Document:

Exhibit 10.1

 

EXECUTION COPY

 

 

CUSIP No. #                      

 

AMENDED
AND RESTATED

CREDIT AGREEMENT

 

Dated as of December 5,
2005

 

among

 

AFFILIATED
MANAGERS GROUP, INC.,

as Borrower,

 

BANK
OF AMERICA, N.A.,

as Administrative Agent and Swingline Lender,

 

JPMORGAN
CHASE BANK, N.A. and THE BANK OF NEW YORK,
as Co-Syndication Agents,

 

U.S. BANK
NATIONAL ASSOCIATION and ING CAPITAL, LLC,
as Co-Documentation Agents,

 

and

 

The Several
Lenders

from Time to Time Parties Hereto

 

 

BANC
OF AMERICA SECURITIES LLC
 Sole Lead Arranger and Sole Book Manager

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  SECTION 1.

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.1.

  	
  Defined
  Terms

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.2.

  	
  Other
  Definitional and Interpretive Provisions

  	
  18

  
	
   

  	
   

  	
   

  
	
  1.3.

  	
  Accounting
  Terms

  	
  18

  
	
   

  	
   

  	
   

  
	
  1.4.

  	
  Allocation
  of Loans and Commitments

  	
  19

  
	
   

  	
   

  	
   

  
	
  SECTION 2.

  	
  AMOUNT AND TERMS OF COMMITMENTS; SWINGLINE LOANS

  	
  19

  
	
   

  	
   

  	
   

  
	
  2.1.

  	
  Commitments

  	
  19

  
	
   

  	
   

  	
   

  
	
  2.2.

  	
  Procedure
  for Borrowing

  	
  20

  
	
   

  	
   

  	
   

  
	
  2.3.

  	
  Increase of
  Commitments

  	
  20

  
	
   

  	
   

  	
   

  
	
  2.4.

  	
  Commitment
  Fee

  	
  21

  
	
   

  	
   

  	
   

  
	
  2.5.

  	
  Termination
  or Reduction of Commitments

  	
  21

  
	
   

  	
   

  	
   

  
	
  2.6.

  	
  Repayment of
  Loans; Evidence of Debt

  	
  22

  
	
   

  	
   

  	
   

  
	
  2.7.

  	
  Swingline
  Loans

  	
  22

  
	
   

  	
   

  	
   

  
	
  2.8.

  	
  Procedure
  for Swingline Borrowing and Prepayment; Refunding of Swingline Loans

  	
  23

  
	
   

  	
   

  	
   

  
	
  SECTION 3.

  	
  GENERAL PROVISIONS APPLICABLE TO THE LOANS

  	
  25

  
	
   

  	
   

  	
   

  
	
  3.1.

  	
  Optional Prepayments

  	
  25

  
	
   

  	
   

  	
   

  
	
  3.2.

  	
  Mandatory
  Commitment Reductions; Mandatory Prepayments

  	
  25

  
	
   

  	
   

  	
   

  
	
  3.3.

  	
  Conversion
  and Continuation Options

  	
  25

  
	
   

  	
   

  	
   

  
	
  3.4.

  	
  Minimum
  Amounts and Maximum Number of Tranches

  	
  26

  
	
   

  	
   

  	
   

  
	
  3.5.

  	
  Interest
  Rates and Payment Dates

  	
  26

  
	
   

  	
   

  	
   

  
	
  3.6.

  	
  Computation
  of Interest and Fees

  	
  27

  
	
   

  	
   

  	
   

  
	
  3.7.

  	
  Inability to
  Determine Interest Rate

  	
  27

  
	
   

  	
   

  	
   

  
	
  3.8.

  	
  Pro Rata
  Treatment and Payments

  	
  27

  
	
   

  	
   

  	
   

  
	
  3.9.

  	
  Illegality

  	
  28

  
	
   

  	
   

  	
   

  
	
  3.10.

  	
  Requirements
  of Law

  	
  29

  
	
   

  	
   

  	
   

  
	
  3.11.

  	
  Taxes

  	
  30

  
	
   

  	
   

  	
   

  
	
  3.12.

  	
  Indemnity

  	
  32

  
	
   

  	
   

  	
   

  
	
  3.13.

  	
  Change of
  Lending Office

  	
  32

  
	
   

  	
   

  	
   

  
	
  3.14.

  	
  Replacement
  of Lenders

  	
  32

  

 

i

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  SECTION 4.

  	
  REPRESENTATIONS AND WARRANTIES

  	
  33

  
	
   

  	
   

  	
   

  
	
  4.1.

  	
  Financial
  Condition

  	
  33

  
	
   

  	
   

  	
   

  
	
  4.2.

  	
  No Change

  	
  34

  
	
   

  	
   

  	
   

  
	
  4.3.

  	
  Corporate
  Existence; Compliance with Law

  	
  34

  
	
   

  	
   

  	
   

  
	
  4.4.

  	
  Corporate
  Power; Authorization; Enforceable Obligations

  	
  34

  
	
   

  	
   

  	
   

  
	
  4.5.

  	
  No Legal Bar

  	
  34

  
	
   

  	
   

  	
   

  
	
  4.6.

  	
  No Material
  Litigation

  	
  35

  
	
   

  	
   

  	
   

  
	
  4.7.

  	
  No Default

  	
  35

  
	
   

  	
   

  	
   

  
	
  4.8.

  	
  Ownership of
  Property; Liens

  	
  35

  
	
   

  	
   

  	
   

  
	
  4.9.

  	
  Taxes

  	
  35

  
	
   

  	
   

  	
   

  
	
  4.10.

  	
  Federal
  Regulations

  	
  35

  
	
   

  	
   

  	
   

  
	
  4.11.

  	
  ERISA

  	
  35

  
	
   

  	
   

  	
   

  
	
  4.12.

  	
  Investment
  Company Act; Investment Advisers Act

  	
  36

  
	
   

  	
   

  	
   

  
	
  4.13.

  	
  Investment
  Advisory Agreements

  	
  36

  
	
   

  	
   

  	
   

  
	
  4.14.

  	
  Subsidiaries
  and Other Ownership Interests

  	
  37

  
	
   

  	
   

  	
   

  
	
  4.15.

  	
  Use of
  Proceeds

  	
  37

  
	
   

  	
   

  	
   

  
	
  4.16.

  	
  Accuracy and
  Completeness of Information

  	
  37

  
	
   

  	
   

  	
   

  
	
  4.17.

  	
  Pledge
  Agreements

  	
  37

  
	
   

  	
   

  	
   

  
	
  SECTION 5.

  	
  CONDITIONS PRECEDENT

  	
  37

  
	
   

  	
   

  	
   

  
	
  5.1.

  	
  Conditions
  to Effectiveness

  	
  37

  
	
   

  	
   

  	
   

  
	
  5.2.

  	
  Conditions
  to Each Loan

  	
  39

  
	
   

  	
   

  	
   

  
	
  SECTION 6.

  	
  AFFIRMATIVE COVENANTS

  	
  40

  
	
   

  	
   

  	
   

  
	
  6.1.

  	
  Financial
  Statements

  	
  40

  
	
   

  	
   

  	
   

  
	
  6.2.

  	
  Certificates;
  Other Information

  	
  41

  
	
   

  	
   

  	
   

  
	
  6.3.

  	
  Payment of
  Obligations

  	
  43

  
	
   

  	
   

  	
   

  
	
  6.4.

  	
  Conduct of
  Business and Maintenance of Existence

  	
  43

  
	
   

  	
   

  	
   

  
	
  6.5.

  	
  Maintenance
  of Property; Insurance

  	
  43

  
	
   

  	
   

  	
   

  
	
  6.6.

  	
  Inspection
  of Property; Books and Records; Discussions

  	
  44

  
	
   

  	
   

  	
   

  
	
  6.7.

  	
  Notices

  	
  44

  
	
   

  	
   

  	
   

  
	
  6.8.

  	
  Stock
  Pledges

  	
  45

  
	
   

  	
   

  	
   

  
	
  6.9.

  	
  Guarantees

  	
  46

  

 

ii

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  SECTION 7.

  	
  NEGATIVE COVENANTS

  	
  46

  
	
   

  	
   

  	
   

  
	
  7.1.

  	
  Financial
  Condition Covenants

  	
  46

  
	
   

  	
   

  	
   

  
	
  7.2.

  	
  Limitation
  on Indebtedness

  	
  46

  
	
   

  	
   

  	
   

  
	
  7.3.

  	
  Limitation
  on Liens

  	
  48

  
	
   

  	
   

  	
   

  
	
  7.4.

  	
  Limitation
  on Guarantee Obligations

  	
  49

  
	
   

  	
   

  	
   

  
	
  7.5.

  	
  Limitation
  on Fundamental Changes

  	
  49

  
	
   

  	
   

  	
   

  
	
  7.6.

  	
  Limitation
  on Sale of Assets

  	
  50

  
	
   

  	
   

  	
   

  
	
  7.7.

  	
  Limitation
  on Leases

  	
  50

  
	
   

  	
   

  	
   

  
	
  7.8.

  	
  Limitation
  on Dividends

  	
  50

  
	
   

  	
   

  	
   

  
	
  7.9.

  	
  Limitation
  on Capital Expenditures

  	
  51

  
	
   

  	
   

  	
   

  
	
  7.10.

  	
  Limitation
  on Investments, Loans and Advances

  	
  51

  
	
   

  	
   

  	
   

  
	
  7.11.

  	
  Limitation
  on Payments of Subordinated Indebtedness

  	
  52

  
	
   

  	
   

  	
   

  
	
  7.12.

  	
  Restriction
  on Amendments to Revenue Sharing Agreements

  	
  53

  
	
   

  	
   

  	
   

  
	
  7.13.

  	
  Limitation
  on Transactions with Affiliates

  	
  53

  
	
   

  	
   

  	
   

  
	
  7.14.

  	
  Limitation
  on Changes in Fiscal Year

  	
  53

  
	
   

  	
   

  	
   

  
	
  7.15.

  	
  Limitation
  on Synthetic Lease Obligations

  	
  53

  
	
   

  	
   

  	
   

  
	
  7.16.

  	
  Limitation
  on Certain Acquisitions

  	
  53

  
	
   

  	
   

  	
   

  
	
  SECTION 8.

  	
  EVENTS OF DEFAULT

  	
  54

  
	
   

  	
   

  	
   

  
	
  SECTION 9.

  	
  THE ADMINISTRATIVE AGENT

  	
  56

  
	
   

  	
   

  	
   

  
	
  9.1.

  	
  Appointment
  and Authorization

  	
  56

  
	
   

  	
   

  	
   

  
	
  9.2.

  	
  Rights as a
  Lender

  	
  56

  
	
   

  	
   

  	
   

  
	
  9.3.

  	
  Exculpatory
  Provisions

  	
  56

  
	
   

  	
   

  	
   

  
	
  9.4.

  	
  Reliance by
  Administrative Agent

  	
  57

  
	
   

  	
   

  	
   

  
	
  9.5.

  	
  Delegation
  of Duties

  	
  58

  
	
   

  	
   

  	
   

  
	
  9.6.

  	
  Resignation
  of Administrative Agent

  	
  58

  
	
   

  	
   

  	
   

  
	
  9.7.

  	
  Non-Reliance
  on Administrative Agent and Other Lenders

  	
  59

  
	
   

  	
   

  	
   

  
	
  9.8.

  	
  Administrative
  Agent May File Proofs of Claim

  	
  59

  
	
   

  	
   

  	
   

  
	
  9.9.

  	
  Collateral
  and Guaranty Matters

  	
  59

  
	
   

  	
   

  	
   

  
	
  9.10.

  	
  Other
  Agents; Arrangers and Managers

  	
  60

  
	
   

  	
   

  	
   

  
	
  SECTION 10.

  	
  MISCELLANEOUS

  	
  60

  
	
   

  	
   

  	
   

  
	
  10.1.

  	
  Amendments
  and Waivers

  	
  60

  
	
   

  	
   

  	
   

  
	
  10.2.

  	
  Notices

  	
  61

  

 

iii

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  10.3.

  	
  No Waiver;
  Cumulative Remedies

  	
  62

  
	
   

  	
   

  	
   

  
	
  10.4.

  	
  Survival of
  Representations and Warranties

  	
  62

  
	
   

  	
   

  	
   

  
	
  10.5.

  	
  Expenses;
  Indemnity; Waiver of Damages

  	
  62

  
	
   

  	
   

  	
   

  
	
  10.6.

  	
  Successors
  and Assigns; Participations and Assignments

  	
  64

  
	
   

  	
   

  	
   

  
	
  10.7.

  	
  Adjustments;
  Set-off

  	
  66

  
	
   

  	
   

  	
   

  
	
  10.8.

  	
  Counterparts

  	
  67

  
	
   

  	
   

  	
   

  
	
  10.9.

  	
  Severability

  	
  67

  
	
   

  	
   

  	
   

  
	
  10.10.

  	
  Integration

  	
  67

  
	
   

  	
   

  	
   

  
	
  10.11.

  	
  GOVERNING
  LAW

  	
  67

  
	
   

  	
   

  	
   

  
	
  10.12.

  	
  Submission
  To Jurisdiction; Waivers

  	
  67

  
	
   

  	
   

  	
   

  
	
  10.13.

  	
  Acknowledgements

  	
  68

  
	
   

  	
   

  	
   

  
	
  10.14.

  	
  WAIVERS OF
  JURY TRIAL

  	
  68

  
	
   

  	
   

  	
   

  
	
  10.15.

  	
  Confidentiality

  	
  68

  
	
   

  	
   

  	
   

  
	
  10.16.

  	
  Effect of
  Amendment and Restatement

  	
  68

  
	
   

  	
   

  	
   

  
	
  10.17.

