITY INTEREST    

	2.1
	Grant of Security Interest.    To secure payment and performance of all Noteholder Debt, each Debtor hereby grants to
Collateral Agent on behalf of the Secured Parties a continuing security interest in and, a lien upon, and hereby assigns to Collateral Agent on behalf of the Secured Parties as security, all personal
and real property and fixtures and interests in property and fixtures of such Debtor (other than Excluded Assets and accounts receivable owed to Atlantic Conn Transit, Inc. by Ridgefield Board
of Education), whether now owned or hereafter acquired or existing, and wherever located (together with all other collateral security for the Noteholder Debt at any time granted to or held or acquired
by Collateral Agent on behalf of the Secured Parties, collectively, the "Collateral"), including: 

        (a)   all
Accounts; 

        (b)   all
general intangibles, including, without limitation, all Intellectual Property; 

        (c)   all
goods, including, without limitation, Inventory and Equipment; 

        (d)   all
Motor Vehicles; 

        (e)   all
Real Property and fixtures; 

        (f)    all
chattel paper (including all tangible and electronic chattel paper); 

        (g)   all
instruments (including all promissory notes); 

        (h)   all
documents; 

        (i)    all
deposit accounts; 

        (j)    all
letters of credit, banker's acceptances and similar instruments and including all letter-of-credit rights; 

        (k)   all
supporting obligations and all present and future liens, security interests, rights, remedies, title and interest in, to and in respect of Receivables and other
Collateral, including (i) rights and 

5

 

remedies
under or relating to insurance policies, guaranties, contracts of suretyship, letter-of-credit rights, letters of credit and credit and other insurance related to the
Collateral, (ii) rights of stoppage in transit, replevin, repossession, reclamation and other rights and remedies of an unpaid vendor, lienor or secured party, (iii) goods described in
invoices, documents, contracts or instruments with respect to, or otherwise representing or evidencing, Receivables or other Collateral, including returned, repossessed and reclaimed goods, and
(iv) deposits by and property of account debtors or other persons securing the obligations of account debtors; 

        (l)    all
(i) investment property (including securities, whether certificated or uncertificated, securities accounts, security entitlements, commodity contracts or
commodity accounts) and (ii) monies, credit balances, deposits and other property of each Debtor now or hereafter held or received by or in transit to Perfection Agent or its affiliates or at
any other depository or other institution from or for the account of each Debtor, whether for safekeeping, pledge, custody, transmission, collection or otherwise; 

        (m)  all
commercial tort claims, including, without limitation, those identified in any Information Certificate; 

        (n)   to
the extent not otherwise described above, all Receivables; 

        (o)   all
Records; and 

        (p)   all
products and proceeds of the foregoing, in any form, including insurance proceeds and all claims against third parties for loss or damage to or destruction of or
other involuntary conversion of any kind or nature of any or all of the other Collateral. 

        Notwithstanding
anything in this Section 2.1 to the contrary, in no event shall the security interest granted under this  Section 2.1 attach to any Excluded Asset
for so long as such asset remains an Excluded Asset. 

        2.2   Perfection of Security Interests. 

        (a)   Each
Debtor irrevocably and unconditionally authorizes Collateral Agent (or its agent) to file at any time and from time to time such financing statements with respect
to the Collateral naming Collateral Agent or its designee as the secured party and such Debtor as debtor, as Collateral Agent may require, and including any other information with respect to such
Debtor or otherwise required by part 5 of Article 9 of the Uniform Commercial Code of such jurisdiction as Collateral Agent may determine, together with any amendment and continuations
with respect thereto, which authorization shall apply to all financing statements filed on, prior to or after the date hereof. Each Debtor hereby ratifies and approves all financing statements naming
Collateral Agent or its designee as secured party and such Debtor as debtor with respect to the Collateral (and any amendments with respect to such financing statements) filed by or on behalf of
Collateral Agent prior to the date hereof and ratifies and confirms the authorization of Collateral Agent to file such financing statements (and amendments, if any). Each Debtor hereby authorizes
Collateral Agent to adopt on behalf of such Debtor any symbol required for authenticating any electronic filing. In the event that the description of the collateral in any financing statement naming
Collateral Agent or its designee as the secured party and any Debtor as debtor includes assets and properties of such Debtor that do not at any time constitute Collateral, whether hereunder, under any
of the other Noteholder Agreements or otherwise, the filing of such financing statement shall nonetheless be deemed authorized by such Debtor solely to the extent of the Collateral included in such
description and it shall not render the financing statement ineffective as to any of the Collateral or otherwise affect the financing statement as it applies to any of the Collateral. Except in
accordance with the Indenture and the Security Documents, in no event shall any Debtor at any time file, or permit or cause to be filed, any correction statement or termination statement with respect
to any financing statement (or amendment or continuation with respect thereto) naming Collateral Agent or its designee as secured party and such Debtor as debtor. 

6

 

        (b)   No
Debtor has any chattel paper (whether tangible or electronic) or instruments as of the date hereof, except as set forth in the Information Certificate or as
constitutes an Excluded Asset. In the event that any Debtor shall be entitled to or shall receive any chattel paper or instrument which does not constitute an Excluded Asset after the date hereof,
such Debtor shall promptly notify Collateral Agent thereof in writing. Promptly upon the receipt of such chattel paper or instrument (and so long as such chattel paper or instrument is not an Excluded
Asset) by or on behalf of any Debtor (including by any agent or representative), such Debtor shall deliver, or cause to be delivered to Perfection Agent, all such tangible chattel paper and
instruments, accompanied by such instruments of transfer or assignment duly executed in blank as Perfection Agent may from time to time specify. At Perfection Agent's option, Debtor shall, or
Perfection Agent may at any time on behalf of Debtor, cause the original of any such instrument or chattel paper to be conspicuously marked in a form and manner acceptable to Perfection Agent. 

        (c)   In
the event that any Debtor shall at any time hold or acquire an interest in any electronic chattel paper or any "transferable record" (as such term is defined in
Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant
jurisdiction) which does not constitute an Excluded Asset, such Debtor shall promptly notify Collateral Agent thereof in writing. Promptly upon receipt thereof, Debtor shall take, or cause to be
taken, such necessary actions to give Perfection Agent control of such electronic chattel paper (so long as such electronic chattel paper is not an Excluded Asset) under
Section 9-105 of the UCC and control of such transferable record under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case
may be, Section 16 of the Uniform Electronic Transactions Act, as in effect in such jurisdiction. 

        (d)   No
Debtor has any deposit accounts as of the date hereof, except as set forth in the Information Certificate. Promptly after the Issue Date each Debtor shall deliver
fully executed Deposit Account Control Agreements for all deposit accounts that constitute Collateral, together with opinions of counsel in form and substance reasonably satisfactory to the Collateral
Agent. No Debtor shall, directly or indirectly, after the date hereof open, establish or maintain any deposit account which does not constitute an Excluded Asset unless each of the following
conditions is satisfied: (i) Collateral Agent shall have received not less than five (5) Business Days' prior written notice of the intention of such Debtor to open or establish such
account which notice shall specify in reasonable detail and specificity reasonably acceptable to Collateral Agent the name of the account, the owner of the account, the name and address of the bank at
which such account is to be opened or established, the individual at such bank with whom such Debtor is dealing and the purpose of the account, (ii) the bank where such account is opened or
maintained shall be reasonably acceptable to Perfection Agent, and (iii) Debtor shall promptly deliver to Collateral Agent a Deposit Account Control Agreement with respect to such deposit
account duly authorized, executed and delivered by such Debtor and the bank at which such deposit account is opened and maintained. 

