Document:

Exhibit 10.2

 

Execution Copy

 

THIS INVESTMENT AGREEMENT HAS
NOT BEEN REGISTERED PURSUANT TO THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933, AS AMENDED (THE “ACT”), OR QUALIFIED PURSUANT TO ANY APPLICABLE
STATE SECURITIES LAW.  THE NOTES ISSUED
UNDER THIS INVESTMENT AGREEMENT MAY BE RESOLD ONLY IF REGISTERED PURSUANT
TO THE PROVISIONS OF THE ACT AND QUALIFIED PURSUANT TO APPLICABLE STATE
SECURITIES LAWS OR IF AN EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION IS
AVAILABLE, EXCEPT UNDER CIRCUMSTANCES WHERE NEITHER SUCH REGISTRATION,
QUALIFICATION NOR EXEMPTION IS REQUIRED BY LAW.

 

THIS INVESTMENT AGREEMENT AND
THE INDEBTEDNESS EVIDENCED HEREBY ARE SUBORDINATE IN THE MANNER AND TO THE
EXTENT SET FORTH IN THAT CERTAIN SUBORDINATION AND INTERCREDITOR AGREEMENT (THE
“SUBORDINATION AGREEMENT”) DATED AS OF THE FUNDING DATE (AS DEFINED HEREIN) BY
AND AMONG FESTIVAL FUN PARKS, LLC, THE GUARANTORS PARTY THERETO, LAMINAR DIRECT
CAPITAL L.P., AS SUBORDINATED AGENT AND MERRILL LYNCH CAPITAL, AS ADMINISTRATIVE
AGENT, TO THE SENIOR DEBT (AS DEFINED IN THE SUBORDINATION AGREEMENT); AND EACH
PARTY TO THIS INVESTMENT AGREEMENT, BY ITS ACCEPTANCE HEREOF, SHALL BE BOUND BY
THE PROVISIONS OF THE SUBORDINATION AGREEMENT.

 

INVESTMENT AGREEMENT

 

dated as of February 6, 2008

 

by and among

 

FESTIVAL FUN PARKS, LLC,

 

as the Company,

 

THE GUARANTORS FROM TIME TO TIME PARTY HERETO

 

and

 

LAMINAR DIRECT CAPITAL L.P.,

 

as Agent,

 

and

 

THE LENDERS PARTY HERETO

 

$61,500,000 Senior Subordinated Notes

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
  ARTICLE I. DEFINITIONS AND ACCOUNTING
  TERMS

  	
  1

  
	
   

  	
  1.01

  	
  Defined Terms

  	
  1

  
	
   

  	
  1.02

  	
  Other Interpretive Provisions

  	
  14

  
	
   

  	
  1.03

  	
  Accounting Terms

  	
  14

  
	
   

  	
  1.04

  	
  Rounding

  	
  15

  
	
   

  	
  1.05

  	
  References to Agreements and Laws

  	
  15

  
	
   

  	
  1.06

  	
  Times of Day

  	
  15

  
	
  ARTICLE II. NOTES

  	
  15

  
	
   

  	
  2.01

  	
  Authorization and Issuance of the Notes

  	
  15

  
	
  ARTICLE III. PURCHASE AND SALE

  	
  15

  
	
   

  	
  3.01

  	
  Purchase and Sale of the Notes

  	
  15

  
	
  ARTICLE IV. TERMS OF NOTES

  	
  16

  
	
   

  	
  4.01

  	
  Repayment of Principal

  	
  16

  
	
   

  	
  4.02

  	
  Payments of Interest

  	
  16

  
	
   

  	
  4.03

  	
  Mandatory Prepayment/Redemption

  	
  17

  
	
   

  	
  4.04

  	
  Optional Prepayments of the Notes

  	
  18

  
	
   

  	
  4.05

  	
  Mandatory Offer to Prepay upon a Change of Control

  	
  18

  
	
   

  	
  4.06

  	
  Direct Payment

  	
  19

  
	
   

  	
  4.07

  	
  Taxes

  	
  19

  
	
   

  	
  4.08

  	
  Applicable High Yield Discount Obligation Mandatory Prepayment

  	
  20

  
	
  ARTICLE V. CONDITIONS PRECEDENT TO CLOSING

  	
  21

  
	
   

  	
  5.01

  	
  Conditions to Closing

  	
  21

  
	
  ARTICLE VI. REPRESENTATIONS AND WARRANTIES

  	
  22

  
	
   

  	
  6.01

  	
  Existence and Power

  	
  22

  
	
   

  	
  6.02

  	
  Organization and Governmental Authorization; No Contravention

  	
  23

  
	
   

  	
  6.03

  	
  Binding Effect

  	
  23

  
	
   

  	
  6.04

  	
  Capitalization

  	
  23

  
	
   

  	
  6.05

  	
  Financial Information

  	
  23

  
	
   

  	
  6.06

  	
  Litigation

  	
  24

  
	
   

  	
  6.07

  	
  Ownership of Property

  	
  24

  
	
   

  	
  6.08

  	
  No Default

  	
  24

  
	
   

  	
  6.09

  	
  Labor Matters

  	
  24

  
	
   

  	
  6.10

  	
  Regulated Entities

  	
  25

  
	
   

  	
  6.11

  	
  Margin Regulations

  	
  25

  
	
   

  	
  6.12

  	
  Compliance With Laws; Anti-Terrorism Laws

  	
  25

  
	
   

  	
  6.13

  	
  Taxes

  	
  25

  
	
   

  	
  6.14

  	
  Compliance with ERISA

  	
  26

  
	
   

  	
  6.15

  	
  Brokers

  	
  26

  
	
   

  	
  6.16

  	
  Related Transactions

  	
  26

  
	
   

  	
  6.17

  	
  Material Contracts

  	
  27

  
	
   

  	
  6.18

  	
  Environmental Compliance

  	
  27

  
	
   

  	
  6.19

  	
  Intellectual Property

  	
  28

  
	
   

  	
  6.20

  	
  Real Property Interests

  	
  28

  
	
   

  	
  6.21

  	
  Solvency

  	
  28

  
	
   

  	
  6.22

  	
  Full Disclosure

  	
  28

  
	
   

  	
  6.24

  	
  Use of Proceeds

  	
  29

  
	
   

  	
  6.25

  	
  Transactions with Affiliates

  	
  29

  
	
  ARTICLE VIA. REPRESENTATIONS AND WARRANTIES OF THE LENDERS

  	
  29

  

 

i

 

	
  ARTICLE VII. AFFIRMATIVE COVENANTS

  	
  30

  
	
   

  	
  7.01

  	
  Financial Statements and Other Reports

  	
  30

  
	
   

  	
  7.02

  	
  Payment and Performance of Obligations

  	
  33

  
	
   

  	
  7.03

  	
  Maintenance of Existence

  	
  33

  
	
   

  	
  7.04

  	
  Maintenance of Property; Insurance

  	
  33

  
	
   

  	
  7.05

  	
  Compliance with Laws

  	
  34

  
	
   

  	
  7.06

  	
  Inspection of Property, Books and Records

  	
  34

  
	
   

  	
  7.07

  	
  Use of Proceeds

  	
  34

  
	
   

  	
  7.08

  	
  Lenders’ Meetings

  	
  34

  
	
   

  	
  7.09

  	
  Required Swap Contracts

  	
  35

  
	
   

  	
  7.10

  	
  Hazardous Materials; Remediation

  	
  35

  
	
   

  	
  7.11

  	
  Further Assurances

  	
  35

  
	
   

  	
  7.14

  	
  Modifications of Senior Transaction Documents

  	
  36

  
	
   

  	
  7.15

  	
  Remarketing Cooperation

  	
  36

  
	
  ARTICLE VIII. NEGATIVE AND FINANCIAL COVENANTS

  	
  36

  
	
   

  	
  8.01

  	
  Debt

  	
  36

  
	
   

  	
  8.02

  	
  Liens

  	
  37

  
	
   

  	
  8.03

  	
  Contingent Obligations

  	
  37

  
	
   

  	
  8.04

  	
  Restricted Distributions

  	
  38

  
	
   

  	
  8.05

  	
  Restrictive Agreements

  	
  39

  
	
   

  	
  8.06

  	
  Payments and Modifications of Subordinated Debt

  	
  39

  
	
   

  	
  8.07

  	
  Consolidations, Mergers and Sales of Assets

  	
  39

  
	
   

  	
  8.08

  	
  Purchase of Assets, Investments

  	
  40

  
	
   

  	
  8.09

  	
  Transactions with Affiliates

  	
  43

  
	
   

  	
  8.10

  	
  Modification of Organizational Documents

  	
  44

  
	
   

  	
  8.11

  	
  Modification of Certain Agreements

  	
  44

  
	
   

  	
  8.12

  	
  Fiscal Year

  	
  44

  
	
   

  	
  8.13

  	
  Conduct of Business

  	
  44

  
	
   

  	
  8.14

  	
  Investor Fees

  	
  44

  
	
   

  	
  8.15

  	
  [Reserved]

  	
  44

  
	
   

  	
  8.16

  	
  Limitation on Sale and Leaseback Transactions

  	
  44

  
	
   

  	
  8.17

  	
  [Reserved]

  	
  44

  
	
   

  	
  8.18

  	
  Compliance with Anti-Terrorism Laws

  	
  45

  
	
   

  	
  8.19

  	
  Anti-Layering

  	
  45

  
	
   

  	
  8.20

  	
  Limitations on Investor Ownership of Senior Indebtedness

  	
  45

  
	
   

  	
  8.21

  	
  Modifications of Senior Transaction Documents

  	
  45

  
	
   

  	
  8.22

  	
  Capital Expenditures

  	
  45

  
	
   

  	
  8.23

  	
  Fixed Charge Coverage Ratio

  	
  46

  
	
   

  	
  8.24

  	
  Total Debt to EBITDA Ratio

  	
  46

  
	
  ARTICLE IX. EVENTS OF DEFAULT AND REMEDIES

  	
  47

  
	
   

  	
  9.01

  	
  Events of Default

  	
  47

  
	
   

  	
  9.02

  	
  Remedies Upon Event of Default

  	
  49

  
	
   

  	
  9.03

  	
  Other Remedies

  	
  49

  
	
   

  	
  9.04

  	
  Rescission of Acceleration

  	
  49

  
	
   

  	
  9.05

  	
  Application of Funds

  	
  50

  
	
  ARTICLE X. MISCELLANEOUS

  	
  50

  
	
   

  	
  10.01

  	
  Entire Agreement

  	
  50

  
	
   

  	
  10.02

  	
  Reimbursement of Expenses

  	
  51

  
	
   

  	
  10.03

  	
  Survival of Agreements and Representations and Warranties

  	
  51

  
	
   

  	
  10.04

  	
  No Waiver

  	
  51

  

 

ii

 

	
   

  	
  10.05

  	
  Binding Effect; Participations

  	
  51

  
	
   

  	
  10.06

  	
  Initial Holder

  	
  52

  
	
   

  	
  10.07

  	
  Cumulative Powers

  	
  52

  
	
   

  	
  10.08

  	
  Loss of Securities; Reissue of Securities in Lesser Denominations

  	
  52

  
	
   

  	
  10.09

  	
  Communications

  	
  52

  
	
   

  	
  10.10

  	
  Form, Registration, Transfer and Exchange of
  Notes; Lost Notes

  	
  53

  
	
   

  	
  10.11

  	
  Confidentiality; Public Announcements

  	
  54

  
	
   

  	
  10.12

  	
  Governing Law

  	
  55

  
	
   

  	
  10.13

  	
  Headings

  	
  55

  
	
   

  	
  10.14

  	
  Multiple Originals

  	
  55

  
	
   

  	
  10.15

  	
  Amendment or Waiver

  	
  55

  
	
   

  	
  10.16

  	
  Waiver of Jury Trial

  	
  56

  
	
   

  	
  10.17

  	
  Consent to Jurisdiction and Service of Process

  	
  56

  
	
   

  	
  10.18

  	
  Indemnification; Damage Waiver

  	
  56

  
	
   

  	
  10.19

  	
  Regulatory Requirements

  	
  58

  
	
   

  	
  10.20

  	
  USA Patriot-Act Notice

  	
  58

  
	
  ARTICLE XI. AGENCY PROVISIONS

  	
  58

  
	
   

  	
  11.01

  	
  Appointment

  	
  58

  
	
   

  	
  11.02

  	
  Delegation of Duties

  	
  58

  
	
   

  	
  11.03

  	
  Exculpatory Provisions

  	
  59

  
	
   

  	
  11.04

  	
  Reliance by Agent

  	
  59

  
	
   

  	
  11.05

  	
  Notices of Default

  	
  59

  
	
   

  	
  11.06

  	
  Non-Reliance on the Agent and Other Lenders

  	
  60

  
	
   

  	
  11.07

  	
  Indemnification

  	
  60

  
	
   

  	
  11.08

  	
  The Agent in Its Individual Capacity

  	
  60

  
	
   

  	
  11.09

  	
  Resignation of the Agent; Successor Agent

  	
  60

  
	
   

  	
  11.10

  	
  Reimbursement by Lenders

  	
  61

  

 

iii

 

EXHIBITS AND SCHEDULES

 

SCHEDULES

 

	
  3.01

  	
  Issue
  Price of Notes

  
	
  6.01

  	
  Existence,
  Organizational Identification Numbers, Foreign Qualification, Prior Names

  
	
  6.04

  	
  Capitalization

  
	
  6.06

  	
  Litigation

  
	
  6.15

  	
  Brokers

  
	
  6.17

  	
  Material
  Contracts

  
	
  6.18

  	
  Environmental
  Compliance

  
	
  6.19

  	
  Intellectual
  Property

  
	
  6.20

  	
  Owned
  Real Estate

  
	
  8.01

  	
  Debt

  
	
  8.02

  	
  Liens

  
	
  8.03

  	
  Contingent
  Obligations

  
	
  8.08

  	
  Investments

  
	
  8.09

  	
  Affiliate
  Transactions

  
	
  8.13

  	
  Business
  Description

  
	
   

  	
   

  
	
  EXHIBITS

  
	
   

  	
   

  
	
  A

  	
  Form of
  Note

  
	
  B

  	
  Form of
  Secretary’s Certificate

  
	
  C

  	
  Form of
  Compliance Certificate

  
	
  D

  	
  [Reserved]

  
	
  E

  	
  Form of
  Officer’s Funding Certificate

  
	
  F

  	
  Form of
  Solvency Certificate

  

 

ANNEX

 

Funding
Checklist

 

iv

 

INVESTMENT AGREEMENT

 

THIS INVESTMENT AGREEMENT is made and entered into as of February 6,  2008  among FESTIVAL FUN PARKS, LLC,
a Delaware limited liability company (the “Company”), LAMINAR DIRECT CAPITAL L.P.,  a
Delaware limited partnership, as a Lender and in its capacity as agent (acting
in such capacity, the “Agent”) and the other lenders from time to time
party hereto (collectively, the “Lenders” and each individually, a “Lender”).

 

STATEMENT OF PURPOSE

 

A.            Centaur Holdings United States, Inc., a
Delaware corporation (“Purchaser”),  was organized
for the purpose of acquiring (the “Palace Acquisition”) all of the outstanding Capital Stock of Palace
Entertainment Holdings, Inc., a Delaware corporation (“Holdings”)
from Palace Holdings Group, LLC, a Delaware limited liability company (“Seller”);
and

 

B.            The Palace Acquisition was consummated
pursuant to the terms of that certain Stock Purchase and Contribution Agreement
dated as of July 31, 2007 among Seller, Holdings and Purchaser (as amended
or otherwise modified prior to the date hereof, and including all exhibits and
schedules thereto, the “Palace
Acquisition Agreement”); and

 

C.            The Company has requested the Lenders to
purchase senior subordinated notes in the aggregate principal amount of
$61,500,000 to provide, in part, funds necessary to refinance certain Debt of
the Company and, indirectly, the Purchaser and to pay costs and expenses
payable in connection therewith.

 

D.            Each of Holdings and, subject to the
limitations set forth herein, each Subsidiary is willing to guaranty all of the
Subdebt Obligations (as defined herein).

 

E.             The Lenders are willing, on the terms and
conditions set forth herein, to purchase senior subordinated notes in the
aggregate principal amount of $61,500,000.

 

AGREEMENT

 

In
consideration of the mutual covenants and agreements herein contained, the
parties hereto covenant and agree as follows:

 

ARTICLE
I.

DEFINITIONS AND ACCOUNTING TERMS

 

1.01        Defined
Terms.

 

As
used in this Agreement, the following terms shall have the meanings set forth
below:

 

“Accounts”
means “accounts”, as defined in Article 9 of the UCC.

 

“Accrual Rate” has the meaning set forth in Section 4.02(b).

 

“Acquisition
Pro Forma” has the meaning set forth in Section 8.08(b).

 

“Acquisition
Projections” has the meaning set forth in Section 8.08(b).

 

 

“Additional
Cash Amount” has the meaning set forth in Section 4.02(c).

 

“Additional
Interest Amount” has the meaning set forth in Section 4.02(c).

 

“Adjusted
EBITDA” has the meaning set forth in the Compliance Certificate.

 

“Affiliate”
means with respect to any Person (i) any Person that directly or
indirectly controls such Person, (ii) any Person which is controlled by or
is under common control with such controlling Person and (iii) each of
such Person’s (other than, with respect to any Lender, any Lender’s) officers
or directors (or Persons functioning in substantially similar roles) and the
spouses, parents, descendants and siblings of such officers, directors or other
Persons.  As used in this definition, the
term “control” of a Person means the possession, directly or indirectly,
of the power to vote five percent (5%) or more of any class of voting Capital
Stock of such Person or to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting Capital Stock, by
contract or otherwise.

 

“Agent”
has the meaning set forth in the introductory paragraph hereto.

 

“Aggregate
Accrual” has the meaning set forth in Section 4.08.

 

“Agreement”
means this Investment Agreement, as the same may be amended, restated,
supplemented or otherwise modified from time to time.

 

“Anti-Terrorism Laws” means any
Laws relating to terrorism or money laundering, including Executive Order No. 13224
(effective September 24, 2001), the USA PATRIOT Act, the Laws comprising
or implementing the Bank Secrecy Act, and the Laws administered by OFAC.

 

“Asset
Disposition” means any sale, lease, license, transfer, assignment or other
consensual disposition by any Credit Party of any asset, but excluding (i) dispositions
of Inventory or used, obsolete, worn-out or surplus Equipment, all in the
Ordinary Course of Business, (ii) dispositions of Cash Equivalents for
cash or in exchange for other Cash Equivalents, (iii) sales, transfers and
other dispositions of accounts receivable in connection with the compromise,
settlement or collection thereof in the Ordinary Course of Business, (iv) the
lease, assignment, license, sub-license or sub-lease of any real or personal property
in the Ordinary Course of Business to the extent the same does not materially
interfere with the business of Company or any Subsidiary and  (v) any disposition of property or assets or issuance
of Capital Stock by Company or any Domestic Subsidiary to Company or any other
Domestic Subsidiary.

 

“Attorney
Costs” means and includes all reasonable fees, out of pocket expenses and
disbursements of any law firm or other external counsel.

 

“Audited
Financial Statements” means the audited consolidated balance sheet of
Holdings and its Subsidiaries for the Fiscal Year ended December 31, 2006,
and the related consolidated statements of income or operations, shareholders’
equity and cash flows for such fiscal year of Holdings and its Subsidiaries,
including the notes thereto.

 

“Availability
Period” has the meaning set forth in Section 3.01(b).

 

“Blocked Person” means any
Person:  (i) listed in the annex to,
or is otherwise subject to the provisions of, Executive Order No. 13224, (ii) owned
or controlled by, or acting for or on behalf of, any Person that is listed in
the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224,
(iii) with which any Lender is prohibited from dealing or otherwise
engaging in any transaction by any Anti-Terrorism Law, (iv) that commits,
threatens or conspires to commit or supports 

 

2

 

“terrorism”
as defined in Executive Order No. 13224; or (v) that is named a “specially
designated national” or “blocked person” on the most current list published by
OFAC or other similar list.

 

“Business
Day” means any day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close under the Laws of, or are in fact
closed in, Houston, TX or New York, NY.

 

“Capital
Expenditures” has the meaning provided in the Compliance Certificate; provided, that, solely for
purposes of Section 8.22, no expenditures to acquire assets
pursuant to a Permitted Acquisition shall constitute Capital Expenditures.

 

“Capital
Lease” of any Person means any lease of any property by such Person as
lessee which would, in accordance with GAAP, be required to be accounted for as
a capital lease on the balance sheet of such Person.

 

“Capital
Stock” means any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any
and all warrants, rights or options to purchase any of the foregoing.

 

“Cash
Equivalents” means any Investment in (i) direct obligations of the
United States or any agency thereof, or obligations guaranteed by the United
States or any agency thereof with a maturity date of no more than one (1) year
from the date of acquisition, (ii) commercial paper with a duration of not
more than nine (9) months rated at least A-1 by Standard & Poor’s
Ratings Service and P-1 by Moody’s Investors Services, Inc., which is
issued by a Person (other than any Credit Party or an Affiliate of any Credit
Party) organized under the laws of any state of the United States or of the
District of Columbia, (iii) time deposits, certificates of deposit and
banker’s acceptances with a duration of not more than six (6) months
issued by any office located in the United States of any bank or trust company
which is organized under the laws of the United States or any state thereof, or
is licensed to conduct a banking business in the United States, and has
capital, surplus and undivided profits of at least $500,000,000 and which
issues (or the parent of which issues) certificates of deposit or commercial
paper with a rating described in clause (ii) above, (iv) repurchase
agreements and reverse repurchase agreements with a duration of not more than
30 days with respect to securities described in clause (i) above entered
into with an office of a bank or trust company meeting the criteria specified
in clause (iii) above, or (v) any money market or mutual fund which
invests only in the foregoing types of investments, has portfolio assets in
excess of $5,000,000,000 and is rated AAA by Standard & Poor’s Ratings
Service and Aaa by Moody’s Investors Services, Inc.

 

“Cash
Pay Period” has the meaning set forth in Section 4.02(b).

 

“Cash
Pay Rate” has the meaning set forth in Section 4.02(b).

 

“CERCLA” means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980.

 

“Change
of Control”  means (i) Investors
shall collectively cease to, directly or indirectly, own and control at least (A) 90%
of the outstanding Capital Stock of Parent owned by them on the Closing Date
(after giving effect to the consummation of the transactions contemplated by
the Operative Documents) or (B) that percentage of the outstanding voting
Capital Stock of Parent necessary at all times to elect a majority of the board
of directors (or similar governing body) of Parent and to direct the management
policies and decisions of Parent, (ii) Parent shall cease to, directly or
indirectly, own and control one hundred percent (100%) of each class of the
outstanding Capital Stock of Holdings, (iii) Holdings shall cease to
directly own and control one hundred percent (100%) of each class of the 

 

3

 

outstanding
Capital Stock of Company, (iv) except as a result of any merger permitted
by Section 8.07, Company shall cease to, directly or indirectly,
own and control one hundred percent (100%) of each class of the outstanding
Capital Stock of each Subsidiary or (v) any “Change of Control”, “Change
in Control”, or terms of similar import occurs under any Senior Transaction
Document.

 

“Change
of Control Offer” has the meaning set forth in Section 4.05(a).

 

“Change
of Control Payment” has the meaning set forth in Section 4.05(a).

 

“Change
of Control Payment Date” has the meaning set forth in Section 4.05(a).

 

“Closing”
has the meaning set forth in Section 3.01(b).

 

“Closing Date” has the meaning set forth in Section 3.01(b).

 

“Code”
means the Internal Revenue Code of 1986, as amended, and any successor statute
of similar import, together with the regulations thereunder, in each case as in
effect from time to time.  References to
sections of the Code shall be construed to also refer to any successor
sections.

 

“Company” has the meaning set forth in the introductory paragraph hereto.

 

“Compliance
Certificate” means a certificate, duly executed by a Responsible
Officer, appropriately completed and substantially in the form of Exhibit C
hereto.

 

“Consolidated Subsidiary” means at any date any
Subsidiary the accounts of which would be consolidated with those of the Holdings (or any other Person, as
the context may require hereunder) in its consolidated financial statements if
such statements were prepared as of such date.

 

“Contingent Obligation” means, with respect to any Person,
any direct or indirect liability of such Person:  (i) with respect to any debt, lease,
dividend or other obligation of another Person if the purpose or intent of such
Person incurring such liability, or the effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or
discharged, or that any agreement relating thereto will be complied with, or
that any holder of such liability will be protected, in whole or in part,
against loss with respect thereto, (ii) with respect to any undrawn
portion of any letter of credit issued for the account of such Person or as to
which such Person is otherwise liable for the reimbursement of any drawing, (iii) under
any Swap Contract, to the extent not yet due and payable, (iv) to make
take-or-pay or similar payments if required regardless of nonperformance by any
other party or parties to an agreement; or (v) for any obligations of
another Person pursuant to any agreement to purchase, repurchase or otherwise
acquire any obligation or any property constituting security therefor, to
provide funds for the payment or discharge of such obligation or to preserve
the solvency, financial condition or level of income of another Person.  The amount of any Contingent Obligation shall
be equal to the amount of the obligation so guaranteed or otherwise supported
or, if not a fixed and determinable amount, the maximum amount so guaranteed or
otherwise supported.

 

“Contractual
Obligations” shall mean, with respect to any Person, any term or provision
of any securities issued by such Person, or any indenture, mortgage, deed of
trust, contract, undertaking, document, instrument or other agreement to which
such Person is a party or by which it or any of its properties is bound or to
which it or any of its properties is subject.

 

“Controlled Group” means all members of a group of corporations
and all members of a group of trades or businesses (whether or not
incorporated) under common control which, together with Company, 

 

4

 

are treated as a single employer under Section 414(b),
(c), (m) or (o) of the Code or Section 4001(b) of ERISA.

 

“Credit
Parties” means each of Holdings, the Company, Palace Finance and any
Subsidiary of Company, whether now existing or hereafter acquired or formed;
and “Credit Parties”
means all such Persons, collectively.

 

“Debt”
of a Person means at any date, without duplication, (i) all obligations of
such Person for borrowed money, (ii) all obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments, (iii) all
obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising and paid on a timely basis and
in the Ordinary Course of Business, (iv) all Capital Leases of such
Person, (v) all non-contingent obligations of such Person to reimburse any
bank or other Person in respect of amounts paid under a letter of credit,
banker’s acceptance or similar instrument, (vi) all Capital Stock of such
Person subject to repurchase or redemption otherwise than at the sole option of
such Person, (vii) all obligations secured by a Lien on any asset of such
Person, whether or not such obligation is otherwise an obligation of such
Person, (viii) “earnouts” and similar payment obligations of such Person,
and (ix) all Debt of others Guaranteed by such Person.  Without duplication of any of the foregoing,
Debt of Company shall include any and all Subdebt Obligations.

 

“Debtor
Relief Laws” means the Bankruptcy Code of the United States, and all other
liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief Laws of the United States or other applicable
jurisdictions from time to time in effect and affecting the rights of creditors
generally.

 

“Default” means any event or condition that
constitutes an Event of Default or that, with the giving of any notice, the passage of
time, or both, would be an Event of Default.

 

“Default Rate” has the meaning set forth in Section 4.02(d).

 

“Dollar”
and “$” mean lawful money of
the United States.

 

“Domestic Subsidiary” means a
Subsidiary organized, incorporated or otherwise formed under the laws of the
United States or Canada or any state or province thereof.

 

“EBITDA”
has the meaning set forth in the Compliance Certificate.

 

“Environmental
Laws” means any and all Laws relating to the environment or the effect of
the environment on human health or to emissions, discharges or releases of
pollutants, contaminants, Hazardous Materials or wastes into the environment,
including ambient air, surface water, ground water or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, Hazardous
Materials or wastes or the clean-up or other remediation thereof.

 

“Equipment” means, collectively, “equipment”
and “fixtures” (as each term is defined in Article 9 of the UCC).

 

“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended.

 

“ERISA Plan” means any “employee
benefit plan”, as such term is defined in Section 3(3) of ERISA
(other than a Multiemployer Plan), which Company maintains, invests or
contributes to, or, in the 

 

5

 

case
of an employee benefit plan which is subject to Section 412 of the Code or
Title IV of ERISA, to which Company or any member of the Controlled Group may
have any liability, including any liability by reason of having been a
substantial employer within the meaning of Section 4063 of ERISA at any
time during the preceding five years, or by reason of being deemed to be a
contributing investor under Section 4069 of ERISA.

 

“Event of Default” means any of the events
set forth in Section 9.01.

 

“Excess Cash Flow” has the meaning set forth in
the Senior Credit Agreement.

 

“Excess Cash Flow Certificate” has the meaning
set forth in the Senior Credit Agreement.

 

“Exchange Act” means the Securities Exchange Act
of 1934, as amended, and the rules and regulations of the SEC thereunder.

 

“Existing Notes” means those certain 10-7/8%
Senior Notes due 2014 in an aggregate original principal amount of $150,000,000
issued pursuant to the Existing Notes Indenture.

 

“Existing Notes Indenture” means that Indenture
dated as of April 12, 2006, among Holdings, Palace Finance, certain
Subsidiaries of Company and Wells Fargo Bank, N.A.

 

“Existing Notes Tender Offer” means the offer by
Company and Palace Finance to purchase all of the outstanding Existing Notes on
the terms set forth in the Offer to Purchase.

 

“Existing RBS Debt” means Debt of Purchaser
incurred under the Bridge Facility Agreement dated as of August 23, 2007
among Purchaser, Monkwood Luxco S.A.R.L. and The Royal Bank of Scotland PLC.

 

“Family Entertainment Centers Division” means the
operating division of Company and its Subsidiaries engaged in operating family
entertainment centers, together with all other operating divisions of Company
and its Subsidiaries, but excluding the Waterparks Division.

 

“Fee
Letter” means that certain letter agreement dated as of the Closing Date
among the Agent, the Company, Holdings and the Lenders.

 

“Fiscal
Year” means a fiscal year of Company, ending on September 30 of each
calendar year.

 

“Fixed Charge Coverage Ratio” has
the meaning set forth in the Compliance Certificate.

 

“Foreign
Subsidiary” shall mean any Subsidiary other than a Domestic Subsidiary.

 

“Funding
Date” has the meaning set forth in Section 3.01(b).

 

“GAAP”
means generally accepted accounting principles set forth from time to time in
the opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the United States
accounting profession), which are applicable to the circumstances as of the
date of determination.

 

“Governmental Authority” means any
nation or government, any state or other political subdivision thereof, and any
agency, department or Person exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government and any
corporation or other Person 

 

6

 

owned
or controlled (through stock or capital ownership or otherwise) by any of the
foregoing, whether domestic or foreign.

 

“Guarantee”
by any Person means any obligation, contingent or otherwise, of such Person
directly or indirectly guaranteeing any Debt or other obligation of any other
Person and, without limiting the generality of the foregoing, any obligation,
direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Debt or other obligation (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods, securities
or services, to take-or-pay, or to maintain financial statement conditions or
otherwise) or (ii) entered into for the purpose of assuring in any other
manner the obligee of such Debt or other obligation of the payment thereof or
to protect such obligee against loss in respect thereof (in whole or in part), provided  that the term Guarantee shall not include endorsements for
collection or deposit in the Ordinary Course of Business.  The term “Guarantee” used as a verb has a
corresponding meaning.

 

“Guarantors” shall
mean the Guarantors that sign Guaranty
Agreement and each other Person that hereafter provides a guaranty of
the Subdebt Obligations, in each case together with their successors and
permitted assigns, and “Guarantor” shall mean any one of them.

 

“Guaranty
Agreement” means that certain Guaranty entered into on the Funding Date in
favor of the Agent, on behalf of the Lenders.

 

“Hazardous
Materials” means (i) any “hazardous substance” as defined in CERCLA, (ii) any
“hazardous waste” as defined by the Resource Conservation and Recovery Act, (iii) asbestos,
(iv) polychlorinated biphenyls, (v) petroleum, its derivatives,
by-products and other hydrocarbons, (vi) mold and (vii) any other
pollutant, toxic, radioactive, caustic or otherwise hazardous substance
regulated under Environmental Laws.

 

“Hazardous
Materials Contamination” means contamination (whether now existing or
hereafter occurring) of the improvements, buildings, facilities, soil,
groundwater, air or other elements on or of the relevant property by Hazardous
Materials, or any derivatives thereof, or on or of any other property as a
result of Hazardous Materials, or any derivatives thereof, generated on,
emanating from or disposed of in connection with the relevant property.

 

“Holdings”
has the meaning set forth in the Recitals to this Agreement.

 

“Indemnified
Party” has the meaning set forth in Section 10.18.

 

“Intellectual Property” means, with
respect to any Person, all patents, trademarks, trade names, trade styles,
trade dress, service marks, logos and other business identifiers, copyrights,
technology, know-how and processes, computer hardware and software and all
applications and licenses therefor, used in or necessary for the conduct of
business by such Person.

 

“Interest
Payment Date” has the meaning set forth in Section 4.02(a).

 

“Inventory”
means “inventory”, as defined in Article 9 of the UCC.

 

“Investment” means any investment
in any Person, whether by means of acquiring (whether for cash, property,
services, Capital Stock or otherwise), making or holding Debt securities,
Capital Stock, capital contributions, loans, time deposits, advances,
Guarantees or otherwise.  The amount of
any Investment shall be the original cost of such Investment plus the
cost of all additions thereto, without any 

 

7

 

adjustments
for increases or decreases in value, or write-ups, write-downs or write-offs
with respect thereto.