  	
  USA Patriot
  Act

  	
  69

  

 

	
  ANNEXES

  	
   

  	
   

  
	
  Annex I

  	
   

  	
  —

  	
   

  	
  Pricing Grid

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SCHEDULES

  
	
  Schedule I

  	
   

  	
  —

  	
   

  	
  Lender
  Commitments

  	
   

  	
   

  
	
  Schedule 4.1

  	
   

  	
  —

  	
   

  	
  Financial
  Condition

  	
   

  	
   

  
	
  Schedule 4.2

  	
   

  	
  —

  	
   

  	
  Changes in
  Capital Stock

  	
   

  	
   

  
	
  Schedule 4.9

  	
   

  	
  —

  	
   

  	
  Taxes

  	
   

  	
   

  
	
  Schedule 4.14

  	
   

  	
  —

  	
   

  	
  Subsidiaries
  and Other Ownership Interests

  	
   

  	
   

  
	
  Schedule 7.2(g)

  	
   

  	
  —

  	
   

  	
  Existing
  Indebtedness

  	
   

  	
   

  
	
  Schedule 7.3(j)

  	
   

  	
  —

  	
   

  	
  Existing
  Liens

  	
   

  	
   

  
	
  Schedule 7.13

  	
   

  	
  —

  	
   

  	
  Transactions
  with Affiliates

  	
   

  	
   

  
	
  Schedule 10.2

  	
   

  	
  —

  	
   

  	
  Addresses

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBITS

  
	
  Exhibit A

  	
   

  	
  —

  	
   

  	
  Form of
  Note

  	
   

  	
   

  
	
  Exhibit B-1

  	
   

  	
  —

  	
   

  	
  Copy of
  Borrower Pledge Agreement

  	
   

  	
   

  
	
  Exhibit B-2

  	
   

  	
  —

  	
   

  	
  Copy of
  Subsidiary Pledge Agreement

  	
   

  	
   

  
	
  Exhibit C

  	
   

  	
  —

  	
   

  	
  Form of
  Borrower Certificate

  	
   

  	
   

  
	
  Exhibit D

  	
   

  	
  —

  	
   

  	
  Form of
  Opinion of Borrower’s Counsel

  	
   

  	
   

  
	
  Exhibit E

  	
   

  	
  —

  	
   

  	
  Form of
  Assignment and Assumption

  	
   

  	
   

  
	
  Exhibit F

  	
   

  	
  —

  	
   

  	
  Form of
  Confidentiality Agreement

  	
   

  	
   

  
	
  Exhibit G

  	
   

  	
  —

  	
   

  	
  Terms and
  Conditions of Subordinated Indebtedness

  	
   

  	
   

  

 

iv

 

	
  Exhibit H

  	
   

  	
  —

  	
   

  	
  Form of
  Compliance Certificate

  	
   

  
	
  Exhibit I

  	
   

  	
  —

  	
   

  	
  Form of
  Borrowing Notice

  	
   

  
	
  Exhibit J

  	
   

  	
  —

  	
   

  	
  Form of
  Conversion/Continuation Notice

  	
   

  
	
  Exhibit K

  	
   

  	
  —

  	
   

  	
  Form of
  Confirmation

  	
   

  
	
  Exhibit L

  	
   

  	
  —

  	
   

  	
  Form of
  Joinder Agreement

  	
   

  

 

v

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

This AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December 5,
2005, is among Affiliated Managers Group, Inc., a Delaware corporation
(the “Borrower”), the several banks and
other financial institutions from time to time parties to this Agreement (the “Lenders”), Bank of America, N.A. (“Bank of
America”), as administrative agent, JPMorgan Chase Bank, N.A. and The Bank
of New York, as co-syndication agents, and U.S. Bank National Association and
ING Capital, LLC, as co-documentation agents.

 

W I T N E S S
E T H :

 

WHEREAS, the Borrower, various financial institutions and Bank of
America, as administrative agent, are parties to a Credit Agreement dated as of
August 17, 2004 (as amended, the “Existing
Credit Agreement”); and

 

WHEREAS, the parties hereto have agreed to amend and restate the
Existing Credit Agreement pursuant to this Agreement;

 

NOW,
THEREFORE, the parties hereto agree as follows:

 

SECTION 1.  DEFINITIONS

 

1.1.          Defined Terms.  As used in this Agreement, the following
terms shall have the following meanings:

 

“ABR” means, for any day, a fluctuating rate
per annum equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1%
and (b) the rate of interest in effect for such day as publicly announced
from time to time by Bank of America as its “prime rate.”  The “prime rate” is a rate set by Bank of
America based upon various factors including Bank of America’s costs and
desired return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above or below
such announced rate.  Any change in such
rate announced by Bank of America shall take effect at the opening of business
on the day specified in the public announcement of such change.

 

“ABR Loan” means a Loan that bears interest at
a rate based upon the ABR.

 

“Acquisition” means the acquisition by the
Borrower, directly or indirectly, of equity interests in an Investment Firm.

 

“Act”
is defined in Section 10.17.

 

“Adjusted
Consolidated EBITDA” means, for any Computation Period, Consolidated EBITDA
for such Computation Period adjusted by giving effect on a pro  forma
basis to Acquisitions and dispositions completed during such Computation
Period.

 

 

“Administrative Agent” means Bank of America,
N.A. in its capacity as administrative agent under this Agreement and the other
Loan Documents, or any successor administrative agent.

 

“Administrative
Agent’s Office” means the Administrative Agent’s address and, as
appropriate, account as set forth on Schedule 10.2, or such other
address or account as the Administrative Agent may from time to time notify the
Borrower and the Lenders.

 

“Administrative
Questionnaire” means an Administrative Questionnaire in a form supplied by
the Administrative Agent.

 

“Affiliate” means as to any Person, any other
Person which, directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person. 
For purposes of this definition, “control” of a Person means the power,
directly or indirectly, either to (a) vote 10% or more of the securities
having ordinary voting power for the election of directors of such Person or (b) direct
or cause the direction of the management and policies of such Person, whether
by contract or otherwise.

 

“Agent
Parties” is defined in Section 10.2(d).

 

“Agreement” means this Amended and Restated
Credit Agreement.

 

“Applicable Margin” means with respect to
Eurodollar Loans and ABR Loans, from time to time, the rate per annum set forth
under the headings “Applicable Margin for Eurodollar Loans” and “Applicable
Margin for ABR Loans,” respectively, on Annex I
hereto based upon the Debt Rating.

 

“Arranger”
means Banc of America Securities LLC, in its capacity as sole lead arranger and
sole book manager.

 

“Asset Sale” means any sale, issuance,
conveyance, transfer, lease or other disposition, including by way of merger,
consolidation or sale and leaseback transaction (any of the foregoing, a “transfer”),
directly or indirectly, in one or a series of related transactions, of (i) all
or substantially all of the properties and assets (other than marketable
securities, including “margin stock” within the meaning of Regulation U, liquid
investments and other financial instruments) of the Borrower or any Subsidiary,
or (ii) any other properties or assets of the Borrower or any Subsidiary,
other than in the ordinary course of business, to any Persons other than the
Borrower or any Subsidiary.  For the
purposes of this definition, the term “Asset Sale” shall not include (a) any
transfer of properties and assets to the extent that the gross proceeds from
the transfer thereof do not exceed (i) $10,000,000 in any single
transaction or series of related transactions, taken as a whole, or (ii) $25,000,000
(irrespective of the size of the individual transactions) in the aggregate for
all such transactions on or after the Closing Date, and (b) any transfer
of the Capital Stock of any Investment Firm or any Subsidiary to a partner,
officer, director, shareholder, employee or member (or any entity owned or
controlled by such Person) of an Investment Firm which is a Subsidiary or in
which the Borrower or a Subsidiary has an ownership interest (any such transfer
described in this clause (b), a “Shareholder
Asset Sale”).  In addition,
with regard to a Subsidiary, the term

 

2

 

“Asset Sale” shall include only that portion of the gross proceeds to
such Subsidiary from the transfer thereof representing the percentage of such
proceeds equal to the percentage of the Borrower’s ownership interest in such
Subsidiary.

 

“Assignee” is defined in Section 10.6(c).

 

“Attorney
Costs” means and includes all reasonable and documented fees, expenses and
disbursements of any law firm or other external counsel and, without
duplication, the reasonable and documented allocated cost of internal legal
services and all reasonable and documented expenses and disbursements of internal
counsel.

 

“Available Commitment” means as to any Lender
at any time, an amount equal to the excess, if any, of (a) the amount of
such Lender’s Commitment over (b) the aggregate principal amount of all
outstanding Revolving Loans made by such Lender plus, for all purposes
other than Section 2.4, its
Commitment Percentage of all outstanding Swingline Loans.

 

“Bank of
America” means Bank of America, N.A. and its successors.

 

“Borrower” is defined in the preamble.

 

“Borrower
Materials” is defined in Section 6.2.

 

“Borrower
Pledge Agreement” means the pledge agreement dated as of August 7,
2002 by the Borrower in favor of the Administrative Agent, a copy of which (as
in effect on the date hereof) is attached as Exhibit B-1.

 

“Borrowing Date” means any Business Day
specified in a notice pursuant to Section 2.2 or 2.8 as a
date on which the Borrower requests the Lenders or the Swingline Lender to make
Loans hereunder.

 

“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, the state where the Administrative
Agent’s Office is located, Boston, Massachusetts or New York, New York, and, if
such day relates to any Eurodollar Rate Loan, means any such day on which
dealings in Dollar deposits are conducted by and between banks in the London
interbank eurodollar market.

 

“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 or options to purchase any
of the foregoing.

 

“Cash
Equivalent” means, at any time, (a) any evidence of indebtedness,
maturing not more than one year after such time, issued or guaranteed by the
United States Government or any agency thereof, (b) commercial paper,
maturing not more than one year from the date of issue, or corporate demand
notes, in each case (unless issued by a Lender or its holding company) rated at
least A-1 or A-2 by S&P or P-1 or P-2 by

 

3

 

Moody’s (or carrying an equivalent rating by an
internationally-recognized rating agency), (c) any certificate of deposit
(or time deposits represented by such certificates of deposit) or banker’s
acceptance, maturing not more than one year after such time, or overnight
Federal Funds transactions or money market deposit accounts that are issued or
sold by, or maintained with, a commercial bank or financial institution
incorporated under the laws of the United States, any state thereof or the
District of Columbia which is rated at least A-1 or A-2 by S&P or P-l or P-2
by Moody’s (or carrying an equivalent rating by an internationally-recognized rating
agency), (d) any repurchase agreement entered into with a commercial bank
or financial institution meeting the requirements of clause (c) which
(i) is secured by a fully perfected security interest in any obligation of
the type described in any of clauses (a) through (c) and
(ii) has a market value at the time such repurchase agreement is entered
into of not less than 100% of the repurchase obligation of such commercial bank
or financial institution thereunder, (e) securities with maturities of six
months or less from the date of acquisition backed by standby letters of credit
issued by any commercial bank or financial institution meeting the requirements
of clause (c), (f) any short-term (or readily marketable or
immediately redeemable) investment in a structured investment vehicle,
structured investment deposit or similar instrument with a financial strength
rating of A by S&P or Moody’s or (g) shares of money market mutual or
similar funds which invest primarily in assets satisfying the requirements of
clauses (a) through (f) of this definition.

 

“Change of Control” shall be deemed to occur
on any date on which any Person or “group” (within the meaning of Section 13(d) or
14(d) of the Securities Exchange Act of 1934) shall have acquired
beneficial ownership of Capital Stock having 30% or more of the ordinary voting
power in the election of directors of the Borrower.

 

“Closing Date” means the date on which the
conditions precedent set forth in Section 5.1 shall be satisfied.

 

“COBRAs”
means the Floating Rate Senior Convertible Debentures due 2033 issued by the
Borrower on February 25, 2003.

 

“Code” means the Internal Revenue Code of
1986.

 

“Commitment” means, as to any Lender, the
obligation of such Lender to make Loans to the Borrower hereunder and to participate
in Swingline Loans in an aggregate principal amount at any one time outstanding
not to exceed the amount set forth opposite such Lender’s name on Schedule I
under the heading “Commitment”, as such amount may be increased or reduced from
time to time in accordance with the provisions of this Agreement.

 

“Commitment Fee Rate” means, from time to
time, the rate per annum set forth under the heading “Commitment Fee Rate” on Annex I hereto based upon the Debt Rating.

 

“Commitment Percentage” means as to any Lender
at any time, the percentage (expressed as a decimal, carried out to nine
decimal places) which such Lender’s

 

4

 

Commitment then constitutes of the aggregate Commitments (or, at any
time after the Commitments shall have expired or terminated, the percentage
which (a) the aggregate principal amount of such Lender’s Revolving Loans
then outstanding plus (b) its Percentage of any Swingline Loans,
constitutes of the aggregate principal amount of the Loans then outstanding).

 

“Commitment Period” means the period from the
date hereof to the Termination Date or such earlier date on which the
Commitments shall terminate as provided herein.

 

“Commonly Controlled Entity” means an entity,
whether or not incorporated, which is under common control with the Borrower
within the meaning of Section 4001 of ERISA or is part of a group which
includes the Borrower and which is treated as a single employer under Section 414
of the Code.

 

“Compliance
Certificate” means a certificate substantially in the form of Exhibit H.

 

“Computation
Period” means each period of four consecutive fiscal quarters ending on the
last day of a fiscal quarter.

 

“Consolidated EBITDA” means for any period the
consolidated EBITDA of the Borrower and its Subsidiaries for such period.

 

“Consolidated Interest Expense” means, for any
period, the amount of interest expense of the Borrower and, to the extent
payable out of Free Cash Flow (and not Operating Cash Flow) under the relevant
Revenue Sharing Agreement, its Subsidiaries on a consolidated basis, net of the
portion thereof attributable to minority interests, for such period.

 

“Consolidated Net Income” (or “Consolidated Net Loss”) means for any period,
consolidated net income (or loss) of the Borrower and its Subsidiaries for such
period.

 

“Consolidated Net Worth” means, as at any
date, all amounts included under shareholders’ equity on a consolidated balance
sheet of the Borrower and its Subsidiaries as at such date.

 

“Contractual Obligation” means, as to any
Person, any provision of any security issued by such Person or of any
agreement, instrument or other undertaking to which such Person is a party or
by which it or any of its property is bound.