        (e)   No
Debtor holds, directly or indirectly, beneficially or as record owner or both, any investment property, as of the date hereof, or has any investment account,
securities account, commodity account or other similar account with any bank or other financial institution or other securities intermediary or commodity intermediary as of the date hereof, in each
case except as set forth in the Information Certificate. 

	(i)
	In
the event that any Debtor shall be entitled to or shall at any time after the date hereof hold or acquire any certificated securities (other than certificated
securities that are Excluded Assets), such Debtor shall promptly endorse, assign and deliver the same to Perfection Agent, accompanied by such instruments of transfer or assignment duly executed in
blank as Perfection Agent may from time to time specify. If any securities (other than certificated securities that are Excluded Assets), now or hereafter acquired by any Debtor are uncertificated and
are issued to such Debtor or its nominee directly by the issuer thereof, such 

7

 

Debtor
shall immediately notify Collateral Agent thereof and shall promptly cause the issuer to agree to comply with instructions from Perfection Agent as to such securities, without further consent
of Debtor or such nominee. 

	(ii)
	No
Debtor shall, directly or indirectly, after the date hereof open, establish or maintain any investment account, securities account, commodity account or any other
similar account (other than a deposit account or an investment account, securities account, commodity account or similar account which is an Excluded Asset) with any securities intermediary or
commodity intermediary unless each of the following conditions is satisfied: (A) Collateral Agent shall have received not less than five (5) Business Days' prior written notice of the
intention of such Debtor to open or establish such account which notice shall specify in reasonable detail and specificity reasonably acceptable to Collateral Agent the name of the account, the owner
of the account, the name and address of the securities intermediary or commodity intermediary at which such account is to be opened or established, the individual at such intermediary with whom such
Debtor is dealing and the purpose of the account, (B) the securities intermediary or commodity intermediary (as the case may be) where such account is opened or maintained shall be reasonably
acceptable to Perfection Agent, and (C) on or before the opening of such investment account, securities account or other similar account with a securities intermediary or commodity
intermediary, such Debtor shall execute and deliver, and cause to be executed and delivered to Collateral Agent, an Investment Property Control Agreement with respect thereto duly authorized, executed
and delivered by such Debtor and such securities intermediary or commodity intermediary. 

        (f)    No
Debtor is the beneficiary or otherwise entitled to any right to payment under any letter of credit, banker's acceptance or similar instrument as of the date hereof,
except as set forth in the Information Certificate. In the event that any Debtor shall be entitled to or shall receive any right to payment under any letter of credit, banker's acceptance or any
similar instrument which does not constitute an Excluded Asset, whether as beneficiary thereof or otherwise after the date hereof, such Debtor shall promptly use reasonable efforts to notify
Collateral Agent thereof in writing. Such Debtor shall promptly deliver, or cause to be delivered to Perfection Agent, with respect to any such letter of credit, banker's acceptance or similar
instrument (unless any such instrument is an Excluded Asset), the written agreement of the issuer and any other nominated person obligated to make any payment in respect thereof (including any
confirming or negotiating bank), in form and substance reasonably satisfactory to Perfection Agent, consenting to the assignment of the proceeds of the letter of credit to Perfection Agent by such
Debtor and agreeing to make all payments thereon directly to Perfection Agent or as Perfection Agent may otherwise direct. 

        (g)   No
Debtor has any commercial tort claims as of the date hereof, except as set forth in the Information Certificate. In the event that any Debtor shall at any time after
the date hereof have any commercial tort claims, such Debtor shall promptly notify Collateral Agent thereof in writing, which notice shall (i) set forth in reasonable detail the basis for and
nature of such commercial tort claim and (ii) include the express grant by such Debtor to Collateral Agent of a security interest in such commercial tort claim (and the proceeds thereof). In
the event that such notice does not include such grant of a security interest, the sending thereof by such Debtor to Collateral Agent shall be deemed to constitute such grant to Collateral Agent. Upon
the sending of such notice, any commercial tort claim described therein shall constitute part of the Collateral and shall be deemed included therein. Without limiting the authorization of Collateral
Agent provided in Section 2.2(a) hereof or otherwise arising by the execution by each Debtor of this Agreement or any of the other Noteholder
Agreements, Collateral Agent is hereby irrevocably authorized from time to time and at any time to file such financing statements naming Collateral Agent or its designee as secured party and the
applicable Debtor as debtor, or any amendments to any financing statements, covering any such commercial tort claim as Collateral. In addition, such Debtor shall promptly upon Collateral Agent's
request, execute and 

8

 

deliver,
or cause to be executed and delivered, to Collateral Agent such other agreements, documents and instruments as Collateral Agent may require in connection with such commercial tort claim. 

        (h)   No
Debtor has any goods, documents of title or other Collateral which do not constitute Excluded Assets in the custody, control or possession of a third party as of the
date hereof, except (i) as set forth in the Information Certificate, (ii) for any Collateral in the possession or under the control of the Perfection Agent or the Collateral Agent and
(iii) except for goods located in the United States in transit to a location of such Debtor permitted herein in the ordinary course of business of such Debtor in the possession of the carrier
transporting such goods. In the event that any goods, documents of title or other Collateral are at any time after the date hereof in the custody, control or possession of any other person not
referred to in the Information Certificate or such carriers, such Debtor shall promptly notify Collateral Agent thereof in writing. Promptly upon Perfection Agent's request, such Debtor shall exercise
commercially reasonable efforts to deliver to Perfection Agent a Collateral Access Agreement duly authorized, executed and delivered by such person and such Debtor. 

        (i)    Each
Debtor shall take all other actions reasonably requested by Collateral Agent from time to time to cause the attachment, perfection and, subject to Permitted Prior
Liens, first priority of, and the ability of Collateral Agent to enforce, the security interest of Collateral Agent in any and all of the Collateral, including, without limitation,
(i) executing, delivering and, where appropriate, filing financing statements and amendments relating thereto under the UCC or other applicable law, to the extent, if any, that such Debtor's
signature thereon is required therefor, (ii) causing Collateral Agent's name to be noted as secured party on any certificate of title for a titled good if such notation is a condition to
attachment, perfection or priority of, or ability of Collateral Agent to enforce, the security interest of Collateral Agent in such Collateral, (iii) complying with any provision of any
statute, regulation or treaty of the United States as to any Collateral if compliance with such provision is a condition to attachment, perfection or priority of, or ability of Collateral Agent to
enforce, the security interest of Collateral Agent in such Collateral, (iv) obtaining the consents and approvals of any governmental authority or third party, including, without limitation, any
consent of any licensor, lessor or other person obligated on Collateral, and (v) taking all actions required by any earlier versions of the UCC or by other law, as applicable in any relevant
jurisdiction. 