 

“Investors”
means Candover investments plc, Candover 2005 Fund US No.1 LLP, Candover 2005
Fund US No.2 LLP, Candover 2005 Fund US No.3 LLP, Candover 2005 Fund US No.4
LLP, Candover 2005 Fund UK No.1 LLP, Candover 2005 Fund UK No.2 LLP, Candover
2005 Fund UK No.3 LLP, Candover (Trustees) Ltd acting on behalf of Candover
2005 Fund Direct Co-Investment Plan, Candover (Trustees) Ltd acting on behalf
of Candover 2005 Fund Direct Co-Investment Scheme and Northern Trust Fiduciary
Services (Guernsey) Ltd.

 

“IPO”
means an initial public offering of Capital Stock of any of the Credit Parties.

 

“Laminar”
means Laminar Direct Capital L.P., a Delaware limited partnership, and its
successors and assigns.

 

“Laws” means any and all federal,
state, local and foreign statutes, laws, judicial decisions, regulations,
guidances, guidelines, ordinances, rules, judgments, orders, decrees, codes,
plans, injunctions, permits, concessions, grants, franchises, governmental
agreements and governmental restrictions, whether now or hereafter in effect.

 

“Lender”
or “Lenders” has the meaning set forth in the introductory paragraph
hereto and their respective successors and assigns.

 

“Lien”
means, with respect to any asset, any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind, or any other type of preferential
arrangement that has the practical effect of creating a security interest, in
respect of such asset.  For the purposes
of this Agreement and the other Loan Documents, a Credit Party shall be deemed
to own subject to a Lien any asset which it has acquired or holds subject to
the interest of a vendor or lessor under any conditional sale agreement,
Capital Lease or other title retention agreement relating to such asset.

 

“Litigation” means any action, suit
or proceeding before any court, mediator, arbitrator or Governmental Authority.

 

“Loan
Documents” means this Agreement, the Notes, the Fee Letter, the
Subordination Agreement, the Guaranty Agreement, any other guaranty or similar
document executed by any Person or Persons and the Agent in connection with
this Agreement, the exhibits and schedules attached to any of the aforementioned
documents and any other documents entered into in connection therewith, as each
may be amended, modified or supplemented from time to time.

 

“Losses” has the meaning set forth in Section 10.18.

 

“Margin
Stock” has the meaning assigned thereto in Regulation U of the Federal
Reserve Board.

 

“Material
Adverse Effect” means, with respect to any event, act, condition or
occurrence of whatever nature (including any adverse determination in any
litigation, arbitration, or governmental investigation or proceeding), whether
singly or in conjunction with any other event or events, act or acts, condition
or conditions, occurrence or occurrences, whether or not related, a material
adverse change in, or a material adverse effect upon, any of (i) the
financial condition, operations, business or properties of the Credit Parties, taken as a whole, (ii) the
material rights and remedies of Agent or Lenders under any Loan Document, or
the ability of the Credit Parties, taken as a whole, to perform any of their
obligations 

 

8

 

under the Loan Documents, or (iii) the legality, validity or
enforceability of any material provision of any Loan Document.

 

“Material
Asset Disposition” shall mean the sale, lease or other disposition, whether
in a single transaction or a series of related transactions, of assets of the
Credit Parties and their Subsidiaries which: 
(a) represent more than fifty percent (50%)  of the combined assets of the Credit
Parties and their Subsidiaries as would be shown in the consolidated financial
statements of the Credit Parties and their Subsidiaries as of the beginning of
the twelve (12)-month period ending with the month in which such determination
is made, or (b) is responsible for more than fifty percent (50%)  of the combined net sales or net income of the Credit
Parties and their Subsidiaries as reflected in the consolidated financial
statements referred to in subsection (a) above.

 

“Material Contracts” has the
meaning set forth in Section 6.17.

 

“Maturity
Date” means the earliest of (a) February 22, 2008 (i.e., the last
day of the Availability Period) if the Funding Date has not yet occurred, (b) the
seventh anniversary of the Funding Date or (c) one year after the maturity
of the last maturing tranche of the Senior Credit Agreement.

 

“Maximum
Accrual” has the meaning set forth in Section 4.08.

 

“Merrill
Lynch” means Merrill Lynch Business Financial Services Inc.

 

“Merrill
Lynch Assignment Agreement” means one or more assignment and assumption
agreements whereby Merrill Lynch assigns all of its rights and obligations
hereunder to one or more assignees, such agreement(s) to become effective
no later that three (3) Business Days following the Closing Date.

 

“Multiemployer Plan” means a
multiemployer plan, that is intended to meet the definition set forth in Section 4001(a)(3) of
ERISA, to which Company or any member of the Controlled Group has any
liability.

 

“Note”
or “Notes” has the meaning set forth in Section 2.01, as the
same may be modified, supplemented, restated and/or amended from time to time
in accordance with the terms hereof and thereof.

 

“Observer”
has the meaning set forth in Section 7.13.

 

“OFAC” means the U.S. Department of
Treasury Office of Foreign Assets Control.

 

“OFAC Lists” means, collectively,
the Specially Designated Nationals and Blocked Persons List maintained by OFAC
pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001)
and/or any other list of terrorists or other restricted Persons maintained
pursuant to any of the rules and regulations of OFAC or pursuant to any
other applicable Executive Orders.

 

“Offer
to Purchase” means the Offer to Purchase and Consent Solicitation Statement
dated December 20, 2007, delivered by Festival Fun Parks, LLC and Palace
Finance to the holders of the Existing Notes.

 

“Offering
Memorandum” has the meaning set forth in Section 7.15.

 

9

 

“Operative
Documents” means the Loan Documents, the Palace Acquisition Documents, the
Offer to Purchase and the Senior Transaction Documents.

 

“Ordinary Course of Business”
means, in respect of any transaction involving any Credit Party, the ordinary
course of such Credit Party’s business, as conducted by such Credit Party in
accordance with past practices or in a manner reasonably related thereto.

 

“Organizational
Documents” means, with respect to any Person other than a natural person,
the documents by which such Person was organized (such as a certificate of
incorporation, certificate of limited partnership or articles of organization,
and including, without limitation, any certificates of designation for
preferred stock or other forms of preferred equity) and which relate to the
internal governance of such Person (such as by-laws, a partnership agreement or
an operating, limited liability company or members agreement).

 

“Other
Taxes” has the meaning set forth in Section 4.07(b).

 

“Palace
Acquisition” has the meaning set forth in the Recitals.

 

“Palace
Acquisition Agreement” has the meaning set forth in the Recitals hereto.

 

“Palace
Acquisition Documents” means the Palace Acquisition Agreement, together
with all related documents, including exhibits and schedules, and any
amendments, modifications and supplements thereto.

 

“Palace
Finance” means Palace Finance, Inc., a Delaware corporation and a
direct wholly-owned Subsidiary of the Company.

 

“Park”
means any water park or family entertainment center now or hereafter owned and
operated by Company or any of its Subsidiaries.

 

“Parent”
means Centaur Luxco S.A.R.L., a Luxembourg entity.

 

“Patriot
Act” has the meaning set forth in Section 10.20.

 

“PBGC” means the Pension Benefit
Guaranty Corporation and any Person succeeding to any or all of its functions
under ERISA.

 

“Pension Plan” means any ERISA Plan
that is subject to Section 412 of the Code or Title IV of ERISA.

 

“Permits” has the meaning set forth
in Section 6.01.

 

“Permitted
Acquisition”  has the meaning set forth in Section 8.08(b).

 

“Permitted
Contest” means a contest maintained in good faith by appropriate
proceedings promptly instituted and diligently conducted and with respect to
which such reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made; provided  that compliance with the obligation that is the subject of
such contest is effectively stayed during such challenge.

 

“Permitted
Liens” means Liens permitted pursuant to Section 8.02.

 

10

 

“Person”
means any natural person, corporation, limited liability company, professional
association, limited partnership, general partnership, joint stock company,
joint venture, association, company, trust, bank, trust company, land trust,
business trust or other organization, whether or not a legal entity, and any
Governmental Authority.

 

“PIK
Amount” has the meaning set forth in Section 4.02(c).

 

“Principal”
has the meaning set forth in Section 4.01.

 

“Pro
Forma Acquisition EBITDA”  has the
meaning provided in the Compliance Certificate.

 

“Purchaser”
has the meaning set forth in the Recitals to this Agreement.

 

“RBS
Restricted Distribution” has the meaning set forth in Section 8.04.

 

“Redemption
Price” means the Principal amount of Notes being redeemed or repaid
multiplied by the applicable redemption price percentage set forth below, in
each case plus accrued and unpaid interest on the Principal reduced or repaid:

 

	
  Period

  	
   

  	
  Redemption
  Price Percentage

  	
   

  
	
  Funding
  Date to the first anniversary of the Funding Date

  	
   

  	
  103

  	
  %

  
	
  First
  anniversary of the Funding Date to the second anniversary of the Funding Date

  	
   

  	
  102

  	
  %

  
	
  Second
  anniversary of the Funding Date to the third anniversary of the Funding Date

  	
   

  	
  101

  	
  %

  
	
  Third
  anniversary of the Funding Date and thereafter

  	
   

  	
  100

  	
  %

  

 

“Regulatory
Requirement” has the meaning set forth in Section 10.19.

 

“Related
Parties” means, with respect to any Person, such Person’s Affiliates and
the partners, directors, officers, employees, agents and advisors of such
Person and of such Person’s Affiliates.

 

“Required
Lenders” means, as of the date of any determination, Lenders holding more
than 66-2/3% of the outstanding Principal of the Notes.

 

“Required Swap Contract”  means any Swap Contract entered into to comply with the
requirements of Section 4.9 of the Senior Credit Agreement
regardless of whether such Swap Contract exceeds the minimum requirements set
forth in Section 4.9 of the Senior Credit Agreement.

 

“Resale
Materials” has the meaning set forth in Section 7.15.

 

“Responsible Officer” means any of
the Chief Executive Officer, Chief Financial Officer or any other officer of
Company acceptable to Agent.

 

“Restricted
Distribution” means as to any Person (i) any dividend or other
distribution (whether in cash, Capital Stock or other property) on any equity
interest in such Person (except those payable solely in Capital Stock of the
same class) or (ii) any payment by such Person on account of (A) the
purchase, redemption, retirement, defeasance, surrender, cancellation,
termination or acquisition of any 

 

11

 

Capital Stock in such Person or
any claim respecting the purchase or sale of any equity interest in such Person
or (B) any option, warrant or other right to acquire any Capital Stock in
such Person.

 

“SEC”
means the Securities and Exchange Commission, or any Governmental Authority
succeeding to any of its principal functions.

 

“Securities
Act” means the Securities Act of 1933, as amended, and the rules and
regulations of the SEC thereunder.

 

“Seller”
means the “Seller” party to the Palace Acquisition Agreement, as set forth in
the Recitals hereto.

 

“Senior
Agent” means Merrill Lynch Business Financial Services Inc., in its
capacity as administrative agent and collateral agent under the Senior Credit
Agreement (and its successors and assigns pursuant to the terms of the Senior
Credit Agreement) or any other Person appointed by the Senior Lenders holding
Senior Debt as administrative agent or collateral agent for purposes of the
Senior Credit Agreement.

 

“Senior
Credit Agreement” means the Credit Agreement dated as of the date
hereof among  the Company, the Senior Agent and
the other agents and lenders party thereto and or any agreements refinancing,
replacing or otherwise restructuring all or any portion of the Senior
Indebtedness under such  agreements
or any successor or replacement agreement and whether with the same or any
other agent, lender or group of lenders, as refinanced, replaced, restructured,
amended or otherwise modified from
time to time in accordance with its terms and the terms of the Subordination
Agreement.

 

“Senior Debt” means, as of any
date, Total Debt as of such date (but excluding the Notes).

 

“Senior
Debt to EBITDA Ratio” means, as of any date, the ratio of Senior Debt as of
such date to Adjusted EBITDA for the twelve-month period then ended.

 

“Senior
Indebtedness” means the “Senior Debt” as such term is defined in the
Subordination Agreement.

 

“Senior
Lenders” shall mean all Person(s) who
are holders of Senior Indebtedness under the Senior Transaction Documents.

 

“Senior Transaction Documents” means the “Senior Debt
Documents”, as defined in the Subordination Agreement.

 

“Solvent” means, with respect to
any Person, that such Person (i) owns and will own assets the fair
saleable value of which are (A) greater than the total amount of its
liabilities (including the reasonably expected amount of Contingent
Obligations) and (B) greater than the amount that will be required to pay
the probable liabilities of its then existing debts as they become absolute and
matured considering all financing alternatives and potential asset sales
reasonably available to it, (ii) has capital that is not unreasonably
small in relation to its business as presently conducted or after giving effect
to any contemplated transaction and (iii) does not intend to incur and
does not believe that it will incur debts beyond its ability to pay such debts
as they become due.

 

“Subdebt
Obligations” means all advances to, and debts, liabilities, fees,
commissions, obligations, covenants and duties of, any Credit Party arising under any Loan Document or otherwise with
respect to any Notes, whether direct or indirect (including those acquired by
assumption), absolute or 

 

12

 

contingent, due or to become
due, now existing or hereafter arising and including interest and fees that
accrue after the commencement by or against any Credit Party or any Affiliate thereof of any proceeding under
any Debtor Relief Laws naming such Person as the debtor in such proceeding,
regardless of whether such interest and fees are allowed claims in such
proceeding.

 

“Subordination
Agreement” means the Subordination and Intercreditor Agreement,
dated as of the Funding Date among the Company, the Guarantors, the Senior
Agent and the Lenders (or the Agent on behalf of the Lenders),  as the same may be further amended and in effect from time
to time.

 

“Subsidiary”
means, with respect to any Person, (i) any corporation of which an
aggregate of more than 50% of the outstanding Capital Stock having ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, Capital Stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person or one or more Subsidiaries of such
Person, or with respect to which any such Person has the right to vote or
designate the vote of more than 50% of such Capital Stock whether by proxy,
agreement, operation of Law or otherwise, and (ii) any partnership or
limited liability company in which such Person and/or one or more Subsidiaries
of such Person shall have an interest (whether in the form of voting or
participation in profits or capital contribution) of more than 50% or of which
any such Person is a general partner or may exercise the powers of a general
partner.  Unless the context otherwise
requires, each reference to a Subsidiary shall be a reference to a Subsidiary
of Company.

 

“Swap Contract” means any “swap
agreement”, as defined in Section 101 of the Bankruptcy Code.

 

“Target”  has the meaning set forth in Section 8.08(b).

 

“Taxes”
has the meaning set forth in Section 4.07(a).

 

“Total
Debt” has the meaning provided in the Compliance Certificate.

 

“Total Debt to EBITDA Ratio” has
the meaning provided in the Compliance Certificate.

 

“Transaction”
means (a) the Palace Acquisition and (b) all financings, equity
contributions and other transactions related thereto, including pursuant to the
Loan Documents and the Senior Transaction Documents.

 

“Transfer”
means the sale, pledge, assignment, or other transfer of the Notes, in whole or
in part, and of the rights of the holder thereof with respect thereto and under
this Agreement.

 

“Transferee”
means any direct or indirect transferee of all or any part of any Notes
permitted under Section 10.10.

 

“United
States” and “U.S.” mean the United States of America.

 

“USA
Patriot Act” shall mean the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT)
Act of 2001, as in effect from time to time.

 

“Waterparks
Division” means the operating division of Company and its Subsidiaries
engaged in operating water parks.

 

13

 

“Wholly-Owned
Domestic Subsidiary” means any Domestic Subsidiary which is a Wholly-Owned
Subsidiary.

 

“Wholly-Owned Subsidiary” means,
with respect to any Person, any Subsidiary of such Person of which all of the
Capital Stock (other than, in the case of a corporation, directors’ qualifying
shares, to the extent legally required) are directly or indirectly owned and
controlled by such Person or one or more Wholly-Owned Subsidiaries of such
Person.

 

1.02        Other
Interpretive Provisions.

 

With
reference to this Agreement and each other Loan Document, unless otherwise
specified herein or in such other Loan Document:

 

(a)           The
meanings of defined terms are equally applicable to the singular and plural
forms of the defined terms.

 

(b)           (i)            The words “herein,” “hereto,” “hereof”
and “hereunder” and words of similar import when used in any Loan
Document shall refer to such Loan Document as a whole and not to any particular
provision thereof.

 

(ii)           Article, Section, Exhibit and Schedule references are to the
Loan Document in which such reference appears.

 

(iii)          The term “including” is by way of example and not limitation.

 

(iv)          The term “documents” includes any and all instruments,
documents, agreements, certificates, notices, reports, financial statements and
other writings, however evidenced, whether in physical or electronic form.

 

(v)           The terms “knowledge” or “known” when used with respect
to any Credit Party shall be deemed
to be a reference to the knowledge of any Responsible Officer.

 

(c)           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.”

 

(d)           Section headings
herein and in the other Loan Documents are included for convenience of
reference only and shall not affect the interpretation of this Agreement or any
other Loan Document.

 

1.03        Accounting
Terms.

 

(a)           All
accounting terms not specifically or completely defined herein shall be
construed in conformity with, and all financial data (including financial
ratios and other financial calculations) required to be submitted pursuant to
this Agreement shall be prepared in conformity with, GAAP applied on a
consistent basis with Company’s past practices, as in effect from time to time.

 

(b)           If
at any time any change in GAAP would affect the computation of any financial
ratio or requirement set forth in any Loan Document, and either the Company or
the Required Lenders shall so request, the Required Lenders and the Company
shall negotiate in good faith to amend such ratio or requirement to preserve
the original intent thereof in light of such change in GAAP (subject to the 

 

14

 

approval of the Company and the
Required Lenders); provided  that, until so amended, (i) such
ratio or requirement shall continue to be computed in accordance with GAAP
prior to such change therein and (ii) the Company shall provide to the
Lenders financial statements and other documents required under this Agreement
or as reasonably requested hereunder setting forth a reconciliation between
calculations of such ratio or requirement made before and after giving effect
to such change in GAAP.

 

1.04        Rounding.

 

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

 

1.05        References to Agreements and Laws.

 

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

 

1.06        Times
of Day.

 

Unless
otherwise specified, all references herein to times of day shall be references
to Eastern time (daylight or standard, as applicable).

 

ARTICLE II.

NOTES

 

2.01        Authorization
and Issuance of the Notes.

 

The Company has authorized the issuance to the Lenders
of senior subordinated notes in the aggregate original principal amount of $61,500,000 to
be dated the Funding Date, to mature on the Maturity Date, to bear interest on
the unpaid balance thereof, from the Funding Date until the Principal shall
have become due and payable, at the rates specified in Article IV and to
be substantially in the form of Exhibit A (the “Notes”).

 

ARTICLE III.

PURCHASE AND SALE

 

3.01        Purchase
and Sale of the Notes.

 

(a)           Subject to the terms
and conditions herein set forth, and in reliance upon the representations and
warranties of the Credit Parties contained herein, the Company shall sell to
the Lenders, and the Lenders shall purchase from the Company, the Notes for
an aggregate purchase price of $61,500,000, in the respective amounts set forth on Schedule 3.01.

 

(b)           The closing of this
Agreement (the “Closing”) shall, subject to the satisfaction of the
conditions set forth in Section 5.01, take place on the date hereof
(the “Closing Date”).  The funding
of the purchase and sale of the
Notes shall take place substantially concurrently with the satisfaction of the 

 

15

 

conditions set forth in Section 5.02
(the “Funding Date”), which date shall occur (x) on or after the
date that is four (4) Business Days following the Closing Date and (y) on
or prior to February 22, 2008 (such period from the date referred to in
clause (x) through February 22, 2008, the “Availability Period”).  On the
Funding Date, the Company will issue, sell and deliver to the Lenders the Notes
in the respective amounts on Schedule 3.01 and the Lenders will pay
the Company the purchase price therefor by wire transfer of immediately
available funds pursuant to written instructions delivered to the Lenders by
the Company prior to the Funding Date.

 

ARTICLE IV.

TERMS OF NOTES

 

4.01        Repayment
of Principal.

 

Unless
otherwise required to be sooner paid pursuant to the provisions hereof and of
the Notes, the Company shall repay the unpaid principal amount of the Notes
(including capitalized and accrued interest to the extent such interest has not
been paid in cash and has been added to the principal balance of the Notes)  (the “Principal”) in full upon the Maturity
Date.  Whenever any payment to be made
hereunder or under any Note shall be stated to be due on a day which is not a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day.

 

4.02        Payments
of Interest.

 

(a)           Interest
Payments.  The Principal shall bear interest on the
unpaid balance thereof from the Funding Date until repayment of the Notes in
full, computed on the basis of actual days elapsed over a 360-day year.  Interest payments shall be due and payable
quarterly commencing on April 1, 2008 and continuing on each succeeding July 1,
October 1, January 1 and April 1 thereafter, until paid (each
such date, an “Interest Payment Date”). All accrued and unpaid interest
shall be paid in full on the Maturity Date. 
On each Interest Payment Date and subject to Sections 4.02(b) and
4.02(d), the Company shall (i) pay to the Lenders in cash quarterly
installments of interest (in arrears) at the applicable Cash Pay Rate on the
then outstanding Principal under the Notes and (ii) as set forth below,
either accrue the PIK Amount to the outstanding Principal of the Notes or, at
the option of the Company, pay a portion (or all) of the PIK Amount in
cash.  If an Event of Default has
occurred and is continuing, the Default Rate shall apply as set forth in Section 4.02(d).

 

(b)           Accrual
Rates and Cash Pay Rates.

 

(1)           Subject
to Section 4.02(d) hereof, from the Funding Date and
thereafter until the repayment of the Notes in full, interest shall accrue on
the Principal of the Notes outstanding from time to time at the fixed rate of
15.0% per annum (the “Accrual Rate”).

 

(2)           Subject
to Section 4.02(d) hereof, from the Funding Date and
thereafter until the repayment of the Notes in full (the “Cash Pay Period”),
interest shall be paid currently in cash on a quarterly basis in arrears on
each Interest Payment Date at the fixed rate of 12.0% per annum (the “Cash
Pay Rate”); provided that, subject to Section 4.02(d) hereof,
the Cash Pay Rate with respect to all PIK Amounts shall be 15.0%.

 

(c)           PIK
Amounts; Optional Cash Payments.  Subject to Section 4.02(d) hereof,
on each Interest Payment Date, the Company shall, at its election, either:  (A) to the extent not prohibited under
the Subordination Agreement, make an additional cash payment to the Lenders on
the Notes in an amount equal to 3.0% per annum of the Principal outstanding
under the Notes, excluding all PIK Amounts (the “Additional Cash Amount”);
(B) increase the then outstanding Principal of the Notes, excluding all
prior 

 

16

 

PIK Amounts, by an amount (the “PIK Amount”)
equal to the difference between (i) interest accruing at the applicable
Accrual Rate during the preceding three-month period  and
(ii) interest accruing at the applicable Cash Pay Rate during the
preceding three-month period; or (C) to the extent not prohibited under
the Subordination Agreement, pay a portion of the Additional Cash Amount to the
Lenders and accrue to the Principal a portion of the PIK Amount such that the
combined amount of the portion of the Additional Cash Amount and the portion of
the PIK Amount is equal to 3.0% per annum of the Principal outstanding under
the Notes, excluding all PIK Amounts (collectively, the Additional Cash Amount,
the PIK Amount or any combination thereof, the “Additional Interest Amount”);
provided that, if the Company shall make an election to satisfy a
portion of its interest payment obligations under this Section 4.02(c) on
an Interest Payment Date by accruing any amount of the Additional Interest
Amount, it shall do so by accruing any such amount of the Additional Interest
Amount to all holders of outstanding Notes on an equal and ratable basis.

 

(d)           Default
Rate; Payment of Default Interest.  After the occurrence and
during the continuance of any Event of Default, the Principal and, to the
extent they have become due and payable, all of the other Subdebt Obligations
shall bear interest at a per annum rate equal to the sum of the Accrual Rate plus
2.0%  (the “Default Rate”), beginning
on the date of the occurrence of such Event of Default (it being understood and
agreed that, with respect to an Event of Default related to non-compliance with
any of the covenants contained in Sections 8.22, 8.23 and 8.24,
the date of occurrence shall be the applicable test date).  All such interest shall be paid in a manner
consistent with Section 4.02(b) and Section 4.02(c) hereof
on a quarterly basis (or, at the option of the Lender, on demand) until the
payment in full of the Notes hereunder or other cure of such Event of Default; provided,
however, that, with respect to that portion of the Principal outstanding
under the Notes to which the PIK Amount is applicable, the PIK Amount and the
Additional Interest Amount, as opposed to the Cash Pay Rate, shall increase by
an amount equal to 2.0% per annum of the Principal outstanding under the Notes
(without duplication to the Default Rate set forth above).

 

(e)           Calculation
of Interest.  Interest shall be calculated on the basis of
a 360-day year and shall be computed for each payment period on the Principal
for the actual number of days elapsed and shall be compounded quarterly.

 

(f)            Savings
Clause.  In no contingency or event shall the interest
rate charged pursuant to the terms of this Agreement exceed the highest rate
permissible under any law which a court of competent jurisdiction shall, in a
final determination, deem applicable hereto. 
In the event that such a court determines that the Lenders have received
interest hereunder in excess of the highest applicable rate, the amount of such
excess interest shall be applied against the Principal then outstanding to the
extent permitted by applicable law, and any excess interest remaining after
such application shall be refunded promptly to the Company.

 

4.03        Mandatory
Prepayment/Redemption.

 

(a)           IPO
Proceeds; Debt and Equity Issuances; Material Asset Dispositions. 
Subject to the terms of the Subordination Agreement and Section 4.03(d),
upon the consummation of (i) any IPO, (ii) any other issuance of
Capital Stock (other than an issuance permitted under both this Agreement and
the Senior Credit Agreement) by a Credit Party or a Subsidiary thereof, (iii) any
incurrence of Debt (other than an incurrence permitted under both this
Agreement and the Senior Credit Agreement) by any Credit Party or a Subsidiary
thereof or (iv) any Material Asset Disposition, the Credit Parties shall
prepay the full Principal amount of the Notes and all other Subdebt Obligations
in the manner set forth in Section 4.03(c).

 

(b)           [Reserved].

 

17

 

(c)           Prepayment.  Upon the occurrence of any event triggering
the prepayment requirement under Section 4.03(a), the Company shall
promptly give written notice to the Lenders. 
The Company covenants and agrees
that it will prepay, promptly following the occurrence of such transactions or
events, the Notes or the portion thereof subject to prepayment by paying an aggregate
amount equal to the Redemption Price of the outstanding Principal amount of the
Notes plus accrued interest to be redeemed.  All mandatory prepayments under this Section 4.03(c) shall
be applied first to all costs, expenses, indemnities and other amounts payable
hereunder and under the applicable Notes, then to payment of default interest,
if any, then to payment of premium, if any, then to payment of accrued interest
and thereafter to payment of Principal. Notwithstanding anything to the
contrary contained herein, all payments of Principal and interest due from the
Company hereunder shall be made to the Lenders on an equal and ratable
basis.  All Notes which have been repaid
may not be reborrowed.

 

(d)           Unconditional
Obligations.  Nothing contained in the
Subordination Agreement is intended to or shall impair, as between the Company
and the Lenders, the obligation of the Company, which is absolute and
unconditional, to pay to the Lenders the Principal of, premium, if any, and
interest on the Notes as and when the same shall become due and payable in
accordance with any event triggering
the prepayment requirement under Section 4.03(a) nor shall anything herein or in the Notes prevent
any Lender from exercising all remedies otherwise permitted by applicable law
upon default under this Agreement, subject to the rights, if any of the holders
of the Senior Indebtedness under the Subordination Agreement.

 

4.04        Optional
Prepayments of the Notes.

 

Subject
to the terms of the Subordination Agreement, the Company shall have the right
at any time and from time to time prior to the Maturity Date, upon the notice
provided for below, to optionally prepay the Notes in whole or in part; provided,
however, that such prepayments shall be allocated to all of the Notes
outstanding at the time in proportion to the respective outstanding Principal
amounts thereof.  In the event of an
optional prepayment made under this Section 4.04, the Company shall
give the Lenders irrevocable written notice of such redemption not less than 10
nor more than 60 days prior to the redemption date, specifying (i) such
redemption date, (ii) the Principal amount of the Notes to be prepaid on
such date, and (iii) the accrued interest applicable to the redemption,
and stating that such redemption is to be made pursuant to this Section 4.04.  All optional prepayments under this Section 4.04
shall be applied first to all costs, expenses, indemnities and other amounts
payable hereunder and under the applicable Notes, then to payment of default
interest, if any, then to payment of premium, if applicable, then to payment of
accrued interest and thereafter to payment of Principal.  Notwithstanding anything to the contrary
contained herein, all payments of Principal and interest due from the Company
hereunder shall be made to the Lenders on an equal and ratable basis.  The price of the Notes payable upon an
optional redemption pursuant to this Section 4.04 shall be an
amount equal to the Redemption Price of the outstanding Principal amount of the
Notes plus accrued interest to be redeemed.  All Notes which have been prepaid
may not be reborrowed.

 

4.05        Mandatory
Offer to Prepay upon a Change of Control.

 

(a)           Upon
the occurrence of a Change of Control, each Lender shall have the right to
require the Company to repurchase all or any part of such Lender’s Notes
pursuant to the offer described below (the “Change of Control Offer”) at
an offer price  (the “Change of
Control Payment”) in cash equal to the Redemption Price of the outstanding
Principal amount of the Notes plus accrued and unpaid interest thereon, if any,
to the date of purchase (the “Change of Control Payment Date”).  Company
will make the Change of Control Offer by delivering a written notice of such
offer to the Lenders within ten (10) days of the occurrence of a Change of
Control, specifying the Change of Control Payment Date (which such date shall
not be more than thirty (30) days following such Change of Control).  A Lender may accept 

 

18

 

such Change of Control Offer by
delivering a written notice of acceptance to the Company within fifteen (15)
days after receipt of the Change of Control Offer specifying the amount of the
Notes to be redeemed.  In connection with
the Change of Control Offer, the Company shall comply with the requirements
of any applicable securities laws and regulations.

 

(b)           By
12:00 p.m. (noon) Eastern Time on the Change of Control Payment Date, the
Company shall, to the extent lawful, (1) accept for payment all Notes or
portions thereof properly tendered pursuant to the Change of Control Offer, and
(2) pay via wire transfer in immediately available funds an amount equal
to the Change of Control Payment in respect of all Notes or portions thereof so
tendered.  All payments under this Section 4.05
shall be applied first to all costs, expenses, indemnities and other amounts
payable hereunder and under the applicable Notes, then to payment of default
interest, if any, then to payment of premium, if any, then to payment of
accrued interest and thereafter to payment of Principal.  The Company shall send to each Lender that
has tendered its Notes the applicable Change of Control Payment for such Notes,
and the Company shall promptly execute and mail to each Lender a new Note equal
in Principal amount to any unpurchased portion of the Notes surrendered, if
any.  Prior to compliance with this Section 4.05,
but in any event within ten (10) days following a Change of Control,
the Company will either (x) cause all outstanding Senior Indebtedness to be
paid in full or (y) obtain the requisite consents, if any, under all
agreements governing outstanding Senior Indebtedness to permit the repurchase
of Notes required by this Section 4.05.  The Company shall provide written notice to
the Lenders of the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.

 

4.06        Direct
Payment.

 

All
payments of Principal and interest due from the Company hereunder shall be due,
without any presentment thereof, directly to the Lenders, at the Lenders’
addresses set forth on Schedule 3.01 or such other address as the
Lenders may from time to time designate in writing to the Company or, if a bank
account(s) with a United States bank is designated for the Lenders on Schedule 3.01
or in any written notice to the Company from the Lenders, the Company will make
such payments in immediately available funds to such bank account, no later
than 12:00 p.m. (noon) Eastern time on the date due, marked for attention
as indicated, or in such other manner or to such other account in any United
States bank as the Lenders may from time to time direct in writing.

 

4.07        Taxes.

 

(a)           Any
and all payments by or on behalf of the Credit
Parties hereunder and under any Loan Document shall be made, free and
clear of and without deduction for any and all current or future taxes, levies,
imposts, deductions, charges or withholdings that are or would be applicable to
the Lenders, and all liabilities with respect thereto, excluding (x) income
taxes imposed on the net income of a Lender and (y) franchise taxes
imposed on the net income of a Lender, in each case by the jurisdiction under
the laws of which such Lender is organized or qualified to do business or a
jurisdiction or any political subdivision thereof in which the Lender engages
in business activity other than activity arising solely from the Lender having
executed this Agreement and having enjoyed its rights and performed its
obligations under this Agreement or any Loan Document or any political subdivision
thereof (all such nonexcluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities, collectively or individually, being called “Taxes”).  If a Credit
Party must deduct any Taxes from or in respect of any sum payable
hereunder or under any other Loan Document to a Lender, (x) the sum
payable shall be increased by the amount (an “additional amount”)
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 4.07 such
Lender shall receive an amount equal to the sum it would have received had no
such deductions been made, (y) such Credit
Party shall make 

 

19

 

such deductions and (z) such
Credit Party shall pay the full
amount deducted to the relevant Governmental Authority in accordance with
applicable law.

 

(b)           The Credit Parties will pay to the relevant
Governmental Authority in accordance with applicable law any current or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made hereunder or under any Loan
Document, or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement or any Loan Document that are or would be applicable
to the Lenders (“Other Taxes”).