 

“Debt Rating” means, as of any date of determination, the rating
by S&P of the Borrower’s non-credit-enhanced, senior unsecured long-term
debt; provided that (a) if Fitch or Moody’s (but not both) also has a
rating for such debt, then the Debt Rating shall be the higher of the ratings
by the two applicable rating agencies (unless the difference between such
rating agencies would be two or more Levels in the pricing grid attached as Annex
1, in which case the Debt Rating shall be the midpoint between such ratings
or, if there is no single midpoint, the higher of the two Levels at the
midpoint between such ratings); and (b) if both Fitch and Moody’s also have
ratings for such debt, then (i) if two

 

5

 

rating agencies have the same rating and the
third rating agency has a different rating, then one of the rating agencies
with the same rating shall be disregarded, and (ii) if all three rating
agencies have different ratings, then the middle rating shall be disregarded
and, in the case of both clause (i) and clause (ii), the
Debt Rating shall be calculated in accordance with clause (a) above;
(c) if such debt is not rated by S&P because S&P no longer
provides debt ratings generally, then, (1) if either Fitch or Moody’s has
a rating for such debt, then the rating by such rating agency shall apply, or (2) if
both Fitch and Moody’s have a rating for such debt, then the provision of clause
(a) above shall be used to determine the Debt Rating or (3) if
neither Fitch or Moody’s has a rating for such debt then the Debt Rating shall
be deemed to be at the lowest Level on the pricing grid and (d) if
such debt is not rated by S&P but S&P continues to provide debt ratings
generally, then the Debt Rating shall be deemed to be at the lowest Level on
the pricing grid.

 

“Default” means any of the events specified in
Section 8, whether or not any requirement for the giving of notice,
the lapse of time, or both, has been satisfied.

 

“Default
Rate” means an interest rate equal to (a) the ABR plus (b) the
Applicable Margin, if any, applicable to ABR Loans plus (c) 2% per
annum; provided that with respect to a Eurodollar Loan, the Default Rate
shall be an interest rate equal to (i) the Eurodollar Rate applicable to
such Loan plus (ii) the Applicable Margin applicable to Eurodollar
Loans plus (iii) 2% per annum.

 

“Defaulting
Lender” is defined in Section 3.8(c).

 

“Dollars” and “$”
mean lawful currency of the United States of America.

 

“Domestic
Subsidiary” means any Subsidiary that is not a Foreign Subsidiary.

 

“EBITDA” means, for any Person for any period,
the sum (without duplication) of the amount for such Person for such period of (a) its
net income before taxes and (b) to the extent deducted in determining its
net income, (i) its interest expense (including capitalized interest
expense), (ii) its depreciation expense, (iii) its amortization
expense and (iv) its Non-Cash Based Compensation Costs.

 

“Environmental
Law” means any Federal, state, local or foreign statute, law, regulation,
ordinance, rule, judgment, order, decree, permit, concession, grant, franchise,
license, agreement or governmental restriction relating to pollution or the
protection of the environment or the release of any material into the
environment, including any of the foregoing related to hazardous substances or
wastes, air emissions or discharges to waste or public systems.

 

“Environmental Liability” means any liability, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), directly or indirectly resulting
from or based upon (a) violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment

 

6

 

or disposal of any Hazardous Materials, (c) exposure
to any Hazardous Materials, (d) the release or threatened release of any
Hazardous Materials into the environment or (e) any contract, agreement or
other consensual arrangement pursuant to which liability is assumed or imposed
with respect to any of the foregoing.

 

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

 

“Eurodollar Loan” means a Loan that bears
interest at a rate based upon the Eurodollar Rate.

 

“Eurodollar
Rate” means, for any Interest Period with respect to any Eurodollar Loan, a
rate per annum determined by the Administrative Agent pursuant to the following
formula:

 

	
  Eurodollar Rate =

  	
  Eurodollar Base Rate

  
	
   

  	
  1.00 - Eurodollar Reserve Percentage

  

 

Where,

 

“Eurodollar Base Rate”
means, for such Interest Period:

 

(a)           the
rate per annum equal to the British Bankers Association LIBOR Rate (“BBA
LIBOR”), as published by Reuters (or another commercially available source
providing quotations of BBA LIBOR as designated by the Administrative Agent
from time to time) at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period, for Dollar deposits
(for delivery on the first day of such Interest Period) with a term equivalent
to such Interest Period; or

 

(b)           if
the rate described in clause (a) is not available at such time for
any reason, the rate per annum determined by the Administrative Agent to be the
rate at which deposits in Dollars for delivery on the first day of such
Interest Period in same day funds in the approximate amount of the Eurodollar
Loan being made, continued or converted by Bank of America and with a term
equivalent to such Interest Period would be offered by Bank of America’s London
Branch to major banks in the London interbank eurodollar market at their
request at approximately 11:00 a.m. (London time) two Business Days prior
to the commencement of such Interest Period.

 

“Eurodollar Reserve
Percentage” means, for any day during any Interest Period, the reserve
percentage (expressed as a decimal, carried out to five decimal places) in
effect on such day, whether or not applicable to any particular Lender, under
regulations issued from time to time by the FRB for determining the maximum
reserve requirement (including any emergency, supplemental or other marginal
reserve requirement) with respect to Eurodollar funding (currently referred to
as “Eurocurrency liabilities”).  The
Eurodollar Rate for each outstanding Eurodollar Loan shall be adjusted
automatically as of the effective date of any change in the Eurodollar Reserve
Percentage.

 

7

 

“Event of Default” means any of the events
specified in Section 8.

 

“Existing
Credit Agreement” is defined in the recitals.

 

“Existing
Lender” means a “Lender” under and as defined in the Existing Credit
Agreement immediately prior to the Closing Date.

 

“Federal
Funds Rate” means, for any day, the rate per annum equal to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank on the Business Day next succeeding such
day; provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day, and (b) if no such rate is so published on
such next succeeding Business Day, the Federal Funds Rate for such day shall be
the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of
1%) charged to Bank of America on such day on such transactions as determined
by the Administrative Agent.

 

“Feline
Prides I Senior Notes” means the interest-bearing senior notes due November 17,
2006 originally issued by the Borrower in December of 2001.

 

“Feline
Prides II” means the equity security units originally issued by the
Borrower on February 17, 2004, consisting of (a) interest bearing
senior notes due February 17, 2010 (“Feline Prides II Senior Notes”)
and (b) purchase contracts under which each purchaser of a Feline Prides
II agrees to purchase common stock of the Borrower for an amount equal to the
face amount of the Feline Prides II Senior Notes held by such purchaser on February 17,
2008.

 

“Feline
Prides II Senior Notes” is defined in the definition of Feline Prides II.

 

“Financing Lease” means any lease of property,
real or personal, the obligations of the lessee in respect of which are
required in accordance with GAAP to be capitalized on a balance sheet of the
lessee.

 

“Financial
Statements” is defined in Section 4.1.

 

“Fitch”
means Fitch, Inc., doing business as Fitch Ratings.

 

“Foreign
Subsidiary” means any Subsidiary that is not organized under the laws of,
and does not conduct the majority of its business in, the United States, any
state thereof or the District of Columbia.

 

“FRB”
means the Board of Governors of the Federal Reserve System of the United
States.

 

“Free Cash Flow” means distributions due and
payable to the Borrower by and from an Investment Firm under the Revenue
Sharing Agreement applicable to such

 

8

 

Investment Firm, including the Borrower’s allocated share of “Free Cash
Flow” or “Owners’ Allocation” as such terms are defined in certain Revenue
Sharing Agreements.

 

“Funds” means the collective reference to all
Investment Companies and other investment accounts or funds (in whatever form
and whether personal or corporate) for which any Subsidiary or Investment Firm
provides advisory, management or administrative services.

 

“GAAP” means generally accepted accounting
principles in the United States of America in effect from time to time.

 

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

 

“Guarantee Obligation” means as to any Person
(the “guaranteeing person”), any
obligation of (a) the guaranteeing person or (b) another Person
(including any bank under any letter of credit) with respect to which the
guaranteeing person has issued a reimbursement, counterindemnity or similar
obligation, in any such case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the “primary obligations”) of any other third
Person (the “primary obligor”) in any
manner, whether directly or indirectly, including any obligation of the
guaranteeing person, whether or not contingent, (i) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (ii) to advance or supply funds (1) for the purchase or
payment of any such primary obligation or (2) to maintain working capital
or equity capital of the primary obligor or otherwise to maintain the net worth
or solvency of the primary obligor, (iii) to purchase property, securities
or services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation or (iv) otherwise to assure or hold harmless the owner
of any such primary obligation against loss in respect thereof; provided that the term Guarantee Obligation
shall not include endorsements of instruments for deposit or collection in the
ordinary course of business.  The amount
of any Guarantee Obligation of any guaranteeing person shall be deemed to be
the lower of (a) an amount equal to the stated or determinable amount of
the primary obligation in respect of which such Guarantee Obligation is made
and (b) the maximum amount for which such guaranteeing person may be
liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which
such guaranteeing person may be liable are not stated or determinable, in which
case the amount of such Guarantee Obligation shall be such guaranteeing person’s
maximum reasonably anticipated liability in respect thereof as determined by
the Borrower in good faith.

 

“Hazardous Materials” means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or other
pollutants, including petroleum or petroleum distillates, asbestos or
asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious
or medical wastes and all other substances or wastes of any nature regulated
pursuant to any Environmental Law.

 

9

 

“Increase
Effective Date” is defined in Section 2.3(a).

 

“Increasing
Lender” is defined in Section 2.3(b).

 

“Increase Request”
is defined in Section 2.3(a).

 

“Increase
Request Date” is defined in Section 2.3(a).

 

“Indebtedness” means, as to any Person at any
date and without duplication, (a) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property or services
(other than current trade liabilities incurred in the ordinary course of
business and payable in accordance with customary practices), (b) any
other indebtedness of such Person which is evidenced by a note, bond, debenture
or similar instrument (including the Feline Prides I Senior Notes and the
Feline Prides II Senior Notes), (c) all obligations of such Person under
Financing Leases, (d) all obligations of such Person in respect of
acceptances issued or created for the account of such Person, (e) all
obligations of such Person under noncompetition agreements reflected as
liabilities on a balance sheet of such Person in accordance with GAAP, (f) all
liabilities secured by any Lien on any property owned by such Person even
though such Person has not assumed or otherwise become liable for the payment
thereof, (g) all net obligations of such Person under interest rate,
commodity, foreign currency and financial markets swaps, options, futures and
other hedging obligations (valued, at such date, in accordance with the
Borrower’s customary practices, as approved by its independent certified public
accountants) and (h) all Guarantee Obligations of such Person in respect
of any of the foregoing.  For purposes of
the foregoing definition, with regard to a Subsidiary, the term “Indebtedness”
shall include only that portion of its Indebtedness representing the percentage
of its Indebtedness equal to the percentage of the Borrower’s ownership
interest in such Subsidiary.  For the
avoidance of doubt, the term “Indebtedness” shall not include (i) Synthetic
Lease Obligations, (ii) any Guarantee Obligations in respect of Synthetic
Lease Obligations or (iii) any liabilities secured by any Lien in
connection with Synthetic Lease Obligations.

 

“Indemnitee”
is defined in Section 10.05.

 

“Insolvency” means with respect to any
Multiemployer Plan, the condition that such Plan is insolvent within the
meaning of Section 4245 of ERISA.

 

“Insolvent” means pertaining to a condition of
Insolvency.

 

“Interest Payment Date” means (a) as to
any ABR Loan, the last Business Day of each March, June, September and
December, (b) as to any Eurodollar Loan, (i) the last day of each
Interest Period therefor, (ii) if any Interest Period is longer than three
months, each three-month anniversary of the first day of such Interest Period
and (iii) the date of any prepayment thereof.

 

“Interest Period” means, with respect to any
Eurodollar Loan:

 

10

 

(i) 
initially, the period commencing on the borrowing or conversion date, as the
case may be, with respect to such Eurodollar Loan and ending one or two weeks
or one, two, three or six months thereafter (or such other period as is
requested by the Borrower and consented to by all Lenders and the
Administrative Agent), as selected by the Borrower in its notice of borrowing
or notice of conversion, as the case may be, given with respect thereto; and

 

(ii) 
thereafter, each period commencing on the last day of the next preceding
Interest Period applicable to such Eurodollar Loan and ending one or two weeks
or one, two, three or six months thereafter (or such other period as is
requested by the Borrower and consented to by all Lenders and the
Administrative Agent), as selected by the Borrower by irrevocable notice to the
Administrative Agent not less than three Business Days prior to the last day of
the then current Interest Period with respect thereto;

 

provided that
the foregoing provisions relating to Interest Periods are subject to the following:

 

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

 

(2)  the
Borrower may not select any Interest Period that would extend beyond the
scheduled Termination Date; and

 

(3) 
unless otherwise agreed by the Borrower, all Lenders and the Administrative
Agent, any Interest Period (other than a one or two week Interest Period) that
begins on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Business Day of the appropriate
subsequent calendar month.

 

“Investment Advisers Act” means the Investment
Advisers Act of 1940.

 

“Investment Company” means an “investment
company” as such term is defined in the Investment Company Act.

 

“Investment Company Act” means the Investment
Company Act of 1940.

 

“Investment Firm” means any Subsidiary or
other Person (other than an Unrestricted Entity or an Unrestricted Investment
Firm) engaged, directly or indirectly, primarily in the business (the “Investment
Management Business”) of providing investment advisory, management,
distribution or administrative services to Funds (or investment accounts or
funds which will be included as Funds after the Borrower acquires an interest
in such other Person) and in which the Borrower, directly or indirectly, has
purchased or otherwise acquired, or has entered into an agreement to

 

11

 

purchase or otherwise acquire, Capital Stock or other interests
entitling the Borrower, directly or indirectly, to a share of the revenues,
earnings or value thereof.

 

“Investment
Management Business” is defined in the definition of “Investment Firm.”

 

“Joinder
Agreement” is defined in Section 2.3(c).

 

“Lenders” is defined in the preamble (and such
term includes the Swingline Lender).

 

“Lien” means any mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), charge or other security interest or any preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including any conditional sale or other title retention agreement and any
Financing Lease or synthetic lease having substantially the same economic
effect as any of the foregoing).

 

“Loan Documents” means this Agreement, any
Notes and the Pledge Agreements.

 

“Loan Party”
means the Borrower and each Subsidiary that is a party to a Loan Document.

 

“Loans” means the Revolving Loans and the Swingline
Loans.