        2.3   Debtors Remains Liable.    Anything herein to the contrary notwithstanding 

        (a)   each
Debtor will remain liable under the contracts and agreements included in the Collateral to the extent set forth therein, to the same extent as if this Agreement had
not been executed; 

        (b)   the
exercise by the Collateral Agent of any of its rights hereunder will not release any Debtor from any of its duties or obligations under any such contracts or
agreements included in the Collateral; and 

        (c)   no
Secured Party will have any obligation or liability under any contracts or agreements included in the Collateral by reason of this Agreement, nor will any Secured
Party be obligated to perform any of the obligations or duties of any Debtor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. 

        2.4   Postponement of Subrogation, etc.    Each Debtor hereby agrees that it will not exercise any rights against any
other Debtor which it may acquire by reason of any payment made hereunder, whether by way of subrogation, reimbursement or otherwise, until the Discharge of Noteholder Debt. Any amount paid to any
Debtor on account of any payment made hereunder prior to the Discharge of Noteholder Debt shall be held in trust for the benefit of the Perfection Agent and shall immediately be paid to the Perfection
Agent applied in accordance with the terms of the Intercreditor Agreement; provided, however, that if
such Debtor has made payment to the Collateral Agent of all or any part of the Noteholder Debt and the Discharge of Noteholder Debt has occurred, then at such Debtor's request, the Collateral Agent
will, at the expense of such Debtor, execute and deliver to such Debtor 

9

 

appropriate
documents (without recourse and without representation or warranty) necessary to evidence the transfer by subrogation to such Debtor of an interest in such Noteholder Debt resulting from
such payment. In furtherance of the foregoing, at all times prior to the Discharge of Noteholder Debt, each Debtor shall refrain from taking any action or commencing any proceeding against the Issuer
or any other Debtors (or its successors or assigns, whether in connection with a bankruptcy proceeding or otherwise) to recover any amounts in respect of payments made under this Agreement to any
Secured Party. 

        SECTION
3.    COLLATERAL COVENANTS    

        3.1   Accounts Covenants.    Collateral Agent shall have the right at any time or times, in Collateral Agent's name
or in the name of a nominee of Collateral Agent, to verify the validity, amount or any other matter relating to any Account or other Collateral, by mail, telephone, facsimile transmission or
otherwise; provided when no Event of Default has occurred and is continuing, Collateral Agent shall give the Issuer at least one Business Day's telephonic notice of any such verification. 

        3.2   Inventory Covenants.    With respect to the Inventory (other than Inventory that is an Excluded Asset):
(a) each Debtor shall at all times maintain inventory records reasonably satisfactory to Collateral Agent, keeping correct and accurate records itemizing and describing the kind, type, quality
and quantity of such Inventory, such Debtor's cost therefor and daily withdrawals therefrom and additions thereto; (b) each Debtor shall conduct a physical count of such Inventory at any time
or times as Collateral Agent may reasonably request (but not more than once per year) on or after an Event of Default, and promptly following such physical inventory shall supply Collateral Agent with
a report in the form and with such specificity as may be reasonably satisfactory to Collateral Agent concerning such physical count; (c) no Debtor shall remove any such Inventory from the
locations set forth or permitted herein, without the prior written consent of Perfection Agent, except for sales and movement or transport of such Inventory in the ordinary course of such Debtor's
business and except to move such Inventory directly from one location set forth or permitted herein to another such location (d) each Debtor shall produce, use, store and maintain such
Inventory, with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with applicable laws (including the requirements of the Federal Fair
Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (e) each Debtor assumes all responsibility and liability arising from or relating to the
production, use, sale or other disposition of such Inventory; (f) no Debtor shall sell such Inventory to any customer on approval, or any other basis which entitles the customer to return or
may obligate such Debtor to repurchase such Inventory(other than in the ordinary course of business consistent with past practices); (g) each Debtor shall keep such Inventory in good and
marketable condition; and (h) no Debtor shall, without prior written notice to Collateral Agent, acquire or accept any such Inventory on consignment or approval (other than in the ordinary
course of business consistent with past practices). 

10

   
        3.3    Motor Vehicles, Equipment and Real Property Covenants.    With respect to Motor Vehicles, the Equipment and
Real Property: (a) within 15 days after the end of each calendar quarter, the Issuer shall deliver to the Collateral Agent a list of all Motor Vehicles which constitute Collateral, which
such list shall be in form and substance satisfactory to the Collateral Agent; (b) upon Collateral Agent's reasonable request (but not more than once per year) or at any time or times on or
after an Event of Default, each Debtor shall, at its expense, deliver or cause to be delivered to Collateral Agent written appraisals as to Motor Vehicles, Equipment and/or Real Property in form,
scope and methodology reasonably acceptable to Collateral Agent and by an appraiser acceptable to Collateral Agent, addressed to Collateral Agent and upon which Collateral Agent is expressly permitted
to rely; (c) each Debtor shall keep Motor Vehicles and Equipment in good order, repair, running and marketable condition (ordinary wear and tear excepted); (d) each Debtor shall use
Motor Vehicles, Equipment and Real Property with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with all applicable laws;
(e) Motor Vehicles and Equipment are and shall be used in each Debtor's business and not for personal, family, household or farming use; (f) no Debtor shall remove any Motor Vehicles or
Equipment from the locations set forth or permitted herein, except to the extent necessary to have any Motor Vehicles or Equipment repaired or maintained in the ordinary course of the business of such
Debtor or to move Motor Vehicles or Equipment directly from one location set forth or permitted herein to another such location and except for the movement of Motor Vehicles used by or for the benefit
of such Debtor in the ordinary course of business; (g) the Equipment is now and shall remain personal property and such Debtor shall not permit any of the Equipment to be or become a part of or
affixed to real property except to the extent that upon such event the Collateral Agent has a perfected security interest in such fixture; and (h) as between the Collateral Agent and such
Debtor, the Debtor assumes all responsibility and liability arising from the use of Motor Vehicles, Equipment and Real Property. 

        3.4    Motor Vehicles.    

        (a)   Each
Debtor shall promptly after such certificates of title or ownership become available, and thereafter from time to time deliver to the Agent originals of the
certificates of title or ownership for the Motor Vehicles constituting Collateral (other than such Motor Vehicles which are Inventory) owned by it with the Collateral Agent listed as lienholder and
take such other action as the Collateral Agent shall deem appropriate to perfect the security interest created hereunder in all such Motor Vehicles. 

        (b)   Without
limiting the generality of the foregoing clause (a), as soon as is reasonably practicable exercising
commercially reasonable efforts following the Issue Date (taking into account the inherent delays in the process of perfecting such security interest and the need to receive title certificates back
from the various states where they were previously sent), for any Motor Vehicle now owned by any Debtor and promptly after the acquisition of any Motor Vehicle by any Debtor, the Issuer and each such
Debtor shall cause the recordation or notation of the Collateral Agent's security interest on the certificates of title or ownership in respect of each such Motor Vehicle and thereafter, as promptly
as is reasonably practicable, deliver satisfactory evidence thereof to the Collateral Agent. 