 

(c)           The Credit Parties jointly and severally agree
to indemnify each Lender for the full amount of Taxes and Other Taxes paid by
such Lender and any liability (including penalties, interest and expenses
(including reasonable attorney’s fees and expenses)) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted by the relevant Governmental Authority.  A certificate as to the amount of such
payment or liability prepared by such Lender absent manifest error, shall be
final conclusive and binding for all purposes. 
Such indemnification shall be made within thirty (30) days after
the date such Lender makes written demand therefor so long as such amounts have
accrued on or after the day which is two hundred seventy (270) days prior to
the date on which such Lender first made demand therefor.  The Credit
Parties shall have the right to receive that portion of any refund of
any Taxes and Other Taxes received by a Lender for which any Credit Party has previously paid any
additional amount or indemnified such Lender and which leaves the Lender, after
such Credit Party’s receipt thereof, in no better or worse financial position
than if no such Taxes or Other Taxes had been imposed or additional amounts or
indemnification paid to the Lender.  The
Lender shall have sole discretion as to whether (and shall in no event be
obligated) to make any such claim for any refund of any Taxes or Other Taxes.

 

(d)           So long as no Default or Event of Default exists at the time of such
assignment, each Lender that (i) is organized under the laws of a
jurisdiction other than the United States and (ii) purports to become an
assignee of an interest pursuant to Section 10.10 after the Funding
Date (unless such Lender was already a Lender hereunder immediately prior to
such assignment) (each such Lender a “Foreign Lender”) shall execute and
deliver to the Company and the Agent one or more (as the Company or the Agent
may reasonably request) United States Internal Revenue Service Forms W-8ECI,
W-8BEN, W-8IMY (as applicable) and other applicable forms, certificates or
documents prescribed by the United States Internal Revenue Service or
reasonably requested by the Agent certifying as to such Lender’s entitlement to
a complete exemption from withholding or deduction of Taxes.  No Credit Party shall be required to pay
additional amounts to any Lender pursuant to this Section 4.07 with
respect to United States withholding and income Taxes to the extent that the
obligation to pay such additional amounts would not have arisen but for the
failure of such Lender to comply with this paragraph other than as a result of
a change in law.

 

4.08        Applicable High Yield Discount Obligation Mandatory
Prepayment.

 

On
or before the first Interest Payment Date immediately following the fifth
anniversary of the Funding Date (but in any event not prior to the fifth
anniversary of the Funding Date) and on or before any Interest Payment Date
thereafter, if the aggregate amounts which would be includible in gross income
of the holders of the Notes with respect to such Notes for all periods ending
on or before such Interest Payment Date (within the meaning of section 163(i) of
the Code) (the “Aggregate Accrual”) would exceed an amount equal to the
sum of (x) the aggregate amount of interest to be paid (within the meaning
of section 163(i) of the Code) under
the Notes on or before such Interest Payment Date (determined without regard to
the amounts payable on such Interest Payment Date under this Section 4.08),
and (y) the product of (A) the issue price (as defined in
sections 1273(b) and 1274(a) of the Code) of the Notes and (B) the
yield to maturity (interpreted in accordance with section 163(i) of
the Code) of the Notes (such 

 

20

 

sum, the “Maximum  Accrual”), the Company shall mandatorily pay to the Lenders ratably in cash an amount equal to the excess, if any,
of the Aggregate Accrual over the Maximum Accrual and the amount of such
payment shall be treated for purposes of section 163(i) of the Code
as interest paid under the Notes.  Notwithstanding
anything to the contrary contained herein, all payments of Principal, premium
and interest due from the Company hereunder shall be made to the Lenders on an
equal and ratable basis.  All Notes which
have been prepaid may not be reborrowed.

 

ARTICLE V.

CONDITIONS PRECEDENT TO CLOSING

 

5.01        Conditions
to Closing.

 

The Lenders obligations to enter into this Agreement
on the Closing Date are subject to each Lender determining, in its sole
discretion, that the following conditions have been satisfied (or each Lender
waiving in writing the conditions that it has determined have not been
satisfied), on or before the Closing Date:

 

(a)           Investment
Agreement.  Each Lender’s receipt of executed
counterparts of this Agreement, which shall be an original or a facsimile
(followed promptly by an original) unless otherwise specified, properly
executed by a Responsible Officer of each signing Credit Party, dated the
Closing Date and in form and substance reasonably satisfactory to the Lenders
and their legal counsel.

 

(b)           Fee
Letter.  Each Lender’s receipt of executed counterparts
of the Fee Letter, which shall be an original or a facsimile (followed promptly
by an original) unless otherwise specified, properly executed by a Responsible
Officer of each signing Credit Party, dated the Closing Date and in form and
substance reasonably satisfactory to the Lenders and their legal counsel

 

5.02        Conditions to Funding.

 

The
obligation of each Lender to purchase the Notes on the Funding Date shall be
subject to the receipt by Agent of each agreement, document and instrument set
forth on the Funding Checklist attached hereto as Annex A (unless waived by
Required Lenders), each in form and substance reasonably satisfactory to the
Agent, and to the satisfaction of the following conditions precedent, each to
the satisfaction of Agent and Lenders in their sole discretion:

 

(a)           evidence that Company shall have repurchased 100% of
the Existing Notes on or prior to the Funding Date pursuant to the Existing
Notes Tender Offer and that such Existing Notes have been cancelled;

 

(b)           evidence of the consummation of the transactions
(other than the Existing Notes Tender Offer and the purchase of the Notes)
contemplated by the Operative Documents, including without limitation the
funding of the loans contemplated by the Senior Transaction Documents;

 

(c)           the payment of all fees, expenses and other amounts
due and payable under each Loan Document, including the Fee Letter;

 

(d)           the absence, since December 31, 2006 of any
material adverse change in any aspect of the business, operations, properties,
prospects or financial condition of any Credit Party, or any event or condition
which could reasonably be expected to result in such a material adverse change;

 

21

 

(e)           after giving effect to the purchase of Notes on the
Funding Date (assuming for purposes hereof, the payment of the RBS Restricted
Payment on the Funding Date) and the consummation of the transactions
contemplated by the Operative Documents, the aggregate outstanding Revolving
Loans (as defined in the Senior Credit Agreement) and Swingline Loans (as
defined in the Senior Credit Agreement) shall not exceed $17,000,000 and Letter
of Credit Liabilities (as defined in the Senior Credit Agreement) shall not
exceed $4,000,000;

 

(f)            the receipt of pro forma
financial statements of Holdings and its Consolidated
Subsidiaries which evidence, in each case for the twelve (12) month period for
which financial statements are most recently available, prepared to give effect
to the purchase of the Notes on the Funding Date and the consummation of the
transactions contemplated by the Operative Documents, and subject to such
adjustments as are deemed reasonably acceptable to Agent, (i) a Total Debt
to EBITDA Ratio of not more than 4.85 to 1.0, and (ii) a Senior Debt to
EBITDA Ratio of not more than 3.07 to 1.0;

 

(g)           evidence that the Merrill Lynch Assignment Agreement
is effective;

 

(h)           receipt by Agent of such other documents,
instruments and/or agreements as Lenders may reasonably request; and

 

Each
Lender, by delivering its signature page to this Agreement on the Closing
Date, shall be deemed to have acknowledged receipt of, and consented to and
approved, each Loan Document, each additional Operative Document and each other
document, agreement and/or instrument required to be approved by Agent,
Required Lenders or Lenders, as applicable, on the Funding Date.

 

If
the Funding Date shall not have occurred on or prior to February 22, 2008,
this Agreement shall terminate on such date except that the provisions of
Articles X and XI shall survive such termination. Without limiting the generality
of the foregoing, Merrill Lynch shall be released from all of its obligations
hereunder upon the earlier of (i) the effectiveness of the Merrill Lynch
Assignment Agreement or (ii) the third Business Day following the date of
this Agreement, if the Merrill Lynch Assignment Agreement shall not have been
entered into and become effective on or before such date.

 

ARTICLE VI.

REPRESENTATIONS AND WARRANTIES

 

The Company represents and warrants to the Lenders that, immediately at
the giving effect to the transactions contemplated herein and the other
Operative Documents:

 

6.01        Existence
and Power.

 

Each Credit Party is an
entity as specified on Schedule 6.01, is duly organized, validly
existing and in good standing under the laws of the jurisdiction specified on Schedule 6.01,
has the same legal name as it appears in such Credit Party’s Organizational
Documents and an organizational identification number (if any), in each case as
specified on Schedule 6.01, and has all powers and all governmental
licenses, authorizations, registrations, permits, consents and approvals
required under all applicable Laws and required in order to carry on its
business as now conducted (collectively, “Permits”), except where the failure to have such Permits could
not reasonably be expected to have a Material Adverse Effect.  Each Credit Party is qualified to do business
as a foreign entity in each jurisdiction in which it is required to be so
qualified, except where the failure to be so qualified could not reasonably be
expected to have a Material Adverse Effect. 
Except as set forth on Schedule 6.01, no Credit Party has
had, over the five (5) year period preceding the Funding Date, any name
other than its current name or was incorporated or 

 

22

 

organized under the laws of any jurisdiction other
than its current jurisdiction of incorporation or organization.

 

6.02        Organization
and Governmental Authorization; No Contravention.

 

The execution, delivery and
performance by each Credit Party of the Operative Documents to which it is a
party are within its powers, have been duly authorized by all necessary action
pursuant to its Organizational Documents, require no further action by or in
respect of, or filing with, any Governmental Authority and do not violate,
conflict with or cause a breach or a default under (i) any Law or any of
the Organizational Documents of any Credit Party or (ii) any agreement or
instrument binding upon it, except for such violations, conflicts, breaches or
defaults as could not reasonably be expected to have a Material Adverse Effect.

 

6.03        Binding
Effect.

 

Each of the Operative
Documents to which any Credit Party is a party constitutes a valid and binding
agreement or instrument of such Credit Party, enforceable against such Credit
Party in accordance with its respective terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency or other similar laws relating
to the enforcement of creditors’ rights generally and by general equitable
principles.

6.04        Capitalization.

 

The authorized Capital Stock
of each of the Credit Parties as of the Funding Date is as set forth on Schedule 6.04.  All issued and outstanding Capital Stock of
each of the Credit Parties is duly authorized and validly issued, fully paid,
non-assessable, free and clear of all Liens other than those in favor of Senior
Agent for the benefit of Senior Agent and Senior Lenders, and such Capital
Stock was issued in compliance with all applicable Laws.  The identity of the holders of the Capital
Stock of each of the Credit Parties and the percentage of their fully-diluted
ownership of the Capital Stock of each of the Credit Parties as of the Funding
Date is set forth on Schedule 6.04. 
No Capital Stock of any Credit Party, other than as  described above, is issued and outstanding as
of the Funding Date.  Except as set forth
on Schedule 6.04, as of the Funding Date there are no preemptive or
other outstanding rights, options, warrants, conversion rights or similar
agreements or understandings for the purchase or acquisition from any Credit
Party of any Capital Stock of any such entity.

 

6.05        Financial
Information.

 

(a)           Audited Statements.  The consolidated balance sheet of Holdings and its Consolidated Subsidiaries as of December 31,
2006 and the related consolidated statements of operations, stockholders’
equity (or comparable calculation, if such Person is not a corporation) and
cash flows for the fiscal year then ended, reported on by Deloitte &
Touche,
copies of which have been delivered to Lenders, fairly present in all material
respects, in conformity with GAAP, the consolidated financial position of
Holdings and its Consolidated
Subsidiaries as of such date and their consolidated results of operations,
changes in stockholders’ equity (or comparable calculation) and cash flows for
such period.

 

(b)           Unaudited Statements. The unaudited
consolidated balance sheet of Holdings and
its Consolidated Subsidiaries as of December 31, 2007 and the related
unaudited consolidated statements of operations and cash flows for the twelve
(12) months then ended, copies of which have been delivered to Lenders, fairly
present in all material respects, in conformity with GAAP applied on a basis
consistent with the financial statements referred to in Section 6.05(a),
the consolidated financial position of the Holdings and its Consolidated Subsidiaries as of such date and their
consolidated results of operations and 

 

23

 

cash flows for the twelve (12)
months then ended (subject to normal year-end adjustments and the absence of
footnote disclosures).

 

(c)           Pro Forma Balance Sheet.  The pro forma balance sheet of Holdings and its Consolidated Subsidiaries as of December 31, 2007, a copy of which
has been delivered to Lenders, fairly presents in all material respects, in
conformity with GAAP applied on a basis consistent with the financial
statements referred to in Section 6.05(a), the consolidated
financial position of Holdings and its Consolidated
Subsidiaries as of such date, adjusted to give effect (as if such events had
occurred on such date) to (i) the transactions contemplated by the
Operative Documents, (ii) the Notes, (iii) the application of the
proceeds therefrom as contemplated by the Loan Documents and (iv) the
payment of all legal, accounting and other fees related thereto to the extent
known at the time of the preparation of such balance sheet.  As of the date of such balance sheet and the
Funding Date, no Credit Party had or has any material liabilities, contingent
or otherwise, including liabilities for taxes, long-term leases or forward or
long-term commitments, which are not properly reflected on such balance sheet.

 

(d)           No Material Adverse Change.  Since December 31, 2006, there has been
no material adverse change in the business, operations, properties, prospects
or financial condition of Holdings and its
Consolidated Subsidiaries, taken as a whole.

 

(e)           Holdings.  Holdings was
formed to hold the Capital Stock of the Company, and, except as contemplated by
this Agreement and the other Operative Documents, has no liabilities or assets
other than Capital Stock of Company.

 

6.06        Litigation.

 

Except as set forth on Schedule 6.06,
as of the Funding Date there is no material Litigation pending against, or to
Company’s knowledge threatened against or affecting, any Credit Party.  There is no Litigation pending which could
reasonably be expected to have a Material Adverse Effect or which in any manner
draws into question the validity of any of the Operative Documents.

 

6.07        Ownership
of Property.

 

Company and each of its
Subsidiaries is the lawful owner of, has good and marketable title (subject to
Permitted Liens) to and is in lawful possession of, or has valid leasehold
interests in, all properties and other assets (real or personal, tangible,
intangible or mixed) purported or reported to be owned or leased (as the case
may be) by such Person, except as may have been disposed of in the Ordinary
Course of Business or otherwise in compliance with the terms hereof.

 

6.08        No
Default.

 

No Default or Event of
Default has occurred and is continuing. 
No Credit Party is in breach or default under or with respect to any
contract, agreement, lease or other instrument to which it is a party or by
which its property is bound or affected, which breach or default could
reasonably be expected to have a Material Adverse Effect.

6.09        Labor
Matters.

 

As of the Funding Date,
there are no strikes or other labor disputes pending or, to Company’s
knowledge, threatened against any Credit Party which could reasonably be
expected to have a Material Adverse Effect. 
Hours worked and payments made to or on behalf of the employees of the
Credit Parties have not been in violation of the Fair Labor Standards Act or
any other applicable Law dealing with such matters, except for such violations
which could not reasonably be expected to have a Material Adverse 

 

24

 

Effect.  All material payments due from the Credit
Parties, or for which any claim may be made against any of them, on account of
wages and employee and retiree health, if any, and welfare insurance and other
benefits have been paid or accrued as a liability on their books to the extent
required by applicable Laws, as the case may be.

 

6.10        Regulated
Entities.

 

No Credit Party is an “investment
company” or a company “controlled” by an “investment company” or a “subsidiary”
of an “investment company,” all within the meaning of the Investment Company
Act of 1940.

 

6.11        Margin
Regulations.

 

None of the proceeds from
the Loans have been or will be used, directly or indirectly, for the purpose of
purchasing or carrying any Margin Stock, for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry any
Margin Stock or for any other purpose which might cause any of the Loans to be
considered a “purpose credit” within the meaning of Regulation T, U or X of the
Federal Reserve Board.

 

6.12        Compliance
With Laws; Anti-Terrorism Laws.

 

(a)           Laws Generally.  Each Credit Party is in compliance with the
requirements of all applicable Laws, except for such Laws the noncompliance
with which could not reasonably be expected to have a Material Adverse Effect.

 

(b)           Anti-Terrorism Laws.  None of the Credit Parties and, to the
knowledge of the Credit Parties, none of their Affiliates (i) is in
violation of any Anti-Terrorism Law, (ii) engages in or conspires to
engage in any transaction that evades or avoids, or has the purpose of evading
or avoiding, or attempts to violate, any of the prohibitions set forth in any
Anti-Terrorism Law, (iii) is a Blocked Person, or is controlled by a
Blocked Person, (iv) is acting or will act for or on behalf of a Blocked
Person, (v) is associated with, or will become associated with, a Blocked
Person or (vi) is providing, or will provide, material, financial or
technical support or other services to or in support of acts of terrorism of a
Blocked Person.  No Credit Party nor, to
the knowledge of any Credit Party, any of its Affiliates or agents acting or
benefiting in any capacity in connection with the transactions contemplated by
this Agreement, (A) conducts any business or engages in making or
receiving any contribution of funds, goods or services to or for the benefit of
any Blocked Person, or (B) deals in, or otherwise engages in any
transaction relating to, any property or interest in property blocked pursuant
to Executive Order No. 13224, any similar executive order or other
Anti-Terrorism Law.

 

6.13        Taxes.

 

All Federal and material state
and local tax returns, reports and statements required to be filed by or on
behalf of each Credit Party have been filed with the appropriate Governmental
Authorities in all jurisdictions in which such returns, reports and statements
are required to be filed and, except to the extent subject to a Permitted
Contest, all Taxes (including real property Taxes) and other charges shown to
be due and payable in respect thereof have been timely paid prior to the date
on which any material fine, penalty, interest, late charge or loss may be added
thereto for nonpayment thereof.  Except
to the extent subject to a Permitted Contest, all material state and local
sales and use Taxes required to be paid by each Credit Party have been
paid.  All Federal and material state
returns have been filed by each Credit Party for all periods for which returns
were due with respect to employee income tax withholding, social security and
unemployment taxes, and, except to the extent subject to a Permitted Contest,
the amounts 

 

25

 

shown thereon to be due and
payable have been paid in full or adequate provisions therefor have been made.

 

6.14        Compliance
with ERISA.

 

(a)           ERISA Plans.  Except as could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, each ERISA
Plan (and the related trusts and funding agreements) complies in form and in
operation with, has been administered in compliance with, and the terms of each
ERISA Plan satisfy, the applicable requirements of ERISA and the Code.  The United States Internal Revenue Service
has issued a favorable determination letter with respect to each ERISA Plan
which is intended to be qualified under Section 401(a) of the Code,
which may be relied on currently.  No
Credit Party has incurred liability for any material excise tax under any of
Sections 4971 through 5000 of the Code.

 

(b)           Pension Plans and
Multiemployer Plans.  (A) During
the thirty-six (36) month period prior to the Funding Date or the making of any
Loan, (i) no steps have been taken to terminate any Pension Plan and (ii) no
contribution failure has occurred with respect to any Pension Plan sufficient
to give rise to a Lien under Section 302(f) of ERISA.  (B) No Credit Party has incurred liability
to the PBGC (other than for current premiums) with respect to any Pension
Plan.  (C) All contributions (if
any) have been made on a timely basis to any Multiemployer Plan that are
required to be made by any Credit Party or any other member of the Controlled
Group under the terms of the Multiemployer Plan or of any collective bargaining
agreement or by applicable Law; no Credit Party nor any member of the
Controlled Group has withdrawn or partially withdrawn from any Multiemployer
Plan, incurred any withdrawal liability with respect to any such plan or
received notice of any claim or demand for withdrawal liability or partial
withdrawal liability from any such plan, and no condition has occurred which,
if continued, could reasonably be expected to result in a withdrawal or partial
withdrawal from any such plan, and no Credit Party nor any member of the
Controlled Group has received any notice that any Multiemployer Plan is in
reorganization, that increased contributions may be required to avoid a reduction
in plan benefits or the imposition of any excise tax, that any such plan is or
has been funded at a rate less than that required under Section 412 of the
Code, that any such plan is being terminated, or that any such plan is or is
expected to become insolvent.

 

6.15        Brokers.

 

Except as set forth on Schedule
6.15, and except for fees payable to Agent and/or Lenders, no broker,
finder or other intermediary has brought about the obtaining, making or closing
of the transactions contemplated by the Operative Documents, and no Credit
Party has or will have any obligation to any Person in respect of any finder’s
or brokerage fees in connection herewith or therewith.

 

6.16        Related
Transactions.

 

The Palace Acquisition has
been consummated in all material respects pursuant to the provisions of the
Palace Acquisition Documents, true and complete copies of which have been
delivered to Lenders, and in compliance with all applicable Laws.  The transactions contemplated by the Senior
Transaction Documents to be consummated on or prior to the date hereof have
been so consummated (including without limitation the disbursement and transfer
of all funds in connection therewith) in all material respects pursuant to the
provisions of the applicable Operative Documents, true and complete copies of
which have been delivered to Lenders, and in compliance with all applicable
Laws.

 

26

 

6.17        Material
Contracts.

 

Except for the Operative
Documents and the other agreements set forth on Schedule 6.17
(collectively with the Operative Documents, the “Material Contracts”), as of the Funding Date there are no (i) employment
agreements covering the management of any Credit Party, (ii) collective
bargaining agreements or other labor agreements covering any employees of any
Credit Party, (iii) agreements for managerial, consulting or similar
services to which any Credit Party is a party or by which it is bound, (iv) agreements
regarding any Credit Party, its assets or operations or any investment therein
to which any of its equity holders is a party or by which it is bound, (v) real
estate leases, Intellectual Property licenses or other lease or license
agreements to which any Credit Party is a party, either as lessor or lessee, or
as licensor or licensee, or (vi) customer, distribution, marketing or
supply agreements to which any Credit Party is a party, in each case with
respect to the preceding clauses (i), (iii), (iv), (v) and (vi) requiring
payment of more than $500,000 in
any year ($250,000 in any year in the case of real estate leases), (vii) partnership
agreements to which any Credit Party is a general partner or joint venture
agreements to which any Credit Party is a party or (viii) any other
agreements or instruments to which any Credit Party is a party, and the breach,
nonperformance or cancellation of which, or the failure of which to renew,
could reasonably be expected to have a Material Adverse Effect.  Schedule 6.17 sets forth, with respect
to each real estate lease agreement to which any Credit Party is a party as of
the Funding Date, the address of the subject property and the annual rental
(or, where applicable, a general description of the method of computing the
annual rental).  The consummation of the
transactions contemplated by the Loan Documents and the other Operative
Documents will not give rise to a right of termination in favor of any party to
any Material Contract (other than any Credit Party) if such termination could
reasonably be expected to have a Material Averse Effect.  All of
such Material Contracts are valid, subsisting and in full force and effect and
none of the Credit Parties, as applicable, or, to the knowledge of the Credit
Parties, any other parties, are in default thereunder, in each case except as could
not reasonably be expected to have a Material Adverse Effect.

 

6.18        Environmental
Compliance.

 

(a)           Hazardous
Materials. 
Except in each case as set forth on Schedule 6.18, (i) no
Hazardous Materials are located on any properties now or previously owned,
leased or operated by any Credit Party or have been released into the
environment, or deposited, discharged, placed or disposed of at, on, under or
near any of such properties in a manner that would require the taking of any
action under any Environmental Law and could reasonably be expected to give
rise to, remediation costs and expenses on the part of the Credit Parties in
excess of an amount that could
reasonably be expected to have a Material Adverse Effect.  No portion of any such
property is being used, or has been used at any previous time, for the
disposal, storage, treatment, processing or other handling of Hazardous
Materials in violation of any Environmental Law; and (ii) to the knowledge
of Company, all oral or written notifications of a release of Hazardous
Materials required to be filed by or on behalf of any Credit Party under any
applicable Environmental Law have been filed or are in the process of being
timely filed by or on behalf of the applicable Credit Party.

 

(b)           Notices
Regarding Environmental Compliance.  Except in each case as set forth on Schedule
6.18, no notice, notification, demand, request for information, citation,
summons, complaint or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending, or to
Company’s knowledge, threatened by any Governmental Authority or other Person
with respect to any (i) alleged violation by any Credit Party of any
Environmental Law, (ii) alleged failure by any Credit Party to have any
Permits required in connection with the conduct of its business or to comply
with the terms and conditions thereof, (iii) any generation, treatment,
storage, recycling, transportation or disposal of any Hazardous Materials or (iv) release
of Hazardous Materials.

 

27

 

(c)           Properties
Requiring Remediation.  Except in each case as set forth on Schedule
6.18, no property now owned or leased by any Credit Party and, to the
knowledge of Company, no such property previously owned or leased by any Credit
Party, to which any Credit Party has transported or arranged for the
transportation of any Hazardous Materials, is listed or, to Company’s
knowledge, proposed for listing, on the National Priorities List promulgated
pursuant to CERCLA, or CERCLIS (as defined in CERCLA) or any similar state list
or is the subject of Federal, state or local enforcement actions or, to the
knowledge of Company, other investigations which may lead to material claims
against any Credit Party for clean-up costs, remedial work, damage to natural
resources or personal injury claims, including, but not limited to, claims
under CERCLA.

 

(d)           Underground
Storage Tanks. 
Except in each case as set forth on Schedule 6.18, there are no
underground storage tanks located on any property owned or leased by any Credit
Party that are not properly registered or permitted under applicable
Environmental Laws or that are leaking or disposing of Hazardous Materials so
as to require the taking of any action under applicable Environmental Laws.

 

(e)           Environmental
Liens.  Except in
each case as set forth on Schedule 6.18, there are no Liens under or
pursuant to any applicable Environmental Laws on any real property or other
assets owned or leased by any Credit Party, and no actions by any Governmental
Authority have been taken or, to the knowledge of Company, are in process which
could subject any of such properties or assets to such Liens.

 

For purposes of this Section 6.18,
each Credit Party shall be deemed to include any business or business entity
(including a corporation) which is, in whole or in part, a predecessor of such
Credit Party.

 

6.19        Intellectual
Property.

 

Each Credit Party owns, is
licensed to use or otherwise has the right to use, all Intellectual Property
that is material to the condition (financial or other), business or operations
of such Credit Party.  All such Intellectual
Property existing as of the Funding Date and registered with any United States
or foreign Governmental Authority is set forth on Schedule 6.19.  All material Intellectual Property of each
Credit Party is fully protected and/or duly and properly registered, filed or
issued in the appropriate office and jurisdictions for such registrations,
filings or issuances.  To Company’s
knowledge, each Credit Party conducts its business without infringement or
claim of infringement of any Intellectual Property rights of others and there
is no infringement or claim of infringement by others of any Intellectual
Property rights of any Credit Party, which infringement or claim of
infringement could reasonably be expected to have a Material Adverse Effect.

 

6.20        Real Property
Interests.

 

Except for leasehold
interests disclosed on Schedule 6.17, and except for the ownership or
other interests set forth on Schedule 6.20, no Credit Party has, as of
the Funding Date, any ownership, leasehold or other interest in real
property.  Schedule 6.20 sets
forth, with respect to each parcel of real estate owned by any Credit Party as
of the Funding Date, the address and legal description of such parcel.

 

6.21        Solvency.

 

Company and each additional
Credit Party is Solvent.

 

6.22        Full
Disclosure.

 

To the Company’s knowledge,
none of the information (financial or otherwise) furnished by or on behalf of
any Credit Party to Agent or any Lender in connection with the consummation of
the transactions contemplated by the Operative Documents, contains any untrue
statement of a material fact 

 

28

 

or omits to state a material fact necessary to make
the statements contained herein or therein not misleading in light of the
circumstances under which such statements were made.  All financial projections delivered to Agent
and Lenders have been prepared on the basis of the assumptions stated
therein.  Such projections represent
Company’s best estimate of Company’s future financial performance and such
assumptions are believed by Company to be fair and reasonable in light of
current business conditions; provided that Company can give no assurance
that such projections will be attained.

 

6.23        [Reserved.]

 

6.24        Use of
Proceeds.

 

The
proceeds of the Notes on the Funding Date, together with proceeds of the loans
under the Senior Credit Agreement on the Funding Date, shall be used solely (i) to
fund a Restricted Distribution of up to $9,000,000 for the purposes of
permitting Purchaser to repay a portion of the Existing RBS Debt and to fund
the Existing Notes Tender Offer and (ii) for the payment of related costs
and expenses.

 

6.25        Transactions
with Affiliates.

 

Except
as set forth on Schedule 6.25, there are no material Contractual
Obligations of a Credit Party to any of the officers, directors, shareholders,
Affiliates or their respective Affiliates, or Related Parties, of a Credit
Party other than (i) for payment of salary for services rendered, (ii) reimbursement
for reasonable expenses incurred on behalf of a Credit Party, (iii) for
standard employee benefits made generally available to all employees of the
Company and (iv) pursuant to any of the Operative Documents.  Except as set forth on Schedule 6.25,
none of the officers, directors, shareholders, employees, Affiliates, or their
respective Affiliates or Related Parties, of any Credit Party has incurred Debt
to a Credit Party or has any direct or indirect material ownership interest in
any Person with which a Credit Party is affiliated or, to the Credit Parties’
best knowledge, with which a Credit Party has a business relationship except
that such Person may own stock in publicly traded companies.  Other than as set forth on Schedule 6.25,
no officer, director, shareholder, Affiliate, or any of their respective
Affiliates or Related Parties, of a Credit Party, is, directly or indirectly, a
party to or otherwise interested in any material Contractual Obligation with a
Credit Party.  Except as may be expressly
disclosed in notes to the Audited Financial Statements, no Credit Party is a
guarantor or indemnitor of any Debt of any other Person.

 

ARTICLE VIA.

REPRESENTATIONS AND WARRANTIES OF THE LENDERS

 

Each of the Lenders, severally and not jointly,
represents and warrants only as to itself to the Company as follows:

 

(a)           It is an “accredited investor” as that term is defined in Rule 501
of the Securities Act, and that, in making the purchases contemplated herein,
it is specifically understood and agreed that the Lenders is acquiring the
Notes for the purpose of investment and not with a view towards the sale or
distribution thereof within the meaning of the Securities Act; provided,
however, that the disposition of the Lenders’ property shall at all
times be and remain within its control.

 

(b)           It understands that the Notes will not be registered under the
Securities Act, by reason of their issuance by the Company in a transaction exempt from the registration
requirements of the Securities Act, and that it must hold the Notes
indefinitely unless a subsequent disposition thereof is registered under the Securities
Act and applicable state securities laws or is exempt from registration.

 

29

 

(c)           It has not employed any broker or finder in connection with the
transactions contemplated by this Agreement.

 

(d)           It has been furnished with or has had access to the information it has
requested from the Company and has
had an opportunity to discuss with the management of the Company the business and financial affairs of the Credit
Parties, and has generally such knowledge and experience in business and
financial matters and with respect to investments in securities or privately
held companies so as to enable it to understand and evaluate the risks of such
investment and form an investment decision with respect thereto; provided,
however, that the foregoing shall in no way affect, diminish or derogate
from the representations and warranties made by the Company hereunder or the right of the Lenders to rely
thereon and to seek indemnification hereunder.

 

(e)           Either (i) no part of the funds to be used by such Lender to
acquire or hold the Notes constitutes assets of any “employee benefit plan”
within the meaning of Section 3(3) of ERISA or any “plan” within the
meaning of Section 4975 of the Code or (ii) the acquisition and holding
of the Notes by such Lender is exempt from the restrictions on prohibited
transactions of ERISA and the Code pursuant to one or more statutory,
regulatory or administrative exemptions.

 

ARTICLE VII.

AFFIRMATIVE COVENANTS

 

So long as any Lender shall have any Notes remaining
unpaid or unsatisfied or other Subdebt Obligations (other than contingent
indemnity obligations) hereunder shall remain unpaid or unsatisfied, the
Company shall, and shall cause each of its Subsidiaries to:

 

7.01        Financial
Statements and Other Reports.

 

Company
will maintain and will cause each Credit Party to maintain a system of
accounting established and administered in accordance with sound business
practices to permit preparation of financial statements in accordance with GAAP
and to provide the information required to be delivered to Agent and Lenders
hereunder, and will deliver to Lenders all of the following deliveries:

 

(a)           Monthly Financial Statements.  As soon as practicable and in any event
within thirty (30) days after the end of each month (including the last month
of Company’s Fiscal Year) (i) a consolidated balance sheet of Holdings and
its Consolidated Subsidiaries as at the end of such month and the related
consolidated statements of operations and cash flows for such month and (ii) summary
statements of operations for the Family Entertainment Centers Division and the
Waterparks Division on a divisional basis as of the end of such month, and, in
case, for the portion of the Fiscal Year ended at the end of such month setting
forth in each case in comparative form the figures for the corresponding
periods of the previous Fiscal Year and the figures for such month and for such
portion of the Fiscal Year ended at the end of such month set forth in the
annual operating and Capital Expenditure budgets and cash flow forecast
delivered pursuant to Section 7.01(m), all in reasonable detail and
certified by a Responsible Officer as fairly presenting in all material
respects the financial condition and results of operations of Holdings and its
Consolidated Subsidiaries and as having been prepared in accordance with GAAP
applied on a basis consistent with the audited financial statements of
Holdings, subject to changes resulting from audit and normal year-end
adjustments and the absence of footnote disclosures.