 

“Material Adverse Effect” means a material
adverse effect on (a) the business, operations, property or condition
(financial or otherwise) of the Borrower and its Subsidiaries taken as a whole,
(b) the ability of the Borrower to perform its obligations under any Loan
Document to which it is a party or (c) the validity or enforceability
against any Loan Party of this or any of the other Loan Documents to which it
is a party or the rights or remedies of the Administrative Agent or the Lenders
hereunder or thereunder.

 

“Moody’s”
means Moody’s Investors Service, Inc. and any successor thereto.

 

“Multiemployer Plan” means a Plan which is a
multiemployer plan as defined in Section 4001(a)(3) of ERISA.

 

“Net Proceeds” means, with respect to any
Asset Sale or Shareholder Asset Sale, the net amount equal to the aggregate
amount received (including by way of deferred payment pursuant to a note
receivable, other non-cash consideration or otherwise) in connection with such
Asset Sale or Shareholder Asset Sale minus
the sum of (a) the reasonable fees, commissions and other out-of-pocket
expenses incurred by the Borrower or any Subsidiary, as applicable, in
connection with such Asset Sale or Shareholder Asset Sale (other than amounts
payable to Affiliates of the Person making such disposition), (b) federal,
state and local taxes incurred in connection with such Asset Sale or
Shareholder Asset Sale, whether or not payable at such time and (c) reasonable
reserves for indemnification obligations and working capital or other purchase
price adjustments in

 

12

 

connection with such Asset Sale or Shareholder Asset Sale that are maintained in accordance with GAAP,
provided that (i) such reserves do not exceed 10% of the purchase price
for such Asset Sale or Shareholder Asset Sale and (ii) concurrently
with any reduction in the amount of any such reserve (excluding any reduction
resulting from a payment to the applicable buyer or that has previously been
accounted for pursuant to clause (iii) below), the Borrower shall
be deemed to have received “Net Proceeds” in an amount equal to such reduction
and (iii) any reserve for working capital or similar purchase price
adjustments shall, solely for purposes of determining “Net Proceeds”, be deemed
to be reduced to zero on the date that is 270 days after the closing of the
applicable Asset Sale and the Borrower shall be deemed to have received “Net
Proceeds” in the amount of such reduction on such date. For purposes of the
foregoing definition, with regard to a Subsidiary, the term “Net Proceeds”
shall include only that portion of its Net Proceeds representing the percentage
of its Net Proceeds equal to the percentage of the Borrower’s ownership
interest in such Subsidiary (or, if less in the case of any Asset Sale by a
Subsidiary, the portion to which the Borrower is entitled under any relevant
Revenue Sharing Agreement or other operating agreement with or with respect to
such Subsidiary).

 

“Non-Cash Based Compensation Costs” means for
any period, the amount of non-cash expense or costs computed under APB No. 25
and related interpretations or FAS 123 and related interpretations, which
relate to the issuance of interests in the Borrower, any Subsidiary or any
Investment Firm.

 

“Non-Excluded Taxes” is defined in Section 3.11(a).

 

“Note” is defined in Section 2.6(e).

 

“Operating
Allocation” is defined in the definition of Operating Cash Flow.

 

“Operating Cash Flow” is that term defined as
either “Operating Cash Flow” or “Operating Allocation” in the relevant Revenue
Sharing Agreement; provided that in the event such term is not defined
in any Relevant Sharing Agreement, Operating Cash Flow shall mean all revenues
other than Free Cash Flow (as defined in this Agreement) for the applicable Investment
Firm.

 

“Owners’
Allocation” is defined in the definition of Free Cash Flow.

 

“Participants” is defined in Section 10.6(b).

 

“PBGC” means the Pension Benefit Guaranty
Corporation established pursuant to Subtitle A of Title IV of ERISA.

 

“Percentage”
means for any Lender the percentage set forth under the heading “Percentage” on
Schedule I, as adjusted from time to time due to changes in such
Lender’s Commitment and in the aggregate Commitments in accordance with the
provisions of this Agreement.

 

13

 

“Person” means an individual, partnership,
corporation, limited liability company, business trust, joint stock company,
trust, unincorporated association, joint venture, Governmental Authority or
other entity of whatever nature.

 

“Plan” means at a particular time, any
employee benefit plan which is covered by ERISA and in respect of which the
Borrower or a Commonly Controlled Entity is (or, if such plan were terminated
at such time, would under Section 4069 of ERISA be deemed to be) an “employer”
as defined in Section 3(5) of ERISA.

 

“Platform”
is defined in Section 6.2.

 

“Pledge Agreements” means, collectively, the
Borrower Pledge Agreement and the Subsidiary Pledge Agreement.

 

“Pledge
Agreement Supplement” means a Pledge Agreement Supplement substantially in
the form of Annex I to Exhibit B-1 or B-2, as applicable.

 

“Pledged Collateral” is defined in each Pledge
Agreement.

 

“Public
Lender” is defined in Section 6.2.

 

“Refunded Swingline Loans” is defined in Section 2.8(b).

 

“Refunding Date” is defined in Section 2.8(c).

 

“Register” is defined in Section 10.6(d).

 

“Regulation U” means Regulation U of the FRB.

 

“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 Affiliates.

 

“Reorganization” means, with respect to any
Multiemployer Plan, the condition that such plan is in reorganization within
the meaning of Section 4241 of ERISA.

 

“Reportable Event” means a reportable event as
defined in Section 4043 of ERISA and the regulations issued under such section with
respect to a Plan, excluding such events as to which the PBGC by regulation
waived the requirements of Section 4043(a) of ERISA that it be
notified within 30 days of the occurrence of such event; provided that a
failure to meet the minimum funding standard of Section 412 of the Code
and of Section 302 of ERISA shall be a Reportable Event regardless of the
issuance of any such waiver of the notice requirement in accordance with either
Section 4043(a) of ERISA or Section 412(d) of the Code.

 

“Required
Lenders” means at any time, Lenders the Commitment Percentages of which
aggregate more than 50%, disregarding the Commitment Percentage of any

 

14

 

Defaulting Lender so long as such Lender is treated equally with the
other Lenders with respect to any action resulting from any consent or approval
of the Required Lenders.

 

“Requirement of Law” means, as to any Person,
any law, treaty, rule or regulation or determination of an arbitrator or a
court or other Governmental Authority, in each case applicable to or binding
upon such Person or any of its property or to which such Person or any of its
property is subject.

 

“Responsible Officer” means each of the chief
executive officer, the president, any executive vice president, any senior vice
president or any vice president of the Borrower or, with respect to financial
matters, the senior financial officer of the Borrower, in each case acting
singly.

 

“Revenue Sharing Agreement” means each
agreement entered into by the Borrower or a Subsidiary with an Investment Firm
pursuant to which a specified percentage of the revenue of such Investment Firm
is distributed among such Investment Firm’s partners, shareholders or members, pro  rata
in accordance with such partners’, shareholders’ or members’ ownership
percentages in such Investment Firm (such percentage being referred to in
certain Revenue Sharing Agreements as “Free Cash Flow” or “Owners’ Allocation”),
or any other agreement providing for the distribution of income, revenue or
assets of an Investment Firm.

 

“Revolving
Loans” is defined in Section 2.1(a).

 

“S&P”
means Standard & Poor’s Ratings Services, a division of The
McGraw-Hill Companies, Inc. and any successor thereto.

 

“Securities Acts” means the Securities Act of
1933 and the Securities Exchange Act of 1934.

 

“Shareholder
Asset Sale” is defined in the definition of Asset Sale.

 

“Single Employer Plan” means any Plan which is
covered by Title IV of ERISA, but which is not a Multiemployer Plan.

 

“Specified
Percentage” is defined in the definition of Total Indebtedness.

 

“Subordinated Indebtedness” means (a) Indebtedness
of the Borrower and/or any other Loan Party under any Subordinated Payment Note
and (b) other Indebtedness of the Borrower or any Subsidiary which has
maturities and other terms, and which is subordinated to the obligations of the
Borrower and its Subsidiaries hereunder and under the other Loan Documents in a
manner, approved in writing by the Required Lenders.

 

“Subordinated Payment Notes” means any
unsecured notes evidencing Indebtedness of the Borrower and/or any other Loan
Party or obligations issued to a seller in connection with an Acquisition of an
Investment Firm or in connection with an increase of the Borrower’s ownership
interest in an Investment Firm, in each case as permitted hereunder (i) for
which the Borrower and/or any other Loan Party is directly,

 

15

 

primarily or contingently liable, (ii) the payment of the
principal of and interest on which and other obligations of the Borrower or
such other Loan Party in respect of which are subordinated to the prior payment
in full of the principal of and interest (including post-petition interest
whether or not allowed as a claim in any proceeding) on the Loans and all other
obligations and liabilities of the Borrower or such other Loan Party to the
Administrative Agent and the Lenders hereunder, and (iii) which are
generally consistent with the terms and conditions of subordination set forth
in Exhibit G hereof (with any variations to such terms and
conditions being subject to approval by the Administrative Agent) or otherwise
satisfactory in form and substance to the Required Lenders.  For the avoidance of doubt, the term “Subordinated
Payment Notes” includes the Subordinated Promissory Notes issued by The
Managers Funds LLC, a majority-owned subsidiary of the Borrower, pursuant to
the Purchase Agreement dated May 22, 2000 by and among the Borrower, The
Managers Funds LLC and Smith Breeden Associates, Inc. and any contingent
consideration issuable by the Borrower in a form substantially the same as the
form of contingent consideration described in the Friess Associates, LLC
Amended and Restated LLC Agreement dated August 28, 2001.

 

“Subsidiary” means, as to any Person, a
corporation, partnership, limited liability company or other entity of which
Capital Stock having ordinary voting power (other than Capital Stock having
such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation,
partnership, limited liability company or other entity is at the time owned, or
the management of which is otherwise controlled, directly or indirectly through
one or more intermediaries, or both, by such Person; provided that,
except for purposes of the definition of “Unrestricted Entity,” no Unrestricted
Entity or Unrestricted Investment Firm shall constitute a Subsidiary for any
purpose.  Unless otherwise qualified, all
references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Borrower.

 

“Subsidiary Pledge Agreement” means the
Subsidiary Pledge Agreement dated as of August 7, 2002 made by various
Subsidiaries in favor of the Administrative Agent, a copy of which (as in
effect on the date hereof) is attached as Exhibit B-2.

 

“Supermajority
Lenders” means at any time, Lenders the Commitment Percentages of which
aggregate at least 66-2/3%, disregarding the Commitment Percentage of any
Defaulting Lender so long as such Lender is treated equally with the other
Lenders with respect to any action resulting from any consent or approval of
the Supermajority Lenders.

 

“Swingline Amount” means the lesser of
$15,000,000 and the aggregate amount of the Commitments.

 

“Swingline Lender” means Bank of America in
its capacity as the lender of the Swingline Loans, or any successor swingline lender
hereunder.

 

“Swingline Loans” is defined in Section 2.7(a).

 

16

 

“Swingline Participation Amount” is defined in
Section 2.8(c).

 

“Synthetic
Lease Obligation” means the monetary obligations of a Person under (a) a
so-called synthetic, off-balance sheet or tax retention lease, or (b) an
agreement for the use or possession of property creating obligations that do
not appear on the balance sheet of such Person but which, upon the insolvency
or bankruptcy of such Person, would be characterized as the indebtedness of
such Person (without regard to accounting treatment).

 

“Termination Date” means November 17,
2009 or any earlier date when the Commitments hereunder are terminated; provided
that if the Borrower remarkets and/or replaces the Feline Prides II Senior
Notes on or before November 17, 2009 with an unsecured senior debt
instrument that has no scheduled amortization prior to January 2011, then the
scheduled Termination Date shall automatically be extended to December     ,
2010.

 

“Total Indebtedness” means at any time, the
aggregate principal amount (including capitalized interest) of all Indebtedness
of the Borrower and its Subsidiaries (including the Loans, the Zero-Coupon
Bonds, purchase money obligations, amounts payable under noncompetition
agreements and the pro-rata share (based on ownership percentage) of the funded
Indebtedness of any entity (other than an Unrestricted Entity or an
Unrestricted Investment Firm) in which the Borrower and/or its Subsidiaries
have a minority interest); provided that Total Indebtedness shall not
include (a) Subordinated Payment Notes, (b) Indebtedness of the
Borrower owing to any Subsidiary permitted by Section 7.2(k), (c) Indebtedness
of any Subsidiary owing to the Borrower or any other Loan Party, (d) prior
to February 17, 2008, the Specified Percentage (as defined below) of the
principal amount of the Feline Prides II Senior Notes and (e) net
obligations under interest rate, commodity, foreign currency or financial market
swaps, options, futures and other hedging obligations.  For purposes of clause (d) above,
“Specified Percentage” means (i) 80% at any time prior to February 17,
2006, (ii) 85% during the period from February 17, 2006 through February 17,
2007 and (iii) 90% thereafter.

 

“Tranche” means the collective reference to
Eurodollar Loans having Interest Periods that began or will begin on the same
date and end on the same later date (whether or not such Loans shall originally
have been made on the same day).

 

“Transferee” is defined in Section 10.6(f).

 

“Type” means, as to any Loan, its nature as an
ABR Loan or a Eurodollar Loan.

 

“Unrestricted
Entity” means, any Subsidiary that engages in no material business other
than the ownership of investments in, and the management of, Unrestricted
Investment Firms.

 

“Unrestricted
Investment Firm” is defined in Section 7.10(l).

 

“Zero-Coupon Bonds” means the senior unsecured
convertible zero-coupon bonds due 2021 issued by the Borrower on May 7,
2001.

 

17

 

1.2.          Other Definitional and Interpretive Provisions.  (a)  Unless otherwise specified therein,
all terms defined in this Agreement shall have the defined meanings when used
in any Notes or any certificate or other document made or delivered pursuant
hereto.

 

(b) 
When used with reference to a period of time, the word “from” means “from and
including” and the word “to” means “to but excluding”.

 

(c) 
The term “including” is not limiting and means “including without limitation.”

 

(d) 
Unless otherwise expressly provided herein, (i) references to agreements
(including this Agreement) and other contractual instruments shall be deemed to
include all subsequent amendments and other modifications thereto, but only to
the extent such amendments and other modifications are not prohibited by the
terms of any Loan Document; and (ii) references to any statute or
regulation are to be construed as including all statutory and regulatory
provisions and rules consolidating, amending, replacing, supplementing or
interpreting such statute or regulation.