        (c)   Without
limiting Section 3.5, each Debtor hereby appoints the Collateral Agent as its
attorney-in-fact, effective the date hereof and terminating upon the termination of this Agreement, for the purpose of (i) executing on behalf of such Debtor title or
ownership applications for filing with appropriate state agencies to enable Motor Vehicles constituting Collateral now owned or hereafter acquired by such Debtor to be retitled and the Collateral
Agent listed as lienholder thereon, (ii) filing such applications with such state agencies and (iii) executing such other documents and instruments on behalf of, and taking such other
action in the name of, such Debtor as the Collateral Agent may deem necessary or advisable to accomplish the purposes hereof (including, without limitation, the purpose of creating in favor of the
Collateral Agent a first priority perfected lien on the Motor Vehicles constituting Collateral and exercising the rights and remedies of the Collateral Agent under  Section 6.2). This appointment as
attorney-in-fact is irrevocable and coupled with an interest. The 

11

 

Collateral
Agent shall notify the applicable Debtor of any exercise by the Collateral Agent of such power of attorney. 

        3.5    Power of Attorney.    Each Debtor hereby irrevocably designates and appoints Collateral Agent (and all persons
designated by Collateral Agent) as such Debtor's true and lawful attorney-in-fact, and authorizes Collateral Agent, in Debtor's or Collateral Agent's name, to: (a) at
any time an Event of Default exists or has occurred and is continuing (i) demand payment on Receivables or other Collateral, (ii) enforce payment of Receivables by legal proceedings or
otherwise, (iii) exercise all of such Debtor's rights and remedies to collect any Receivable or other Collateral, (iv) sell or assign any Receivable upon such terms, for such amount and
at such time or times as the Collateral Agent deems advisable, (v) settle, adjust, compromise, extend or renew an Account, (vi) discharge and release any Receivable,
(vii) prepare, file and sign such Debtor's name on any proof of claim in bankruptcy or other similar document against an account debtor or other obligor in respect of any Receivables or other
Collateral, (viii) notify the post office authorities to change the address for delivery of remittances from account debtors or other obligors in respect of Receivables or other proceeds of
Collateral to an address designated by Collateral Agent, and open and dispose of all mail addressed to such Debtor and handle and store all mail relating to the Collateral; and (ix) at any time
to take control in any manner of any item of payment in respect of Receivables or constituting Collateral or otherwise received in or for deposit in any deposit accounts maintained by such Debtor or
otherwise received by Collateral Agent, (x) have access to any lockbox or postal box into which remittances from account debtors or other obligors in respect of Receivables or other proceeds of
Collateral are sent or received, (xi) endorse such Debtor's name upon any items of payment in respect of Receivables or constituting Collateral or otherwise received by Collateral Agent and
deposit the same in Collateral Agent's account for application to the Noteholder Debt, (xii) endorse
such Debtor's name upon any chattel paper, document, instrument, invoice, or similar document or agreement relating to any Receivable or any goods pertaining thereto or any other Collateral, including
any warehouse or other receipts, or bills of lading and other negotiable or non-negotiable documents, and (xiii) sign such Debtor's name on any verification of Receivables and
notices thereof to account debtors or any secondary obligors or other obligors in respect thereof and (b) do all acts and things which are necessary, in Collateral Agent's determination, to
fulfill such Debtor's obligations under this Agreement and the other Noteholder Agreements. Each Debtor hereby releases Collateral Agent and its officers, employees and designees from any liabilities
arising from any act or acts under this power of attorney and in furtherance thereof, whether of omission or commission, except as a result of Collateral Agent's own gross negligence or wilful
misconduct as determined pursuant to a final non-appealable order of a court of competent jurisdiction. 

        3.6    Right to Cure.    Collateral Agent may, but is not required to, at any time an Event of Default exists or has
occurred and is continuing (a) upon notice to any Debtor, cure any material default by such Debtor under any material agreement with a third party that materially affects the Collateral, its
value or the ability of Collateral Agent to collect, sell or otherwise dispose of the Collateral or the rights and remedies of Collateral Agent therein or the ability of such Debtor to perform its
obligations hereunder or under the other Noteholder Agreements, (b) pay or bond on appeal any judgment entered against any Debtor, (c) discharge taxes, liens, security interests or other
encumbrances at any time levied on or existing with respect to the Collateral and (d) pay any amount, incur any expense or perform any act which, in Collateral Agent's judgment, is necessary or
appropriate to preserve, protect, insure or maintain the Collateral and the rights of Collateral Agent with respect thereto. Collateral Agent may add any amounts so expended to the Noteholder Debt and
charge the applicable Debtor's account therefor, such amounts to be repayable by such Debtor on demand. Collateral Agent shall be under no obligation to effect such cure, payment or bonding and shall
not, by doing so, be deemed to have assumed any obligation or liability of any Debtor. Any payment made or other action taken by Collateral Agent under this Section shall be without prejudice to any
right to assert an Event of Default hereunder and to proceed accordingly. 

12

 

        3.7    Access to Premises.    From time to time as requested by Collateral Agent, at the cost and expense of the
Debtors, (a) Collateral Agent or its designee shall have complete access to all of each Debtor's premises during normal business hours and after reasonable advance notice to such Debtor, or at
any time and without notice to such Debtor if an Event of Default exists or has occurred and is continuing, for the purposes of inspecting, verifying and auditing the Collateral and all of such
Debtor's books and records, including the Records, (b) each Debtor shall promptly furnish to Collateral Agent such copies of such books and records or extracts therefrom as Collateral Agent may
request, and (c) use during normal business hours such of each Debtor's personnel, equipment, supplies and premises as may be reasonably necessary for the foregoing and if an Event of Default
exists or has occurred and is continuing for the collection of Accounts and realization of other Collateral. 

SECTION
4.    REPRESENTATIONS AND WARRANTIES

        Each
Debtor hereby represents and warrants to Secured Parties the following (which shall survive the execution and delivery of this Agreement): 

        4.1    Corporate Existence; Power and Authority.    Such Debtor is a corporation duly organized and in good standing
under the laws of its state of incorporation and is duly qualified as a foreign corporation and in good standing in all states or other jurisdictions where the nature and extent of the business
transacted by it or the ownership of assets makes such qualification necessary, except for those jurisdictions in which the failure to so qualify would not have a material adverse effect on such
Debtor's financial condition, results of operation or business or the rights of Collateral Agent in or to any of the Collateral. The execution, delivery and performance of this Agreement, the other
Noteholder Agreements and the transactions contemplated hereunder and thereunder (a) are all within such Debtor's corporate powers, (b) have been duly authorized, (c) are not in
contravention of law or the terms of such Debtor's certificate of incorporation, by-laws, or other organizational documentation, or any indenture, agreement or undertaking to which Debtor
is a party or by which such Debtor or its property are bound and (d) will not result in the creation or imposition of, or require or give rise to any obligation to grant, any lien, security
interest, charge or other encumbrance upon any property of such Debtor. This Agreement and the other Noteholder Agreements constitute legal, valid and binding obligations of such Debtor enforceable in
accordance with their respective terms. 

        4.2    Name; State of Organization; Chief Executive Office; Collateral Locations.    

        (a)   The
exact legal name of such Debtor is as set forth on the signature page of this Agreement and in the Information Certificate. Such Debtor has not, during the past five
years, been known by or used any other corporate or fictitious name or been a party to any merger or consolidation, or acquired all or substantially all of the assets of any Person, or acquired any of
its property or assets out of the ordinary course of business, except as set forth in the Information Certificate. 