 

(b)           Annual Financial Statements.  As soon as available and in any event within
one hundred twenty (120) days after the end of each Fiscal Year (commencing
with the Fiscal Year ending December 31, 2007), a consolidated balance
sheet of Holdings and its Consolidated Subsidiaries as of the end of such
Fiscal Year and the related consolidated statements of operations, stockholders’
equity (or the 

 

30

 

comparable
item, if Holdings is not a corporation) and cash flows for such Fiscal Year,
setting forth in each case in comparative form the figures for the previous
Fiscal Year and the figures for such Fiscal Year set forth in the annual
operating and Capital Expenditure budgets and cash flow forecast delivered
pursuant to Section 7.01(m), certified without qualification (including
with respect to the scope of audit) or exception by independent public
accountants of nationally recognized standing and reasonably acceptable to
Agent; provided  that,
with respect to the Fiscal Year ending December 31, 2007, such financial
statements shall be delivered in a non-standard GAAP one year presentation.

 

(c)           Compliance Certificates.  Together with each delivery of financial
statements pursuant to Sections 7.01(a) and 7.01(b), (i) a
Compliance Certificate, and (ii) a summary report discussing the reasons
for any significant variations in the operations and financial condition of
Holdings and its Consolidated Subsidiaries as between the fiscal period covered
by such financial statements and the same periods during the immediately
preceding Fiscal Year, and as between such periods and the same periods
included in the projections and forecasts delivered pursuant to Section 7.01(m).

 

(d)           [Reserved.]

 

(e)           Accountant’s Letters.  Promptly upon receipt thereof, copies of all
reports submitted to any Credit Party by independent public accountants in
connection with each annual, interim or special audit of the financial
statements of any Credit Party made by such accountants, including the comment
letter submitted by such accountants to management in connection with any
audit.

 

(f)            Regulatory Filing Information.  Promptly upon their becoming available,
copies of (i) all financial statements, reports, notices and proxy
statements sent or made available generally by any Credit Party to its security
holders, (ii) all regular and periodic reports and all registration
statements and prospectuses filed by any Credit Party with any securities
exchange or with the Securities and Exchange Commission or any successor, (iii) all
press releases and other statements made available generally by any Credit
Party concerning material developments in the business of any Credit Party and (iv) all
Swap Contracts entered into by any Credit Party.  If information required to be delivered
pursuant to this clause (f) is posted on a website to which Agent and all
Lenders have been granted access, such information shall be deemed to have been
delivered pursuant to this clause (f) when the Company has delivered
notice of such posting to Agent and Lenders.

 

(g)           Acquisition Adjustments.  Promptly upon such information becoming
available, a summary of all purchase price and other monetary adjustments in
excess of $2,000,000 individually or in the aggregate that are made pursuant to
any of the Palace Acquisition Documents.

 

(h)           Notices of Material Events.  Promptly upon any officer of any Credit Party
obtaining knowledge (i) of the existence of any Event of Default or
Default, or becoming aware that the holder of any Senior Indebtedness or any
other Debt of any Credit Party in excess of $2,000,000 has given any notice or
taken any other action with respect to a claimed default thereunder, (ii) of
any change in any Credit Party’s certified accountant, (iii) that any
Person has given any notice to any Credit Party or taken any other action with
respect to a claimed default under any Material Contract (other than the Loan
Documents) or any other material agreement or instrument to which any Credit
Party is a party or by which any of its assets is bound, or (iv) of the
institution of any Litigation seeking equitable relief or involving an alleged
liability of any Credit Party equal to or greater than $2,000,000 or any
adverse determination in any Litigation involving equitable relief or a
potential liability of any Credit Party equal to or greater than $2,000,000, a
certificate of a Responsible Officer specifying the nature and period of
existence of any such condition or event, or specifying the notice given or
action taken by such holder or Person and the nature of such claimed default
(including any Event of Default or Default), event or 

 

31

 

condition,
and what action the applicable Credit Party has taken, is taking or proposes to
take with respect thereto.

 

(i)            ERISA Notices.  Promptly upon any officer of any Credit Party
obtaining knowledge of (i) the institution of any steps by any member of
the Controlled Group or any other Person to terminate any Pension Plan, (ii) the
failure of any member of the Controlled Group to make a required contribution
on a timely basis to any ERISA Plan or to any Multiemployer Plan which could
reasonably be expected to have a Material Adverse Effect, (iii) the taking
or omission of any action with respect to a Pension Plan which could reasonably
be expected to result in the requirement that Company or any other Credit Party
furnish a bond or other security to the PBGC or such Pension Plan, (iv) the
occurrence of or reasonably expected occurrence of a reportable event under Section 4043
of ERISA (for which a reporting requirement is not waived) with respect to any
Pension Plan, (v) the occurrence of any event with respect to any Pension
Plan or Multiemployer Plan which could reasonably be expected to result in the
incurrence by any member of the Controlled Group of any material liability,
fine or penalty (including any claim or demand for withdrawal liability or
partial withdrawal from any Multiemployer Plan), or (vi) the receipt by
Company or any other Credit Party of any notice that any Multiemployer Plan is
in reorganization, that increased contributions may be required to avoid a
reduction in plan benefits or the imposition of an excise tax, that any such
plan is or is expected to be in “at risk” status (within the meaning of Section 430(i) of
the Code and Title IV of ERISA), that any such plan is or has been funded at a
rate less than that required under Section 412 of the Code, that any such
plan is being terminated, or that any such plan is or may be expected to become
insolvent, a certificate of a Responsible Officer specifying the nature and
period of existence of any such condition or event, or specifying the notice
given or action taken by such holder or Person, and what action the applicable
Credit Party has taken, is taking or proposed to take with respect thereto.

 

(j)            Environmental Notices.  Promptly upon any officer of any Credit Party
obtaining knowledge of any complaint, order, citation, notice or other written
communication from any Person delivered to any Credit Party with respect to, or
if any officer of any Credit Party becomes aware of (i) the existence or
alleged existence of a material violation of any applicable Environmental Law, (ii) any
release of any Hazardous Materials into the environment requiring the taking of
any action under Environmental Law, (iii) the commencement of any cleanup
of any Hazardous Materials, (iv) any pending or threatened proceeding for
the termination, suspension or non-renewal of any Permit required under any
applicable Environmental Law, or (v) any property of any Credit Party that
is or will be subject to a Lien imposed pursuant to any Environmental Law, a
certificate of a Responsible Officer specifying the nature and period of existence
of any such condition or event, or specifying the notice given or action taken
by such holder or Person, and what action the applicable Credit Party has
taken, is taking or proposes to take with respect thereto.

 

(k)           [Reserved.]

 

(l)            Material and Governmental Notices.  Promptly upon receipt or filing thereof,
copies of any reports or notices related to any material taxes and any other
material reports or notices received by any Credit Party from, or filed by any
Credit Party with, any Governmental Authority.

 

(m)          Projections.  Within sixty (60) days after the conclusion
of each Fiscal Year, Company’s annual operating plans, operating and Capital
Expenditure budgets, and financial forecasts, including cash flow projections
covering proposed fundings, repayments, additional advances, investments and
other cash receipts and disbursements, each for the following three (3) Fiscal
Years presented on a monthly basis for the next Fiscal Year and annually for
the two (2) subsequent Fiscal Years, all of which shall be in a format
reasonably consistent with projections, budgets and forecasts theretofore
provided to Lenders, 

 

32

 

and
promptly following the preparation thereof, material updates to any of the
foregoing from time to time prepared by management of Company.

 

(n)           [Reserved.]

 

(o)           [Reserved.]

 

(p)           Credit Party Information.  With reasonable promptness, such other
information and data with respect to any Credit Party as from time to time may
be reasonably requested by Agent or any Lender.

 

7.02        Payment and
Performance of Obligations.

 

Company
(a) will pay and discharge, and cause each Subsidiary to pay and
discharge, at or before maturity, all of their respective obligations and
liabilities, including tax liabilities, except for (i) the Senior
Indebtedness and (ii) such obligations and/or liabilities (A) that
may be the subject of a Permitted Contest and (B) the nonpayment or
nondischarge of which could not reasonably be expected to have a Material
Adverse Effect, (b) will maintain, and cause each Subsidiary to maintain,
in accordance with GAAP, appropriate reserves for the accrual of all of their
respective obligations and liabilities and (c) will not breach or permit
any Subsidiary to breach, or permit to exist any default under, the terms of
any lease, commitment, contract, instrument or obligation to which it is a
party, or by which its properties or assets are bound, except for such breaches
or defaults (i) with respect to the Senior Transaction Documents  or (ii) which could not reasonably be
expected to have a Material Adverse Effect.

 

7.03        Maintenance of
Existence.

 

Company
will preserve, renew and keep in full force and effect, and will cause each
Subsidiary to preserve, renew and keep in full force and effect, their
respective existence and their respective rights, privileges and franchises
necessary or desirable in the normal conduct of business.

 

7.04        Maintenance of
Property; Insurance.

 

(a)           Maintenance of Property.  Company will keep, and will cause each
Subsidiary to keep, all material property useful and necessary in its business
in good working order and condition, ordinary wear and tear excepted.

 

(b)           Required Insurance Coverage.  Company will maintain, and will cause each
Subsidiary to maintain, (i) casualty insurance on all real and personal
property on an all risks basis (including the perils of flood and quake),
covering the repair and replacement cost of all such property and coverage for
business interruption and public liability insurance (including
products/completed operations liability coverage) in each case of the kinds
customarily carried or maintained by Persons of established reputation engaged
in similar businesses and in amounts acceptable to Lenders and (ii) such
other insurance coverage in such amounts and with respect to such risks as
Lenders may reasonably request.  All such
insurance shall be provided by insurers having an A.M. Best policyholders
rating reasonably acceptable to Lenders. 
Company will not, and will not permit any Subsidiary to, bring or keep
any article on any business location of any Credit Party, or cause or allow any
condition to exist, if the presence of such article or the occurrence of such
condition could reasonably cause the invalidation of any insurance required by
this Section 7.04(b), or would otherwise be prohibited by the terms
thereof.

 

33

 

(c)           Evidence of Insurance Coverage.  Company will deliver to Agent and Lenders on
the Funding Date, a certificate from Company’s insurance broker dated such date
showing the amount of coverage as of such date.

 

7.05        Compliance with
Laws.

 

Company
will comply, and cause each Subsidiary to comply, with the requirements of all
applicable Laws, except to the extent that failure to so comply could not
reasonably be expected to have a Material Adverse Effect or result in any Lien
(other than a Permitted Lien) upon a material portion of the assets of any such
Person in favor of any Governmental Authority.

 

7.06        Inspection of
Property, Books and Records.

 

Company
will keep, and will cause each Subsidiary to keep, proper books of record and
account in accordance with GAAP in which full, true and correct entries shall
be made of all dealings and transactions in relation to its business and
activities; and will permit, and will cause each Subsidiary to permit, at the
sole cost of Company or any applicable Subsidiary, representatives of Agent
(and of any Lender during and upon the existence and continuance of an Event of
Default) to visit and inspect any of their respective properties (subject to
the rights of third party tenants and licensees), to examine and make abstracts
or copies from any of their respective books and records, to conduct a
collateral audit and analysis of their respective Inventory and Accounts and to
discuss their respective affairs, finances and accounts with their respective
officers, employees and independent public accountants as often as may
reasonably be desired; provided, that, following the Funding Date, Company and
its Subsidiaries shall not be obligated to reimburse Agent and Lenders for the
cost of more than one (1) inspection per Fiscal Year made in the absence
of an Event of Default.  In the absence
of an Event of Default, Agent shall give Company or any applicable Subsidiary
commercially reasonable prior written notice of such exercise.  No notice shall be required during the
existence and continuance of any Event of Default.

 

7.07        Use of
Proceeds.

 

Company
will use the proceeds of the Notes solely to fund a Restricted Distribution of
up to $9,000,000 for the purposes of permitting Purchaser to repay a portion of
the Existing RBS Debt, to fund in part the repayment of Debt under the Existing
Credit Agreement and to fund the Existing Notes Tender Offer and the payment of
related costs and expenses.

 

7.08        Lenders’
Meetings.

 

Company
will, in each case to the extent requested by either Agent or Required Lenders,
conduct (a) a monthly conference call with Agent and Lenders and (b) an
annual meeting of Agent and Lenders (or, at Agent’s election, an annual
conference call with Agent and Lenders), in each case to discuss the most
recently reported financial results and the financial condition of Company and
its Subsidiaries, at which shall be present a Responsible Officer and such
other officers of the Credit Parties as may be reasonably requested to attend
by Agent or Required Lenders, such request or requests to be made within a
reasonable time prior to the scheduled date of such conference call or such
meeting, as applicable.  Such meetings
and conference calls shall be held at a time and place convenient to Lenders
and to Company.

 

34

 

7.09        Required Swap
Contracts.

 

Not
later than ninety (90) days following the Funding Date (or such later date as
agreed to by the Senior Agent), Company will, at its sole cost and expense,
enter into and thereafter maintain in full force and effect Swap Contracts as
required pursuant to the Senior Credit Agreement.

 

7.10        Hazardous Materials;
Remediation.

 

(a)           Remediation.  If any release or disposal of Hazardous
Materials shall occur or shall have occurred on any real property or any other
assets of Company or any other Credit Party, Company will cause, or direct the
applicable Credit Party to cause, the prompt containment and removal of such
Hazardous Materials and the remediation of such real property or other assets
as is necessary to comply with all Environmental Laws and to preserve the value
of such real property or other assets.  Without
limiting the generality of the foregoing, Company shall, and shall cause each
other Credit Party to, comply with each Environmental Law requiring the
performance at any real property by Company or any other Credit Party of
activities in response to the release or threatened release of a Hazardous
Material.

 

(b)           [Reserved.]

 

7.11        Further
Assurances.

 

(a)           General.  Company will, and will cause each Subsidiary,
at its own cost and expense, to promptly and duly take, execute, acknowledge
and deliver all such further acts, documents and assurances as may from time to
time be necessary or as Agent or Required Lenders may from time to time
reasonably request in order to carry out the intent and purposes of the Loan
Documents and the transactions contemplated thereby.

 

(b)           New Subsidiaries.  Without limiting the generality of the
foregoing, in the event Company or any of its Subsidiaries shall acquire or
form any new Subsidiary after the date hereof, Company or the respective
Subsidiary will cause such new Subsidiary, upon such acquisition and
concurrently with such formation (excluding any Foreign Subsidiary whose
guarantee would result in material adverse tax consequences to Company under Section 956
of the Internal Revenue Code as determined by Lenders), (i) to execute a
Guarantee (in form and substance reasonably acceptable to Lenders) guaranteeing
payment and performance of all of the Subdebt Obligations, and (ii) to
deliver such proof of corporate (or comparable) action, incumbency of officers,
opinions of counsel and other documents as Lenders shall have required or
requested.  Until such time that any
Subsidiary shall have fully complied with the provisions of this paragraph, and
without limitation of any rights and remedies available to Agent and Lenders as
a result thereof, the operating results of such Subsidiary shall be disregarded
in the calculation of EBITDA for any measurement period.

 

(c)           Capital Stock.  Company will, and will cause each of its
Subsidiaries, to take such action from time to time as shall be necessary to
ensure that each of its Subsidiaries is a Wholly-Owned Subsidiary.

 

7.12        [Reserved].

 

7.13        [Reserved].

 

35

 

7.14        Modifications
of Senior Transaction Documents.

 

If the Credit Parties amend, change, add, or otherwise
modify the financial covenants (and the definitions used therein) in, or any
other provisions of, the Senior Transaction Documents to be more restrictive to
the Credit Parties than the existing financial covenants (and the related
financial definitions used therein) and other provisions in the Senior
Transaction Documents in effect as of the Closing Date, then, at the option of
the Required Lenders upon delivery of written notice, the Credit Parties agree
to amend, add or otherwise modify the financial covenants (and the related
financial definitions used herein) and other provisions in the Loan Documents,
it being understood that such modifications shall preserve, on substantially
similar and proportional economic terms, the relative differential, if any,
that existed on the Closing Date between the financial covenants (for each
applicable period) in the Senior Transaction Documents (and the related
financial or numerical definitions used therein) in effect as of the Closing Date
and the financial covenants (for each applicable period) in the Loan Documents
(and the financial or numerical definitions used herein) in effect as of the
Closing Date.  The Credit Parties agree
to effectuate all such amendments, changes, additions and/or modifications
concurrently with the modifications of the Senior Transaction Documents.

 

7.15        Remarketing
Cooperation.

 

                The Company shall cooperate
with the Lenders in completing any permitted resale of any portion of the
Notes, to the extent reasonably requested by the Lenders, including, without
limitation, (a) providing direct
contact between the Credit Parties’ senior management and prospective
purchasers in meetings, so long as such undertaking does not interfere with the
ability of such management personnel to perform their management obligations,
and (b) assisting the Lenders, upon their reasonable request, with
reviewing and/or updating any informational materials relating to the Credit
Parties and their business.

 

ARTICLE VIII.

NEGATIVE AND FINANCIAL COVENANTS

 

So
long as any Lender shall have any Notes remaining unpaid or unsatisfied or
other Subdebt Obligations (other than contingent indemnity obligations)
hereunder shall remain unpaid or unsatisfied:

 

8.01        Debt.

 

Company
will not, and will not permit any Subsidiary to, directly or indirectly,
create, incur, assume, guarantee or otherwise become or remain directly or
indirectly liable with respect to, any Debt, except for:

 

(a)           Debt under the Loan Documents;

 

(b)           Debt outstanding on the Funding Date and set forth
on Schedule 8.01 and any refinancings, refundings, renewals or
extensions thereof to the extent that the amount of such Debt is not increased
at the time of such refinancing, refunding, renewal or extension except by an
amount equal to fees and expenses reasonably incurred in connection with such
refinancing and by an amount equal to any existing unutilized commitments
thereunder;

 

(c)           Senior Indebtedness;

 

(d)           Debt incurred or assumed for the purpose of
financing all or any part of the cost of acquiring any fixed asset (including
through Capital Leases), in an aggregate principal amount at any time
outstanding not greater than $3,300,000;

 

36

 

(e)           Debt, if any, arising under Swap Contracts;

 

(f)            Intercompany Debt arising from loans made by (i) Company
to its Wholly-Owned Domestic Subsidiaries to fund working capital requirements
of such Subsidiaries in the Ordinary Course of Business, or (ii) any
Wholly-Owned Subsidiary of Company to Company; and

 

(g)           Unsecured Debt not to exceed $3,300,000 in the
aggregate at any time outstanding.

 

8.02        Liens.

 

Company
will not, and will not permit any Subsidiary to, directly or indirectly,
create, assume or suffer to exist any Lien on any asset now owned or hereafter
acquired by it, except:

 

(a)           Liens created by the Senior Transaction Documents;

 

(b)           Liens existing on the Funding Date and set forth on Schedule 8.02
and any extensions or renewals thereof, provided that (i) the Debt secured
is not increased except as permitted by Section 8.01(b) and (ii) such
Lien is not extended to any other property;

 

(c)           Any Lien on any asset securing Debt permitted under Section 8.01(d),
provided  that such Lien attaches only to
the assets financed by such Debt, and such Lien attaches concurrently with or
within ninety (90) days after the acquisition thereof;

 

(d)           Liens for taxes or other governmental or
quasi-governmental charges not at the time delinquent or thereafter payable
without penalty or the subject of a Permitted Contest;

 

(e)           Liens arising in the Ordinary Course of Business (i) in
favor of carriers, warehousemen, mechanics and materialmen, and other similar
Liens imposed by Law and (ii) in connection with worker’s compensation,
unemployment compensation and other types of social security (excluding Liens
arising under ERISA) or in connection with surety bonds, bids, performance
bonds and similar obligations for sums not overdue for a period of more than 30
days or the subject of a Permitted Contest and not involving any deposits or
advances or borrowed money or the deferred purchase price of property or
services and, in each case, for which it maintains adequate reserves;

 

(f)            Attachments, appeal bonds, judgments and other
similar Liens, for sums not exceeding $2,200,000
in the aggregate arising in connection with court proceedings; provided that the execution or
other enforcement of such Liens is effectively stayed and the claims secured
thereby are the subject of a Permitted Contest; and

 

(g)           Easements, rights of way, restrictions, minor
defects or irregularities in title and other similar Liens not interfering in
any material respect with the ordinary conduct of the business of Company or
any Subsidiary.

 

8.03        Contingent
Obligations.

 

Company
will not, and will not permit any Subsidiary to, directly or indirectly,
create, assume, incur or suffer to exist any Contingent Obligations, except
for:

 

37

 

(a)           Contingent Obligations arising in respect of the
Debt under the Loan Documents;

 

(b)           Contingent Obligations resulting from endorsements
for collection or deposit in the Ordinary Course of Business;

 

(c)           Contingent Obligations arising under Required Swap Contracts, and so long as
there exists no Event of Default both immediately before and immediately after
giving effect to any such transaction, Contingent Obligations existing or
arising under any other Swap
Contract, provided that
such obligations are (or were) entered into by Company or a Subsidiary in the
Ordinary Course of Business for the purpose of directly mitigating risks
associated with liabilities, commitments, investments, assets, or property held
or reasonably anticipated by such Person and not for purposes of speculation;

 

(d)           Contingent Obligations outstanding on the Funding
Date and set forth on Schedule 8.03 and Contingent Obligations in
respect of any refinancings, refundings, renewals or extensions of the Debt
underlying such Contingent Obligations to the extent such Debt is permitted by Section 8.01(b);

 

(e)           Contingent Obligations incurred in the Ordinary
Course of Business with respect to surety and appeal bonds, performance bonds
and other similar obligations not to exceed $2,200,000 in the aggregate at any time outstanding;

 

(f)            Contingent Obligations arising under indemnity
agreements with title insurers to cause such title insurers to issue to Senior
Agent mortgagee title insurance policies;

 

(g)           Contingent Obligations arising with respect to
customary indemnification obligations in favor of purchasers in connection with
dispositions permitted under Section 8.07; and

 

(h)           other Contingent Obligations not permitted by
clauses (a) through (g) above, not to exceed $3,300,000 in the aggregate at any time outstanding.

 

8.04        Restricted
Distributions.

 

Company
will not, and will not permit any Subsidiary to, directly or indirectly,
declare, order, pay, make or set apart any sum for any Restricted Distribution;
provided  that the foregoing shall not
restrict or prohibit any Subsidiary from making dividends or distributions,
directly or indirectly, to Company or to any Wholly-Owned Domestic Subsidiary
of Company; provided, further, that the foregoing shall not
restrict or prohibit Company from making a Restricted Distribution to Holdings
on the Funding Date (or within 10 days thereafter) in an amount not to exceed
$9,000,000 in order to permit Holdings to contemporaneously make a Restricted
Distribution of like amount to Purchaser to permit Purchaser to repay a portion
of the Existing RBS Debt on the Funding Date (or within 10 days thereafter)
(with evidence of such repayment to be provided to Agent promptly
thereafter)(the “RBS Restricted Distribution”); provided, further,
that the foregoing shall not restrict or prohibit dividends or distributions,
directly or indirectly, to Holdings at such times and in such amounts as are
necessary to permit:

 

(a)           Purchases of Holdings Stock.  Purchases of shares of (or options to
purchase shares of) Capital Stock in Parent or options therefor from employees
of any Credit Party upon their death, termination of their employment or
retirement, so long as before and after giving effect to any such dividend or
distribution for such purpose, (i) no Event of Default shall have 

 

38

 

occurred
and be continuing, (ii) Company is in compliance on a pro forma basis with
the covenants set forth in Sections 8.22, 8.23 and 8.24
recomputed for the most recently ended quarter for which information is
available and is in compliance with all other terms and conditions of this
Agreement and (iii) if such dividend or distribution is made prior to the
Commitment Expiry Date (as defined in the Senior Credit Agreement), the
Revolving Loan Limit (as defined in the Senior Credit Agreement)  minus the Revolving Loan Outstandings
(as defined in the Senior Credit Agreement) is equal to or greater than $20,000,000 and (iv) such
purchases or payments after the Funding Date do not exceed $2,200,000 in any Fiscal Year and do
not exceed $4,400,000 in the
aggregate from and after the Funding Date;

 

(b)           Taxes and Administrative Expenses Payments.  Payment of taxes by Holdings and, so long as
no Event of Default shall have occurred and be continuing both before and after
giving effect to any such dividend or distribution, payment of out-of-pocket
administrative expenses (including without limitation the payment of reasonable
director fees but excluding the payment of management fees to the Investors)
payable by Holdings in an aggregate amount, with respect to all such administrative
expenses, not to exceed $550,000
in any Fiscal Year.

 

8.05        Restrictive
Agreements.

 

Company
will not, and will not permit any Subsidiary to, directly or indirectly (i) enter
into or assume any agreement (other than the Loan Documents and the Senior Transaction
Documents) prohibiting the creation or assumption of any Lien upon its
properties or assets, whether now owned or hereafter acquired or (ii) create
or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Subsidiary to pay
or make Restricted Distributions to Company or any Subsidiary, to pay any
Debt owed to Company or any Subsidiary, to make loans or advances to
Company or any Subsidiary or to transfer any of its property or assets to
Company or any Subsidiary.

 

8.06        Payments and
Modifications of Subordinated Debt.

 

Company
will not, and will not permit any Subsidiary to, directly or indirectly
declare, pay, make or set aside any amount for payment in respect of any Debt
hereinafter incurred that, by its terms, or by separate agreement, is
subordinated to the Subdebt Obligations, except for regularly scheduled
payments of interest and other amounts in respect of such Debt made in full
compliance with the subordination provisions applicable thereto, or amend or
otherwise modify the terms of any such Debt if the effect of such amendment or
modification is to (A) increase the interest rate or fees on, or change
the manner or timing of payment of, such Debt, (B) accelerate or shorten
the dates upon which payments of principal or interest are due on, or the
principal amount of, such Debt, (C) change in a manner adverse to any
Credit Party or Lender any event of default or add or make more restrictive any
covenant with respect to such Debt, (D) change the prepayment provisions
of such Debt or any of the defined terms related thereto, (E) change the
subordination provisions thereof (or the subordination terms of any guaranty
thereof), or (F) change or amend any other term if such change or
amendment would materially increase the obligations of the obligor or confer
additional material rights on the holder of such Debt in a manner adverse to
Company, any Subsidiaries, Agent or Lenders. 
Company shall, prior to entering into any such amendment or
modification, deliver to Lenders reasonably in advance of the execution
thereof, any final or execution form copy thereof.

 

8.07        Consolidations,
Mergers and Sales of Assets.

 

Company
will not, and will not permit any Subsidiary to, directly or indirectly (i) consolidate
or merge with or into any other Person other than (A) mergers consummated to effect the consummation of a 

 

39

 

Permitted Acquisition and (B) in each case with
not less than twenty (20) Business Days’ prior written notice to Lenders (or
such lesser amount of notice as Agent, in its sole discretion, may from time to
time permit) mergers of any Wholly-Owned Subsidiary with and into Company (with
Company as the surviving entity of such merger) or with and into any other
Wholly-Owned Subsidiary of Company  or
(ii) consummate any Asset Dispositions other than dispositions of fixed
assets for cash and fair value if all of the following conditions are met:  (A) the market value of assets sold or
otherwise disposed of in any single transaction or series of related
transactions does not exceed $5,500,000
(except in the case of dispositions of Designated Lease Facilities (as defined
in the Senior Credit Agreement)) and the aggregate market value of assets sold
or otherwise disposed of during the term of this Agreement does not exceed $38,500,000, (B) the Net Cash
Proceeds (as defined in the Senior Credit Agreement) of any such disposition
are applied as required by the Senior Credit Agreement (unless waived by the
Senior Lenders), (C) after giving effect to any such disposition and the
repayment of Debt with the proceeds thereof, Company is in compliance on a pro
forma basis with the covenants set forth in Sections 8.22, 8.23
and 8.24 recomputed for the most recently ended quarter for which
information is available and is in compliance with all other terms and
conditions of this Agreement, and (D) no Default or Event of Default then
exists or would result from any such disposition.

 

8.08        Purchase of
Assets, Investments.

 

(a)           General Provisions. Company will not, and will
not permit any Subsidiary to, directly or indirectly:

 

(i)            acquire or enter into any agreement to acquire any
assets other than in the Ordinary Course of Business, constituting Capital
Expenditures to the extent permitted pursuant to Section 8.22 or
constituting replacement assets purchased with proceeds of Property Insurance
Policies (as defined in the Senior Credit Agreement), awards or other
compensation with respect to any eminent domain, condemnation or similar
proceeding or with the proceeds of Asset Dispositions as permitted hereunder
and pursuant to the Senior Credit Agreement;

 

(ii)           create, acquire or enter into any agreement to
create or acquire any Subsidiary other than Wholly-Owned Domestic Subsidiaries
acquired or created in connection with the consummation of Permitted
Acquisitions and for which the requirements set forth in Section 7.11
have been satisfied;

 

(iii)          engage or enter into any agreement to engage in any
joint venture or partnership with any other Person; or

 

(iv)          acquire or own or enter into any agreement to
acquire or own any Investment in any Person other than:

 

(A)          Investments existing on the
date of this Agreement and set forth on Schedule 8.08;

 

(B)           Cash Equivalents;

 

(C)           Investments in the Capital
Stock of any Wholly-Owned Domestic Subsidiary existing as of the Closing Date
or otherwise formed or organized in compliance with the terms of this Agreement
and so long as any such Subsidiary has Guaranteed the Subdebt Obligations and (z) Company
has otherwise complied with the provisions of Section 7.11;

 

40

 

(D)          bank deposits established in
accordance with Section 5.17 of the Senior Credit Agreement;

 

(E)           Investments in securities of
Account Debtors (as defined in the Senior Credit Agreement) received pursuant
to any plan of reorganization or similar arrangement upon the bankruptcy or
insolvency of such Account Debtors;

 

(F)           Investments in the form of
Swap Contracts permitted under Section 8.03(c); and

 

(G)           loans to officers and
employees in an aggregate principal amount not to exceed $1,100,000 at any time outstanding;
and

 

(b)           Permitted Acquisitions.  Notwithstanding the foregoing, Company may
acquire, or may cause a Wholly-Owned Domestic Subsidiary to acquire, all or
substantially all of the assets, or all (but not less than all) of the Capital
Stock, of any Person (the “Target”)
(in each case, a “Permitted
Acquisition”) with the prior written approval of Required Lenders or
subject to the satisfaction of each of the following conditions:

 

(i)            unless Agent agrees otherwise, Lenders shall have
received not less than 20 days’
prior notice of such proposed Permitted Acquisition, which notice shall include
a due diligence package including the following materials, each in form and
substance reasonably satisfactory to Lenders:

 

(A)          copies of the Target’s two
most recent annual income statements and balance sheets, together with the
audit opinions thereon, if any, of the Target’s independent accountants,
together with available interim financial statements, (B) a general
description of the business to be acquired, (C) a summary of pending and
known threatened litigation
adversely affecting the business or assets to be acquired, (D) a
description of the method of financing such acquisition, including sources and
uses, (E) a listing of locations of all personal and real property to be
acquired, (F) all material agreements to be assumed or acquired, (G) if
the Target owns or leases, or if the assets to be acquired includes, any real
property and if requested by Agent in its commercially reasonable discretion,
environmental reports and related information regarding any such property
owned, leased or otherwise used (other than leased property used solely as
office space), and (H) final copies of all acquisition agreements and all
material related transaction documents for such acquisition, together with all
schedules thereto (followed by fully executed copies thereof within five (5) Business
Days after the closing of such acquisition).

 

(ii)           unless Agent agrees otherwise, concurrently with
delivery of the notice and due diligence materials referred to in clause (i) above,
Company shall have delivered to Lenders, in form and substance reasonably
satisfactory to Lenders:

 

(A)          a pro forma consolidated and
consolidating balance sheet, income statement and cash flow statement of Holdings
and its Subsidiaries (the “Acquisition
Pro Forma”), based on most recently available financial statements,
which shall be complete and shall fairly present in all material respects the
assets, liabilities, financial condition and results of operations of Holdings
and its Subsidiaries in accordance with GAAP consistently applied, but taking
into account such Permitted Acquisition, the funding of all Loans and the
incurrence or assumption of all other Debt and repayment of Debt in 

 

41

 

connection
therewith, and such Acquisition Pro Forma shall reflect that, on a pro forma
basis, Company is in compliance on a pro forma basis with the covenants set
forth in Sections 8.22, 8.23 and 8.24 recomputed for the
four-quarter-period reflected in the Compliance Certificate most recently
delivered to Lenders pursuant to Section 7.01(c) prior to the
consummation of such Permitted Acquisition; provided that for purposes
of this clause (A), (1) the full amount of cash Acquisition Consideration
paid in connection with such Permitted Acquisition shall be included in Total
Debt for purposes of calculating the ratio of Total Debt to Adjusted EBITDA on
a pro forma basis, except to the extent funded with the proceeds of an equity
contribution made to Holdings substantially contemporaneously with such
Permitted Acquisition and (2) the maximum ratio of Total Debt to Adjusted
EBITDA at such time pursuant to Section 8.24 shall be deemed to be
the maximum ratio at such time minus 0.25.