 

(e) 
Section, subsection, clause, Schedule and Exhibit references
are to this Agreement unless otherwise specified.

 

(f) 
The meanings given to terms defined herein shall be equally applicable to both
the singular and plural forms of such terms.

 

1.3.          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, as in effect from time to time, applied in a manner
consistent with that used in preparing the audited consolidated balance sheet
of the Borrower and its consolidated Subsidiaries as at December 31, 2004
and the related audited consolidated statements of income and of cash flows for
the fiscal year ended on such date, audited by PricewaterhouseCoopers LLP,
except as otherwise specifically prescribed herein.

 

(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 Borrower or
the Required Lenders shall so request, the Administrative Agent, the Lenders
and the Borrower 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 approval of 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
Borrower shall provide to the Administrative Agent and 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.

 

18

 

1.4.          Allocation
of Loans and Commitments.

 

(a) 
The Borrower and each Lender agree that, effective as of the Closing Date, this
Agreement amends and restates in its entirety the Existing Credit
Agreement.  At the Closing Date, the
Commitments shall be allocated in accordance with the terms hereof and each
Lender shall have a direct or participation share equal to its Percentage of
all outstanding Loans.

 

(b) 
To facilitate allocation described in clause (a), on the Closing Date, (i) all
loans under the Existing Credit Agreement shall be deemed to be Loans
hereunder, (ii) each Lender that is a party to the Existing Credit
Agreement shall transfer to the Administrative Agent an amount equal to the
excess, if any, of such Lender’s Percentage of all outstanding Loans hereunder
(including any Loans requested by the Borrower on the Closing Date) over the
amount of all of such Lender’s loans under the Existing Credit Agreement, (iii) each
Lender that is not a party to the Existing Credit Agreement shall transfer to
the Administrative Agent an amount equal to such Lender’s Percentage of all
outstanding Loans hereunder (including any Loans requested by the Borrower on
the Closing Date), (iv) the Administrative Agent shall apply the funds
received from the Lenders pursuant to clauses (ii) and (iii),
first, on behalf of the Lenders (pro rata according to the amount of the
loans each is required to purchase to achieve the allocation described in clause
(a), to purchase from each Existing Lender that is not a party hereto the
loans of such Existing Lender under the Existing Credit Agreement (and, if
applicable to purchase from any Existing Lender that is a party hereto but that
has loans under the Existing Credit Agreement in excess of such Lender’s
Percentage of all then-outstanding Loans hereunder (including any Loans
requested by the Borrower on the Closing Date), a portion of such loans equal
to such excess), second, to pay to each Existing Lender all interest,
fees and other amounts (including amounts payable pursuant to Section 3.12
of the Existing Credit Agreement, assuming for such purpose that the loans
under the Existing Credit Agreement were prepaid rather than reallocated at the
Closing Date) owed to such Existing Lender under the Existing Credit Agreement
(whether or not otherwise then due) and, third, as the Borrower shall
direct, and (v) the Borrower shall select new Interest Periods to apply to
all Revolving Loans hereunder (or, to the extent the Borrower fails to do so,
such Revolving Loans shall be, continue as or become ABR Loans).

 

(c) 
The Borrower and the Lenders that are Existing Lenders (which Lenders
constitute the “Required Lenders” under and as defined in the Existing Credit
Agreement) agree that, concurrently with the effectiveness hereof, the Existing
Credit Agreement shall be amended and restated hereby and shall thereafter be
of no further force or effect (except for provisions thereof that by their
terms survive termination thereof).

 

SECTION 2.  AMOUNT AND TERMS OF COMMITMENTS; SWINGLINE
LOANS

 

2.1.          Commitments. 
(a)  Subject to the terms and conditions hereof, each Lender
severally agrees to make revolving credit loans (“Revolving Loans”) (provided that any repricing or conversion of
an outstanding Revolving Loan shall not be considered a making of a Revolving
Loan) to the Borrower from time to time during the Commitment Period in an
aggregate principal amount at any one time outstanding not to exceed the amount
of such Lender’s Commitment; provided that no Lender shall be obligated
to make a Revolving Loan if, after giving effect to the making of such
Revolving Loan, such Lender’s Available Commitment

 

19

 

would be less than zero.  During the Commitment Period the Borrower may
use the Commitments by borrowing, prepaying the Revolving Loans in whole or in
part, and reborrowing, all in accordance with the terms and conditions hereof.

 

(b) 
The Revolving Loans may from time to time be (i) Eurodollar Loans, (ii) ABR
Loans or (iii) a combination thereof, as determined by the Borrower and
notified to the Administrative Agent in accordance with Sections 2.2 and
3.3.

 

2.2.          Procedure for Borrowing.  The Borrower may borrow under the Commitments
during the Commitment Period on any Business Day; provided
that the Borrower shall give the Administrative Agent irrevocable written
notice, in substantially the form of Exhibit I hereto (which notice
must be received by the Administrative Agent prior to 11:00 a.m., New York
City time, (a) three Business Days prior to the requested Borrowing Date,
if all or any part of the requested Revolving Loans are to be initially
Eurodollar Loans or (b) on the requested Borrowing Date, if all of the
requested Loans are to be initially ABR Loans), in each case specifying (i) the
amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether
the borrowing is to be of Eurodollar Loans, ABR Loans or a combination thereof
and (iv) if the borrowing is to be entirely or partly of Eurodollar Loans,
the respective amounts of each such Type of Loan and the respective lengths of
the initial Interest Periods for such Eurodollar Loans.  Each borrowing of ABR Loans shall be in an
amount equal to $1,000,000 or a whole multiple of $100,000 in excess thereof, and
each borrowing of Eurodollar Loans shall be in an amount equal to $5,000,000 or
a whole multiple of $1,000,000 in excess thereof.  Upon receipt of any such notice from the
Borrower, the Administrative Agent shall promptly notify each Lender thereof.  Each Lender will make the amount of its pro
rata share of each borrowing available to the Administrative Agent for the
account of the Borrower at the Administrative Agent’s Office prior to 1:00 p.m.,
New York City time, on the Borrowing Date requested by the Borrower in funds
immediately available to the Administrative Agent.  Such borrowing will then be made available to
the Borrower by the Administrative Agent crediting the account of the Borrower
on the books of such office with the aggregate of the amounts made available to
the Administrative Agent by the Lenders and in like funds as received by the
Administrative Agent.  The failure of any
Lender to make a Revolving Loan to be made by it as part of any borrowing shall
not relieve any other Lender of its obligation to make available its share of
such borrowing.

 

2.3.          Increase of Commitments.  (a)  The Borrower may from time to time
(but not more than five times), so long as no Default exists, request an
increase in the aggregate amount of the Commitments by delivering a written
request (an “Increase Request”) to the
Administrative Agent and the Lenders; provided that the aggregate
amount of all increases in the amount of the Commitments pursuant to this Section 2.3
shall not exceed $100,000,000.  Any
Increase Request shall specify (i) the date (the “Increase Response
Date”) by which any Lender or prospective Lender that is willing to
increase its Commitment must respond to such request, (ii) the date (the “Increase Effective Date”) on which the
requested increase is to become effective (which shall be at least five
Business Days after the related Increase Response Date) and (iii) the
amount of the requested increase (which shall be $10,000,000 or a higher
integral multiple of $1,000,000).  No
Lender shall be obligated to increase its commitment pursuant to any Increase
Request.

 

20

 

(b)  Not later than the Increase Response Date for
an Increase Request, any Lender or prospective Lender that is willing to
increase its Commitment in response to such Increase Request (an “Increasing
Lender”) shall notify the Borrower and the Administrative Agent of the
amount by which such Lender or prospective Lender is willing to increase its
Commitment (which amount shall be an integral multiple of $1,000,000).  On the first Business Day after the Increase
Response Date, the Administrative Agent shall notify the Increasing Lenders of
the amounts of their respective increases (it being understood that if the
aggregate amount of increased Commitments offered pursuant to an Increase
Request exceeds the amount requested, the Borrower, in consultation with the
Administrative Agent, may (subject to the limitation in clause (a)
above) accept all or any portion of such excess offered Commitments and/or
allocate the increases in the Commitments among the Increasing Lenders).  On the applicable Increase Effective Date,
the Commitment of each Increasing Lender shall be increased by the amount
offered by (or, if applicable, allocated to) such Increasing Lender and the
aggregate amount of the Commitments shall be increased (and the Commitment
Percentages adjusted) accordingly.

 

(c) 
If any Increasing Lender is not a Lender prior to the related Increase
Effective Date, such Increasing Lender shall be subject to approval by the
Borrower and the Administrative Agent (such approval not to be unreasonably
withheld or delayed) and such Increasing Lender, the Borrower and the
Administrative Agent shall sign and deliver a joinder agreement (a “Joinder Agreement”), substantially in form
and substance as Exhibit L, pursuant to which such Increasing
Lender shall become a party to this Agreement.

 

(d) 
The parties hereto agree that, notwithstanding any other provision of this
Agreement, the Administrative Agent, the Borrower, each Increasing Lender and
each other Lender, as applicable, may make arrangements reasonably satisfactory
to such parties to cause an Increasing Lender to temporarily hold risk
participations in the Revolving Loans of the other Lenders (rather than fund
its Commitment Percentage of all outstanding Revolving Loans concurrently with
the applicable increase) with a view toward minimizing breakage costs and
transfers of funds in connection with any increase in the aggregate amount of
the Commitments.  The Borrower
acknowledges that if (despite any arrangements established pursuant to the
foregoing sentence), as a result of a non-pro-rata increase in the aggregate
amount of the Commitments, any Eurodollar Loans must be prepaid or converted
(in whole or in part) on a day other than the last day of an Interest Period
therefor, then such prepayment or conversion shall be subject to the provisions
of Section 3.12.

 

2.4.          Commitment Fee.  The Borrower agrees to pay to the
Administrative Agent for the account of each Lender a commitment fee for the
period from the first day of the Commitment Period to the Termination Date,
computed at the Commitment Fee Rate on the average daily amount of the
Available Commitment of such Lender during the period for which payment is
made, payable quarterly in arrears on the last day of each March, June, September and
December and on the Termination Date.

 

2.5.          Termination or Reduction of Commitments.  The Borrower shall have the right, upon not
less than five Business Days’ notice to the Administrative Agent, to terminate
the Commitments or, from time to time, to reduce the aggregate amount of the
Commitments to an amount that is not less than the aggregate principal amount
of all outstanding Loans.  Any such

 

21

 

reduction shall be in an amount equal to $5,000,000 or
a whole multiple thereof and shall reduce permanently the Commitments then in
effect. Upon receipt of any such notice, the Administrative Agent shall
promptly notify each Lender thereof.

 

2.6.          Repayment of Loans; Evidence of Debt.  (a)  The Borrower hereby unconditionally
promises to pay to the Administrative Agent for the account of each Lender the
then unpaid principal amount of each Loan of such Lender on the Termination
Date (or such earlier date on which the Loans become due and payable pursuant
to Section 8).  The Borrower
hereby further agrees to pay interest on the unpaid principal amount of the
Loans from time to time outstanding from the date hereof until payment in full
thereof at the rates per annum, and on the dates, set forth in Section 3.5.

 

(b) 
Each Lender shall maintain in accordance with its usual practice an account or
accounts evidencing indebtedness of the Borrower to such Lender resulting from
each Loan of such Lender from time to time, including the amounts of principal
and interest payable and paid to such Lender from time to time under this
Agreement.

 

(c) 
The Administrative Agent shall maintain the Register pursuant to Section 10.6(d),
and a subaccount therein for each Lender, in which shall be recorded (i) the
amount and Type of each Loan made hereunder and each Interest Period for each
Eurodollar Loan, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to each Lender hereunder
and (iii) the amount of any sum received by the Administrative Agent
hereunder from the Borrower and each Lender’s share thereof.

 

(d) 
The entries made in the Register and the accounts of each Lender maintained
pursuant to Section 2.6(b) shall, to the extent permitted by
applicable law, be prima  facie evidence of the existence and amounts
of the obligations of the Borrower therein recorded; provided that the failure of
any Lender or the Administrative Agent to maintain the Register or any such
account, or any error therein, shall not in any manner affect the obligation of
the Borrower to repay (with applicable interest) the Loans made to the Borrower
by such Lender in accordance with the terms of this Agreement.

 

(e) 
The Borrower agrees that, upon the request to the Administrative Agent by any
Lender, the Borrower will sign and deliver to such Lender a promissory note of
the Borrower evidencing the Loans of such Lender, substantially in the form of Exhibit A
with appropriate insertions as to date and principal amount (a “Note”).

 

2.7.          Swingline Loans.

 

(a)  Subject to the
terms and conditions hereof, the Swingline Lender may (in its sole and absolute
discretion) make a portion of the credit otherwise available to the Borrower
under the Commitments available from time to time during the Commitment Period
by making swing line loans (“Swingline Loans”)
to the Borrower; provided that (i) the
aggregate principal amount of Swingline Loans outstanding at any time shall not
exceed the Swingline Amount and (ii) the Borrower shall not request, and
the Swingline Lender shall not make, any Swingline Loan if, after giving effect
to the making of such Swingline Loan, the aggregate amount of the Available
Commitments would be less than

 

22

 

zero.  During
the Commitment Period, the Borrower may borrow, repay, and reborrow Swingline
Loans, subject to the agreement of the Swingline Lender and in accordance with
the terms and conditions hereof.  All
Swingline Loans shall be ABR Loans.

 

(b)  The Borrower
shall repay all outstanding Swingline Loans on the Termination Date.