        (b)   Such
Debtor is an organization of the type and organized in the jurisdiction set forth in the Information Certificate. The Information Certificate accurately sets forth
the organizational identification number of such Debtor or accurately states that such Debtor has none and accurately sets forth the federal employer identification number of such Debtor. 

        (c)   The
chief executive office and mailing address of such Debtor and such Debtor's Records concerning Accounts are located only at the address identified as such in  Schedule 4.2 hereto and its only other
places of business and the only other locations of Collateral, if any, are the addresses set forth in  Schedule 4.2 hereto, subject to the right of such Debtor to establish new locations in
accordance with  Section 5.2 below. Schedule 4.2 correctly identifies any of such locations which are not
owned by such Debtor and sets forth the owners and/or operators thereof. 

        4.3    Priority of Liens; Title to Properties.    Subject to  Section 4.4, the security interests and liens granted to
Collateral Agent under this Agreement and the other Noteholder Agreements constitute
valid and perfected first priority liens and security interests in and upon the Collateral subject only to 

13

 

Permitted
Prior Liens except as otherwise permitted by the Indenture. Such Debtor has good and marketable fee simple title to or valid leasehold interests in all of its Real Property and good, valid
and merchantable title to all of its other properties and assets subject to no liens, mortgages, pledges, security interests, encumbrances or charges of any kind, other than Permitted Liens and except
as otherwise permitted by the Indenture. 

        4.4    Priority of Liens on Motor Vehicles.    Upon each Debtor satisfying or causing to be satisfied any and all
requirements of Section 3.4(b), the security interests and liens granted to the Collateral Agent in the Motor Vehicles under this Agreement and
the other Noteholder Agreements will constitute valid and perfected first priority liens and security interests in and upon such Motor Vehicles. 

        4.5    Survival of Warranties; Cumulative.    All representations and warranties contained in this Agreement or any of
the other Noteholder Agreements shall survive the execution and delivery of this Agreement. The representations and warranties set forth herein shall be cumulative and in addition to any other
representations or warranties which such Debtor shall now or hereafter give, or cause to be given, to Secured Parties. 

        4.6    Information Certificate.    Such Debtor has delivered to the Collateral Agent a Information Certificate, fully
and accurately completed in all material respects and executed by an authorized officer of such Debtor. 

        4.7    Best Interests.    It is in the best interests of such Debtor (other than the Issuer) to execute this Agreement
inasmuch as such Debtor will, as a result of being a Subsidiary of the Issuer, derive substantial direct and indirect benefits from the issuance of Notes by the Issuer, and each Debtor agrees that the
Secured Parties are relying on this representation in agreeing to purchase the Notes. 

SECTION
5.    AFFIRMATIVE AND NEGATIVE COVENANTS

        5.1    New Collateral Locations.    A Debtor may only open any new location within the continental United States
provided Debtor (i) gives Collateral Agent thirty (15) days prior written notice of the intended opening of any such new location and (ii) executes and delivers, or causes to be
executed and delivered, to Collateral Agent such agreements, documents, and instruments as Collateral Agent may deem necessary or desirable to protect its interests in the Collateral at such location;
provided that no lien need be granted in real property other than as owned in fee by the applicable Debtor. 

        5.2    Costs and Expenses.    Each Debtor shall pay to Collateral Agent within ten business days following demand with
reasonable substantiation therefore all costs, expenses, filing fees and taxes paid or payable in connection with the preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Noteholder Debt, Collateral Agent's rights in the Collateral, this Agreement, the other Noteholder Agreements and all other documents related
hereto or thereto, including any amendments, supplements or consents which may hereafter be contemplated (whether or not executed) or entered into in respect hereof and thereof, including:
(a) all costs and expenses of filing or recording (including UCC financing statement filing taxes and fees, documentary taxes, intangibles taxes and mortgage recording taxes and fees, if
applicable); (b) reasonable insurance premiums, appraisal fees and search fees; (c) reasonable costs and expenses of preserving and protecting the Collateral; (d) reasonable costs
and expenses paid or incurred in connection with obtaining payment of the Noteholder Debt, enforcing the security interests and liens of Collateral Agent, selling or otherwise realizing upon the
Collateral, and otherwise enforcing the provisions of this Agreement and the other Noteholder Agreements or defending any claims made or threatened against Collateral Agent arising out of the
transactions contemplated hereby and thereby (including preparations for and consultations concerning any such matters); and (e) reasonable fees and disbursements of counsel to Collateral Agent
in connection with any of the foregoing. 

14

 

        5.3    Further Assurances.    At the request of Collateral Agent at any time and from time to time, each Debtor shall,
at its expense, at any time or times duly execute and deliver, or cause to be duly executed and delivered, such further agreements, documents and instruments, and do or cause to be done such further
acts as may be necessary or proper to evidence, perfect, maintain and enforce the security interests and the priority thereof in the Collateral and to otherwise effectuate the provisions or purposes
of this Agreement or any of the other Noteholder Agreements. 

15

   
        SECTION 6.    EVENTS OF DEFAULT AND REMEDIES    

        6.1   Events of Default.    The occurrence or existence of any Event of Default under the Indenture is referred to
herein individually as an "Event of Default", and collectively as "Events of Default". 

        6.2   Remedies. 

        (a)   Subject
to the Intercreditor Agreement, at any time an Event of Default exists or has occurred and is continuing, Collateral Agent shall have all rights and remedies
provided in this Agreement, the other Noteholder Agreements, the UCC and other applicable law, all of which rights and remedies may be exercised without notice to or consent by any Debtor or any other
Obligor, except as such notice or consent is expressly provided for hereunder or required by applicable law. All rights, remedies and powers granted to Collateral Agent hereunder, under any of the
other Noteholder Agreements, the UCC or other applicable law, are cumulative, not exclusive and enforceable, in Collateral Agent's discretion, alternatively, successively, or concurrently on any one
or more occasions, and shall include, without limitation, the right to apply to a court of equity for an injunction to restrain a breach or threatened breach by any Debtor of this Agreement or any of
the other Noteholder Agreements. Collateral Agent may, at any time or times, proceed directly against any Debtor or any other Obligor to collect the Noteholder Debt without prior recourse to any
Obligor or any of the Collateral. 

        (b)   Subject
to the Intercreditor Agreement, without limiting the foregoing, at any time an Event of Default exists or has occurred and is continuing, Collateral Agent may,
in its discretion and, without limitation, (i) with or without judicial process or the aid or assistance of others, enter upon any premises on or in which any of the Collateral may be located
and take possession of the Collateral or complete processing, manufacturing and repair of all or any portion of the Collateral, (ii) require any such Debtor, at such Debtor's expense, to
assemble and make available to Collateral Agent any part or all of the Collateral at any place and time designated by Collateral Agent, (iii) collect, foreclose, receive, appropriate, setoff
and realize upon any and all Collateral, (iv) remove any or all of the Collateral from any premises on or in which the same may be located for the purpose of effecting the sale, foreclosure or
other disposition thereof or for any other purpose, and/or (v) sell, lease, transfer, assign, deliver or otherwise dispose of any and all Collateral (including entering into contracts with
respect thereto, public or private sales at any exchange, broker's board, at any office of Collateral Agent or elsewhere) at such prices or terms as Collateral Agent may deem reasonable, for cash,
upon credit or for future delivery, with the Collateral Agent having the right to purchase the whole or any part of the Collateral at any such public sale, all of the foregoing being free from any
right or equity of redemption of any Debtor, which right or equity of redemption is hereby expressly waived and released by each Debtor. If any of the Collateral is sold or leased by Collateral Agent
upon credit terms or for future delivery, the Noteholder Debt shall not be reduced as a result thereof until payment therefor is finally collected by Collateral Agent. If notice of disposition of
Collateral is required by law, ten (10) days prior notice by Collateral Agent to a Debtor designating the time and place of any public sale or the time after which any private sale or other
intended disposition of Collateral is to be made, shall be deemed to be reasonable notice thereof and each Debtor waives any other notice. In the event Collateral Agent institutes an action to recover
any Collateral or seeks recovery of any Collateral by way of prejudgment remedy, each Debtor waives the posting of any bond which might otherwise be required. 