 

(B)           if requested by Agent with
respect to any Permitted Acquisition for which the Acquisition Consideration
exceeds $10,000,000, updated versions of the operating plans, budgets and
forecasts most recently delivered to Lenders pursuant to Section 7.01(m) covering
the three (3) year period commencing on the date of such Permitted
Acquisition and otherwise prepared in accordance with the requirements of Section 7.01(m) (the
“Acquisition Projections”)
and based upon historical financial data of a recent date reasonably
satisfactory to Agent, taking into account such Permitted Acquisition, the
funding of all Loans and the incurrence or assumption of all other Debt and
repayment of Debt in connection therewith; and

 

(C)           a certificate of a
Responsible Officer of Company to the effect that (w) Holdings and each
Subsidiary will be Solvent upon the consummation of the Permitted Acquisition, (x) the
Acquisition Pro Forma fairly presents in all material respects the financial
condition of Holdings and its Subsidiaries (on a consolidated basis) as of the
date thereof and the periods covered thereby, in each case after giving effect
to the Permitted Acquisition and related transactions, (y) the Acquisition
Projections (if any) represent Company’s best estimate of Holdings’
consolidated future financial performance as of the date thereof and after
giving effect to the Permitted Acquisition, the assumptions contained therein
are believed by Holdings to be fair and reasonable in light of current business
conditions and the Acquisition Projections demonstrate Company’s projected
compliance with the covenants set forth in Sections 8.22, 8.23
and 8.24 for the one-year-period immediately following the consummation
of such Permitted Acquisition; provided,
that Company can give no assurance that the results reflected in the
Acquisition Projections will be attained; and (z) Holdings and its
Subsidiaries have completed their due diligence investigation with respect to
the Target and such Permitted Acquisition, which investigation was conducted in
a manner similar to that which would have been conducted by a prudent purchaser
of a comparable business and the results of which investigation, to the extent
requested, were delivered to the Lenders;

 

(iii)          such Permitted Acquisition shall only involve assets
located in the United States or Canada (and, in connection with the acquisition
of the Capital Stock of a Target, such Target shall be formed, incorporated or
otherwise organized under the laws of a state within the United States or Canada)
and comprising a business, or those assets of a business, of the type engaged
in by Company as of the Closing Date and businesses reasonably related thereto,
and which business would not subject Agent or any Lender to regulatory or third
party approvals in connection with the exercise of its rights and remedies
under this Agreement or any other Loan Documents other than approvals
applicable to the exercise of such rights and remedies with respect to Company
prior to such Permitted Acquisition;

 

42

 

(iv)          such Permitted Acquisition shall be consensual,
shall have been approved by the Target’s board of directors (or comparable
governing board) and shall be consummated in accordance with the terms of the
agreements and documents related thereto, and in compliance with all applicable
Laws;

 

(v)           no assets or liabilities (including, without
limitation, Investments, Debt and Contingent Obligations) shall be acquired,
incurred, assumed or otherwise be reflected on a consolidated balance sheet of
Holdings and its Subsidiaries after giving effect to such Permitted
Acquisition, except (A) Loans made hereunder and under the Senior
Transaction Documents and (B) those assets and liabilities which may be
acquired, incurred or assumed in accordance with the provisions of this
Agreement (including, without limitation, the provisions of Section 8.01,
8.03 and 8.08(a));

 

(vi)          the business and assets acquired in such Permitted
Acquisition shall be free and clear of all Liens (other than Permitted Liens);

 

(vii)         at or prior to the closing of any Permitted
Acquisition, the Target shall have executed such documents and taken such
actions as may be required by Agent in connection therewith (including the
delivery of (A) certified copies of the resolutions of the board of
directors (or comparable governing board) of Holdings, its Subsidiaries and the
Target authorizing such Permitted Acquisition, (B) legal opinions, in form
and substance reasonably acceptable to Agent, with respect to the transactions
described herein and (C) evidence of insurance of the business to be
acquired consistent with the requirements of Section 6.04; all
amounts payable in connection with any Permitted Acquisition (including all
transaction costs, all Debt, liabilities and Contingent Obligations incurred or
assumed and the maximum amount of any earn-out or comparable payment obligation
in connection therewith, whether or not reflected on a consolidated balance
sheet of Company and Target) (such amounts being referred to collectively as “Acquisition
Consideration”) shall not exceed $10,000,000,
shall not exceed $10,000,000 with respect to all Permitted Acquisitions
consummated during any twelve-month period, and shall not exceed $30,000,000 with respect to all Permitted
Acquisitions consummated during the
term hereof;

 

(viii)        on or prior to the date of such Permitted
Acquisition, Lenders shall have received, in form and substance reasonably
satisfactory to Agent and if requested by Agent, (A) all opinions, certificates,
lien search results and other documents reasonably requested by Agent and (B) amendments
to the Schedules, to the extent necessary to make the representations and
warranties in this Agreement true and correct after giving effect to the
consummation of such Permitted Acquisition; and

 

(ix)           at the time of such Permitted Acquisition and after
giving effect thereto, no Default or Event of Default has occurred and is
continuing.

 

8.09        Transactions
with Affiliates.

 

Except
(i) as expressly permitted by this Agreement, (ii) as otherwise
disclosed on Schedule 8.09, and (iii) for transactions that contain
terms that are no less favorable to Company or any Subsidiary, as the case may
be, than those which might be obtained from a third party not an Affiliate of
any Credit Party, Company will not, and will not permit any Subsidiary to,
directly or indirectly, enter into or permit to exist any transaction
(including the purchase, sale, lease or exchange of any property or the
rendering of any service) with any Affiliate of Company.

 

43

 

8.10        Modification of
Organizational Documents.

 

Company
will not, and will not permit any Subsidiary to, directly or indirectly, amend or otherwise modify any Organizational Documents of
such Person, except for such amendments or other modifications required by Law
or which are not adverse to the interests of Agent or any Lender and which, in
each instance, are fully disclosed to Lenders.

 

8.11        Modification of
Certain Agreements.

 

Company
will not, and will not permit any Subsidiary to, directly or indirectly, amend
or otherwise modify any Palace Acquisition Document which in any case: (i) is contrary to the terms of this
Agreement or any other Loan Document; (ii) could reasonably be expected to
be adverse in any material respect to the rights, interests or privileges of
the Agent or Lenders or their ability to enforce the same; (iii) results
in the imposition or expansion in any material respect of any restriction or
burden on Company or any Subsidiary; (iv) or reduces in any material
respect any rights or benefits of Company or any Subsidiary.  Company shall, prior to entering into any
amendment or other modification of any of the foregoing documents, deliver to
Lenders reasonably in advance of the execution thereof, any final or execution
form copy of amendments or other modifications to such documents.

 

8.12        Fiscal Year.

 

Company
will not, and will not permit any Subsidiary to, change its Fiscal Year; provided,
that, prior to September 30, 2008, Company shall change its fiscal year
from a fiscal year ending on December 31 to a fiscal year ending on September 30.

 

8.13        Conduct of
Business.

 

Company
will not, and will not permit any Subsidiary to, directly or indirectly, engage
in any line of business other than those businesses engaged in on the Closing
Date and described on Schedule 8.13 and businesses reasonably related
thereto as determined by the Agent in its reasonable discretion.

 

8.14        Investor Fees.

 

Company
will not, and will not permit any Subsidiary to, directly or indirectly, pay or
become obligated to pay any management, consulting or similar advisory fees or
other amounts to or for the account of Investor or any Affiliate of Investor.

 

8.15        [Reserved].

 

8.16        Limitation on
Sale and Leaseback Transactions.

 

Company
will not, and will not permit any Subsidiary to, directly or indirectly, enter
into any arrangement with any Person whereby in a substantially contemporaneous
transaction Company or any Subsidiary sells or transfers all or substantially
all of its right, title and interest in an asset and, in connection therewith,
acquires or leases back the right to use such asset.

 

8.17        [Reserved].

 

44

 

8.18        Compliance with
Anti-Terrorism Laws.

 

Company
will not, and will not permit any Subsidiary to, directly or indirectly,
knowingly enter into any Operative Documents or Material Contracts with any
Person listed on the OFAC Lists.  Company
shall immediately notify Lenders if Company has knowledge that Company, any
additional Credit Party or any of their respective Affiliates or agents acting
or benefiting in any capacity in connection with the transactions contemplated
by this Agreement is or becomes a Blocked Person or (i) is convicted on, (ii) pleads
nolo contendere to, (iii) is
indicted on or (iv) is arraigned and held over on charges involving money
laundering or predicate crimes to money laundering.  Company will not, and will not permit any
Subsidiary to, directly or indirectly, (i) knowingly conduct any business
or engage in any transaction or dealing with any Blocked Person, including,
without limitation, the making or receiving of any contribution of funds, goods
or services to or for the benefit of any Blocked Person, (ii) knowingly
deal in, or otherwise engage in any transaction relating to, any property or
interests in property blocked pursuant to Executive Order No. 13224, any
similar executive order or other Anti-Terrorism Law, or (iii) engage in or
conspire to engage in any transaction that evades or avoids, or has the purpose
of evading or avoiding, or attempts to violate, any of the prohibitions set
forth in Executive Order No. 13224 or other Anti-Terrorism Law.

 

8.19        Anti-Layering.

 

Notwithstanding
the provisions of Section 8.01, incur any Debt that is subordinate
or junior in any respect to any Debt arising under the Senior Credit Agreement
and senior in any respect to any Debt arising under the Notes and the other Subdebt Obligations.

 

8.20        Limitations on
Investor Ownership of Senior Indebtedness.

 

Company
will not permit the Investor, the Company or any of their respective
Affiliates, directly or indirectly, to purchase, participate, be assigned or in
any way beneficially own any of the Debt arising under any of the Senior Transaction
Documents.

 

8.21        Modifications
of Senior Transaction Documents.

 

Company will not amend, replace,
refinance, refund, restructure, supplement, extend or otherwise modify the
Senior Credit Agreement in effect on the Closing Date or Funding Date, as
applicable, or any other Senior Transaction Document in effect on the Closing Date or Funding Date,
as applicable, in contravention of the Subordination Agreement.

 

8.22        Capital
Expenditures.

 

Company
will not permit the aggregate amount of Capital Expenditures for any period set
forth below to exceed the amount set forth below for such period:

 

	
  Period

  	
   

  	
  Amount

  	
   

  
	
  12 month period ending
  September 30, 2008

  	
   

  	
  $

  	
  15,950,000

  	
   

  
	
  2009 Fiscal Year and each
  Fiscal Year thereafter

  	
   

  	
  $

  	
  15,400,000

  	
   

  

 

If
Company does not utilize the entire amount of Capital Expenditures permitted in
any period set forth above, Company may carry forward to the immediately
succeeding period only, seventy-five 

 

45

 

percent
(75%) of such unutilized amount (with Capital Expenditures made by Company in
such succeeding period applied last to such carried forward amount).

 

8.23        Fixed Charge
Coverage Ratio.

 

(a)           Company will not permit the Fixed Charge Coverage
Ratio for the twelve (12) month period ending on any date set forth below to be
less than the ratio set forth below for such date:

 

	
  Fiscal Quarter Ending

  	
   

  	
  Ratio

  	
   

  
	
  September 30, 2008

  	
   

  	
  0.90x

  	
   

  
	
  December 31, 2008

  	
   

  	
  0.90x

  	
   

  
	
  March 31, 2009

  	
   

  	
  1.00x

  	
   

  
	
  June 30, 2009

  	
   

  	
  1.00x

  	
   

  
	
  September 30, 2009

  	
   

  	
  1.00x

  	
   

  
	
  December 31, 2009

  	
   

  	
  1.00x

  	
   

  
	
  March 31, 2010

  	
   

  	
  1.00x

  	
   

  
	
  June 30, 2010

  	
   

  	
  1.00x

  	
   

  
	
  September 30, 2010

  	
   

  	
  1.00x

  	
   

  
	
  December 31, 2010 and
  each fiscal quarter thereafter

  	
   

  	
  1.05x

  	
   

  

 

8.24        Total Debt to
EBITDA Ratio.

 

Company
will not permit the ratio of (i) Total Debt on any date set forth below to
(ii) Adjusted  EBITDA for the twelve (12) month period ending on such date
to exceed the ratio set forth below opposite such date:

 

	
  Fiscal Quarter Ending

  	
   

  	
  Ratio

  	
   

  
	
  June 30, 2008

  	
   

  	
  6.05x

  	
   

  
	
  September 30, 2008

  	
   

  	
  6.05x

  	
   

  
	
  December 31, 2008

  	
   

  	
  6.05x

  	
   

  
	
  March 31, 2009

  	
   

  	
  5.50x

  	
   

  
	
  June 30, 2009

  	
   

  	
  5.50x

  	
   

  
	
  September 30, 2009

  	
   

  	
  5.23x

  	
   

  
	
  December 31, 2009

  	
   

  	
  5.23x

  	
   

  
	
  March 31, 2010

  	
   

  	
  5.23x

  	
   

  
	
  June 30, 2010

  	
   

  	
  5.23x

  	
   

  
	
  September 30, 2010

  	
   

  	
  4.68x

  	
   

  
	
  December 31, 2010

  	
   

  	
  4.68x

  	
   

  
	
  March 31, 2011

  	
   

  	
  4.68x

  	
   

  
	
  June 30, 2011

  	
   

  	
  4.68x

  	
   

  
	
  September 30, 2011

  	
   

  	
  4.40x

  	
   

  
	
  December 31, 2011 and
  each fiscal quarter thereafter

  	
   

  	
  4.13x

  	
   

  

 

46

 

ARTICLE IX.

EVENTS OF DEFAULT AND REMEDIES

 

9.01        Events of
Default.

 

For
purposes of the Loan Documents, the occurrence of any of the following
conditions and/or events, whether voluntary or involuntary, by operation of Law
or otherwise, shall constitute an “Event
of Default”:

 

(a)           Company shall fail to pay when due any principal,
interest, premium or fee under any Loan Document or any other amount payable
under any Loan Document;

 

(b)           Company shall fail to observe or perform any
covenant contained in Section 7.01, Section 7.04(b), Section 7.06,
Section 7.07, Section 7.12 or Article VIII
(excluding Sections 8.02 (solely with respect to non-consensual Liens
prohibited thereunder)); or Company shall fail to observe or perform any
covenant contained in Section 7.09, 7.10, 7.11, or 8.02 (solely
with respect to non-consensual Liens prohibited thereunder) and such default is
not remedied within fifteen (15) days after the earlier of (i) receipt by
Company of notice from Agent or Required Lenders of such default or (ii) actual
knowledge of Company or any other Credit Party of such default;

 

(c)           any Credit Party defaults in the performance of or
compliance with any term contained in this Agreement or in any other Loan
Document (other than occurrences described in other provisions of this Section 9.01
for which a different grace or cure period is specified or for which no grace
or cure period is specified and thereby constitute immediate Events of Default)
and such default is not remedied or waived within thirty (30) days after the
earlier of (i) receipt by Company of notice from Agent or Required Lenders
of such default or (ii) actual knowledge of Company or any other Credit
Party of such default;

 

(d)           any representation, warranty, certification or
statement made by any Credit Party or any other Person in any Loan Document or
in any certificate, financial statement or other document delivered pursuant to
any Loan Document is incorrect in any respect (or in any material respect if
such representation, warranty, certification or statement is not by its terms
already qualified as to materiality) when made (or deemed made);

 

(e)(i)        failure of any Credit Party to pay when due or
within any applicable grace period any principal, interest or other amount on
Debt (other than the Notes and the Senior Indebtedness) or in respect of any
Swap Contract, or the occurrence of any breach, default, condition or event
with respect to any Debt (other than the Notes and the Senior Indebtedness) or
in respect of any Swap Contract, if the effect of such failure or occurrence is
to cause or to permit the holder or holders of any such Debt, or the
counterparty under any such Swap Contract, to cause Debt or other liabilities
having an individual principal amount in excess of $2,750,000 (or any amount,
solely with respect to Swap Contracts) or having an aggregate principal amount
in excess of $2,750,000 (or any amount, solely with respect to Swap Contracts)
to become or be declared immediately due and payable; or (ii) (A) the
Company or any other Credit Party shall fail to pay when due, or within any
applicable grace period, principal, interest and/or any other amounts under the
Senior Credit Agreement in an aggregate amount in excess of $2,750,000, and,
except with respect to amounts due on the termination date of the Senior Credit
Agreement, such failure shall continue for at least 90 days, whether by reason
of demand, maturity, acceleration or otherwise, or (B) any other event of
default or other 

 

47

 

default
under the Senior Credit Agreement occurs and, in the case of this clause (B),
as a consequence thereof, any or all of the Senior Indebtedness has become, or
has been declared, due and payable before its stated final maturity by
acceleration or otherwise;

 

(f)            any Credit Party shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other
similar Law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;

 

(g)           an involuntary case or other proceeding shall be
commenced against any Credit Party seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or
other similar Law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of sixty (60) days; or an
order for relief shall be entered against any Credit Party under the federal bankruptcy
laws as now or hereafter in effect;

 

(h)(i) institution of any steps by any
Person to terminate a Pension Plan if as a result of such termination any
Credit Party or any member of the Controlled Group could reasonably be expected
to be required to make a contribution to such Pension Plan, or could incur a
liability or obligation to such Pension Plan, in excess of $2,750,000, (ii) a contribution
failure occurs with respect to any Pension Plan sufficient to give rise to a
Lien under Section 302(f) of ERISA, or (iii) there shall occur
any withdrawal or partial withdrawal from a Multiemployer Plan and the
withdrawal liability (without unaccrued interest) to Multiemployer Plans as a
result of such withdrawal (including any outstanding withdrawal liability that
any Credit Party or any member of the Controlled Group have incurred on the
date of such withdrawal) exceeds $2,750,000;

 

(i)            one or more judgments or orders for the payment of
money (not paid or fully covered by insurance maintained in accordance with the
requirements of this Agreement and as to which the relevant insurance company
has acknowledged coverage) aggregating in excess of $2,750,000 shall be rendered against any or all Credit Parties and
either (i) enforcement proceedings shall have been commenced by any
creditor upon any such judgments or orders or (ii) there shall be any
period of twenty (20) consecutive days during which a stay of enforcement of
any such judgments or orders, by reason of a pending appeal, bond or otherwise,
shall not be in effect;

 

(j)            there shall occur (i) any failure by the Company,
for any reason, to comply with the procedures, or to timely make any required
payment, set forth in Section 4.05 regarding a Change of Control
Offer or (ii) any Change of Control in circumstances where Section 4.05
need not be complied with because of applicable securities laws or regulations;

 

(k)           [reserved];

 

(l)            any Credit Party shall be prohibited or otherwise
materially restrained from conducting the business theretofore conducted by it
by virtue of any casualty, any labor strike, any determination, ruling,
decision, decree or order of any court or regulatory authority of 

 

48

 

competent
jurisdiction or any other event and such casualty, labor strike, determination,
ruling, decision, decree, order or other event remains unstayed and in effect
for any period of ten (10) days, and such event, in the opinion of Agent,
shall have a Material Adverse Effect;

 

(m)          any of the Operative Documents shall for any reason
fail to constitute the valid and binding agreement of any party thereto, or any
such party shall so assert; or

 

(n)           Holdings engages in any type of business activity
other than the ownership of the Capital Stock of Company by Holdings, and
performance by each of its obligations under Operative Documents to which it is
a party, or Holdings takes any action which would violate any of the provisions
of Articles VII or VIII hereof (assuming for purposes hereof that each such
provision is expressly binding on Holdings).

 

9.02        Remedies Upon
Event of Default.

 

If
any Event of Default occurs and is continuing, then (a) if such event is
an Event of Default specified in Section 9.01(f) or Section 9.01(g),
the obligation of each Lender to make Loans shall automatically
terminate and all of the Notes shall automatically become
immediately due and payable, together with interest accrued and premium, if
any, thereon, without presentment, demand, protest or notice of any kind, all
of which are hereby waived by the Company and each other Credit Party and (b) if
such event is any other Event of Default, the Required Lenders may, at their
option, declare by notice in writing to the Company all of the Notes to be, and
all of the Notes shall thereupon be and become, immediately due and payable,
together with interest accrued and premium, if any, thereon without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Company and each other Credit Party.

9.03        Other Remedies.

 

(a) If
any Event of Default under Section 9.01(a), (f) or (g) shall
occur and be continuing, any Lender, and (b) if any other  Event of Default shall occur and be continuing, the
Required Lenders, may proceed to protect and enforce their rights under this Agreement
and the Notes by exercising such remedies as are available under the Loan
Documents and/or under applicable Law, either by suit in equity or by action at
law, or both, whether for specific performance of any covenant or other
agreement contained in any Loan Document or in aid of the exercise of any power
granted in any Loan Document.  No remedy
conferred in any Loan Document upon any Lender is intended to be exclusive of
any other remedy, and each and every such remedy shall be cumulative and in addition
to every other remedy conferred herein or now or hereafter existing at law or
in equity or by statute or otherwise.

 

9.04        Rescission of
Acceleration.

 

The
provisions of Section 9.01 are subject to the condition that if the
Principal of and accrued interest on the Notes shall have been declared
immediately due and payable by reason of the occurrence of any Event of Default
described in Section 9.01(e)(ii), the Required Lenders may, by
written instrument filed with the Company, rescind and annul such declaration
and the consequences thereof, provided that at the time such declaration is
annulled and rescinded:

 

(a)           no judgment or decree has been entered for the
payment of any monies due pursuant to the Notes or this Agreement;

 

49

 

(b)           all arrears of interest and Principal upon all the
Notes and all other sums payable under the Notes and under this Agreement shall
have been duly paid, unless the same specifically has been waived in writing by
the Required Lenders; and

 

(c)           each and every other Event of Default shall have
been made good, cured or waived;

and
provided  further that no such rescission and annulment shall
extend to or affect any subsequent Event of Default or impair any right
consequent thereto.

 

9.05        Application of
Funds.

 

After
the exercise of remedies provided for in Section 9.02 (or after the
Loans have automatically become immediately due and payable), any amounts
received on account of the Obligations shall be applied by the Agent in the following
order:

 

First, to payment of that portion of the Subdebt
Obligations constituting fees, indemnities, expenses and other amounts (to the
extent constituting Subdebt Obligations, including fees, charges and
disbursements of counsel to the Agent and amounts payable under Article IV)
payable to the Agent in its capacity as such;

 

Second, to payment of that portion of the Subdebt
Obligations constituting fees, indemnities and other amounts (other than
principal and interest) payable to the Lenders (to the extent constituting
Subdebt Obligations, including fees, charges and disbursements of counsel to
the respective Lenders and amounts payable under Article IV),
ratably among them in proportion to the respective amounts described in this
clause Second payable to them;

 

Third, to payment of that portion of the Subdebt
Obligations constituting accrued and unpaid interest on the Notes and other Subdebt Obligations, ratably among the Lenders in proportion to the
respective amounts described in this clause Third payable to them;

 

Fourth, to payment of that portion of the Subdebt
Obligations constituting principal, ratably among the Lenders in proportion to
the respective amounts described in this clause Fourth payable to them;
and

 

Last, the balance, if any, after all of the Subdebt
Obligations have been indefeasibly paid in full, to the Company or as otherwise
required by Law.

 

ARTICLE X.

MISCELLANEOUS

 

As further and special provisions set forth under this
Agreement, the parties hereto further warrant, covenant, contract and agree
each with the other as follows:

 

10.01      Entire
Agreement.

 

This Agreement,
the Loan Documents and other documents referred to herein and therein
constitute the entire understanding among the parties as to the subject matter
specifically referred to herein or therein.

 

50

 

10.02      Reimbursement
of Expenses.

 

The
Company agrees (a) to pay upon demand all reasonable out-of-pocket costs
and expenses of the Agent and the Lenders (including, without limitation, the
reasonable fees and expenses of the Agent and the Lenders) in connection with (i) the
Lenders’ due diligence investigation in connection with, and the preparation,
negotiation, execution, delivery of, this Agreement and the other Loan Documents,
and any amendment, modification or waiver hereof or thereof or consent with
respect hereto or thereto and (ii) the administration, monitoring and
review of this Agreement, the Notes and the other Loan Documents (including,
without limitation, out-of-pocket expenses for travel, meals, long-distance
telephone calls, wire transfers, facsimile transmissions and copying), (b) to
pay upon demand all reasonable out-of-pocket costs and expenses of the Lenders
(including, without limitation, reasonable attorneys’ fees and expenses, which
shall, prior to the occurrence of an Event of Default, be for one law firm
acting as counsel to the Agent and Lenders) in connection with (x) any
refinancing or restructuring of the Notes, whether in the nature of a “work-out,”
in any insolvency or bankruptcy proceeding or otherwise and whether or not
consummated, and (y) the enforcement, attempted enforcement or
preservation of any rights or remedies under this Agreement or any of the other
Loan Documents, whether in any action, suit or proceeding (including any
bankruptcy or insolvency proceeding) or otherwise, and (c) to pay and hold
the Agent and the Lenders harmless from and against all liability for any
intangibles, documentary, stamp or other similar taxes, fees and excises, if
any, including any interest and penalties, and any finder’s or brokerage fees,
commissions and expenses (other than any fees, commissions or expenses of
finders or brokers engaged by the Lenders), that may be payable in connection
with the Notes contemplated by this Agreement and the other Loan Documents; provided,
however, that, absent conflicts, the Agent acting on behalf of the
Lenders shall have no more than one (1) counsel in any jurisdiction and
the Lenders shall have no more than one (1) counsel in any jurisdiction
for all Lenders.

 

10.03      Survival of
Agreements and Representations and Warranties.

 

All
agreements, representations and warranties contained herein or made in writing
by the Credit Parties (x) shall be considered to have been relied upon by
the Lenders, (y) shall survive the execution and delivery of this
Agreement, the Notes and payment therefor or termination of this Agreement and
may be relied upon by any subsequent Lenders, regardless of any investigation
made at any time by or on behalf of the Lenders and (z) shall continue in
full force and effect until the repayment in full of the Notes and all other
Subdebt Obligations (it being understood and agreed that indemnification
obligations shall specifically survive the repayment of the Notes and Subdebt
Obligations).

 

10.04      No Waiver.

 

No delay by or on behalf of the Lenders in exercising
any rights conferred hereunder, and no course of dealing between the Lenders
and the Company shall operate as a waiver of any right granted hereunder,
unless expressly waived in writing by the party whose waiver is alleged.

 

10.05      Binding Effect;
Participations.

 

All covenants, representations, warranties and other
stipulations in this Agreement and other documents referred to herein, given by
or on behalf of any of the parties hereto, shall bind and inure to the benefit
of the respective successors, heirs, personal representatives and assigns of
the parties hereto, except that each of the Company and the other Credit
Parties may not assign or transfer any of its respective rights or obligations
under this Agreement or any of the other Loan Documents without the prior
written consent of the Lenders.

 

51

 

10.06      Initial Holder.

 

The Company shall be entitled to treat and deal with the
Lenders, and shall not be required to recognize any other Person as the holder
of a Note, except after production of such Note duly endorsed for transfer,
together with such documentation as the Company may reasonably require concerning
compliance with federal or state securities laws, or after receipt by the
Company of written notice from the Person theretofore entitled to be treated as
the holder advising the Company of the transfer of such Note to such other
Person and stating the latter’s address, together with such documentation as
the Company may reasonably require concerning compliance with federal or state
securities laws.

 

10.07      Cumulative
Powers.

 

No remedy herein conferred upon the Lenders or any
holder of the Notes is intended to be exclusive of any other remedy, and each
such remedy shall be cumulative and in addition to every other remedy given
hereunder or now or hereafter existing at law, or in equity or by statute or
otherwise.

 

10.08      Loss of
Securities; Reissue of Securities in Lesser Denominations.

 

Upon:

 

(a)           receipt of evidence satisfactory to the Company of loss, theft,
mutilation or destruction of any Note, and

 

(b)           in the case of any such loss, theft or destruction, upon delivery of
indemnity in such form and amount as shall be reasonably satisfactory to the
Company, or in the event of such mutilation, upon surrender and cancellation of
such Note,

 

the Company will make and deliver a new Note of like
tenor, in lieu of such lost, stolen, mutilated or destroyed Note.  In addition, upon request of any holder of a
Note, or other securities of the Company now or hereafter issued by the Company
to the Lenders, and upon surrender of such Note, or other securities to the
Company and compliance with any restrictive legends, the Company will reissue,
in lesser denominations to parties designated by such holder, new certificates
or other securities in the equivalent amounts of such other securities
surrendered.

 

10.09      Communications.

 

All communications and notices provided for hereunder
shall be sent by personal delivery, nationally recognized overnight courier,
facsimile or registered or certified mail, to the Lenders and the Company at
their addresses set forth on Schedule 10.09, respectively, or to
such other address with respect to any party as such party shall notify the
other parties hereto in writing.  Any
notice required to be given hereunder by one party to another shall be deemed
to have been received (i) when delivered, if personally delivered or sent
via facsimile or (ii) one day following delivery to a nationally
recognized overnight courier or (iii) on the third business day following
the date on which the piece of mail containing such communication is posted, if
sent by certified or registered mail. 
Except as otherwise provided for herein, all requests for disclosure or
other provision of information to be made or otherwise given by the Company
shall be completed no later than ten (10) days following the receipt
by the Company of a written request therefor in the manner described in this Section 10.09.

 

52

 

10.10      Form, Registration, Transfer and
Exchange of Notes; Lost Notes.

 

(a)           The Notes are issuable as registered notes only, each in denominations
of at least $1,000,000 and any larger integral multiple of $100,000.  The Company shall keep at its principal
office a register in which the Company shall provide for the registration of
Notes and of Transfers of Notes.  Upon
surrender for registration of Transfer of any Note at the principal office of
the Company, the Company shall, promptly and at its expense, execute and
deliver one or more new Notes of like tenor and of a like aggregate principal
amount, which Notes shall be registered in the name of such Transferee or
Transferees.  At the option of Lender,
its Note may be exchanged for Notes of like tenor and of any authorized
denominations, of a like aggregate principal amount, upon surrender of the Note
to be exchanged at the principal office of the Company.  Whenever any Notes are so surrendered for
exchange, the Company shall, at its expense, execute and deliver the Notes
which the Lender making the exchange is entitled to receive.  Any Note or Notes issued in exchange for any
Note or upon Transfer thereof shall carry the rights to unpaid interest and
interest to accrue which were carried by the Note so exchanged or transferred,
so that neither gain nor loss of interest shall result from any such transfer
or exchange.  Upon receipt of written
notice from the holder of any Note and, in the case of any such loss, theft, or
destruction, upon receipt of an unsecured indemnity agreement, or other
indemnity reasonably satisfactory to the Company from such holder, or in the
case of any such mutilation, upon surrender and cancellation of such Note, the
Company will make and deliver a new Note, of like tenor, in lieu of the lost,
stolen, destroyed, or mutilated Note, and the Company at its own expense will
execute and, within five (5) Business Days after such receipt,
deliver, in lieu thereof, an equivalent replacement Note dated the date of such
lost, stolen, destroyed or mutilated Note.

 

(b)           Any holder of a Note may make a Transfer to any Person provided that (i) such
Transfer is made in compliance with the Securities Act and any applicable state
securities laws, (ii) such holder of a Note has provided the Company with
such information as to such Transferee’s compliance with applicable securities
laws as reasonably may be requested by the Company, (iii) such Transfer is
in compliance with subsection (a) above, and (iv) such Transfer
shall be in a principal amount of not less than $1,000,000 (or such lesser
amount as shall be the then outstanding principal balance of the Note). The
Company shall cooperate in connection with any such Transfer including
providing such information to any Lender or such Lender’s proposed Transferee
as, in the reasonable opinion of counsel to the transferor, may be necessary to
satisfy the requirements of Rule 144A of the Securities Act in connection
with any Transfer to a “Qualified Institutional Buyer” under such rule.  Upon any Transfer, the Transferee shall, to
the extent of such Transfer, be entitled to exercise the rights of the Lender
making such Transfer and shall thereafter be deemed a “Lender” under this
Agreement.

 

(c)           Upon original issuance, and until such time as the same is no longer
required under the applicable requirements of the Securities Act, each Note
(and all securities issued in exchange therefor or substitution thereof) shall
bear the following legend:

 

“THIS NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”),
OR QUALIFIED PURSUANT TO ANY APPLICABLE STATE SECURITIES LAW.  THIS NOTE MAY BE RESOLD ONLY IF
REGISTERED PURSUANT TO THE PROVISIONS OF THE ACT AND QUALIFIED PURSUANT TO
APPLICABLE STATE SECURITIES LAWS OR IF AN EXEMPTION FROM SUCH REGISTRATION AND
QUALIFICATION IS AVAILABLE, EXCEPT UNDER CIRCUMSTANCES WHERE NEITHER SUCH
REGISTRATION, QUALIFICATION NOR EXEMPTION IS REQUIRED BY LAW.

 

THIS NOTE AND THE INDEBTEDNESS EVIDENCED
HEREBY ARE SUBORDINATE IN THE MANNER AND TO THE EXTENT SET FORTH IN THAT 

 

53

 

CERTAIN SUBORDINATION AGREEMENT (THE
“SUBORDINATION AGREEMENT”) DATED AS OF THE FUNDING DATE (AS DEFINED IN THE
INVSTMENT AGREEMENT) BY AND AMONG FESTIVAL FUN PARKS, LLC, THE GUARANTORS PARTY
THERETO, LAMINAR DIRECT CAPITAL L.P., AS SUBORDINATED AGENT AND MERRILL LYNCH
CAPITAL, AS AGENT, TO THE SENIOR DEBT (AS DEFINED IN THE SUBORDINATION
AGREEMENT); AND EACH HOLDER OF THIS NOTE, BY ITS ACCEPTANCE HEREOF, SHALL BE
BOUND BY THE PROVISIONS OF THE SUBORDINATION AGREEMENT.”

 

The
Credit Parties shall, from time to time at the request of any Lender, execute
and deliver to such Lender or to such party or parties as such Lender may
designate, all further instruments as may in such Lender’s reasonable opinion
be necessary or advisable to give full force and effect to any Transfer and
shall provide to such Lender or to such party or parties as such Lender may
designate all such information as such Lender reasonably may request.