 

2.8.          Procedure for Swingline Borrowing and Prepayment;
Refunding of Swingline Loans.

 

(a)  Whenever the
Borrower desires that the Swingline Lender make Swingline Loans it shall give
the Swingline Lender and the Administrative Agent irrevocable telephonic notice
confirmed promptly in writing (which telephonic notice must be received by the
Swingline Lender and the Administrative Agent not later than 1:00 p.m.,
New York City time, on the proposed Borrowing Date), specifying (i) the
amount to be borrowed and (ii) the requested Borrowing Date (which shall
be a Business Day during the Commitment Period).  Each Swingline Loan shall be in an amount
equal to $200,000 or a whole multiple of $50,000 in excess thereof.  Unless the Swingline Lender has received
notice (by telephone or in writing) from the Administrative Agent (including at
the request of any Lender) prior to 1:15 p.m., New York City time, on the
proposed Borrowing Date (A) directing the Swingline Lender not to make
such Swingline Loan as a result of the limitations set forth in Section 2.7(a)(ii) or
(B) that one or more of the applicable conditions specified in Section 5
is not then satisfied, then, subject to the terms and conditions hereof, the
Swingline Lender may (in its sole and absolute discretion), not later than 3:00 p.m.,
New York City time, on the proposed Borrowing Date, make available to the
Administrative Agent at the Administrative Agent’s Office an amount in
immediately available funds equal to the amount of the Swingline Loan to be
made by the Swingline Lender.  The
Administrative Agent shall make the proceeds of any such Swingline Loan
available to the Borrower by depositing such proceeds in the account of the
Borrower with the Administrative Agent on such Borrowing Date in immediately
available funds.

 

(b)  The Swingline
Lender may, at any time and from time to time in its sole and absolute
discretion, on behalf of the Borrower (which hereby irrevocably authorizes the
Swingline Lender to act on its behalf), request each Lender to make, and each
Lender hereby agrees to make, a Revolving Loan (which shall be an ABR Loan), in
an amount equal to such Lender’s Commitment Percentage of the aggregate amount
of the Swingline Loans (the “Refunded Swingline
Loans”) outstanding on the date of such notice, to repay the
Swingline Lender.  Such request shall be
made in writing and in accordance with the requirements of Section 2.2,
without regard to the minimum and multiples specified therein for the principal
amount of Revolving Loans.  Each Lender
shall make the amount of such Revolving Loan available to the Administrative
Agent at the Administrative Agent’s Office in immediately available funds, not
later than 1:00 p.m. New York City time, on the Borrowing Date specified
by the Swingline Lender.  The proceeds of
such Revolving Loans shall be immediately made available by the Administrative
Agent to the Swingline Lender for application by the Swingline Lender to the
repayment of the Refunded Swingline Loans. 
The Borrower irrevocably authorizes

 

23

 

the Swingline Lender to charge the Borrower’s accounts
with the Administrative Agent (up to the amount available in each such account)
in order to immediately pay the amount of such Refunded Swingline Loans to the
extent amounts received from the Lenders are not sufficient to repay in full
such Refunded Swingline Loans.

 

(c)  If prior to the
time a Revolving Loan would have otherwise been made pursuant to Section 2.8(b),
one of the events described in Section 8(f) shall have
occurred and be continuing with respect to the Borrower or if for any other
reason, as determined by the Administrative Agent in its sole discretion, Revolving
Loans may not be made as contemplated by Section 2.8(b), each
Lender shall, on the date such Revolving Loan was to have been made pursuant to
the notice referred to in Section 2.8(b) (the “Refunding Date”), purchase for cash an
undivided participating interest in the then outstanding Swingline Loans by
paying to the Swingline Lender an amount (the “Swingline
Participation Amount”) equal to (i) such Lender’s Commitment
Percentage times (ii) the sum of
the aggregate principal amount of Swingline Loans then outstanding that were to
have been repaid with such Revolving Loans.

 

(d)  Whenever, at
any time after the Swingline Lender has received from any Lender such Lender’s
Swingline Participation Amount, the Swingline Lender receives any payment on
account of the Swingline Loans, the Swingline Lender will distribute to such
Lender its Swingline Participation Amount (appropriately adjusted, in the case
of interest payments, to reflect the period of time during which such Lender’s
participating interest was outstanding and funded and, in the case of principal
and interest payments, to reflect such Lender’s pro
rata portion of such payment if such
payment is not sufficient to pay the principal of and interest on all Swingline
Loans then due); provided that in the
event that such payment received by the Swingline Lender is required to be
returned, such Lender will return to the Swingline Lender any portion thereof
previously distributed to it by the Swingline Lender.

 

(e)  Each Lender’s
obligation to make the Revolving Loans referred to in Section 2.8(b) and
to purchase participating interests pursuant to Section 2.8(c) shall
be absolute and unconditional and shall not be affected by any circumstance,
including (i) any setoff, counterclaim, recoupment, defense or other right
that such Lender or the Borrower may have against the Swingline Lender, the
Borrower or any other Person for any reason whatsoever; (ii) the existence
of a Default or the failure to satisfy any of the other conditions specified in
Section 5; (iii) any adverse change in the condition
(financial or otherwise) of the Borrower; (iv) any breach of this
Agreement or any other Loan Document by any Loan Party or any other Lender; or (v) any
other circumstance, happening or event whatsoever, whether or not similar to
any of the foregoing.

 

(f)  The Borrower
may from time to time prepay Swingline Loans , in whole or in part, without
premium or penalty, upon irrevocable notice to the Administrative Agent and the
Swingline Lender not later than 11:00 a.m., New York City time on the date
of prepayment, specifying the date and amount of prepayment.  Partial prepayments of Swingline Loans shall
be in an aggregate principal amount of $200,000 or a whole multiple of $50,000
in excess thereof, and after giving effect to any such prepayment the aggregate
principal amount of all Swingline Loans shall not be less than $200,000.

 

24

 

SECTION 3.  GENERAL PROVISIONS APPLICABLE TO THE LOANS

 

3.1.          Optional Prepayments.  The Borrower may at any time and from time to
time prepay the Revolving Loans, in whole or in part, without premium or
penalty, upon irrevocable notice to the Administrative Agent, at least three
Business Days’ prior to the date of prepayment if all or any part of the
Revolving Loans to be prepaid are Eurodollar Loans, and at least one Business
Day prior to the date of prepayment if all of the Revolving Loans to be prepaid
are ABR Loans, specifying the date and amount of prepayment and whether the
prepayment is of Eurodollar Loans, ABR Loans or a combination thereof, and, if
of a combination thereof, the amount allocable to each.  Upon receipt of any such notice, the Administrative
Agent shall promptly notify each Lender thereof.  If any such notice is given, the amount
specified in such notice shall be due and payable on the date specified
therein, together with any amounts payable pursuant to Section 3.12.  Partial prepayments of ABR Loans shall be in
an aggregate principal amount of $1,000,000 or a whole multiple of $100,000 in
excess thereof, and partial prepayments of Eurodollar Loans shall be in an
aggregate principal amount of $5,000,000 or a whole multiple of $1,000,000 in
excess thereof.

 

3.2.          Mandatory Commitment Reductions; Mandatory Prepayments.  (a)  Concurrently with any Asset
Sale or Shareholder Asset Sale if, after giving effect to such Shareholder
Asset Sale, the Borrower does not continue to hold, directly or indirectly, in
excess of a 50% equity ownership interest in the relevant Subsidiary or
Investment Firm, the aggregate amount of the Commitments shall be permanently
reduced by the excess (rounded down, if necessary, to an integral multiple of
$5,000,000), if any, of the aggregate amount of the Net Proceeds of all Asset
Sales and all such Shareholder Asset Sales made after the Closing Date
(excluding any portion of such amount previously applied to reduce the
Commitments pursuant to this Section 3.2) over $200,000,000;
provided that the requirements of this clause (a) shall not
apply to Net Proceeds from any Asset Sale or Shareholder Asset Sale to the
extent that the Borrower notifies the Administrative Agent prior to or
concurrently with the receipt of such Net Proceeds that such Net Proceeds are
intended to be used, and such Net Proceeds are in fact used, to purchase
similar assets within 270 days after such Asset Sale or Shareholder Asset Sale.

 

(b) 
If, as a result of the reduction of the Commitments pursuant to clause (a),
the aggregate principal amount of the Loans exceeds the aggregate amount of the
Commitments, the Borrower shall immediately prepay Loans in the amount of such
excess.  All prepayments of Loans
pursuant to this Section 3.2(b) shall
be made without premium or penalty (but shall be subject to Section 3.12)
and shall be accompanied by accrued and unpaid interest on the principal amount
being prepaid.  All such prepayments shall
be applied as directed in writing by the Borrower or, in the absence of such
direction, first, to prepay Swingline Loans until the Swingline Loans
are paid in full, second, to prepay Revolving Loans that are ABR Loans
until such Loans are paid in full and, third, to prepay Eurodollar
Loans.

 

3.3.          Conversion and Continuation Options.  (a)  The Borrower may elect from time to
time to convert Eurodollar Loans to ABR Loans by giving the Administrative
Agent at least two Business Days’ prior irrevocable written notice,
substantially in the form of Exhibit J hereto, of such election; provided
that any such conversion of Eurodollar Loans may only be made on the last day
of an Interest Period with respect thereto. 
The Borrower may elect from time to time to convert ABR Loans (other
than ABR Loans which are Swingline Loans) to

 

25

 

Eurodollar Loans by giving the Administrative Agent at
least three Business Days’ prior irrevocable written notice, substantially in
the form of Exhibit J hereto, of such election.  Any such notice of conversion to Eurodollar
Loans shall specify the length of the initial Interest Period or Interest
Periods therefor.  Upon receipt of any
such notice, the Administrative Agent shall promptly notify each Lender thereof.  All or any part of outstanding Eurodollar
Loans and ABR Loans may be converted as provided herein; provided
that no Loan may be converted into a Eurodollar Loan when any Event of Default
has occurred and is continuing and the Administrative Agent has or the Required
Lenders have determined that such a conversion is not appropriate.

 

(b) 
Any Eurodollar Loans may be continued as such upon the expiration of the then
current Interest Period with respect thereto by the Borrower giving written
notice, substantially in the form of Exhibit J hereto, to the
Administrative Agent, in accordance with the applicable provisions of the term “Interest
Period” set forth in Section 1.1, of the length of the next
Interest Period to be applicable to such Loans; provided that no Eurodollar
Loan may be continued as such when any Event of Default has occurred and is
continuing and the Administrative Agent has notified the Borrower that the
Required Lenders have determined that such a continuation is not appropriate;
and provided,  further,
that if the Borrower shall fail to give such notice or if such continuation is
not permitted such Eurodollar Loans shall be automatically converted to ABR
Loans on the last day of such then expiring Interest Period.

 

3.4.          Minimum Amounts and Maximum Number of Tranches.  All borrowings, conversions and continuations
of Loans hereunder and all selections of Interest Periods hereunder shall be in
such amounts and be made pursuant to such elections so that, after giving
effect thereto, the aggregate principal amount of the Loans comprising each
Eurodollar Tranche shall be equal to $5,000,000 or a whole multiple of
$1,000,000 in excess thereof.  In no
event shall there be more than 10 Eurodollar Tranches outstanding at any time.

 

3.5.          Interest Rates and Payment Dates.  (a)  Each Eurodollar Loan shall bear
interest for each day during each Interest Period with respect thereto at a
rate per annum equal to the Eurodollar Rate determined for such Interest Period
plus the Applicable Margin.

 

(b) 
Each ABR Loan shall bear interest at a rate per annum equal to the ABR plus
the Applicable Margin.

 

(c) 
If any amount payable by the Borrower under any Loan Document is not paid when
due (after any applicable grace period), whether at stated maturity, by
acceleration or otherwise, such amount shall thereafter bear interest at a
fluctuating interest rate per annum at all times equal to the Default Rate to
the fullest extent permitted by applicable laws.  Furthermore, upon the request of the Required
Lenders, at any time an Event of Default exists, the Borrower shall pay
interest on the Loans at a fluctuating interest rate per annum at all times
equal to the Default Rate to the fullest extent permitted by applicable laws.

 

(d) 
Interest shall be payable in arrears on each Interest Payment Date and on the
Termination Date; provided
that interest accruing pursuant to Section 3.5(c) shall be
payable from time to time on demand.

 

26

 

3.6.          Computation of Interest and Fees.  (a)  Interest based on Bank of America’s
“prime rate” shall be calculated on the basis of a year of 365 (or, if
applicable, 366) days and for the actual number of days elapsed.  All other interest and all fees shall be
calculated on the basis of a year of 360 days and for the actual number of days
elapsed.  The Administrative Agent shall
as soon as practicable notify the Borrower and the Lenders of each
determination of a Eurodollar Rate.  Any
change in the interest rate on a Loan resulting from a change in the ABR or the
Eurodollar Reserve Percentage shall become effective as of the opening of
business on the day on which such change becomes effective.  The Administrative Agent shall as soon as
practicable notify the Borrower and the Lenders of the effective date and the
amount of each such change in the ABR or the Eurodollar Reserve Percentage.

 

(b) 
Each determination of an interest rate by the Administrative Agent pursuant to
any provision of this Agreement shall be conclusive and binding on the Borrower
and the Lenders in the absence of manifest error.  The Administrative Agent shall, at the
request of the Borrower or any Lender, deliver to the Borrower or such Lender a
statement showing the quotations used by the Administrative Agent in
determining any interest rate pursuant to Section 3.5(a).

 

3.7.          Inability to Determine Interest Rate.  If prior to the first day of any Interest
Period:

 

(a)  the
Administrative Agent shall have determined (which determination shall be
conclusive and binding upon the Borrower) that, by reason of circumstances affecting
the relevant market, adequate and reasonable means do not exist for ascertaining
the Eurodollar Rate for such Interest Period, or

 

(b)  the
Administrative Agent shall have received notice from the Required Lenders that
the Eurodollar Rate determined or to be determined for such Interest Period
will not adequately and fairly reflect the cost to such Lenders (as
conclusively certified by the Required Lenders) of making or maintaining their
affected Loans during such Interest Period,

 

then the
Administrative Agent shall give telecopy or telephonic notice thereof, to the
Borrower and the Lenders as soon as practicable thereafter.  If such notice is given, (x) any Eurodollar
Loans requested to be made on the first day of such Interest Period shall be
made as ABR Loans, (y) any ABR Loans that were to have been converted on the
first day of such Interest Period to Eurodollar Loans shall be continued as ABR
Loans and (z) any outstanding Eurodollar Loans that were to be continued on the
first day of such Interest Period shall be converted to ABR Loans.  Until such notice has been withdrawn by the
Administrative Agent, no further Eurodollar Loans shall be made or continued as
such, nor shall the Borrower have the right to convert Loans to Eurodollar
Loans.