        (c)   To
the extent that applicable law imposes duties on Collateral Agent to exercise remedies in a commercially reasonable manner (which duties cannot be waived under such
law), each Debtor acknowledges and agrees that it is not commercially unreasonable for Collateral Agent (i) to fail to incur expenses reasonably deemed significant by Collateral Agent to
prepare Collateral for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition, (ii) to fail to obtain third party
consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain consents of any governmental authority or 

16

 

other
third party for the collection or disposition of Collateral to be collected or disposed of, (iii) to fail to exercise collection remedies against account debtors, secondary obligors or
other persons obligated on Collateral or to remove liens or encumbrances on or any adverse claims against Collateral, (iv) to exercise collection remedies against account debtors and other
persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (v) to advertise dispositions of Collateral through publications or media of
general circulation, whether or not the Collateral is of a specialized nature, (vi) to contact other persons, whether or not in the same business as any Debtor for expressions of interest in
acquiring all or any portion of the Collateral, (vii) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the collateral is of a specialized
nature, (viii) to dispose of Collateral by utilizing Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of
doing so, or that match buyers and sellers of assets, (ix) to dispose of assets in wholesale rather than retail markets, (x) to disclaim disposition warranties, (xi) to purchase
insurance or credit enhancements to insure Collateral Agent against risks of loss, collection or disposition of Collateral or to provide to Collateral Agent a guaranteed return from the collection or
disposition of Collateral, or (xii) to the extent deemed appropriate by Collateral Agent, to obtain the services of other brokers, investment bankers, consultants and other professionals to
assist Collateral Agent in the collection or disposition of any of the Collateral. Each Debtor acknowledges that the purpose of this Section is to provide non-exhaustive indications of
what actions or omissions by Collateral Agent would not be commercially unreasonable in Collateral Agent's exercise of remedies against the Collateral and that other actions or omissions by Collateral
Agent shall not be deemed commercially unreasonable solely on account of not being indicated in this Section. Without limitation of the foregoing, nothing contained in this Section shall be construed
to grant any rights to any Debtor or to impose any duties on Collateral Agent that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section. 

        (d)   Subject
to the terms of the Intercreditor Agreement, for the purpose of enabling Collateral Agent to exercise the rights and remedies hereunder, each Debtor hereby
grants to Collateral Agent, to the extent assignable, an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to such Debtor) to use, assign,
license or sublicense any of the trademarks, service-marks, trade names, business names, trade styles, designs, logos and other source of business identifiers and other Intellectual Property and
general intangibles now owned or hereafter acquired by such Debtor, wherever the same may be located, including in such license reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer programs used for the compilation or printout thereof. 

        (e)   Subject
to the terms of the Intercreditor Agreement, Collateral Agent may apply the cash proceeds of Collateral actually received by Collateral Agent from any sale,
lease, foreclosure or other disposition of the Collateral to payment of the Noteholder Debt, in whole or in part and in such order as Collateral Agent may elect, whether or not then due. Each Debtor
shall remain liable to Collateral Agent for the payment of any deficiency with interest at the highest rate provided for in the Indenture and all costs and expenses of collection or enforcement,
including attorneys' fees and legal expenses. 

        SECTION
7.    COLLATERAL AGENT    

        7.1   Collateral Agent Has No Duty.    The powers conferred on the Collateral Agent hereunder are solely to protect
its interest (on behalf of the Secured Parties) in the Collateral and shall not impose any duty on it to exercise any such powers. 

        7.2   Reasonable Care.    The Collateral Agent is required to exercise reasonable care in the custody and
preservation of any of the Collateral in its possession; provided, however, that the Collateral Agent
shall be deemed to have exercised reasonable care in the custody and preservation of any of the Collateral if it takes such action for that purpose as any Grantor reasonably requests in writing at
times 

17

 

other
than upon the occurrence and during the continuance of any Event of Default, but failure of the Collateral Agent to comply with any such request at any time shall not in itself be deemed a
failure to exercise reasonable care. 

        7.3   Other Provisions Relating to the Collateral Agent. 

        (a)   The
Collateral Agent has been appointed to act as such pursuant to the Indenture and the other Noteholder Agreements, with such powers, rights and obligations as are
expressly delegated to the Collateral Agent by the terms of this Security Agreement, the Indenture and the other Noteholder Agreements. The Collateral Agent may, from time to time, appoint another
financial institution to act as Collateral Agent so long as such institution meets the requirements of Section 7.3(d). The Collateral Agent,
acting in its capacity as such, shall have only such duties with respect to the Collateral as are set forth herein. If the Trustee is serving as Collateral Agent hereunder, the provisions of Article
Seven of the Indenture applicable to the Trustee shall also apply to the Collateral Agent hereunder. 

        (b)   Except
during the continuance of an Event of Default, the Collateral Agent need perform only those duties that are specifically set forth in this Agreement and no
others, and no implied covenants or obligations will be read into this Agreement against the Collateral Agent. In case an Event of Default has occurred and is continuing, the Collateral Agent shall
exercise those rights and powers vested in it by this Agreement, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs. 

        (c)   As
to any matters not expressly provided for by this Agreement, the Noteholder Agreements or the Intercreditor Agreement, the Collateral Agent shall not be required to
take any action or exercise any discretion, but shall be required to act or to refrain from acting upon the instructions of the Trustee (representing the Noteholders) and shall in all such cases be
fully protected in acting, or in refraining from acting, in accordance with such instructions of the Trustee (representing the Noteholders), and any action taken or failure to act pursuant thereto
shall be binding on all of the Noteholders. The Collateral Agent may rely on the written certification of the Trustee with respect to any such vote. Notwithstanding any other provisions herein, the
Collateral Agent shall not be required to advance or expend any funds or otherwise incur any financial liability in the performance of its duties or the exercise of its powers or rights hereunder at
the request of the Noteholders unless the Debtors or the Noteholders have provided to the Collateral Agent security or indemnity, which the Collateral Agent, in its reasonable discretion, deems
sufficient against any and all liability or expense which may be incurred by it by reason of taking or continuing to take such action. 