 

(d)           Notwithstanding anything in the Loan Documents to
the contrary, (i) a Lender may pledge, or grant a security
interest in, all or any portion of its Notes and other rights and
interests under the Loan Documents to a bank or other funding
source in support of borrowings made by such Lender from such Person
and (ii) any Lender which is a fund may pledge, or grant a
security interest in, all or any portion of its Notes and other rights and
interests under the Loan Documents to its trustee in support of its
obligations to its trustee.  No pledge or grant of a security
interest pursuant to this clause (d) shall release the transferor
Lender from any of its obligations hereunder.

 

(e)           Notwithstanding the above, so long as no Default or
Event of Default shall have occurred, the Company reserves the right to refuse
any requests for Transfer of Notes to any Person that the Company reasonably
determines to be a direct competitor of the Company or any of its Subsidiaries;
provided  that at no time shall any bank, financial institution,
insurance company, fund or broker be deemed to be a direct competitor of the
Company.

 

(f)            Notwithstanding anything in
this Agreement to the contrary, but in connection with the Transfer of a Note
otherwise permitted hereunder, the Transfer of such Note may be accomplished
pursuant to the execution of an allonge related to such Note in favor of the
assignee and upon notice of such Transfer and delivery of a copy of such
allonge to the Company, and the Company agrees that such allonge and such
Transfer shall be recorded in the register referenced in clause (a) above;
it being understood that a reissued Note in favor of such assignee will not be
required.

 

10.11      Confidentiality;
Public Announcements.

 

(a)           Each Lender shall use its best
efforts not to make public disclosure of any information designated by the
Company in writing as confidential, including financial terms and financial and
organizational information contained in any documents, statements,
certificates, materials or information furnished, or to be furnished, by the
Company in connection with the Notes contemplated by this Agreement; provided,
however, that the foregoing shall not be construed, now or in the
future, to apply to any information reflected in any recorded document,
information which is independently developed by such Lender, information
obtained from sources other than the Company or information that is or becomes
in the public domain other than through the fault of such Lender, nor shall it
be construed to prevent such Lender from (i) making any disclosure of any
information (A) if required to do so by any requirement of Law, (B) to
any Governmental Authority having or claiming authority to regulate or oversee
any aspect of the Lender’s business or that of the Company or affiliates of
such Lender in connection with the exercise of such authority or claimed
authority, or (C) pursuant to subpoena; or (ii) to the extent such
Lender or its counsel deems 

 

54

 

necessary or appropriate to do so to effect or preserve
its security for any applicable investment or financing or to enforce any
remedy provided herein or in any applicable investment or financing documents
or otherwise available by law; or (iii) making, on a confidential basis,
such disclosures as such Lender deems necessary or appropriate to such Lender’s
legal counsel or accountants (including outside auditors); or (iv) making
such disclosures as such Lender reasonably deems necessary or appropriate to
any bank or financial institution or other entity, and/or counsel to or other
representatives of such bank or financial institution or other entity, to which
such Lender in good faith desires to sell an interest in any applicable
investment or financing; provided, however, that such bank, financial
institution or other entity or counsel to or representative thereof, agrees to
take reasonable steps to maintain the confidentiality of such disclosures; or (v) making
such disclosures to (x) any bank or financial institution and (y) S&P,
Moody’s and/or other ratings agency, as such Lender reasonably deems necessary
or appropriate in connection with such Lender’s obtaining financing; provided,
however, that such bank, financial institution, S&P, Moody’s and/or
such other ratings agency agrees to take reasonable steps to maintain the
confidentiality of such disclosures.

 

(b)           The Required Lenders shall have the right to review and approve, such
approval not to be unreasonably withheld, any public announcement or public
filing made after the closing date relating to the Note, or to the Lenders in
any way before any such announcement or filing is announced or filed, provided,
however, no review or approval shall be required for any such announcement or
filing required to be announced or filed by law.  In addition, the Lenders shall provide the
Company an opportunity to review and approve any public announcement issued by
the Lenders specifically relating to the Note, such approval not to be
unreasonably withheld or delayed; provided, however, no review or
approval shall be required for any such announcement required to be announced
by law; provided  further, the Lenders shall provide the Company
with an advance copy of any regulatory filings or tombstone ads prepared by or
on behalf of the Lenders, but shall not be required to obtain approval by the
Company.

 

10.12      Governing Law.

 

This Agreement shall be governed in all respects by the
laws of the State of New York without regard to conflicts of laws.

 

10.13      Headings.

 

The descriptive section headings herein have been
inserted for convenience only and shall not be deemed to limit or otherwise
affect the construction of any provisions hereof.

 

10.14      Multiple
Originals.

 

This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement to produce or account for more
than one such counterpart.

 

10.15      Amendment or
Waiver.

 

This Agreement may be amended, and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by them, if the Company shall obtain the prior written consent of the
Required Lenders to such amendment, action or omission to act; provided,
however, that, without the prior written consent of all of the Lenders,
no such agreement shall (i) decrease or forgive the Principal amount of,
or extend the Maturity Date of any Note, or decrease the rate of interest or
premium on the Note, or any fees or other amounts payable hereunder, (ii) effect
any waiver, amendment or modification that by its terms changes the amount,
allocation, payment or pro rata sharing of payment on or among the Notes, or
any date fixed by this Agreement or any other Loan Document for any payment of
Principal, 

 

55

 

interest or premium, (iii) amend the provisions of
this Section 10.15, the definition of the term “Required Lenders”
or of the term “Note”, (iv) release all or substantially all of the
Guarantors from their guaranty obligations under the applicable Loan Documents,
except in the case of a Subsidiary of the Company, to the extent such Person
ceases to be a Subsidiary as a result of a transaction permitted hereunder, or (v) release
the Company from its obligations under the Loan Documents.  Each holder of a Note, at the time or times
thereafter outstanding, shall be bound by any consent authorized by this Section 10.15,
whether or not the Note shall have been marked to indicate such consent.

 

10.16      Waiver of Jury
Trial.

 

THE
LENDERS AND THE CREDIT PARTIES EACH HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE (TO THE EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT TO A
TRIAL BY JURY OF ANY DISPUTE ARISING UNDER, RELATING TO, OR CONNECTED WITH THIS
AGREEMENT, OR ANY OTHER AGREEMENT, INSTRUMENT OR DOCUMENT CONTEMPLATED HEREBY
OR DELIVER IN CONNECTION HEREWITH AND AGREE THAT ANY SUCH DISPUTE SHALL BE
TRIED BEFORE A JUDGE SITTING WITHOUT A JURY. 
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES TO ENTER INTO
THIS AGREEMENT.

 

10.17      Consent to
Jurisdiction and Service of Process.

 

ALL
JUDICIAL PROCEEDINGS BROUGHT AGAINST THE CREDIT PARTIES WITH RESPECT TO THIS
AGREEMENT, THE NOTE OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK, AND,
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE CREDIT PARTIES ACCEPTS,
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL JUDGMENT RENDERED THEREBY IN
CONNECTION WITH THIS AGREEMENT FROM WHICH NO APPEAL HAS BEEN TAKEN OR IS
AVAILABLE.  EACH OF THE CREDIT PARTIES
IRREVOCABLY AGREES THAT ALL SERVICE OF PROCESS IN ANY SUCH PROCEEDINGS IN ANY
SUCH COURT MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR
CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE
PREPAID, TO IT AT ITS ADDRESS SET FORTH IN SCHEDULE 10.09 OR AT
SUCH OTHER ADDRESS OF WHICH THE LENDERS SHALL HAVE BEEN NOTIFIED PURSUANT
THERETO, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY THE CREDIT PARTIES TO BE
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. 
EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING,
WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH JURISDICTION.  NOTHING HEREIN SHALL AFFECT THE RIGHT TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF
THE LENDERS TO BRING PROCEEDINGS AGAINST THE CREDIT PARTIES IN THE COURT OF ANY
OTHER JURISDICTION.

 

10.18      Indemnification;
Damage Waiver.

 

(a)           The Company, without limitation as to time, will defend and indemnify
the Lenders and their respective officers, directors, managers, employees,
attorneys and agents (each, an “Indemnified Party”) against, and hold
each Indemnified Party harmless from, all losses, claims, damages, liabilities,
costs (including the costs of preparation and attorneys’ fees and expenses)
(collectively, the “Losses”) incurred by 

 

56

 

any Indemnified Party as a result of, or arising out of,
or relating to (i) any misrepresentation or breach of any representation
or warranty made by Company herein, (ii) any breach of any covenant,
agreement or obligation of Company contained in any of the Loan Documents or (iii) any
investigation or proceeding against Company or any Indemnified Party and
arising out of or in connection with this Agreement or any of the Loan
Documents, whether or not the transactions contemplated by this Agreement are
consummated, which investigation or proceeding requires the participation of,
or is commenced or filed against, any Indemnified Party because of this
Agreement, any other Operative Document or such other documents and the
transactions contemplated hereby or thereby, other than any Losses resulting
from action on the part of such Indemnified Party which is finally determined
in such proceeding to be primarily and directly a result of such party’s gross
negligence or willful misconduct.  The
Company agrees to reimburse each Indemnified Party promptly for all such Losses
as they are incurred by such Indemnified Party in connection with the
investigation of, preparation for or defense of any pending or threatened claim
or any action or proceeding arising therefrom. 
The Lenders agree to reimburse the Company for any payments made by the
Company to the Lenders pursuant to this paragraph for Losses which are finally
determined in such proceeding to primarily and directly result from the gross
negligence or willful misconduct of the Lenders.  The obligations of Company under this paragraph
will survive any transfer of the Notes by the Lenders and the termination of
this Agreement.  In the event that the
foregoing indemnity is unavailable or insufficient to hold an Indemnified Party
harmless, then Company will contribute to amounts paid or payable by such
Indemnified Party in respect of such Indemnified Party’s Losses in such
proportions as appropriately reflect the relative benefits received by and
fault of the Company and such Indemnified Party in connection with the matters
as to which such Losses relate and other equitable considerations.

 

(b)           If any action, proceeding or investigation is commenced, as to which
any Indemnified Party proposes to demand such indemnification, it shall notify
the Company with reasonable promptness; provided, however, that
any failure by such Indemnified Party to notify the Company shall not relieve
Company from their obligations hereunder except to the extent the Company is
materially prejudiced thereby.  The
Company shall be entitled to assume the defense of any such action, proceeding
or investigation, including the employment of counsel and the payment of all
fees and expenses.  The Indemnified Party
shall have the right to employ separate counsel in connection with any such
action, proceeding or investigation and to participate in the defense thereof,
but the fees and expenses of such counsel shall be paid by the Indemnified
Party, unless (i) the Company has failed to assume the defense and employ
counsel as provided herein, (ii) the Company has agreed in writing to pay
such fees and expenses of separate counsel or (iii) an action, proceeding,
or investigation has been commenced against both the Indemnified Party and/or
the Company and representation of both such Company and the Indemnified Party
by the same counsel would be inappropriate because of actual or potential
conflicts of interest between the parties. 
In the case of any circumstance described in clauses (i), (ii) or
(iii) of the immediately preceding sentence, the Company shall be
responsible for the reasonable fees and expenses of such separate counsel; provided,
however, that the Company shall not in any event be required to pay the
fees and expenses of more than one separate counsel (and, if deemed necessary
by such separate counsel, appropriate local counsel who shall report to such
separate counsel) for all Indemnified Parties. 
The Company shall be liable only for settlement of any claim against an
Indemnified Party made with the Company’s written consent (which consent shall
not be unreasonably withheld or delayed).

 

(c)           To the fullest extent permitted by applicable law, the Company shall
not assert, and hereby waive, any claim against any Indemnified Party, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement, any other Loan Document or any agreement or
instrument contemplated hereby, the transactions contemplated hereby or
thereby, or the use of the proceeds thereof. 
No Indemnified Party shall be liable for any damages arising from the
use by unintended recipients of any information or other materials distributed
by it through telecommunications, electronic or other information transmission
systems in 

 

57

 

connection with this Agreement or the other Loan
Documents or the transactions contemplated hereby or thereby.

 

10.19      Regulatory
Requirements.

 

In the event of any reasonable determination by any Lender
that, by reason of any existing or future federal or state law, statute, rule,
regulation, guideline, order, court or administrative ruling, request or
directive (whether or not having the force of law and whether or not failure to
comply therewith would be unlawful) (collectively, a “Regulatory Requirement”),
such Lender is effectively restricted or prohibited from holding any of the
Notes, or otherwise realizing upon or receiving the benefits intended under the
Notes, the Company shall, and shall cause their Subsidiaries, to take such
action as such Lenders and the Company shall jointly agree in good faith to be
reasonably necessary to permit such Lenders to comply with such Regulatory
Requirement.  The reasonable costs of
taking such action shall be borne by the Company.

 

10.20      USA Patriot-Act
Notice.

 

Each Lender (for itself and not on behalf of any Lender)
hereby notifies each of the Credit Parties that pursuant to the requirements of the USA Patriot Act (Title III
of Pub.L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”),
it is required to obtain, verify and record information that identifies the Credit Parties, which information includes
the name and address of each of the Credit Parties and other information that
will allow such Lender, as applicable, to identify each Credit Party in
accordance with the Act.

 

10.21      Subordination
Agreement

 

                This Agreement and the indebtedness evidenced hereby are subordinate in
the manner and to the extent set forth in the Subordination Agreement; and each
party to this Agreement, by its acceptance hereof, shall be bound by the
provisions of the Subordination Agreement.

ARTICLE XI.

AGENCY PROVISIONS

 

11.01      Appointment.

 

Each
of the Lenders hereby irrevocably designates and appoints Laminar as the Agent
of such Lender (or the Lenders represented by it) under this Agreement and the
other Loan Documents for the term hereof (and Laminar hereby accepts such
appointment) and each such Lender irrevocably authorizes Laminar to take such
action on its behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers and perform such duties as are expressly
delegated to the Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental
thereto.  Notwithstanding any provision
to the contrary elsewhere in this Agreement or the other Loan Documents, the
Agent shall not have any duties or responsibilities, except those expressly set
forth herein and therein, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or the other Loan Documents or otherwise exist against the
Agent.  Any reference to the Agent in this
Agreement or the other Loan Documents shall be deemed to refer to the Agent
solely in its capacity as Agent and not in its capacity, if any, as a Lender.

 

11.02      Delegation of
Duties.

 

The
Agent may execute any of its respective duties under this Agreement or the
other Loan Documents by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning 

 

58

 

all
matters pertaining to such duties.  The
Agent shall not be responsible for the negligence or misconduct of any agents
or attorneys-in-fact selected by the Agent with reasonable care.

 

11.03      Exculpatory
Provisions.

 

Neither
the Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact, Subsidiaries or Affiliates shall be (i) liable for any
action lawfully taken or omitted to be taken by it or such Person under or in
connection with this Agreement (except for actions occasioned by its or such
Person’s own gross negligence or willful misconduct), or (ii) responsible
in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Credit Parties or any of its
Subsidiaries or any officer thereof contained in this Agreement, the other Loan
Documents or in any certificate, report, statement or other document referred
to or provided for in, or received by the Agent under or in connection with,
this Agreement or the other Loan Documents or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document or for any failure of the Credit Parties or any of
their Subsidiaries to perform its obligations hereunder or thereunder.  The Agent shall not be under any obligation
to any Lender to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement or of any
other Loan Document, or to inspect the properties, books or records of the
Credit Parties or any of their Subsidiaries.

 

11.04      Reliance by
Agent.

 

The
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any note, writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to the
Credit Parties), independent accountants and other experts selected by the
Agent.  The Agent may deem and treat the
payee of any Note as the owner thereof for all purposes unless the Agent shall
have actual notice of any transferee. 
The Agent shall be fully justified in failing or refusing to take any
action under this Agreement and the other Loan Documents unless it shall first
receive such advice or concurrence of the Required Lenders (or, when expressly
required hereby, all the Lenders) as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action except for its own gross negligence or willful
misconduct.  The Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this
Agreement and the other Loan Documents in accordance with a request of the
Required Lenders (or, when expressly required hereby, all the Lenders), and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders and all future Lenders.

 

11.05      Notices of
Default.

 

The
Agent shall not be deemed to have knowledge or notice of the occurrence of any
Event of Default hereunder or under any other Loan Document unless it has
received notice of such Event of Default in accordance with the terms of hereof
or thereof or notice from a Lender or the Company referring to this Agreement
or the other Loan Documents, describing such Event of Default and stating that
such notice is a “notice of default.”  In
the event that the Agent receives such a notice, it shall promptly give notice
thereof to the Lenders.  The Agent shall
take such action with respect to such Event of Default as shall be reasonably
directed by the Required Lenders; provided that unless and until the
Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with
respect to such Event of Default as it shall deem advisable in the best
interests of the Lenders, except to the extent that other provisions of
this Agreement or the other 

 

59

 

Loan
Documents expressly require that any such action be taken or not be taken only
with the consent and authorization or the request of the Lenders or Required
Lenders, as applicable.

 

11.06      Non-Reliance on
the Agent and Other Lenders.

 

Each
of the Lenders expressly acknowledges that neither the Agent nor any of its
respective officers, directors, employees, agents, attorneys-in-fact,
Subsidiaries or Affiliates has made any representations or warranties to it and
that no act by the Agent hereinafter taken, including any review of the affairs
of the Credit Parties or any of their Subsidiaries, shall be deemed to constitute
any representation or warranty by the Agent to any Lender.  Each of the Lenders, represents that it has
made and will continue to make, independently and without reliance upon the
Agent or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, its own credit analysis, appraisals and
decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other condition
and creditworthiness of the Credit Parties and their Subsidiaries.  Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the Agent
hereunder or under the other Loan Documents, the Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, financial and other condition or
creditworthiness of the Credit Parties or any of their Subsidiaries which may
come into the possession of the Agent or any of its respective officers,
directors, employees, agents, attorneys-in-fact, Subsidiaries or Affiliates.

 

11.07      Indemnification.

 

Each
of the Lenders hereby agrees to indemnify the Agent in its capacity as such (to
the extent not reimbursed by the Credit Parties and without limiting the
obligation of the Credit Parties to do so), ratably according to the respective
amounts of their Notes, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever which may at any time (including, without
limitation, at any time following the payment of the Notes) be imposed on, incurred
by or asserted against the Agent in any way relating to or arising out of this
Agreement, the other Loan Documents, or any documents contemplated by or
referred to herein or therein or the transactions contemplated hereby or
thereby or any action taken or omitted by the Agent under or in connection with
any of the foregoing; provided that no Lender shall be liable for the
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements to the
extent they result from the Agent’s gross negligence or willful
misconduct.  The agreements in this Section 11.07
shall survive the payment of the Notes and all other amounts payable hereunder
and the termination of this Agreement and the other Loan Documents.

 

11.08      The Agent in
Its Individual Capacity.

 

The
Agent and its respective Subsidiaries and Affiliates may make loans to, accept
deposits from and generally engage in any kind of business with the Credit
Parties as though the Agent were not an Agent hereunder.  With respect to any Note issued to it, the
Agent shall have the same rights and powers under this Agreement and the other
Loan Documents as any Lender and may exercise the same as though it were not an
Agent, and the term “Lenders” shall include the Agent in its individual
capacity.

 

11.09      Resignation of
the Agent; Successor Agent.

 

The
Agent may resign as Agent at any time by giving thirty (30) days advance
notice thereof to the Lenders and the Company and, thereafter, the retiring
Agent shall be discharged from its duties and obligations hereunder.  Upon any such resignation, the Required
Lenders shall have the right, subject to 

 

60

 

the
approval of the Company (so long as no Event of Default has occurred and is
continuing; such approval not to be unreasonably withheld), to appoint a
successor Agent.  If no successor Agent
shall have been so appointed by the Required Lenders, been approved (so long as
no Event of Default has occurred and is continuing) by the Company or have
accepted such appointment within thirty (30) days after the Agent’s giving
of notice of resignation, then the Agent may, on behalf of the Lenders, appoint
a successor Agent reasonably acceptable to the Company (so long as no Default
or Event of Default has occurred and is continuing).  Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all rights, powers, privileges and duties of
the retiring Agent.  After any retiring
Agent’s resignation hereunder as Agent, the provisions of this Section 11.09
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 Agent.  If no successor has accepted appointment as
Agent by the date which is thirty (30) days following a retiring Agent’s
notice of resignation, the retiring Agent’s resignation shall nevertheless
thereupon become effective and the Required Lenders shall perform all of the
duties of the Agent hereunder until such time, if any, as the Required Lenders
appoint a successor agent as provided for above.

 

11.10      Reimbursement
by Lenders.

 

To
the extent that the Credit Parties for any reason fail to indefeasibly pay any
amount required under Section 10.02 or Section 10.18 to
be paid by it to the Agent (or any sub-agent thereof), or any Related Party of
any of the foregoing, each Lender severally agrees to pay to the Agent (or any
such sub-agent) or such Related Party, as the case may be, such Lender’s
applicable percentage thereof (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided
that the unreimbursed expense or indemnified loss, claim, damage, liability or
related expense, as the case may be, was incurred by or asserted against the
Agent (or any such sub-agent) in its capacity as such, or against any Related
Party of any of the foregoing acting for the Agent (or any such sub-agent) in
connection with such capacity.  For the
purposes of this Section 11.10, the “applicable percentage” of a
Lender shall be the percentage of the total aggregate principal amount of the
Notes represented by the Notes held by such Lender at such time.

 

[remainder of page intentionally left blank]

 

61

 

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

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  FESTIVAL FUN PARKS, LLC,

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Russell D. Owens

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
  LAMINAR DIRECT CAPITAL L.P.,

  
	
   

  	
  in its capacity as a Lender and as Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Robert T. Ladd

  
	
   

  	
  Title:

  	
  Authorized Signatory

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE GOVERNOR AND COMPANY OF THE BANK OF

  IRELAND,

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Deirdre Reddan

  
	
   

  	
  Title:

  	
  Authorized Signatory

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Geraldine Hannon

  
	
   

  	
  Title:

  	
  Authorized Signatory

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MERRILL LYNCH BUSINESS AND FINANCIAL

  SERVICES INC.,

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Jason J. Swanson

  
	
   

  	
  Title:

  	
  Director

  
											

 

 

SCHEDULE 3.01

 

ISSUE PRICE
OF NOTES

 

	
  Name of Lender

  	
   

  	
  Name in which

  to

  Register Notes

  	
   

  	
  Principal Amount

  of Notes

  	
   

  	
  Issue Price for

  Notes

  	
   

  	
  Total Notes

  Purchase Price

  	
   

  	
  Payment Wire

  Instructions

  
	
  Laminar
  Direct

  Capital L.P.

  	
   

  	
  Laminar

  Direct Capital

  L.P.

  	
   

  	
  $

  	
  28,250,000.00

  	
   

  	
  $

  	
  28,250,000.00

  	
   

  	
  $

  	
  28,250,000.00

  	
   

  	
  VIA WIRE TRANSFER TO:

  

  HSBC Bank USA 

  ABA #: 021001088 

  Credit: Laminar Direct Capital L.P.
  

  Acct # : 639722598 

  Reference: Palace Entertainment Holdings, Inc.

  
	
  Merrill Lynch

  Business and

  Financial Services Inc.

  	
   

  	
  Merrill Lynch

  Business and

  Financial

  Services Inc.

  	
   

  	
  $

  	
  28,250,000.00

  	
   

  	
  $

  	
  28,250,000.00

  	
   

  	
  $

  	
  28,250,000.00

  	
   

  	
  VIA
  WIRE TRANSFER TO:

  

  [bank name] 

  ABA #: [              ]
  

  Credit: [             ]
  

  Acct # : [             ]
  

  Reference: Palace Entertainment Holdings, Inc.

  
	
  The Governor and

  Company of the Bank

  of Ireland

  	
   

  	
  The Governor

  and Company

  of the Bank

  of Ireland

  	
   

  	
  $

  	
  5,000,000.00

  	
   

  	
  $

  	
  5,000,000.00

  	
   

  	
  $

  	
  5,000,000.00

  	
   

  	
  VIA
  WIRE TRANSFER TO:

  

  [bank name] 

  ABA #: [          ]
  

  Credit: [              ]
  

  Acct # : [            ]
  

  Reference: Palace Entertainment Holdings, Inc.

  

 

 

SCHEDULE 10.09

 

ADDRESSES OF THE CREDIT PARTIES AND LENDERS

 

ADDRESS
OF THE COMPANY AND OTHER CREDIT PARTIES:

 

Festival
Fun Parks, LLC

4590
MacArthur Boulevard, Suite 400

Newport
Beach, CA 92660

Attention:  Russell D. Owens

Facsimile:  949.797.9809

 

with
a copy to:

 

Clifford
Chance US LLP

31
West 52nd Street

New
York, NY 10019

Attention:  Eli Weber

Facsimile:  212.878.8375

 

ADDRESS
OF LENDERS:

 

Laminar Direct Capital L.P.

3
Bethesda Metro Center, Suite 1450

Bethesda,
MD 20814

Attention:   Dean
D’Angelo

Facsimile:   301.634.3051

 

Laminar Direct Capital LP

10000 Memorial Drive, Suite 500

Houston, TX 77024

Attention:   Debbie
Blank

Facsimile:   713.292.5454

 

D.
E. Shaw & Co., L.P. 

120 West 45th Street, 39th Floor 

New York, New York  10036 
 Attention:   Hilda Blair

Facsimile:   212.845.1553

 

with
a copy to:

 

Moore &
Van Allen PLLC

100
North Tryon Street, 47th Floor

Charlotte, NC 28202

Attention: 
C. Wayne McKinzie, Esq.

Facsimile:
704.378.2061

 

 

EXHIBIT A

 

FORM OF NOTE

 

SENIOR SUBORDINATED NOTE

 

THIS NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”),
OR QUALIFIED PURSUANT TO ANY APPLICABLE STATE SECURITIES LAW.  THIS NOTE MAY BE RESOLD ONLY IF
REGISTERED PURSUANT TO THE PROVISIONS OF THE ACT AND QUALIFIED PURSUANT TO
APPLICABLE STATE SECURITIES LAWS OR IF AN EXEMPTION FROM SUCH REGISTRATION AND
QUALIFICATION IS AVAILABLE, EXCEPT UNDER CIRCUMSTANCES WHERE NEITHER SUCH
REGISTRATION, QUALIFICATION NOR EXEMPTION IS REQUIRED BY LAW.

 

THIS NOTE AND THE
INDEBTEDNESS EVIDENCED HEREBY ARE SUBORDINATE IN THE MANNER AND TO THE EXTENT
SET FORTH IN THAT CERTAIN SUBORDINATION AND INTERCREDITOR AGREEMENT (THE
“SUBORDINATION AGREEMENT”) DATED AS OF THE FUNDING DATE (AS DEFINED IN THE
INVESTMENT AGREEMENT) BY AND AMONG FESTIVAL FUN PARKS, LLC, THE GUARANTORS
PARTY THERETO, LAMINAR DIRECT CAPITAL L.P., AS SUBORDINATED AGENT AND MERRILL
LYNCH CAPITAL, AS ADMINISTRATIVE AGENT, TO THE SENIOR DEBT (AS DEFINED IN THE
SUBORDINATION AGREEMENT); AND EACH HOLDER OF THIS NOTE, BY ITS ACCEPTANCE
HEREOF, SHALL BE BOUND BY THE PROVISIONS OF THE SUBORDINATION AGREEMENT.

 

FESTIVAL FUN PARKS, LLC

 

	
  $[                  ]

  	
  February     , 2008

  

 

FOR VALUE RECEIVED, the undersigned, FESTIVAL FUN
PARKS, LLC, a Delaware limited liability company (the “Company”),
hereby promises to pay to the order of LAMINAR DIRECT CAPITAL
L.P., a Delaware limited partnership, in its capacity as a lender
under the terms of the Investment Agreement (as defined herein) (in such
capacity, the “Holder”) and its successors or registered assigns, the
principal sum of [                          ]
($[                          ])
or such lesser amount as may constitute the aggregate unpaid principal
amount of this Note, under the terms and conditions of the Investment
Agreement.  The Company also
unconditionally promises to pay interest on the aggregate unpaid principal
amount of this Note (including capitalized interest, if any) at the rates, at
the times and in the manner provided in the Investment Agreement.

 

So
long as no Event of Default has occurred and is continuing, the Principal
hereof shall bear interest at a rate per annum equal to the applicable rate set
forth in Section 4.02(b) of the Investment Agreement, and
shall be due and payable on each Interest Payment Date for the period from the
previous Interest Payment Date to such Interest Payment Date in a manner
consistent with the terms of Section 4.02 of the Investment
Agreement.  After the occurrence and
during the continuance of any Event of Default, the Company’s obligations under
this Note shall bear interest from the date of the occurrence of such Event of
Default and shall be payable by the Company monthly at a rate equal to the Default
Rate in accordance with Section 4.02(d) of the Investment
Agreement.

 

 

Payment
of Principal and interest shall be made in lawful money of the United States of
America to the registered Holder of this Note at the address shown in the
register maintained by the Company for such purpose, all in the manner provided
in the Investment Agreement referred to below.

 

This
Note is one of a series of Notes issued pursuant to that certain Investment
Agreement, dated as of February 6, 2008 (as amended, restated,
supplemented or otherwise modified from time to time, the “Investment
Agreement”), among the Company, the Guarantors from time to time party
thereto, the Holder, the Agent and the other Lenders from time to time a party
thereto, the terms and provisions of which are incorporated herein by
reference, and is entitled to the benefits and subject to the limitations
(including subordination provisions) thereof. 
Capitalized terms used herein without definition shall have the meanings
set forth in the Investment Agreement.

 

This
Note is a registered Note and, as provided in the Investment Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed by the registered
Holder hereof, or the Holder’s attorney duly authorized in writing, a new Note
for a like Principal amount will be issued to, and registered in the name of,
the transferee.  Prior to due presentment
for registration of transfer, the Company may treat the Person in whose name
this Note is registered as the owner hereof for the purpose of receiving
payment and for all other purposes, and the Company shall not be affected by
any notice to the contrary.

 

The
Company is required to make and may make prepayments of principal under the
circumstances and in the amounts specified in the Investment Agreement.  This Note is also subject to optional and
mandatory prepayment, in whole or from time to time in part, at the times and
on the terms specified in the Investment Agreement.

 

If
an Event of Default occurs and is continuing, the Principal and all accrued and
unpaid interest of this Note may be declared or otherwise become due and
payable in the manner, at the price and with the effect provided in the
Investment Agreement.

 

In
the event this Note is not paid when due, the Company will pay, in addition to
Principal and interest, all costs of collection, including reasonable attorneys’
fees, and the Holder hereof shall be entitled to all the rights and remedies
set forth in the Investment Agreement.

 

THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF
NEW YORK AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
SUCH STATE WITHOUT REGARD TO CONFLICTS OF LAWS.

 

[remainder of page intentionally left blank]

 

 

IN
WITNESS WHEREOF, this Note is executed as of the date first written above.

 

	
   

  	
  FESTIVAL
  FUN PARKS, LLC

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

EXHIBIT B

 

FORM OF SECRETARY’S CERTIFICATE

 

FESTIVAL FUN PARKS, LLC

 

Secretary’s Certificate

Dated as of
                      , 2008

 

I,
                            ,
hereby certify to the Agent and Lenders (as such terms are defined below) in
connection with the Investment Agreement, dated as of February 6, 2008
(the “Investment Agreement”), by and among FESTIVAL FUN
PARKS, LLC, a Delaware limited liability company (the “Company”), Laminar Direct Capital L.P., a Delaware limited
partnership, as a Lender and in its capacity as agent (acting in such capacity,
the “Agent”) and the other lenders from time
to time party hereto (collectively, the “Lenders” and
each individually, a “Lender”), that
I am the duly elected, qualified and acting Secretary of the Company, and that,
as such, I have access to records of the Company and am familiar with the
matters herein certified, and I am authorized to execute and deliver this
Certificate and that:

 

1.             Attached as Exhibit A
is a true, correct and complete copy of the Certificate of Formation of the
Company as (the “Certificate of Formation”), which Certificate of
Formation has not been rescinded, modified, or amended and remains in full
force and effect in its entirety on the date hereof.

 

2.             Attached as Exhibit B
is a true, correct and complete copy of the Limited Liability Company Agreement
of the Company (the “Limited Liability Company Agreement”), which
Limited Liability Company Agreement has not been rescinded, modified or amended
and remains in full force and effect in its entirety on the date hereof.

 

3.             Attached as Exhibit C
is a true, correct and complete copy of the resolutions (the “Resolutions”),
duly adopted by the Company on
                                , 2008,
authorizing the execution, delivery and performance of the Loan Documents (as
defined in the Investment Agreement). 
The Resolutions have not been modified, amended, altered, rescinded or
revoked and are in full force and effect as of the date hereof.

 

4.             Attached as Exhibit D
is a true and correct certificate of good standing issued by the Secretary of
State of the State of Delaware.

 

5.             The persons named below are duly elected, qualified
and acting authorized officers of the Company, holding the offices set forth
opposite their names below and the signature set forth opposite each officer’s
name below is his genuine signature, and such officers are duly authorized and
empowered to execute on behalf of the Company, all documents (including Loan
Documents) to which the Company is a party:

 

	
  Name

  	
   

  	
  Office

  	
   

  	
  Signature

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

All
capitalized terms used but not otherwise defined in this Certificate having the
meanings ascribed thereto in the Investment Agreement.

 

 

I
have executed and delivered this Certificate on the date first written above,
and all matters I have certified are true, correct and complete on this date.