 

3.8.          Pro Rata Treatment and Payments.  (a)  Except as provided in Section 2.3(d),
each borrowing by the Borrower from the Lenders hereunder (other than
borrowings of Swingline Loans), each payment by the Borrower on account of any
commitment fee hereunder and any reduction of the Commitments of the Lenders
shall be made pro  rata according to the respective Commitment
Percentages of the Lenders.  Subject to Sections
2.3(d) and 3.8(c), each

 

27

 

payment (including each prepayment) by the Borrower on
account of principal of and interest on the Loans shall be made pro  rata
according to the respective outstanding principal amounts of the Loans then
held by the Lenders; provided that payments in respect of Swingline
Loans that have not been refunded with Revolving Loans pursuant to Section 2.8(b) shall
be for the account of the Swingline Lender only (subject to the Swingline
Lender’s obligation to share with any participants in the Swingline
Loans).  All payments (including
prepayments) to be made by the Borrower hereunder, whether on account of
principal, interest, fees or otherwise, shall be made without set off or
counterclaim and shall be made prior to 12:00 noon, New York City time, on the
due date thereof to the Administrative Agent, for the account of the Lenders at
the Administrative Agent’s Office, in Dollars and in immediately available
funds (and funds received after that time shall be deemed to have been received
on the next succeeding Business Day). 
The Administrative Agent shall distribute such payments to the Lenders
promptly upon receipt (and if such payment is received prior to 12:00 noon, on
the same day) in like funds as received. 
If any payment hereunder becomes due and payable on a day other than a
Business Day, the due date for such payment shall be extended to the next
succeeding Business Day, and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension and
such extension of time shall in such case be included in the computation of
payment of interest or fees, as the case may be.

 

(b) 
Unless the Administrative Agent shall have been notified in writing by any
Lender prior to a borrowing that such Lender will not make the amount that
would constitute its portion of such borrowing available to the Administrative
Agent, the Administrative Agent may assume that such Lender is making such
amount available to the Administrative Agent, and the Administrative Agent may,
in reliance upon such assumption, make available to the Borrower a
corresponding amount.  If such amount is
not made available to the Administrative Agent by the required time on the
Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on
demand, such amount with interest thereon at a rate equal to the daily average
Federal Funds Rate for the period until such Lender makes such amount
immediately available to the Administrative Agent.  A certificate of the Administrative Agent
submitted to any Lender with respect to any amounts owing under this subsection shall
be conclusive in the absence of manifest error. 
If such Lender’s portion of such borrowing is not made available to the
Administrative Agent by such Lender within three Business Days of such
Borrowing Date, the Administrative Agent shall also be entitled to recover such
amount with interest thereon at the rate per annum applicable to ABR Loans
hereunder, on demand, from the Borrower.

 

(c) 
In the event that a Lender fails to make available after a period of three
Business Days to the Administrative Agent its portion of a borrowing (any such
Lender, a “Defaulting Lender”), the Borrower may replace such Lender as
provided in Section 3.14. Notwithstanding any such replacement, no
Defaulting Lender shall be released from any of its rights or obligations under
any Loan Document (including Section 9.7) for actions taken or
failed to be taken by it prior to the date of such substitution.

 

3.9.          Illegality. 
Notwithstanding any other provision herein, if the adoption of or any
change in any Requirement of Law or in the interpretation or application
thereof shall make it unlawful for any Lender to make or maintain Eurodollar
Loans as contemplated by this Agreement, (a) the commitment of such Lender
hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert ABR Loans to Eurodollar Loans shall forthwith be

 

28

 

cancelled and (b) such Lender’s Loans then
outstanding as Eurodollar Loans, if any, shall be converted automatically to
ABR Loans on the respective last days of the then current Interest Periods with
respect to such Loans or within such earlier period as required by law.  If any such conversion of a Eurodollar Loan
occurs on a day which is not the last day of the then current Interest Period
with respect thereto, the Borrower shall pay to such Lender such amounts, if
any, as may be required pursuant to Section 3.12.

 

3.10.        Requirements of Law.  (a)  If the adoption of or any change in
any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:

 

(i)            shall
subject any Lender to any tax of any kind whatsoever with respect to this
Agreement, any Note or any Eurodollar Loan made by it, or change the basis of
taxation of payments to such Lender in respect thereof (except for Non-Excluded
Taxes covered by Section 3.11 and changes in the rate of tax on the
overall net income, or franchise taxes imposed in lieu of income taxes, of such
Lender);

 

(ii)           shall
impose, modify or hold applicable any reserve, special deposit, compulsory loan
or similar requirement against assets held by, deposits or other liabilities in
or for the account of, advances, loans or other extensions of credit by, or any
other acquisition of funds by, any office of such Lender which is not otherwise
included in the determination of the Eurodollar Rate hereunder; or

 

(iii)          shall
impose on such Lender any other condition;

 

and the result
of any of the foregoing is to increase the cost to such Lender, by an amount
which such Lender in good faith deems to be material, of agreeing to make or
maintain, or of making, converting into, continuing or maintaining, Eurodollar
Loans or to reduce any amount receivable hereunder in respect thereof, then, in
any such case, the Borrower shall promptly (and in any event within 10 days
after receipt of a certificate in accordance with Section 3.10(c))
pay such Lender such additional amount or amounts as will compensate such
Lender for such increased cost or reduced amount receivable.

 

(b) 
If any Lender shall have determined that the adoption of or any change in any
Requirement of Law regarding capital adequacy or in the interpretation or
application thereof or compliance by such Lender or any corporation controlling
such Lender with any request or directive regarding capital adequacy (whether
or not having the force of law) from any Governmental Authority made subsequent
to the date hereof shall have the effect of reducing the rate of return on such
Lender’s or such corporation’s capital as a consequence of its obligations
hereunder to a level below that which such Lender or such corporation could
have achieved but for such adoption, change or compliance (taking into
consideration such Lender’s or such corporation’s policies with respect to
capital adequacy) by an amount deemed by such Lender in good faith to be material,
then the Borrower shall promptly (and in any event within 10 days after receipt
of a certificate in accordance with this Section 3.10(b), pay to
such Lender such additional amount or amounts as will fairly compensate such
Lender for such reduction in the return on capital.

 

29

 

(c) 
If any Lender becomes entitled to claim any additional amounts pursuant to this
Section 3.10, it shall promptly
notify the Borrower (with a copy to the Administrative Agent) of the event by
reason of which it has become so entitled; provided that no additional
amount shall be payable under this Section 3.10 for a period longer
than nine months prior to such notice to the Borrower.  A certificate as to any additional amounts payable
pursuant to this Section 3.10
submitted by such Lender to the Borrower (with a copy to the Administrative
Agent) shall be conclusive in the absence of manifest error.  The agreements in this Section shall
survive for a period of one year after the termination of this Agreement and
the payment of the Loans and all other amounts payable hereunder.  In determining whether to make a claim, and calculating the
amount of compensation, under this Section 3.10, each Lender
shall apply standards that are not inconsistent with those generally applied by
such Lender in similar circumstances.

 

3.11.        Taxes. 
(a)  All payments made by the Borrower under this Agreement and any
Notes shall be made free and clear of, and without deduction or withholding for
or on account of, any present or future income, stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any Governmental Authority,
excluding net income taxes and franchise taxes (imposed in lieu of net income
taxes) imposed on the Administrative Agent or any Lender as a result of a
present or former connection between the Administrative Agent or such Lender
and the jurisdiction of the Governmental Authority imposing such tax or any
political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from the Administrative Agent or such Lender
having signed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement or any Note).  If any such non-excluded taxes, levies,
imposts, duties, charges, fees, deductions or withholdings (“Non-Excluded Taxes”) are required to be
withheld from any amounts payable to the Administrative Agent or any Lender
hereunder or under any Note, the amounts so payable to the Administrative Agent
or such Lender shall be increased to the extent necessary to yield to the
Administrative Agent or such Lender (after payment of all Non-Excluded Taxes)
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in this Agreement.  In
addition, if any Non-Excluded Taxes are directly imposed on or asserted against
the Administrative Agent or any Lender with respect to any payment received by
the Administrative Agent or such Lender hereunder, the Administrative Agent or
such Lender may pay such Non-Excluded Taxes and the Borrower will promptly pay
such additional amount (including any penalty, interest or expense) as is
necessary in order that the net amount received by the Administrative Agent or
such Lender after the payment of such Non-Excluded Taxes (including any taxes
on such additional amounts) shall equal the amount such Person would have
received had such Non-Excluded Taxes not been imposed or asserted.  Notwithstanding the foregoing two sentences,
the Borrower shall not be required to increase any amount payable, or pay any
additional amount, under this Section 3.11(a) to any Lender
that is not organized under the laws of the United States of America or a state
thereof if such Lender fails to comply with the requirements of Section 3.11(b).  Whenever any Non-Excluded Taxes are payable
by the Borrower, as promptly as possible thereafter the Borrower shall send to
the Administrative Agent for its own account or for the account of such Lender,
as the case may be, a certified copy of an original official receipt received
by the Borrower showing payment thereof. 
If the Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative Agent the
required receipts or other required documentary evidence, the Borrower shall
indemnify the

 

30

 

Administrative
Agent and the Lenders for any incremental taxes, interest or penalties that may
become payable by the Administrative Agent or any Lender as a result of any
such failure.  The agreements in this subsection shall
survive for a period of one year the termination of this Agreement and the payment
of the Loans and all other amounts payable hereunder.

 

(b) 
Each Lender that is not incorporated under the laws of the United States of
America or a state thereof shall:

 

(i)            deliver
to the Borrower and the Administrative Agent two duly completed copies of
United States Internal Revenue Service Form W-8ECI or Form W-8BEN, or
successor applicable form, as the case may be;

 

(ii)           deliver
to the Borrower and the Administrative Agent two further copies of any such
form or certification on or before the date that any such form or certification
expires or becomes obsolete and after the occurrence of any event requiring a
change in the most recent form previously delivered by it to the Borrower; and

 

(iii)          obtain
such extensions of time for filing and complete such forms or certifications as
may reasonably be requested by the Borrower or the Administrative Agent;

 

unless in any
such case an event (including any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form with respect to it and
such Lender so advises the Borrower and the Administrative Agent.  Such Lender shall certify that it is entitled
to an exemption from United States backup withholding tax.  Each Person that shall become a Lender or a
Participant pursuant to Section 10.6 shall, upon the effectiveness
of the related transfer, be required to provide all of the forms and statements
required pursuant to this subsection; provided that in the case of
a Participant such Participant shall furnish all such required forms and
statements to the Lender from which the related participation shall have been
purchased.

 

(c) 
If the Administrative Agent or any Lender determines, in its sole discretion,
that it has received a refund of any Non-Excluded Taxes as to which it has been
indemnified by the Borrower or with respect to which the Borrower has paid
additional amounts pursuant to this Section, it shall pay to the Borrower an
amount equal to such refund (but not more than the indemnity payments made, or
additional amounts paid, by the Borrower under this Section with respect
to the Non-Excluded Taxes giving rise to such refund), net of all out-of-pocket
expenses of the Administrative Agent or such Lender, as the case may be, and
without interest (other than any interest paid by the relevant Governmental
Authority with respect to the relevant portion of such refund), provided
that the Borrower, upon the request of the Administrative Agent or such Lender,
agrees to repay the amount paid over to the Borrower (plus any penalties,
interest or other charges imposed by the relevant Governmental Authority) to
the Administrative Agent or such Lender if the Administrative Agent or such
Lender is required to repay such refund to such Governmental Authority.  This subsection shall not be construed
to require the Administrative Agent or such Lender to make available its tax
returns (or any other information relating to its taxes that it deems
confidential) to the Borrower or any other Person.

 

31

 

3.12.        Indemnity. 
The Borrower agrees to indemnify each Lender and to hold each Lender
harmless from any loss or expense which such Lender may sustain or incur as a
consequence of (a) default by the Borrower in making a borrowing of,
conversion into or continuation of Eurodollar Loans after the Borrower has
given a notice requesting the same in accordance with the provisions of this
Agreement, (b) default by the Borrower in making any prepayment after the
Borrower has given a notice thereof in accordance with the provisions of this
Agreement or (c) the making of a prepayment of Eurodollar Loans on a day
which is not the last day of an Interest Period with respect thereto.  Such indemnification may include an amount
equal to the excess, if any, of (i) the amount of interest which would
have accrued on the amount so prepaid, or not so prepaid, borrowed, converted
or continued, for the period from the date of such prepayment or of such
failure to prepay, borrow, convert or continue to the last day of such Interest
Period (or, in the case of a failure to borrow, convert or continue, the
Interest Period that would have commenced on the date of such failure) in each
case at the applicable rate of interest for such Loans provided for herein
(excluding the Applicable Margin included therein, if any) over (ii) the
amount of interest (as reasonably determined by such Lender) which would have
accrued to such Lender on such amount by placing such amount on deposit for a
comparable period with leading banks in the interbank eurodollar market.  This covenant shall survive the termination
of this Agreement and the payment of the Loans and all other amounts payable
hereunder.

 

3.13.        Change of Lending Office.  Each Lender agrees that if it makes any
demand for payment under Section 3.10 or 3.11(a), or if any
adoption or change of the type described in Section 3.9 shall occur
with respect to it, it will use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions and so long as such
efforts would not be unreasonably disadvantageous to it, as determined in its
reasonable sole discretion) to designate a different lending office if the
making of such a designation would reduce or obviate the need for the Borrower
to make payments under Section 3.10 or 3.11(a), or would
eliminate or reduce the effect of any adoption or change described in Section 3.9.

 

3.14.        Replacement of Lenders.  (a) If
any Lender (i) makes any demand for payment under Section 3.10
or 3.11(a), (ii) becomes subject to an event described in Section 3.9,
(iii) does not consent to a proposed amendment or supplement to, or waiver
of or other modification of, this Agreement that (A) requires the approval
of all Lenders and (B) has been approved by the Required Lenders, or (iv) is
a Defaulting Lender, then the Borrower may, at its sole expense and effort,
upon notice to such Lender and the Administrative Agent, require such Lender to
assign and delegate, without recourse (in accordance with and subject to the restrictions
contained in, and consents required by, Section 10.6(c)), all of
its interests, rights and obligations under this Agreement and the other Loan
Documents to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment), provided that:

 

(1)  the Borrower
shall have paid to the Administrative Agent the assignment fee specified in Section 10.6(e);

 

(2)  such Lender
shall have received payment of an amount equal to the outstanding principal of
its Loans, accrued interest thereon, accrued fees and all other amounts payable
to it hereunder and under the other Loan Documents (including any

 

32

 

amounts under Section 3.12, calculated as
if such Lender’s Eurodollar Loans were paid in full on the date of such
assignement) from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrower (in the case of all other amounts);

 

(3)  in the case of
any such assignment resulting from a demand for payment under Section 3.10
or 3.11(a), such assignment will result in a reduction in such compensation
or payments thereafter;

 

(4)  the Borrower
may not require any Lender to make such assignment pursuant to clause (iii) above
unless all other Lenders that did not consent to the relevant amendment,
supplement, waiver or modification are concurrently required to assign all of
their interests, rights and obligations hereunder; and

 

(5)  such assignment
does not conflict with applicable laws.