        (d)   Subject
to the appointment and acceptance of a successor Collateral Agent in accordance with the Indenture, the Collateral Agent may resign at any time by giving not
less than thirty (30) days' notice thereof to each Trustee and the Issuer. Upon the acceptance of any appointment as Collateral Agent hereunder by a successor Collateral Agent, (i) such
successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent, and the retiring Collateral Agent shall be
discharged from its duties and obligations hereunder, and (ii) the retiring Collateral Agent shall promptly transfer all Collateral within its possession or control to the possession or control
of the successor Collateral Agent and shall execute and deliver such notices, instructions and assignments as may be necessary or desirable to transfer the rights of the Collateral Agent in respect of
the Collateral to the successor Collateral Agent. After any retiring Collateral Agent's resignation or replacement hereunder as Collateral Agent, the provisions of this Section and Section 6.2
shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Collateral Agent. If the Trustee (or any one of them) shall be acting at
any time as the Collateral Agent, then it will be deemed to have resigned as Collateral Agent upon its replacement as Trustee pursuant to the applicable Noteholder Agreement. Upon any such resignation
or removal, the former Collateral Agent shall take all steps necessary to assign the Collateral to the successor Collateral Agent. 

18

 

        SECTION
8.    JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW    

	8.1
	Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver. 

        (a)   (i) THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT. (ii) Each of the parties hereto hereby irrevocably consents to the non-exclusive jurisdiction of the Supreme Court of New York, New
York County and the United States District Court of New York, New York County and waives trial by jury in any action or proceeding with respect to this Indenture. 

        (b)   Each
Debtor hereby waives personal service of any and all process upon it and consents that all such service of process may be made by certified mail (return receipt
requested) directed to its address set forth on the signature pages hereof and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the
U.S. mails, or, at Collateral Agent's option, by service upon any Debtor in any other manner provided under the rules of any such courts. Within thirty (30) days after such service, such Debtor
shall appear in answer to such process, failing which such Debtor shall be deemed in default and judgment may be entered by Collateral Agent against such Debtor for the amount of the claim and other
relief requested. 

        (c)   EACH
DEBTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER
NOTEHOLDER AGREEMENTS OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF SUCH DEBTOR AND COLLATERAL AGENT IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER NOTEHOLDER
AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. EACH DEBTOR HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT EACH DEBTOR OR COLLATERAL AGENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF
THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF SUCH DEBTOR AND COLLATERAL AGENT TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. 

        (d)   Collateral
Agent shall not have any liability to any Debtor (whether in tort, contract, equity or otherwise) for losses suffered by any Debtor in connection with,
arising out of, or in any way related to the transactions or relationships contemplated by this Agreement, or any act, omission or event occurring in connection herewith, unless it is determined by a
final and non-appealable judgment or court order binding on Collateral Agent that the losses were the result of acts or omissions constituting gross negligence or willful misconduct. In
any such litigation, Collateral Agent shall be entitled to the benefit of the rebuttable presumption that it acted in good faith and with the exercise of ordinary care in the performance by it of the
terms of this Agreement and the other Noteholder Agreements. 

        8.2   Waiver of Notices.    Debtor hereby expressly waives demand, presentment, protest and notice of protest and
notice of dishonor with respect to any and all instruments and commercial paper, included in or evidencing any of the Noteholder Debt or the Collateral, and any and all other demands and notices of
any kind or nature whatsoever with respect to the Noteholder Debt, the Collateral and this Agreement, except such as are expressly provided for herein. No notice to or demand on any 

19

 

Debtor
which Collateral Agent may elect to give shall entitle any Debtor to any other or further notice or demand in the same, similar or other circumstances. 

        8.3   Amendments and Waivers.    Neither this Agreement nor any provision hereof shall be amended, modified, waived
or discharged orally or by course of conduct, but only by a written agreement signed by an authorized officer of Collateral Agent, and as to amendments, as also signed by an authorized officer of each
Debtor. Collateral Agent shall not, by any act, delay, omission or otherwise be deemed to have expressly or impliedly waived any of its rights, powers and/or remedies unless such waiver shall be in
writing and signed by an authorized officer of Collateral Agent. Any such waiver shall be enforceable only to the extent specifically set forth therein. A waiver by Collateral Agent of any right,
power and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right, power and/or remedy which Collateral Agent would otherwise have on any future occasion, whether
similar in kind or otherwise. 

        8.4   Waiver of Counterclaims.    Each Debtor waives all rights to interpose any claims, deductions, setoffs or
counterclaims of any nature (other then compulsory counterclaims) in any action or proceeding with respect to this Agreement, the Noteholder Debt, the Collateral or any matter arising therefrom or
relating hereto or thereto. 

        SECTION
9.    MISCELLANEOUS    

        9.1   Interpretative Provisions. 

        (a)   All
terms used herein which are defined in Article 1 or Article 9 of the UCC shall have the meanings given therein unless otherwise defined in this
Agreement. 

        (b)   All
references to the plural herein shall also mean the singular and to the singular shall also mean the plural unless the context otherwise requires. 

        (c)   All
references to a Debtor and Collateral Agent pursuant to the definitions set forth in the recitals hereto, or to any other person herein, shall include their
respective successors and assigns. 

        (d)   The
words "hereof", "herein", "hereunder", "this Agreement" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not any
particular provision of this Agreement and as this Agreement now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. 

        (e)   The
word "including" when used in this Agreement shall mean "including, without limitation". 

        (f)    All
references to the term "good faith" used herein when applicable to Collateral Agent shall mean, notwithstanding anything to the contrary contained herein or in the
UCC, honesty in fact in the conduct or transaction concerned. Debtors shall have the burden of proving any lack of good faith on the part of Collateral Agent alleged by any Debtor at any time. 

        (g)   An
Event of Default shall exist or continue or be continuing until such Event of Default is waived in accordance with  Section 8.3 or is cured in a manner satisfactory to such Collateral Agent, if such
Event of Default is capable of being cured as determined by
Collateral Agent. 

        (h)   In
the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including", the words "to" and "until" each mean
"to but excluding" and the word "through" means "to and including". 

        (i)    Unless
otherwise expressly provided herein, (i) references herein to any agreement, document or instrument shall be deemed to include all subsequent amendments,
modifications, supplements, extensions, renewals, restatements or replacements with respect thereto, but only to the extent the same are not prohibited by the terms hereof or of any other Financing
Agreement, and (ii) references to any 

20

 

statute
or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, recodifying, supplementing or interpreting the statute or regulation. 

        (j)    The
captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. 

        (k)   This
Agreement and the other Noteholder Agreements are the result of negotiations among and have been reviewed by counsel to Collateral Agent and the other parties, and
are the products of all parties. Accordingly, this Agreement and the other Noteholder Agreements shall not be construed against Collateral Agent merely because of Collateral Agent's involvement in
their preparation. 

        9.2   Notices.    All notices, requests and demands hereunder shall be given in accordance with  Section 11.02 of the Indenture. 

        9.3   Partial Invalidity.    If any provision of this Agreement is held to be invalid or unenforceable, such
invalidity or unenforceability shall not invalidate this Agreement as a whole, but this Agreement shall be construed as though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law. 

        9.4   Successors.    This Agreement, the other Noteholder Agreements and any other document referred to herein or
therein shall be binding upon each Debtor and its successors and assigns and inure to the benefit of and be enforceable by Collateral Agent and its successors and assigns, except that no Debtor may
assign its rights under this Agreement, the other Noteholder Agreements and any other document referred to herein or therein without the prior written consent of Collateral Agent. 