 

 

	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

EXHIBIT A

 

Certificate of Formation

 

SEE ATTACHED

 

 

Exhibit B

 

Limited Liability Company Agreement

 

SEE ATTACHED

 

 

Exhibit C

 

Resolutions

 

SEE ATTACHED

 

 

Exhibit D

 

Certificate of Good Standing

 

SEE ATTACHED

 

 

EXHIBIT C

 

FORM OF COMPLIANCE CERTIFICATE

 

[see attached]

 

 

EXHIBIT D

 

[Reserved].

 

 

EXHIBIT E

 

FORM OF OFFICER’S FUNDING CERTIFICATE

 

The
undersigned, on behalf of  FESTIVAL FUN
PARKS, LLC, a Delaware limited liability company (the “Company”),
pursuant to the Investment Agreement referred to below, hereby certifies to LAMINAR
DIRECT CAPITAL L.P. (together with the other lenders from time to time party to
the Investment Agreement, the “Lenders”):

 

1.             THIS OFFICER’S
FUNDING CERTIFICATE (this “Certificate”) is given pursuant to Section 5.02
of the Investment Agreement of even date herewith (the “Investment Agreement”)
by and among the Company, the Guarantors from time to time party thereto, the
Agent and the Lenders from time to time party thereto.  The undersigned acknowledges that (a) in
entering into the Investment Agreement, the Agent and the Lenders are entitled
to rely and have in fact, relied upon the information contained herein and (b) any
successor or assign of the Agent or any Lender is entitled to rely upon the
information contained herein. 
Capitalized terms used herein and not defined herein shall have the
meanings assigned thereto in the Investment Agreement.

 

2.             Each of the
funding conditions set forth in Section 5.02 of the Investment
Agreement has been satisfied or waived in writing by the Agent and the Lenders
as of the date hereof.

 

3.             Since December 31,
2006 there has not occurred any material adverse change in any aspect of the
business, operations, properties, prospects or financial condition of any
Credit Party, or any event or condition which could reasonably be expected to
result in such a material adverse change.

 

4.             No actions,
suits, investigations or proceedings are pending or threatened in any court or
before any arbitrator or Governmental Authority that purport (a) to
materially and adversely affect the Credit Parties or (b) to affect any
transaction contemplated by this Agreement or the ability of the Credit Parties
or any other obligor under the Loan Documents to perform their respective
obligations under the Loan Documents.

 

5.             Attached hereto
as Exhibit A are pro forma financial statements of Holdings and its Consolidated
Subsidiaries which evidence, in each case for the twelve (12) month period for
which financial statements are most recently available, prepared to give effect
to the purchase of the Notes on the Funding Date and the consummation of the
transactions contemplated by the Operative Documents, and subject to such
adjustments as are deemed reasonably acceptable to Agent, (i) a Total Debt
to EBITDA Ratio of not more than 4.85 to 1.0, and (ii) a Senior Debt to
EBITDA Ratio of not more than 3.07 to 1.0

 

6.             After giving effect to the purchase of Notes on the
Funding Date (assuming for purposes hereof, the payment of the RBS Restricted
Payment on the Funding Date) and the consummation of the transactions contemplated
by the Operative Documents, the aggregate outstanding Revolving Loans (as
defined in the Senior Credit Agreement) and Swingline Loans (as defined in the
Senior Credit Agreement) shall not exceed $17,000,000 and Letter of Credit
Liabilities (as defined in the Senior Credit Agreement) shall not exceed
$4,000,000.

 

7.             The
representations and warranties of the Company and each other Credit Party
contained in Article VI of the Investment Agreement and each other
Loan Document that are subject to materiality or Material Adverse Effect
qualifications shall be true and correct in all respects and the
representations and warranties of the Company and each other Credit Party
contained in Article VI of the Investment Agreement and each other
Loan Document that are not subject to materiality or Material Adverse Effect 

 

 

qualifications
shall be true and correct in all material respects, except to the extent that
such representations and warranties specifically refer to an earlier date, in
which case they shall be true and correct as of such earlier date.

 

8.             No Default or
Event of Default shall exist, or would result from entering into the Loan
Documents and the other Operative Documents.

 

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK]

 

 

IN
WITNESS WHEREOF, the undersigned has executed this Certificate as of the
Funding Date.

 

	
   

  	
  FESTIVAL
  FUN PARKS, LLC

  
	
   

  	
  a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

OFFICER’S FUNDING CERTIFICATE

 

EXHIBIT A

 

Pro Forma Financial Statements

 

[TO BE PROVIDED BY THE COMPANY]

 

 

EXHIBIT F

 

FORM OF SOLVENCY
CERTIFICATE

 

This
Certificate is delivered as of February     , 2008,
pursuant to the Investment Agreement (the “Investment Agreement”),
dated as of February 6, 2008, among FESTIVAL FUN PARKS, LLC,
a Delaware limited liability company, (the “Company”),
Laminar Direct Capital L.P., a Delaware limited partnership, as a Lender and in
its capacity as agent (acting in such capacity, the “Agent”)
and the other lenders from time to time party hereto (collectively, the “Lenders” and each individually, a “Lender”).  All capitalized terms used in this
Certificate which are defined in the Investment Agreement are used in this
Certificate with the same meanings as provided in the Investment Agreement.

 

Solely
in my representative capacity as an officer of the Company and not in my
personal capacity, I hereby certify to the Agent, to the best of my knowledge
and belief, as follows:

 

1.             I am the Chief Financial
Officer of the Company, and in such capacity I am familiar with the financial
affairs of the Company.  I was
responsible for and acted on behalf of the Company in connection with the
negotiation and signing of the Investment Agreement and the other Loan
Documents.  I understand that this
Certificate will be used by the Agent in determining whether or not to extend
credit to the Company under the Investment Agreement on and after the Funding
Date.

 

2.             I have reviewed the contents
of this Certificate, and I have conferred with such officers, employees,
representatives or advisers of the Company with respect to providing this
Certificate and have made such other investigations and inquiries as I have
deemed necessary and prudent in connection with the issuance of this
Certificate.

 

3.             Based on my review,
investigation and inquiry described above, on the Funding Date, both before and
after giving effect to (a) the funding of the Notes, the initial funding
of Loans (as defined in the Senior Credit Agreement) and the issuance of any
Support Agreements (as defined in the Senior Credit Agreement) and Lender
Letters of Credit (as defined in the Senior Credit Agreement) on the Funding
Date (assuming for purposes hereof, the payment of the RBS Restricted
Distribution on the Funding Date), (b) the disbursement of the proceeds of
the Notes and the Loans (as defined in the Senior Credit Agreement) and such
other Debt pursuant to the instructions of the Company, (c) the
consummation of the transactions contemplated by the Loan Documents and the
Senior Transaction Documents and (d) the payment and accrual of all
transaction costs in connection with the foregoing, each Credit Party is and
will be Solvent.

 

 

I
represent the foregoing information to be true and correct to the best of my
knowledge and belief and execute this Certificate solely in my representative
capacity as an officer of the Company and not in my personal capacity.

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  FESTIVAL FUN PARKS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

EXHIBIT C

 

FORM OF

 

COMPLIANCE CERTIFICATE

 

FESTIVAL FUN PARKS, LLC

 

Date:                     ,

 

This
certificate is given by                                           ,
a Responsible Officer of Festival Fun Parks, LLC (the “Company”), pursuant to Section 7.01(c) of
that certain Investment Agreement dated as of February 6, 2008 among the
Company, the Guarantors from time to time party thereto, the Lenders from time
to time party thereto and Laminar Direct Capital L.P., as Agent (as such
agreement may have been amended, restated, supplemented or otherwise modified
from time to time, the “Investment Agreement”).
Capitalized terms used herein without definition shall have the meanings set
forth in the Investment Agreement.

 

The
undersigned Responsible Officer hereby certifies to the Agent and Lenders that:

 

(a)                                  the financial statements delivered with this
certificate in accordance with Section 7.01(a) and/or 7.01(b) of
the Investment Agreement fairly present in all material respects the results of
operations and financial condition of Holdings
and its Subsidiaries as of the dates and the accounting period covered by such
financial statements;

 

(b)                                 I have reviewed the terms of the Investment
Agreement and have made, or caused to be made under my supervision, a review in
reasonable detail of the transactions and conditions of the Company and its
Subsidiaries during the accounting period covered by such financial statements;

 

(c)                                  such review has not disclosed the existence
during or at the end of such accounting period, and I have no knowledge of the
existence as of the date hereof, of any condition or event that constitutes a
Default or an Event of Default, except as set forth in Schedule 1
hereto, which includes a description of the nature and period of existence of
such Default or an Event of Default and what action the Company has taken, is
undertaking and proposes to take with respect thereto; and

 

(d)                                 the Company is in compliance with the
covenants contained in Sections 8.22, 8.23 and 8.24 of the
Investment Agreement, as demonstrated by the calculation of such covenants below,
except as set forth below.

 

 

IN
WITNESS WHEREOF, the undersigned officer has executed and delivered this
certificate this          day of                       ,
        .

 

	
   

  	
  By

  	
   

  
	
   

  	
  Name

  	
   

  
	
   

  	
  Title

  	
   

  	
  of
  the Company

  
						

 

 

CAPITAL EXPENDITURES

(Section 8.22)

 

	
  Capital
  Expenditures for the applicable measurement period (the “Defined Period”) are defined as
  follows:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Amount
  capitalized during the Defined Period by Holdings and its Consolidated Subsidiaries as capital
  expenditures for property, plant, and equipment or similar fixed asset
  accounts, including any such expenditures by way of acquisition of a Person
  or by way of assumption of Debt or other obligations, to the extent reflected
  as plant, property and equipment, but
  in each case excluding the effect of any Permitted Acquisition

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Plus:

  	
  deposits
  made in the Defined Period in connection with property, plant, and equipment;
  less deposits of a prior period included above

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Less:

  	
  Net
  Cash Proceeds of Asset Dispositions received during the Defined Period which
  (i) the Company or a Subsidiary is permitted to reinvest pursuant to the
  terms of the Investment Agreement and (ii) are included in capital
  expenditures above

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Proceeds
  of Property Insurance Policies (as defined in the Senior Credit Agreement)
  received during the Defined Period which (i) the Company or a Subsidiary
  is permitted to reinvest pursuant to the terms of the Investment Agreement
  and (ii) are included in capital expenditures above

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Capital
  Expenditures(1)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Less:

  	
  Portion
  of Capital Expenditures financed during the Defined Period under Capital
  Leases or other Debt (Debt, for this purpose, does not include drawings under
  any revolving credit facility provided in the Senior Credit Agreement in
  accordance with the terms of the Subordination Agreement))

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Unfinanced
  Capital Expenditures (used in calculation of Operating Cash Flow (defined in Section 8.24
  of the Compliance Certificate))

  	
   

  	
  $

  

 

(1) To
the extent Capital Expenditures are being calculated for any Defined Period
which includes any of the following months, Capital Expenditures for such month
shall be deemed to be as follows:

 

	
  Month

  	
   

  	
  Capital Expenditures

  	
   

  
	
  October 2007

  	
   

  	
  $

  	
  925,217

  	
   

  
	
  November 2007

  	
   

  	
  $

  	
  465,274

  	
   

  
	
  December 2007

  	
   

  	
  $

  	
  665,803

  	
   

  

 

For
the month of January 2008, Capital Expenditures shall be calculated in a
manner consistent with the methodology used in the calculation of Capital
Expenditures for the above-referenced months.

 

 

	
  Capital
  Expenditures (from above)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Permitted
  Capital Expenditures (including carry
  forward of $                from
  prior fiscal year)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  In
  Compliance

  	
   

  	
  Yes/No

  

 

 

FIXED CHARGE COVERAGE RATIO

 

(Section 8.23)

 

	
  Fixed
  Charge Coverage Ratio for the applicable measurement period (the “Defined Period”) is defined as
  follows:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Fixed
  Charges:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Interest
  expense ($           ),
  net of interest income ($           ),
  interest paid in kind ($           )
  and amortization of capitalized fees and expenses incurred to consummate the
  transactions contemplated by the Transaction Documents and included in
  interest expense ($           ),
  included in the determination of net income of Holdings and its Consolidated
  Subsidiaries for the Defined Period (“Total Interest Expense”)(2)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Plus
  (without duplication):

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Any
  federal, state, local or other income and franchise taxes paid or payable in
  cash and included in the determination of net income for the Defined Period,
  net of any cash tax credit or other cash tax benefits received during the
  Defined Period

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Scheduled
  payments of principal for the Defined Period with respect to all Debt
  (including the portion of scheduled payments under Capital Leases allocable
  to principal and Permitted AHYDO Prepayments (as defined in the Subordination
  Agreement) but excluding mandatory prepayments required by the Senior Credit
  Agreement and Section 4.03 of the Investment Agreement and
  excluding scheduled repayments of revolving loan borrowings under the Senior
  Credit Agreement in accordance with the terms of the Subordination Agreement)
  and other Debt subject to reborrowing to the extent not accompanied by a
  concurrent and permanent reduction of the Revolving Loan Commitment (as
  defined in the Senior Credit Agreement) (or equivalent loan commitment))

  	
   

  	
   

  
					

 

 (2) Interest expense shall not include
interest expense relating to the Existing RBS Debt which is reflected on the
consolidated financial statements of Holdings and its Subsidiaries solely as a
result of the application of “push-down” accounting principals in accordance
with GAAP, but only so long as neither Holdings nor any of its Subsidiaries has
any liability, contingent or otherwise, with respect to such Existing RBS Debt
(or any intercompany Debt related thereof) and so long as the footnotes to
Holdings’ consolidated financial statements (including the annual financial
statements delivered in accordance with Section 7.01(b) of the
Investment Agreement) reflect the foregoing in a manner satisfactory to the
Agent.

 

 

	
   

  	
  Restricted
  Distributions made by Holdings in cash during the Defined Period, to the
  extent not deducted in the calculation of Operating Cash Flow for the Defined
  Period

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Fixed
  Charges(3),(4)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Operating
  Cash Flow:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EBITDA
  for the Defined Period (calculated in the manner set forth below)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Less:

  	
  Unfinanced
  Capital Expenditures for the Defined Period (calculated in the manner
  required by Section 8.22 of the Compliance Certificate)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  To
  the extent not already reflected in the calculation of EBITDA, other
  capitalized costs, defined as the gross amount paid in cash and capitalized
  during the Defined Period, as long term assets, other than amounts
  capitalized during the Defined Period as capital expenditures for property,
  plant and equipment or similar fixed asset accounts

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Operating
  Cash Flow

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Fixed
  Charge Coverage Ratio (Ratio of Operating Cash Flow to Fixed Charges) for the
  Defined Period

  	
   

  	
         to 1.0

  
	
   

  	
   

  	
   

  
	
  Minimum
  Fixed Charge Coverage for the Defined Period

  	
   

  	
         to 1.0

  
	
   

  	
   

  	
   

  
	
  In
  Compliance

  	
   

  	
  Yes/No

  
					

 

* * * *

 

EBITDA for the Defined Period is defined as follows:

 

(3) Note: Each component of Fixed Charges shall
exclude the operating results of any Target of a Permitted Acquisition prior to
the date the Target became a Subsidiary of the Company, in the case of
Permitted Acquisitions consummated as a purchase of the Capital Stock of such
Target.

 

(4) For
each of the Defined Periods ending September 30, 2008 and
December 31, 2008, Fixed Charges shall be annualized based on actual Fixed
Charges from March 1, 2008 through the end of such period.

 

 

	
  Net
  income (or loss) for the Defined Period of Holdings  and
  its Consolidated Subsidiaries, but excluding: (a) the income (or loss)
  of any Person (other than Subsidiaries of Holdings) in which Holdings or any
  of its Subsidiaries has an ownership interest unless received by Holdings  or its Subsidiary in a cash distribution; and
  (b) the income (or loss) of any Person accrued prior to the date it
  became a Subsidiary of Holdings  or is merged
  into or consolidated with Holdings

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Plus:

  	
  Any
  provision for (or less any benefit, including income tax credits, from)
  federal, state, local or other income and franchise taxes deducted in the
  determination of net income for the Defined Period

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Interest
  expense, net of interest income, deducted in the determination of net income
  for the Defined Period

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Amortization
  and depreciation deducted in the determination of net income for the Defined
  Period

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Losses
  (or less gains) from Asset Dispositions included in the determination of net
  income for the Defined Period (excluding sales, expenses or losses related to
  current assets)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Other
  non-cash expenses (or less gains or income) deducted (or included) in the
  determination of net income for the Defined Period (including non-cash
  expenses deducted as a result of any sale or grant of Capital Stock to
  employees, officers or directors and non-cash expenses (or less gains or
  income) deducted (or included) as a result of the application of purchase
  accounting) and for which no cash outlay (or cash receipt) is foreseeable
  prior to the Maturity Date

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Expenses
  and fees deducted in the determination of net income and incurred during the
  Defined Period to consummate the transactions contemplated by the Transaction
  Documents, but solely to the extent set forth in the statement of sources and
  uses delivered to the Agent on the Funding Date

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Extraordinary
  losses (or less gains) included in the determination of net income during the
  Defined Period, net of related tax effects

  	
   

  	
   

  

 

 

	
   

  	
  To
  the extent deducted in the determination of net income during the Defined
  Period, (1) severance or related legal expenses relating to any
  corporate reorganization resulting from the Palace Acquisition, any Permitted
  Acquisition or any Asset Disposition; (2) costs and expenses incurred
  with de-registering under the Exchange Act; (3) relocation and related
  expenses related to the hiring of a new chief executive officer for the Company;
  (4) expenses, costs and fees associated with failed acquisitions; and
  (5) costs associated with the director and officer “run-off” liability
  policy purchased in connection with the Palace Acquisition; provided that the
  aggregate amount of all such costs and expenses added back during any Defined
  Period shall not exceed $1,000,000 and shall be documented in a manner
  reasonably satisfactory to the Agent

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Less:

  	
  Expenditures
  made after the Funding Date, but during the Defined Period, in connection with
  the consummation of the transactions contemplated by the Transaction
  Documents, but not reflected in the pro forma balance sheet referenced in Section 6.05(c) and
  not deducted in the determination of net income

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EBITDA
  for the Defined Period(5)

  	
   

  	
  $

  

 

 (5) To the extent EBITDA is calculated
for any Defined Period that includes any of the following months, EBITDA for
such month shall be deemed to be as follows:

 

	
  Month

  	
   

  	
  EBITDA

  	
   

  
	
  January 2007

  	
   

  	
  $

  	
  (1,724,000

  	
  )

  
	
  February 2007

  	
   

  	
  $

  	
  (1,895,000

  	
  )

  
	
  March 2007

  	
   

  	
  $

  	
  (1,561,000

  	
  )

  
	
  April 2007

  	
   

  	
  $

  	
  (799,000

  	
  )

  
	
  May 2007

  	
   

  	
  $

  	
  (2,228,000

  	
  )

  
	
  June 2007

  	
   

  	
  $

  	
  8,979,000

  	
   

  
	
  July 2007

  	
   

  	
  $

  	
  16,928,000

  	
   

  
	
  August 2007

  	
   

  	
  $

  	
  20,102,000

  	
   

  
	
  September 2007

  	
   

  	
  $

  	
  2,244,000

  	
   

  
	
  October 2007

  	
   

  	
  $

  	
  (2,192,000

  	
  )

  
	
  November 2007

  	
   

  	
  $

  	
  (1,477,000

  	
  )

  
	
  December 2007

  	
   

  	
  $

  	
  (1,669,000

  	
  )

  

 

For
the month of January 2008, EBITDA shall be calculated in a manner
consistent with the methodology used in the calculation of EBITDA for the
above-referenced months.

 

 

	
  Total
  Debt

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  EBITDA for the Defined Period (calculated in the
  manner required by Section 8.23 of the Compliance Certificate)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Plus:

  	
  Pro Forma Acquisition EBITDA (as defined below)
  for each Permitted Acquisition (and each proposed Permitted Acquisition for
  determining compliance with the requirement of Section 8.08)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Permitted                  Acquisition                  #1:
                          

  Permitted                  Acquisition                  #2:
                          

  Permitted                  Acquisition                  #3:
                          

  [additional line items, as applicable]

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Adjusted EBITDA

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Total
  Debt to EBITDA Ratio (ratio of Total Debt to Adjusted EBITDA for the Defined Period)

  	
   

  	
         to 1.0

  
	
   

  	
   

  	
   

  
	
  Maximum
  Permitted Total Debt to EBITDA Ratio for the Defined Period

  	
   

  	
         to 1.0

  
	
   

  	
   

  	
   

  
	
  In
  Compliance

  	
   

  	
  Yes/No

  

 

“Pro
Forma Acquisition EBITDA” means (i) EBITDA (calculated in the same
manner as EBITDA is calculated on this Exhibit B) attributable to each
Permitted Acquisition (with such pro forma adjustments as are reasonably
acceptable to the Agent based upon data presented to the Agent to its
reasonable satisfaction) consummated during the one (1) year period
preceding the date of determination calculated solely for a number of months
immediately preceding the consummation of the applicable Permitted Acquisition,
which number equals twelve (12) minus the number of months following the
consummation of the applicable Permitted Acquisition for which financial
statements of Holdings and its Subsidiaries have been delivered to the Agent
pursuant to Section 7.01, and (ii) for purposes of determining
compliance with Section 8.08, EBITDA (calculated in the same manner
as EBITDA is calculated on this Exhibit B) of the target of any proposed
Permitted Acquisition (adjusted with such pro forma adjustments as are
reasonably acceptable to the Agent based upon data presented to the Agent to
its reasonable satisfaction) calculated for the twelve (12) months immediately
preceding the consummation of the proposed Permitted Acquisition.

 

 

Schedule 1 to

Compliance Certificate

 

[Company to list any existing
Defaults or Events of Default, specifying the nature and period of existence of
each, and the actions the Company has taken, is undertaking and proposes to
take in respect thereof. If no Defaults and no Events of Default are then in
existence, such schedule should read “None”.]Exhibit
10.21

 

STOCK
PURCHASE AGREEMENT

 

STOCK
PURCHASE AGREEMENT
(the “Agreement”) dated as of February 15, 2008 by and among HSW
International, Inc., a Delaware corporation (the “Company”), and
the Persons listed on Schedule I (collectively, the “Purchasers”).

 

WHEREAS, each Purchaser desires to purchase from
Company, and Company desires to sell to each Purchaser, shares of the Company’s
common stock, par value $0.001 per share (the “Common Stock”).

 

NOW
THEREFORE, in
consideration of the foregoing and the covenants, agreements, representations
and warranties contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the parties, the parties hereto hereby agree as follows:

 

ARTICLE I

DEFINED TERMS

 

Capitalized terms used in
this Agreement shall have the meanings set forth in this Article.

 

“Affiliate” as
applied to any specified Person, means any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
specified Person.  For purposes of the
foregoing, “control,” when used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by contract or otherwise, and the terms “controlled”
and “controlling” shall have meanings correlative to the foregoing.

 

“Agreement”
shall have the meaning given to such term in the Recitals.

 

“Business Day” means
any day that is not a Saturday, a Sunday or other day on which banks are
required or authorized by law to be closed in The City of New York.

 

“Closing”
has the meaning ascribed thereto in Section 2.2.

 

“Closing
Date” has the meaning ascribed thereto in Section 2.2.

 

“Common
Stock” has the meaning given to such term in the Recitals.

 

“Company”
has the meaning given to such term in the Recitals.

 

“Exchange Act” shall
mean the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.

 

“Governmental Authority”
means any domestic or foreign government or political subdivision thereof,
whether on a federal, state or local level and whether executive, legislative
or judicial in nature, including any agency, authority, board, bureau,
commission, court, department or other instrumentality thereof.

 

 

“Person” means any
individual, partnership, firm, corporation, limited liability company,
association, trust, unincorporated organization or other entity.

 

“Purchaser” has the
meaning given to it in the Recitals and any Person succeeding to the rights of
a Purchaser pursuant to the terms hereof.

 

“Shares” has the
meaning ascribed thereto in Section 2.1.

 

“Securities Act”
means the Securities Act of 1933, as amended, or any successor federal statute,
and the rules and regulations of the Commission promulgated thereunder,
all as the same may from time to time be in effect.

 

ARTICLE II

PURCHASE AND SALE OF SHARES; CLOSING

 

2.1           Sale of Common Stock. 
Subject to the satisfaction or waiver of the conditions set forth in Articles V
and VI, at Closing, the Company shall issue and sell to each Purchaser,
and each Purchaser shall purchase from the Company, that number of shares of
Common Stock set forth opposite such Purchaser’s name on Schedule I
hereto (the “Shares”).  The per share
purchase price for each Share shall be equal to $3.68.

 

2.2           Closing.  The closing (the “Closing”)
hereunder with respect to the issuance and sale of the Shares and the
consummation of the transactions contemplated hereby shall, subject to the
satisfaction or waiver of the applicable conditions set forth in Article V
and VI, take place on or before that date which is 45 days after the
date hereof (the date on which the Closing occurs shall be referred to herein
as the “Closing Date”) at the offices of Wyrick Robbins Yates & Ponton
LLP, 4101 Lake Boone Trail, Suite 300, Raleigh, North Carolina 27607, or
at such other time and place as agreed to by the Company and the Purchasers.

 

2.3           Closing Deliveries by Company.  At
the Closing, the Company shall deliver or cause to be delivered to each
Purchaser certificate(s) for the Shares purchased by such Purchaser.

 

2.4           Closing Deliveries by each Purchaser.  At
the Closing, each Purchaser shall deliver or cause to be delivered to the
Company the purchase price with respect to the Shares purchased by such
Purchaser by wire transfer in immediately available funds to the bank account
designated in writing by the Company.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company represents and
warrants to each Purchaser as follows:

 

3.1           Organization and Standing.  The
Company has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the State of Delaware with corporate power and
authority to own, lease and operate its properties, to conduct its business as
currently conducted and to enter into and perform its obligations under this
Agreement.

 

3.2           Capitalization.  On
the date hereof and prior to giving effect to the transactions contemplated
under this Agreement, the authorized capital stock of the Company consists of 

 

 

(i) 200,000,000 shares of common
stock, par value $0.001 per share, 53,574,919 shares of which are outstanding
and (ii) 20,000,000 shares of preferred stock, par value $0.001 per share,
none of which are outstanding

 

3.3           Authority.  The Company has all necessary
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder, and to consummate the transactions contemplated
hereby.  The execution and delivery of
this Agreement has been authorized by all necessary corporate action on the
part of the Company and no other corporate proceedings or approvals are required
on the part of the Company to authorize this Agreement or to consummate the
contemplated transactions.  This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery thereof by the
Purchasers, constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to or
affecting creditors’ rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

 

3.4           Authorization of Common Stock.  The
issuance and sale of the Shares to the Purchasers has been duly authorized and
the shares of Common Stock, when issued to the Purchaser for the consideration
set forth herein, will be fully paid and non-assessable, and free of
restrictions on transfer other than under this Agreement and applicable state
and federal securities laws.

 

3.5           Investment Company.  The
Company is not an “investment company” or a company “controlled” by an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER

 

Each Purchaser represents
and warrants to the Company as follows:

 

4.1           Organization and Standing.  Such
Purchaser is a corporation, limited partnership or other legally recognizable
entity duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization.

 

4.2           Authorization;
Consents.

 

(a)           Such Purchaser has taken all actions
necessary to authorize it (i) to execute, deliver and perform all of its
obligations under this Agreement and (ii) to consummate the transactions
contemplated hereby.  This Agreement,
assuming the due authorization, execution and delivery thereof by the Company,
is a legally valid and binding obligation of such Purchaser enforceable against
it in accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting creditors’ rights generally and by
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).

 

(b)           The execution and delivery by such Purchaser
of this Agreement does not, and the performance of its obligations under this
Agreement and the consummation of the contemplated transactions will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority or any Person under any applicable
laws.

 

 

4.3           Litigation.  As of the date hereof, no
action by or against such Purchaser is pending or, to the best knowledge of
such Purchaser, threatened, which could affect the legality, validity or
enforceability of this Agreement or the consummation of the transactions
contemplated hereby or thereby.

 

4.4           Purchase for Own Account.  Such
Purchaser is purchasing the Shares to be purchased by it solely for its own
account and not as nominee or agent for any other Person and not with a view
to, or for offer or sale in connection with, any current distribution thereof
(within the meaning of the Securities Act) that would cause the original
purchase of the Shares to be in violation of the securities laws of the United
States of America or any state thereof, without prejudice, however, subject to
its right at all times to sell or otherwise dispose of all or any part of such
Shares pursuant to a registration statement under the Securities Act or
pursuant to an exemption from the registration requirements of the Securities
Act, and subject, nevertheless, to the disposition of its property being at all
times within its control.

 

4.5           Qualified Institutional Buyer; Accredited
Investor.  Such Purchaser is knowledgeable,
sophisticated and experienced in business and financial matters and in
investing in securities; it has previously invested in securities similar to
the Shares and it acknowledges that the Shares have not been registered under
the Securities Act and understands that the Shares must be held indefinitely
unless they are subsequently registered under the Securities Act or such sale
is permitted pursuant to an available exemption from such registration
requirement; it is able to bear the economic risk of its investment in the
Shares and is presently able to afford the complete loss of such investment;
and it is a “Qualified Institutional Buyer” as defined in Rule 144A
promulgated under the Securities Act or an “accredited investor” as defined
under paragraph (a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) of Rule 501
under the Securities Act as indicated by such Purchaser on the signature page attached
hereto.

 

4.6           Independent Investigation.  Such
Purchaser has conducted its own independent investigation, review and analysis
of the business, operations, assets, liabilities, results of operations,
financial condition, software, technology and prospects of the Company’s
business, which investigation, review and analysis was done by such Purchaser
and its Affiliates and representatives. 
Such Purchaser acknowledges that it and its representatives have been
provided adequate access to the personnel, properties, premises and records of
the Company’s business for such purpose. 
In entering into this Agreement, such Purchaser acknowledges that it has
relied solely upon the aforementioned investigation, review and analysis and
the representations and warranties of the Company set forth in Article III
hereof and not on any other factual representations or opinions of the Company
or its representatives.

 

4.7           Reliance on Purchaser Representations.  Such
Purchaser understands that the Shares are being offered and sold to it in
reliance upon specific exemptions from the registration requirements of the
Securities Act and the rules and regulations promulgated thereunder, and
state securities laws and that the Company is relying upon the truth and accuracy
of, and the Purchaser’s compliance with, the representations, warranties,
agreements, acknowledgements and understandings of the Purchaser set forth
herein in order to determine the availability of such exemptions and the
eligibility of the Purchaser to acquire the Shares.  Under such laws and rules and
regulations, the Shares may be resold without registration under the Securities
Act only in certain limited circumstances. 
Each Purchaser represents that it is familiar with Rule 144 under
the Securities Act, as presently in effect and as will be in effect after February 15,
2008, and understands the resale limitations.

 

 

4.8           Certain Trading Activities.  Such
Purchaser has not directly or indirectly, nor has any Person acting on behalf
of or pursuant to any understanding with such Purchaser, engaged in any
transactions in the securities of the Company (including, without limitation,
any short sales involving the Company’s securities) since such Purchaser has
entered into discussions with the Company about the purchase of shares
hereunder.  Neither such Purchaser
(including its Affiliates), nor any Person acting on behalf of or pursuant to
any understanding with such Purchaser, holds a short position, directly or indirectly,
in any shares of the Company’s Common Stock.

 

4.9           Non-Disclosure.  Such
Purchaser has not directly or indirectly disclosed this Agreement and the
contemplated transactions or any information furnished by the Company or its
representatives in connection with the contemplated transactions to any other
Person other than to its Affiliates, financial advisors, attorneys, accountants
and representatives (a) who agreed to use such information solely for the
purpose of evaluating the transaction, (b) who were informed by the
Purchaser of the confidential nature of the information and (c) who agreed
to not to disclose any of the information to any other party.

 

4.10         No Brokers.  Such Purchaser has not engaged
any broker, finder, commission agent or other such intermediary in connection
with the sale of the Shares and the transactions contemplated by this
Agreement, and such Purchaser is under no obligation to pay any broker’s or
finder’s fee or commission or similar payment in connection with such
transactions.

 

ARTICLE V

PURCHASERS’ CONDITIONS TO CLOSING

 

The obligation of each
Purchaser to purchase and pay for the Shares to be purchased by such Purchaser
hereunder at the Closing is subject to the satisfaction of the following
conditions precedent (unless waived by such Purchaser).  The Company shall use its commercially
reasonable best efforts to ensure that all conditions to the Closing set forth
in this Article V are satisfied on or prior to the Closing Date,
including executing and delivering all documents required to be delivered by
the Company at the Closing.

 

5.1           No Material Proceedings.  No
legal proceeding shall be pending or threatened as of the Closing Date to
restrain, prohibit or otherwise challenge the transactions hereunder, nor shall
any Governmental Authority have notified any party to this Agreement that the
consummation of the transactions hereby would constitute a violation of the
laws of the United States or the laws of any State hereof or the laws of the
jurisdiction to which such Governmental Authority is subject and that it intends
to commence proceedings to restrain the consummation of such transactions, to
force divestiture if the same are consummated or to materially modify the terms
or results of such transactions unless such Governmental Authority shall have
withdrawn such notice, or has otherwise indicated in writing that it will not
take any action.

 

5.2           Compliance with Agreements.  The
Company shall have performed and complied in all material respects with all
agreements, covenants and conditions contained herein except to the extent that
such failure resulted from actions or inactions, directly or indirectly, by
either of the Purchasers (or any of their Affiliates) in any capacity.

 

5.3           Representations and Warranties.  All
of the representations and warranties of the Company contained herein shall be
true and correct in all material respects on and as of the date hereof and on
and as of the Closing Date, except for those representations and warranties of
the Company that speak as of a certain date, which representations and
warranties shall have been true 

 

 

and correct in all material
respects as of such date, except to the extent that such breach of the
representations and warranties resulted from actions or inactions, directly or
indirectly, by either of the Purchasers (or any of their Affiliates) in any
capacity.

 

ARTICLE VI

CONDITIONS TO OBLIGATIONS OF THE COMPANY AT CLOSING

 

The obligations of the
Company to sell and issue the Shares to be delivered to each Purchaser at the
Closing shall be subject to the satisfaction or waiver of each of the following
conditions on or before Closing Date as set forth below.  Each Purchaser shall use its commercially
reasonable best efforts to ensure that all conditions to the Closing set forth
in this Article VI are satisfied on or prior to the Closing Date,
including executing and delivering all documents required to be delivered by
such Purchaser at the Closing.

 

6.1           Compliance with Agreements.  Each
Purchaser shall have performed and complied with all agreements, covenants and
conditions contained herein, except to the extent that such failure resulted
from actions or inactions directly or indirectly by the Company (or any of its
Affiliates).

 

6.2           Representations and Warranties.  All
of the representations and warranties of such Purchaser contained herein to
which it is a party shall be true and correct in all material respects on and
as of the date hereof and on and as of the Closing Date, except for those
representations and warranties of such Purchaser that speak as of a certain date,
which representations and warranties shall have been true and correct in all
material respects as of such date, except to the extent that such breach of the
representations and warranties resulted from actions or inactions, directly or
indirectly, by the Company (or any of its Affiliates).

 

6.3           No Material Proceedings.  No
legal proceeding shall be pending or threatened as of the Closing Date to
restrain, prohibit or otherwise challenge the transactions hereunder, nor shall
any Governmental Authority have notified any party to this Agreement that the
consummation of the transactions hereby would constitute a violation of the
laws of the United States or the laws of any State hereof or the laws of the
jurisdiction to which such Governmental Authority is subject and that it
intends to commence proceedings to restrain the consummation of such
transactions, to force divestiture if the same are consummated or to materially
modify the terms or results of such transactions unless such Governmental
Authority shall have withdrawn such notice, or has otherwise indicated in
writing that it will not take any action.

 

6.4           Board Approval.  The
Company’s Board of Directors shall have approved the sale and issuance of the
Shares.

 

ARTICLE VII

TRANSFER OF SECURITIES

 

7.1           Restriction on Transfer.  The
Shares shall not be transferable except in compliance with state and federal
securities laws.

 

7.2           Restrictive Legends.  Each
certificate evidencing the Shares shall bear the following legends, until such
time as they are not required by applicable law.

 

THESE SECURITIES HAVE NOT
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES 

 

 

COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933
AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

 

ARTICLE VIII

REGISTRATION RIGHTS

 

8.1           Definitions
for Article VIII.  As used in
this Article VIII, the following capitalized terms shall have the
meanings set forth in this Section 8.1.

 

“Register”,
“Registered” and “Registration” shall refer to a registration
effected by preparing and filing a registration statement or similar document
with the Commission in compliance with the Securities Act and the declaration
or ordering by the Commission of effectiveness of such registration statement
or document.

 

“Registrable
Securities” shall mean the Shares acquired by each Purchaser pursuant to
this Agreement, together with any shares acquired hereafter by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, reorganization, merger or consolidation of the Company.  For purposes of this Agreement, (i) Registrable
Securities shall cease to be Registrable Securities when a registration statement
covering such Registrable Securities has been declared effective under the
Securities Act by the Commission and such Registrable Securities have been
disposed of pursuant to such effective registration statement, and (ii) Registrable
Securities shall cease to be Registrable Securities, if in the opinion of the
Company, such Registrable Securities may be distributed to the public pursuant
to Rule 144 (or any successor provision then in effect) under the
Securities Act.

 

8.2           Requested
Registration.

 

(a)           Request for
Registration.  After the receipt of a written
request from any Purchaser (such Purchaser, the “Demanding Purchaser”) at any
time after 180 days following the Closing requesting that the Company effect
any Registration under the Securities Act covering all or part of the
Registrable Securities held by such Purchaser, the Company shall, (i) as
expeditiously as is possible, but in any event no later than thirty (30) days
after receipt of a written request from a Demanding Purchaser, file a registration
statement with the Commission for such Registration relating to all shares of
Registrable Securities which the Company has been so requested to register by
such Purchaser for sale, and (ii) use its commercially reasonable efforts
to cause such registration statement to be declared effective by the Commission
within forty-five (45) days after filing with the Commission; provided
that the Company shall not be obligated to effect, or take any action to
effect, any such Registration pursuant to this Section 8.2:

 

(1)           At any time that such Purchaser is able to
sell all of its Registrable Securities pursuant to Rule 144 (or any
successor provision then in effect) under the Securities Act;

 

(2)           After the Company has effected two (2) such
Registrations requested 

 

 

by
each Purchaser pursuant to this Section 8.2 and the registration
statements for such Registrations have been declared or ordered effective;

 

(3)           If the Registrable Securities requested by
such Purchaser to be Registered pursuant to such request do not have an
anticipated aggregate public offering price (before any underwriting discounts
and commissions) of at least $5,000,000; or

 

(4)           During the period starting with the date thirty (30) days prior to the
Company’s good faith estimate of the date of filing of, and ending on the date
ninety (90) days immediately following the effective date of, any registration
statement pertaining to securities of the Company (other than a Registration of
securities in a Rule 145 transaction or, with respect to an employee
benefit plan), provided that the Company is actively employing in good
faith all commercially reasonable efforts to cause such registration statement
to become effective; provided, further, however, that the
Company may only delay an offering pursuant to this Section 8.2(a)(4) for
a period of not more than ninety (90) days, if a filing of any other
registration statement is not made within that period and the Company may only
exercise this right once in any twelve (12) month period.

 

(b)           Other Stockholders. The registration statement filed pursuant
to any such request of any Demanding Purchaser may, subject to the provisions
of Section 8.2(c) below, include Registrable Securities of the
other Purchaser, and other securities of the Company which are held by Persons
who, by virtue of agreements with the Company, are entitled to include their
Registrable Securities in any such Registration (“Other Stockholders”).

 

(c)           Underwriting.

 

(1)           If the Purchaser intends to distribute the
Registrable Securities covered by its request for Registration by means of an
underwriting, it shall so advise the Company in its request made pursuant to Section 8.2.

 

(2)           If the other Purchaser or Other Stockholders
request inclusion in any such Registration, the Demanding Purchaser shall offer
to include the Registrable Securities of the other Purchaser and such Other
Stockholders in the underwriting but may condition such offer on their
acceptance of the further applicable provisions of this Section 8.2(c).  The Demanding Purchaser and the Company shall
(together with the other Purchaser and all Other Stockholders proposing to
distribute their Registrable Securities through such underwriting) enter into
an underwriting agreement in customary form with the representative of the underwriter
or underwriters selected for such underwriting by the Company and acceptable to
the Demanding Purchaser. Notwithstanding any other provision of this Section 8.2,
if the representative of such underwriter or underwriters advise the Company
and/or the Demanding Purchaser in writing that marketing factors require a
limitation on the number of shares to be underwritten, the Registrable
Securities held by the other Purchaser and Other Stockholders shall be excluded
from such Registration to the extent so required by such limitation pro rata in
accordance with the number of shares of Registrable Securities requested by
such parties to be included in such Registration, by such minimum number of
shares as is necessary to comply with such limitation.  No Registrable Securities excluded from the
underwriting by reason of the underwriter’s marketing limitation shall be
included in such Registration.  If the
other Purchaser or any Other Stockholder who has requested inclusion in such
Registration as provided above disapproves 

 

 

of
the terms of the underwriting, such person may elect to withdraw therefrom by
written notice to the Company, the underwriter and the Demanding Purchaser. If
the Demanding Purchaser elects to withdraw from such Registration, the initiation
of such Registration shall not count as a demand by such Purchaser for purposes
hereof (including without limitation, Section 8.2(a)(2).  The Registrable Securities so withdrawn shall
also be withdrawn from Registration. If the underwriter has not limited the
number of Registrable Securities to be underwritten, the Company and officers
and directors of the Company may include its or their securities for its or
their own account in such Registration if the representative of such
underwriter or underwriters so agrees and if the number of Registrable
Securities which would otherwise have been included in such Registration and
underwriting will not thereby be limited.

 

8.3           Expenses of Registration.  All
Registration expenses shall be borne by the Company.  All underwriting discounts, selling
commissions, brokerage fees and transfer taxes applicable to the sale of
Registrable Securities and all fees and disbursements of counsel for the
Purchasers shall be borne by the holders of the Registrable Securities so
Registered pro rata on the basis of the number of their shares of Registrable
Securities so Registered.

 

8.4           Registration
Procedures.  If and when the Company
effects a Registration of Registrable Securities under the Securities Act
pursuant to this Article VIII, the Company shall keep each
Purchaser with shares of Registrable Securities covered by such Registration
advised in writing as to the initiation of each Registration and as to the
completion thereof.  At its expense, the
Company shall:

 

(a)           prepare and file with the Commission a
registration statement on any appropriate form under the Securities Act with
respect to such Registrable Securities and thereafter use its commercially
reasonable efforts to cause such registration statement promptly to become and
remain effective for a period ending on the earlier of (1) one hundred
twenty (120) days, (2) the Purchaser being able to sell all of its
Registrable Securities under Rule 144 (or any successor provision then in
effect) under the Securities Act, or (3) the Purchaser completing the
distribution described in the registration statement relating thereto; provided,
however, that such one hundred twenty (120) day period shall be extended
for a period of time equal to the period during which an Purchaser refrains
from selling any Registrable Securities included in such Registration in
accordance with provisions in Section 8.8 hereof; and provided
further that applicable rules under the Securities Act governing
the obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment which (y) includes any prospectus required by Section 10(a) of
the Securities Act or (z) reflects facts or events representing a material
or fundamental change in the information set forth in the registration
statement, the incorporation by reference of information required to be
included in (y) and (z) above to be contained in periodic reports
filed pursuant to Section 12 or 15(d) of the Exchange Act in the
registration statement;

 

(b)           prepare and file with the Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act;

 

(c)           furnish to each Purchaser with shares of
Registrable Securities covered by such Registration such number of copies of
such registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each preliminary
prospectus), any documents incorporated by reference therein and such other
documents 

 

 

as
such Purchaser may reasonably request in order to facilitate the disposition of
the shares of Registrable Securities owned by such Purchaser;

 

(d)           use its commercially reasonable efforts to
register or qualify such Registrable Securities under such other securities or
blue sky laws of such jurisdictions within the United States of America as each
Purchaser with shares of Registrable Securities covered by such Registration
may reasonably request; use its commercially reasonable efforts to keep each
such Registration or qualification (or exemption therefrom) effective during
the period in which such registration statement is required to be kept effective
and take any other action which may be reasonably necessary or advisable to
enable each such Purchaser to consummate the disposition in such jurisdictions
of the Registrable Securities being disposed of by such Purchaser, provided,
however, that Company will not be required to (A) qualify generally to do
business in any jurisdiction where it would not otherwise be required to
qualify but for this subparagraph or (B) subject itself to taxation in or
consent to general service of process in any such jurisdiction, and provided,
further, that the Company shall not be required to qualify such
Registrable Securities in any jurisdiction in which the securities regulatory
authority requires that any Purchaser submits any shares of its Registrable
Securities to the terms, provisions and restrictions of any escrow, lockup or
similar agreement(s) for consent to sell Registrable Securities in such
jurisdiction;

 

(e)           promptly notify each Purchaser with shares of
Registrable Securities covered by such Registration (A) when the registration
statement, any prospectus or any prospectus supplement or post-effective
amendment has been filed and, with respect to a registration statement or any
post-effective amendment, when the same has become effective, (B) of the
issuance by any state securities or other regulatory authority of any order
suspending the qualification or exemption from qualification of any of the
Registrable Securities under state securities or “blue sky” laws or the
initiation of any proceedings for that purpose and (C) of the happening of
any event which makes any statement made in a registration statement or related
prospectus untrue or which requires the making of any changes in such
registration statement, prospectus or documents so that they will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading (or with respect to the prospectus, in light of the circumstance
under which such statements were made), and, subject to Section 8.8,
as promptly as reasonably practicable thereafter, prepare and file with the
Commission and furnish a supplement or amendment to such prospectus so that, as
thereafter deliverable to the purchasers of such Registrable Securities, such
prospectus will not contain any untrue statement of a material fact or omit a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;

 

(f)            during the period
when the prospectus is required to be delivered under the Securities Act,
promptly file all documents required to be filed with the Commission pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act; and

 

(g)           advise each Purchaser with shares of
Registrable Securities covered by such Registration promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of any stop order
by the Commission suspending the effectiveness of such registration statement
or the initiation or threatening of any proceeding for such purpose and
promptly use its commercially reasonable efforts to prevent the issuance of any
stop order or to obtain its withdrawal at the earliest possible moment if such
stop order should be issued.

 

 

8.5           Indemnification.

 

(a)           The Company shall indemnify and hold harmless
each Purchaser, each of their officers, directors, partners and members, and
each person controlling such Purchaser, with respect to each Registration which
has been effected pursuant to this Article VIII, and each
underwriter, if any, and each person who controls any underwriter, against all
claims, losses, damages and liabilities (or actions in respect thereof), to
which they may become subject under the Securities Act or otherwise, insofar as
such claims, losses, damages and liabilities (or actions in respect thereof)
arise out of or are based on any untrue (or alleged untrue) statement of any
material fact contained in any registration statement on the effective date
thereof (including any prospectus, offering circular or other documents)
incident to any such Registration, qualification or compliance, or arise out of
or are based on any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or any violation by the Company of the Securities Act or the
Exchange Act or any rule or regulation thereunder applicable to the
Company and relating to action or inaction required of the Company in connection
with any such Registration, qualification or compliance, and shall reimburse
each Purchaser, each of their officers, directors, partners and members, and
each person controlling such Purchaser, each such underwriter and each person
who controls any such underwriter, for any legal and any other expenses
reasonably incurred by them in connection with investigating and defending any
such claims, losses, damages, liabilities or actions; provided, that the
Company shall not be liable to such Purchaser, its officers, directors,
partners and members, each person controlling such Purchaser, each such
underwriter and each person who controls any such underwriter in any such case
to the extent that any such claims, losses, damages, liabilities or expenses arise
out of or are based on any untrue statement or omission made in connection with
such registration statement, or amendments or supplements thereto, in reliance
upon and in conformity with written information furnished to the Company by
such Purchaser or underwriter expressly for use in connection with such
registration statement by such Purchaser, its officers, directors, partners and
members, each person controlling such Purchaser, each such underwriter and each
person who controls any such underwriter.

 

(b)           Each Purchaser shall, if Registrable
Securities held by it are included in the securities as to which such
Registration, qualification or compliance is being effected, severally and not
jointly, indemnify and hold harmless the Company, each of its directors and
officers and each underwriter for the Company within the meaning of the
Securities Act (if any), and each person who controls the Company or such
underwriter against all claims, losses, damages and liabilities, joint or
several (or actions in respect thereof), to which the Company or any such
director, officer, controlling person, or underwriter may become subject, under
the Securities Act or otherwise, insofar as such claims, losses, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue (or alleged untrue) statement of any material fact contained in any
registration statement on the effective date thereof (including any prospectus,
offering circular or other documents) made by such Purchaser, or arise out of
or are based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements by such
Purchaser therein not misleading, shall reimburse any legal or any other
expenses reasonably incurred by the Company or any such directors, officers,
controlling persons or underwriters in connection with investigating or
defending any such claims, losses, damages, liabilities or actions, in each
case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) was made in such
registration statement or amendments or supplements thereto, in reliance upon
and in conformity with written information furnished to the Company by such Purchaser
expressly for use in connection with such registration statement; provided,
however, that the obligations of such Purchaser hereunder shall be
limited to an 

 

 

amount
equal to the net proceeds to such Purchaser of the Registrable Securities sold as
contemplated herein.

 

(c)           Each party entitled to indemnification under
this Section 8.5 (the “Indemnified Party”) shall give written
notice to the party required to provide indemnification (the “Indemnifying
Party”) and to the other parties hereto promptly after the receipt by such
Indemnified Party of any written notice of the commencement of any claim,
action, proceeding or investigation or threat thereof made in writing for which
the Indemnified Party intends to claim indemnification pursuant to this Agreement,
and shall permit the Indemnifying Party to assume the defense of any such
claim, action, proceeding or investigation; provided that counsel for
the Indemnifying Party, who shall conduct the defense of such claim, action,
proceeding or investigation, shall be approved by the Indemnified Party (whose
approval shall not unreasonably be withheld) and the Indemnified Party may
participate in such defense at such party’s expense (unless the Indemnified
Party shall have reasonably concluded that there may be a conflict of interest
between the Indemnifying Party and the Indemnified Party in such claim, action,
proceeding or investigation, in which case the fees and expenses of counsel
shall be at the expense of the Indemnifying Party), and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Article VIII
unless the Indemnifying Party is materially prejudiced thereby.  No Indemnifying Party, in the defense of any
such claim, action, proceeding or investigation shall, except with the consent
of each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim, action, proceeding or investigation.  Each Indemnified Party shall furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim, action, proceeding or investigation.

 

(d)           If the indemnification provided for in this Section 8.5
is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any losses, liabilities, claims, damages or
expenses referred to herein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party hereunder, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such losses,
liabilities, claims, damages or expenses in such proportion as is appropriate
to reflect the relative fault of the Indemnifying Party on the one hand and of
the Indemnified Party on the other in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.  The relative fault of the Indemnifying Party
and of the Indemnified Party shall be determined by reference to, among other
things, whether the untrue (or alleged untrue) statement of a material fact or
the omission (or alleged omission) to state a material fact relates to
information supplied by the Indemnifying Party or by the Indemnified Party and
the parties’ relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.

 

(e)           Notwithstanding the foregoing, to the extent
that the provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with any underwritten public
offering contemplated by this Agreement are in conflict with the foregoing
provisions, the provisions in such underwriting agreement shall be controlling.

 

(f)            The foregoing
indemnity agreement of the Company and each Purchaser is subject to the
condition that, insofar as they relate to any losses, claims, liabilities or
damages arising out of a statement made in or omitted from a preliminary
prospectus but eliminated or remedied in 

 

 

the
amended prospectus on file with the Commission at the time the registration
statement in question becomes effective or the amended prospectus filed with
the Commission pursuant to Commission Rule 424(b) (the “Final Prospectus”),
such indemnity or contribution agreement shall not inure to the benefit of any
underwriter if a copy of the Final Prospectus was furnished to the underwriter
and was not furnished to the person asserting the losses, liabilities, claims
or damages at or prior to the time such action is required by the Securities
Act.

 

8.6           Information by the
Purchasers.  To the extent the Registrable
Securities held by an Purchaser are included in any Registration, such
Purchaser shall furnish to the Company such information regarding such
Purchaser and the distribution proposed by such Purchaser as the Company may
reasonably request in writing and as shall be reasonably required in connection
with any Registration, qualification or compliance referred to in this Article VIII.

 

8.7           Rule 144
Reporting.  With a view to making
available the benefits of certain rules and regulations of the Commission
which may at any time permit the sale of Registrable Securities to the public
without Registration, at all times from and after the effective date of the
registration statement for the first Registration demanded by any Purchaser
under the Securities Act filed by the Company for an offering of securities of
the Company to the general public, the Company agrees to:

 

(a)           make and keep public information available as
those terms are understood and defined in Rule 144 under the Securities
Act;

 

(b)           use all commercially reasonable efforts to
file with the Commission in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act at any
time after it has become subject to such reporting requirements; and

 

(c)           so long as any Purchaser owns any Registrable
Securities, furnish to such Purchaser, upon request, a written statement by the
Company as to its compliance with the reporting requirements of Rule 144
and of the Securities Act and the Exchange Act.

 

8.8           Blockage Period.  If (i) there has been or there is
pending a development or change in the business, affairs or prospects of the
Company or any of its subsidiaries; (ii) the Company’s counsel advised the
Company in writing that such development or change should be disclosed in the
registration statement, the prospectus included therein, or an amendment or
supplement thereto in order to ensure that the registration statement and such
prospectus, as amended or supplemented, will not contain any misstatement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading (or with respect to the
prospectus, in light of the circumstance under which such statements were
made); and (iii) in the good faith judgment of the officers or directors
of the Company, disclosure of such development or change would either (x) have
an adverse effect on the business or operations of the Company or (y) if
the disclosure otherwise relates to a material financing or acquisition of
assets which has not yet been disclosed and such disclosure would have an
adverse effect on the likelihood of consummating such transaction, then the
Company may deliver written notification to the Purchasers that Registrable
Securities may not be sold pursuant to the registration statement (a “Blockage
Notice”).  The Company shall have no
obligation to include in any such notice any reference to or description of the
facts based upon which the Company is delivering such notice.  The Company shall delay during such Blockage
Period the filing or effectiveness of any registration statement required pursuant
this Agreement.  No Purchaser shall sell
any Registrable Securities pursuant to the registration statement for the
period (the “Blockage Period”) beginning on the date such Blockage Notice was
received by 

 

 

such
Purchaser and ending on the date on which the Company notifies the Purchasers
that the Blockage Period has ended, which Blockage Period shall not exceed an
aggregate of ninety (90) days in any calendar year, provided, that such
Blockage Period shall be extended for any period, not to exceed forty-five (45)
days in any calendar year, during which the Commission is reviewing any
proposed amendment to the registration (and the Company agrees promptly to
notify the Purchasers if the circumstances giving rise to such Blockage Period
no longer apply).  The Company shall
promptly prepare and file any amendment or supplement to the registration
statement or the prospectus included therein necessary so that at the
conclusion of the Blockage Period, the registration statement and the
prospectus included therein do not contain any misstatements of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading (or with respect to the prospectus,
in light of the circumstance under which such statements were made) and notify
the Purchasers of such amendment or supplement and of the conclusion of the
Blockage Period.

 

8.9           Termination.  The provisions of this Article VIII
shall terminate as to a particular Purchaser at such time as such Purchaser has
sold all of his or its Registrable Securities in a Registration pursuant to the
Securities Act or pursuant to Rule 144.  
Section 8.5 shall survive any termination of this Article VIII
or the Agreement.

 

ARTICLE IX

MISCELLANEOUS

 

9.1           Trading Activities.  Each
Purchaser covenants that neither it, its Affiliates nor any person acting on
the behalf of or pursuant to any understanding with it or its Affiliates will
engage in any transactions in the securities of the Company prior to the time
that the transactions contemplated by this Agreement are publicly disclosed and
for the ten (10) trading days following the Closing Date.  Each Purchaser agrees that it, its Affiliates
or any person acting on the behalf of or pursuant to any understanding with Purchaser
or its Affiliates will not directly or indirectly engage in any hedging or
short sales (whether or not against the box) in the securities of the Company
prior to Closing.

 

9.2           Termination.  This Agreement may be
terminated at any time prior to the Closing: (a) by the mutual written
consent of the Company and each Purchaser; and (b) by any Purchaser
or the Company if the Closing has not occurred by the close of business on
that date which is 45 days after the date of this Agreement.  In
the event of termination of this Agreement as provided in Section 9.2,
this Agreement shall forthwith become void and there shall be no liability on
the part of either party hereto except (a) as set forth in Section 8.5
or this Article IX and (b) that nothing herein shall relieve
any party from liability for any breach of this Agreement occurring prior to
such termination.

 

9.3           Fees,
Expenses and Issue Taxes.  The
Company and each of the Purchasers shall each pay their own fees and expenses
incurred on their behalf with respect to the transactions contemplated herein.

 

9.4           Survival of Representations, Warranties and
Agreements.  The representations, warranties and
agreements of each of the Purchasers and the Company in this Agreement shall
not survive the Closing.  Notwithstanding
the foregoing, the agreements contained in Section 8.5 and this Article IX
shall survive the Closing indefinitely. 
In no event shall any Purchaser have any recourse against the present or
former directors, officers or stockholders of the Company or any of its 

 

 

Affiliates with respect to
any representation, warranty or agreement made by the Company in this
Agreement, except in the case of fraud, in which case such Purchaser’s rights
shall be governed by applicable laws.

 

9.5           Confidentiality.  The
Company and the Purchasers each agrees to, and shall cause their respective
Affiliates and its and their officers, directors, employees, agents,
representatives, accountants, and counsel to treat and hold as
confidential (and not disclose or provide access to any Person to), unless
compelled to disclose by judicial or administrative process or by other
requirement of law, this Agreement and the contemplated transactions, all
non-public information (i) furnished by the Company or the Purchasers or
their respective Affiliates in connection with the contemplated transactions
and (ii) relating to trade secrets, processes, patent and trademark
applications, product development, price, customer and supplier lists, pricing
and marketing plans, policies and strategies, details of client and consultant
contracts, operations methods, product development techniques, business
acquisition plans, new personnel acquisition plans and all other confidential
or proprietary information with respect to the Company’s business, the Company
and its Subsidiaries, or each of the Purchasers and their respective
Affiliates.

 

9.6           Public Announcements.  No
party to this Agreement shall make, or cause to be made, any press release or
public announcement in respect of this Agreement or the transactions
contemplated by this Agreement or otherwise communicate with any news media
without the prior written consent of the other party unless otherwise required
by law or applicable stock exchange regulation, and the parties to this
Agreement shall cooperate as to the timing and contents of any such press
release, public announcement or communication.

 

9.7           Further Assurances.  The
parties hereto shall duly execute and deliver, or cause to be duly executed and
delivered, at its own cost and expense, such further instruments and documents
and to take all such action, in each case as may be necessary or proper in the
reasonable judgment of each other party to carry out the provisions and
purposes of this Agreement.

 

9.8           Assignment; Parties in Interests.  Neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior written consent of
the other parties (and any assignment otherwise shall be void).  Subject to the preceding sentence, this
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing herein, express or implied, is intended to or shall confer
upon any Person not a party hereto any right, benefit or remedy of any nature
whatsoever under or by reason hereof, except as otherwise provided.

 

9.9           Entire Agreement.  This
Agreement and the other writings referred to herein or delivered pursuant
hereto which form a part hereof contain the entire agreement among the parties
with respect to the subject matter hereof and thereof and supersede all prior
and contemporaneous arrangements or understandings with respect thereto.

 

9.10         Notices.  All notices and other
communications delivered hereunder (whether or not required to be delivered
hereunder) shall be deemed to be sufficient and duly given if contained in a
written instrument (a) personally delivered, (b) sent by facsimile
with confirmation thereof, (c) sent by nationally recognized overnight
courier guaranteeing next Business Day delivery or (d) sent by first class
registered or certified mail, postage prepaid, return receipt requested, in
each case addressed as follows:

 

 

if
to the Company:

 

HSW International, Inc.

One Capital City Plaza

3350 Peachtree Road, Suite 1500

Atlanta, GA 30326

Attention: General Counsel

Facsimile:  (404) 974-2711

 

with a copy (which shall not constitute Notice) to:

 

Donald R. Reynolds

Wyrick Robbins Yates & Ponton LLP

4101
Lake Boone Trail, Suite 300

Raleigh,
North Carolina 27607

Facsimile:  (919) 781-4865

 

if to the Purchasers:

 

to
the address specified on the signature page executed by each such
Purchaser,

 

with
such additional copies as set forth on such signature page;

 

or to such other address as
the party to whom such notice or other communication is to be given may have
furnished to each other party in writing in accordance herewith.  Any such notice or communication shall be
deemed to have been received (i) when delivered, if personally delivered, (ii) when
sent, if sent by facsimile on a Business Day (or, if not sent on a Business
Day, on the next Business Day after the date sent by facsimile), (iii) on
the next Business Day after dispatch, if sent by nationally recognized,
overnight courier guaranteeing next Business Day delivery, and (iv) on the
fifth Business Day following the date on which the piece of mail containing
such communication is posted, if sent by mail.

 

9.11         Amendments, Modifications and Waivers.  The
terms and provisions of this Agreement may not be modified or amended, except
pursuant to a written instrument executed by the Company and the Purchasers.

 

9.12         Governing Law; Submission to Jurisdiction;
Waiver of Jury Trial.  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 OR RULES OF CONFLICT OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES
WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

 

ALL ACTIONS AND PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE HEARD AND DETERMINED
EXCLUSIVELY IN ANY NEW YORK STATE OR FEDERAL COURT SITTING IN THE BOROUGH OF
MANHATTAN OF THE CITY OF NEW YORK.  THE
PARTIES HERETO HEREBY (A) SUBMIT TO THE EXCLUSIVE JURISDICTION OF ANY
STATE OR FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN OF THE CITY OF NEW
YORK FOR THE PURPOSE OF ANY ACTION 

 

 

ARISING OUT OF OR RELATING
TO THIS AGREEMENT BROUGHT BY ANY PARTY HERETO, AND (B) IRREVOCABLY WAIVE,
AND AGREE NOT TO ASSERT BY WAY OF MOTION, DEFENSE, OR OTHERWISE, IN ANY SUCH
ACTION, ANY CLAIM THAT IT IS NOT SUBJECT PERSONALLY TO THE JURISDICTION OF THE
ABOVE-NAMED COURTS, THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR
EXECUTION, THAT THE ACTION IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE
OF THE ACTION IS IMPROPER, OR THAT THIS AGREEMENT OR THE TRANSACTION MAY NOT
BE ENFORCED IN OR BY ANY OF THE ABOVE-NAMED COURTS. EACH OF THE PARTIES HERETO
HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTION.  EACH OF THE PARTIES HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHERS HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT
AND THE TRANSACTION, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 9.12.

 

9.13         Severability.  If
any term or other provision hereof is invalid, illegal or incapable of being
enforced by any rule of law or public policy, all other conditions and
provisions hereof shall nevertheless remain in full force and effect provided
that the economics or legal substance of the transactions contemplated hereby
are not affected in any manner materially adverse to any party.  Upon determination by a court of competent
jurisdiction that any term or other provision hereof is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties as
closely as possible to the fullest extent permitted by applicable law in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.

 

9.14         Counterparts; Facsimile Signatures. This Agreement may be executed in two or
more counterparts, including by facsimile, each of which shall be deemed an
original but all of which taken together shall constitute a single agreement.

 

 

[Remainder of page intentionally left blank]

 

 

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

 

The Company:

 

HSW International, Inc.

 

	
   

  	
  By:

  	
  /s/ Henry N. Adorno

  
	
   

  	
  Name:

  	
  Henry N. Adorno

  
	
   

  	
  Title:

  	
  Vice Chairman

  
					

 

 

[Signatures continued on following page]

 

 

Purchaser:

 

	
   

  	
  Eastern Advisors Fund LP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jerry Koljenovic

  
	
   

  	
  Name:

  	
  Jerry
  Koljenovic

  
	
   

  	
  Title:

  	
  Chief
  Financial Officer

  

 

	
   

  	
  Such
  Purchaser is a (please indicate as applicable):

  
	
   

  	
   

  
	
   

  	
  x “Qualified Institutional Buyer” as defined
  in Rule 144A promulgated under the Securities Act

  
	
   

  	
   

  
	
   

  	
  o “accredited investor” as defined under
  paragraph (a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) of Rule 501
  under the Securities Act

  

 

	
   

  	
  Principal
  Address:

  
	
   

  	
   

  
	
   

  	
  101 Park Avenue, 33rd Floor

  
	
   

  	
  New York, NY 10178

  
	
   

  	
   

  
	
   

  	
  Address
  for Notice:

  
	
   

  	
   

  
	
   

  	
  101 Park Avenue, 33rd Floor

  
	
   

  	
  New York, NY 10178

  

 

 

Purchaser:

 

	
   

  	
  Eastern
  Advisors Offshore Fund Ltd

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
  /s/ Jerry Koljenovic

  
	
   

  	
  Name:

  	
  Jerry
  Koljenovic

  
	
   

  	
  Title:

  	
  Chief
  Financial Officer

  

 

	
   

  	
  Such
  Purchaser is a (please indicate as applicable):

  
	
   

  	
   

  
	
   

  	
  x “Qualified Institutional Buyer” as defined
  in Rule 144A promulgated under the Securities Act

  
	
   

  	
   

  
	
   

  	
  o “accredited investor” as defined under
  paragraph (a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) of Rule 501
  under the Securities Act

  

 

	
   

  	
  Principal
  Address:

  
	
   

  	
   

  
	
   

  	
  P.O. Box 1043 GT

  
	
   

  	
  69 Dr. Roy’s Drive

  
	
   

  	
  Grand Cayman, Cayman Island, BWI

  
	
   

  	
   

  
	
   

  	
  Address
  for Notice:

  
	
   

  	
   

  
	
   

  	
  101 Park Avenue, 33rd Floor

  
	
   

  	
  New York, NY 10178

  

 

 

SCHEDULE
I

 

PURCHASERS

 

	
  Purchasers

  	
   

  	
  Number of

  Shares

  	
   

  	
  Aggregate

  Purchase Price

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Eastern Advisors
  Fund LP

  	
   

  	
  3,750,000

  	
   

  	
  $

  	
  13,800,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Eastern Advisors
  Offshore Fund Ltd.

  	
   

  	
  1,250,000

  	
   

  	
  $

  	
  4,600,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  5,000,000

  	
   

  	
  $

  	
  18,400,000

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