        9.5   Entire Agreement.    Subject to Section 9.6, this
Agreement, the other Noteholder Agreements, the Intercreditor Agreement, any supplements hereto or thereto, and any instruments or documents delivered or to be delivered in connection herewith or
therewith represents the entire agreement and understanding concerning the subject matter hereof and thereof between the parties hereto, and supersede all other prior agreements, understandings,
negotiations and discussions, representations, warranties, commitments, proposals, offers and contracts concerning the subject matter hereof, whether oral or written. In the event of any inconsistency
between the terms of this Agreement and any schedule or exhibit hereto, the terms of this Agreement shall govern. 

        9.6   RELATIONSHIP WITH INTERCREDITOR AGREEMENT. 

        NOTWITHSTANDING
ANYTHING HEREIN TO THE CONTRARY, THE ENFORCEMENT OF THE LIEN AND SECURITY INTEREST GRANTED TO THE COLLATERAL AGENT PURSUANT TO THIS AGREEMENT AND THE EXERCISE OF ANY
RIGHT OR REMEDY BY THE COLLATERAL AGENT HEREUNDER ARE SUBJECT TO THE PROVISIONS OF THE INTERCREDITOR AGREEMENT. IN THE EVENT OF ANY CONFLICT BETWEEN THE TERMS OF THE INTERCREDITOR AGREEMENT AND THIS
SECURITY AGREEMENT, THE TERMS OF THE INTERCREDITOR AGREEMENT SHALL GOVERN; PROVIDED THAT NOTHING IN THE INTERCREDITOR AGREEMENT SHALL AFFECT THE
ATTACHMENT OF OR, SUBJECT TO THE PRIORITIES ESTABLISHED IN THE INTERCREDITOR AGREEMENT, PERFECTION OF THE LIEN AND SECURITY INTEREST GRANTED TO THE COLLATERAL AGENT PURSUANT TO THIS AGREEMENT. 

        9.7   Release of Liens.    The security interests granted hereunder in any Collateral shall automatically be released
in the manner, at the times and to the extent specified in the Intercreditor Agreement, if any, and as may be permitted by the Indenture and any other Noteholder Agreement. Upon any such release or
termination, the Collateral Agent will, at the Debtors' sole expense, deliver to the applicable Debtor, without any representations, warranties or recourse of any kind whatsoever, all Collateral held
by the Collateral Agent hereunder in which the security interest granted hereunder 

21

 

is
released or terminated, and execute and deliver to the applicable Debtor such documents as such Debtor shall reasonably request to evidence such release or termination. 

        9.8   Additional Debtors.    Upon the execution and delivery by any other Person of a supplement in the form of Annex
I hereto, such Person shall become a "Debtor" hereunder with the same force and effect as if it were originally a party to this Agreement and named as a "Debtor" hereunder. The execution and delivery
of such supplement shall not require the consent of any other Debtor hereto, and the rights and obligations of each Debtor hereunder shall remain in full force and effect notwithstanding the addition
of any new Debtor as a party to this Agreement. 

[REMAINDER
OF THIS PAGE INTENTIONALLY LEFT BLANK] 

22

 

        IN
WITNESS WHEREOF, each party hereto has caused these presents to be duly executed as of the day and year first above written. 

	 	 	ATLANTIC EXPRESS TRANSPORTATION CORP.
	

 	
 	
By:	

/s/  JEROME DENTE      
	 	 	 	
 Name:  Jerome Dente

Title:    Secretary and Treasurer
	

 	
 	

180 JAMAICA CORP.
	 	 	201 WEST SOTELLO REALTY, INC.
	 	 	AIRPORT SERVICES, INC.
	 	 	AMBOY BUS CO., INC.
	 	 	ATLANTIC EXPRESS COACHWAYS, INC.
	 	 	ATLANTIC EXPRESS NEW ENGLAND, INC.
	 	 	ATLANTIC EXPRESS OF CALIFORNIA, INC.
	 	 	ATLANTIC EXPRESS OF ILLINOIS, INC.
	 	 	ATLANTIC EXPRESS OF L.A. INC.
	 	 	ATLANTIC EXPRESS OF MISSOURI INC.
	 	 	ATLANTIC EXPRESS OF NEW JERSEY, INC.
	 	 	ATLANTIC EXPRESS OF PENNSYLVANIA, INC.
	 	 	ATLANTIC EXPRESS OF SOUTH CAROLINA, INC.
	 	 	ATLANTIC PARATRANS OF ARIZONA, INC.
	 	 	ATLANTIC PARATRANS OF NYC, INC.
	 	 	ATLANTIC PARATRANS OF PENNSYLVANIA, INC.
	 	 	ATLANTIC PARATRANS, INC.
	 	 	ATLANTIC QUEENS BUS CORP.
	 	 	ATLANTIC TRANSIT, CORP.
	 	 	ATLANTIC-CHITTENANGO REAL PROPERTY CORP.
	 	 	ATLANTIC-CONN. TRANSIT, INC.
	 	 	ATLANTIC-HUDSON, INC.
	 	 	BLOCK 7932, INC.
	 	 	BROOKFIELD TRANSIT INC.
	 	 	CENTRAL NEW YORK REORGANIZATION CORP.
	 	 	COURTESY BUS CO., INC.
	 	 	FIORE BUS SERVICE, INC.
	 	 	GROOM TRANSPORTATION, INC.
	 	 	GVD LEASING CO., INC.
	 	 	JAMES MCCARTY LIMO SERVICE, INC.
	 	 	JERSEY BUS SALES, INC.
	 	 	JERSEY BUSINESS LAND CO., INC.
	 	 	K. CORR, INC.
	 	 	MCINTIRE TRANSPORTATION, INC.
	 	 	MERIT TRANSPORTATION CORP.
	 	 	METRO AFFILIATES, INC.
	 	 	METROPOLITAN ESCORT SERVICE, INC.
	 	 	MIDWAY LEASING INC.
	 	 	MOUNTAIN TRANSIT, INC.
	 	 	R. FIORE BUS SERVICE, INC.
	 	 	 	 

23

 

	 	 	RAYBERN BUS SERVICE, INC.
	 	 	RAYBERN CAPITAL CORP.
	 	 	RAYBERN EQUITY CORP.
	 	 	ROBERT L. MCCARTHY & SON, INC.
	 	 	STATEN ISLAND BUS, INC.
	 	 	TEMPORARY TRANSIT SERVICE, INC.
	 	 	T-NT BUS SERVICE, INC.
	 	 	TRANSCOMM, INC.
	 	 	WINSALE, INC.
	 	 	WRIGHTHOLM BUS LINE, INC.
	

 	
 	

By:	

/s/  JEROME DENTE      
	 	 	 	
 Name:  Jerome Dente

Title:    Secretary and Treasurer
	

 	
 	

THE BANK OF NEW YORK, as Collateral Agent
	

 	
 	

By:	

/s/  JULIE SALOVITCH-MILLER      
	 	 	 	
 Name:  Julie Salovitch-Miller

Title:    Vice President

24

QuickLinks

Exhibit 4.5

SECURITY AGREEMENT

W I T N E S S E T H

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