 

(b) 
A Lender shall not be required to make any assignment and delegation pursuant
to this Section 3.14 if, prior thereto (as a result of a waiver by
such Lender or otherwise), the circumstances entitling the Borrower to require
such assignment and delegation cease to apply.

 

SECTION 4.  REPRESENTATIONS AND WARRANTIES

 

To induce the
Administrative Agent and the Lenders to enter into this Agreement and to make
the Loans, the Borrower hereby represents and warrants to the Administrative
Agent and each Lender that:

 

4.1.          Financial Condition.  The Borrower has heretofore furnished to each
Lender copies of (i) the audited consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at December 31, 2004 and the
related audited consolidated statements of income and of cash flows for the
fiscal year ended on such date, audited by PricewaterhouseCoopers LLP and (ii) the
unaudited consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at September 30, 2005 and the related unaudited
consolidated statements of income and of cash flows for the six-month period
ended on such date (the “Financial Statements”).  The Financial Statements present fairly, in
all material respects, the consolidated financial condition of the Borrower and
its consolidated Subsidiaries as at December 31, 2004 and September 30,
2005 and present fairly, in all material respects, the consolidated results of their
operations and their consolidated cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments and the absence of footnote disclosure).  The Financial Statements, including the
related schedules and notes thereto, have been prepared in accordance with GAAP
applied consistently throughout the period involved. Except as set forth on Schedule 4.1,
neither the Borrower nor any of its consolidated Subsidiaries had, at December 31,
2004 or at the date hereof, any material Guarantee Obligation, material
contingent liability or material liability for taxes, or any material long-term
lease or unusual material forward or long-term commitment, including any interest
rate or foreign currency swap or exchange transaction, which is not reflected
in the foregoing statements or in the notes thereto.  Except as set forth on Schedule 4.1,
during the period from December 31, 2004 through the date

 

33

 

hereof there has
been no sale, transfer or other disposition by the Borrower or any of its
consolidated Subsidiaries of any material part of its business or property and
no purchase or other acquisition of any business or property (including any
capital stock of any other Person) material in relation to the consolidated
financial condition of the Borrower and its Subsidiaries as of December 31,
2004.

 

4.2.          No Change. 
Since December 31, 2004, except as set forth in the Financial
Statements and except as set forth on Schedule 4.2, there has been
no development or event which has had or could have a Material Adverse Effect.

 

4.3.          Corporate Existence; Compliance with Law.  Each of the Borrower and each Subsidiary (a) is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, (b) has the power and authority, and the
legal right, to own and operate its material properties, to lease the material
properties it operates as lessee and to conduct the businesses in which it is
currently engaged, (c) is duly qualified as a foreign corporation,
partnership or limited liability company, as applicable, and in good standing
under the laws of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification except
where the failure to be so qualified or in good standing would not have a
Material Adverse Effect and (d) is in compliance with its certificate of
incorporation and by-laws or other similar organizational or governing
documents and with all Requirements of Law except
to the extent that the failure to comply therewith could not, in the aggregate,
have a Material Adverse Effect.

 

4.4.          Corporate Power; Authorization; Enforceable Obligations.  Each Loan Party has the corporate power and
authority, and the legal right, to make, deliver and perform the Loan Documents
to which it is a party and has taken all necessary corporate action to
authorize the execution, delivery and performance of the Loan Documents to
which it is a party.  The Borrower has
the corporate power and authority, and the legal right to borrow hereunder and
has taken all necessary corporate action to authorize such borrowings on the
terms and conditions of this Agreement and any Notes.  No consent or authorization of, filing with,
notice to or other act by or in respect of any Governmental Authority or any
other Person is required in connection with the borrowings hereunder or with
the execution, delivery, performance, validity or enforceability of the Loan
Documents against any Loan Party that is a party thereto; provided
that the Administrative Agent’s rights under the Pledge Agreements are subject
to the terms and provisions thereof. 
This Agreement has been, and each other Loan Document will be when
delivered, duly executed and delivered by each Loan Party that is party
thereto.  This Agreement constitutes, and
each other Loan Document when delivered will constitute, a legal, valid and binding
obligation of each Loan Party which is a party thereto, enforceable against
such Loan Party in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws relating to or affecting the enforcement of creditors’ rights
generally and by general equitable principles (whether enforcement is sought by
proceedings in equity or at law).

 

4.5.          No Legal Bar. 
The execution, delivery and performance by each Loan Party of each Loan
Document to which such Person is party, the borrowings hereunder and the use of
the proceeds thereof will not violate any certificate of incorporation and by-laws
or other similar organizational or governing documents, Requirement of Law or
Contractual Obligation

 

34

 

of the Borrower or of any Subsidiary, except for such
violations of Requirements of Law or Contractual Obligations which could not,
singly or in the aggregate, reasonably be expected to have a Material Adverse
Effect, and will not result in, or require, the creation or imposition of any
Lien on any of its or their respective properties or revenues pursuant to any
such organizational or governing document, Requirement of Law or Contractual
Obligation, except pursuant to this Agreement and the other Loan Documents.

 

4.6.          No Material Litigation.  No litigation, investigation or proceeding of
or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Borrower, threatened by or against the Borrower or any
Subsidiary or against any of its or their respective properties or revenues
which could reasonably be expected to have a Material Adverse Effect.

 

4.7.          No Default. 
Neither the Borrower nor any Subsidiary is in default under or with
respect to any of its Contractual Obligations in any respect which could have a
Material Adverse Effect.  No Default has
occurred and is continuing or would result from the consummation of the
transactions contemplated by this Agreement or any other Loan Document.

 

4.8.          Ownership of Property; Liens.  Each of the Borrower and each Subsidiary has
good record and marketable title in fee simple to, or a valid leasehold
interest in, all its material real property, and good title to, or a valid
leasehold interest in, all its other material property, and none of such
property is subject to any Lien except as permitted by Section 7.3.

 

4.9.          Taxes. 
Each of the Borrower and each Subsidiary has filed or caused to be filed
all material tax returns which, to the knowledge of the Borrower, are required
to be filed or has timely filed a request for an extension of such filing and
has paid all taxes shown to be due and payable on said returns or extension
requests or on any assessments made against it or any of its property and, except
as set forth on Schedule 4.9, all other taxes, fees or other
charges imposed on it or any of its property by any Governmental Authority
(except, in each case, to the extent the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided on the
books of the Borrower and as to any of which the failure to pay would not have
a Material Adverse Effect).

 

4.10.        Federal Regulations.  (a)  None of the Pledged Collateral
consists of “margin stock” (within the meaning of Regulation U).  “Margin stock” (within the meaning of
Regulation U) constitutes less than 25% of the value of those assets of the
Borrower and its Subsidiaries which are subject to any limitation on sale or
pledge or any similar restriction hereunder. 
If requested by any Lender or the Administrative Agent, the Borrower
will furnish to the Administrative Agent and each Lender a statement to the
foregoing effect in conformity with the requirements of FR Form U-1
referred to in Regulation U.

 

(b) 
The Borrower is not subject to regulation under any Federal or State statute or
regulation (other than Regulation X of the FRB) which limits its ability
to incur Indebtedness.

 

4.11.        ERISA. 
No Reportable Event has occurred during the five-year period prior to
the date on which this representation is made or deemed made with respect to
any Plan,

 

35

 

and each Plan has complied in all material respects
with the applicable provisions of ERISA and the Code.  The present value of all accrued benefits
under any Single Employer Plan maintained by the Borrower or any Commonly
Controlled Entity (based on those assumptions used to fund the Plans) did not,
as of the last annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the assets of such
Plan allocable to such accrued benefits. 
There are no Multiemployer Plans. 
Neither the Borrower nor any Commonly Controlled Entity has had a
complete or partial withdrawal from any Multiemployer Plan.

 

4.12.        Investment Company Act; Investment Advisers Act.  (a)  Neither the Borrower nor any
Subsidiary or other Investment Firm is, or after giving effect to any Acquisition
will be, an “investment company” within the meaning of the Investment Company
Act.

 

(b) 
Each Subsidiary and each other Investment Firm is, to the extent required
thereby, duly registered as an investment adviser under the Investment Advisers
Act, except to the extent the failure to be so registered could not reasonably
be expected to have a Material Adverse Effect. 
On the date hereof, the Borrower is not an “investment adviser” within
the meaning of the Investment Advisers Act. 
Each Fund which is sponsored by any Subsidiary or other Investment Firm
and which is required to be registered as an “investment company” under the
Investment Company Act is duly registered as such thereunder, except to the
extent the failure to be so registered could not reasonably be expected to have
a Material Adverse Effect.

 

(c) 
The Borrower is not required to be registered as a broker-dealer under the
Securities Acts (and each Subsidiary and other Investment Firm required to be
so registered is so duly registered), except to the extent the failure to be so
registered could not reasonably be expected to have a Material Adverse Effect.

 

(d) 
Each of the Borrower, each Subsidiary and each other Investment Firm is duly
registered, licensed or qualified as an investment adviser or broker-dealer in
each State of the United States where the conduct of its business requires such
registration, licensing or qualification and is in compliance in all material
respects with all Federal and State laws requiring such registration, licensing
or qualification, except to the extent the failure to be so registered,
licensed or qualified or to be in such compliance will not have, in the case of
Federal laws, or could not reasonably be expected to have, in the case of State
laws, a Material Adverse Effect.

 

4.13.        Investment Advisory Agreements.  Each of the investment advisory agreements,
distribution agreements and shareholder or other servicing contracts to which
the Borrower, any Subsidiary or other Investment Firm is a party is a legal,
valid and binding obligation of the parties thereto enforceable against such
parties in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting the enforcement of creditors’ rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law), except for failures which individually or in the aggregate
could not reasonably be expected to have a Material Adverse Effect; and none of
the Borrower, any Subsidiary or any other Investment Firm is in breach or
violation of or in default under any such agreement or

 

36

 

contract in any material respect which individually or
in the aggregate could reasonably be expected to have a Material Adverse
Effect.  The parties hereto understand
that all clients have the right to terminate such investment advisory
agreements at will.

 

4.14.        Subsidiaries and Other Ownership Interests.  The Subsidiaries listed on Schedule 4.14
hereto constitute the only Subsidiaries of the Borrower as at the date
hereof.  The Borrower has as at the date
hereof, directly or indirectly, an equity or other ownership interest in each
Investment Firm and each other Person listed on Schedule 4.14; and
other than as set forth on such schedule, the Borrower has no such interest,
directly or indirectly, in any other Person.

 

4.15.        Use of Proceeds.  The proceeds of the Loans shall be used by
the Borrower (i) for working capital, capital expenditures and other
general corporate purposes (including to make payments on the Zero-Coupon Bonds
and any securities exchanged therefor and to make interest payments in respect
of the Feline Prides I Senior Notes and the Feline Prides II Senior Notes), (ii) to
make Acquisitions and other investments (including acquisitions of additional
Capital Stock in Subsidiaries and Affiliates of the Borrower), (iii) to
repurchase Feline Prides I Senior Notes and Zero Coupon Bonds and, to the
extent permitted by Section 7.10, the Feline Prides II Senior Notes
and the COBRAS, (iv) to purchase, repay or redeem any other debt or equity
of the Borrower or any Subsidiary so long as such purchase, repayment or
redemption is not prohibited by any other provision of this Agreement, and (v) to
pay fees and expenses to be incurred in connection with the foregoing and in
connection with the execution and delivery of the Loan Documents.

 

4.16.        Accuracy and Completeness of Information.  To the best of the Borrower’s knowledge, the
documents furnished and the statements made in writing to the Lenders by or on
behalf of the Borrower in connection with the negotiation, preparation or
execution of this Agreement or any of the other Loan Documents, taken as a
whole, do not contain any untrue statement of fact material to the credit
worthiness of the Borrower or omit to state any such material fact necessary in
order to make the statements contained therein not misleading under the
circumstances in which such statements were made, in either case which has not
been corrected, supplemented or remedied by subsequent documents furnished or
statements made in writing to the Lenders prior to the date hereof.

 

4.17.        Pledge
Agreements.  The provisions of each
Pledge Agreement are effective to create in favor of the Administrative Agent a
legal, valid and enforceable security interest in all right, title and interest
of the Loan Party that is party thereto in the collateral covered thereby and
all necessary actions have been taken to create a first priority perfected Lien
in such collateral. 

 

SECTION 5.  CONDITIONS PRECEDENT

 

5.1.          Conditions to Effectiveness.  This Agreement shall become effective, and
all loans outstanding under the Existing Credit Agreement shall be deemed to be
Loans hereunder and subject to the terms and conditions hereof, on the date on
which all of the following conditions precedent have been satisfied:

 

37

 

(a)  Loan Documents.  The Administrative Agent shall have received (i) this
Agreement, signed by a duly authorized officer of the Borrower, and (ii) a
Confirmation, substantially in the form of Exhibit K, signed by a
duly authorized officer of each Loan Party.

 

(b)  Related Agreements.  The Administrative Agent shall have received
true and correct copies of each of the existing Revenue Sharing Agreements and
any purchase agreements signed in connection with an Acquisition or proposed
Acquisition (either of which is expected to occur on or after the Closing
Date), and such other documents or instruments as may be reasonably requested
by the Administrative Agent (including a copy of any debt instrument, security
agreement or other material contract to which the Borrower or any Subsidiary may
be a party).

 

(c)  Notes.  The Administrative Agent shall have received,
for the account of each Lender that has requested the same, a Note made by the
Borrower conforming to the requirements of this Agreement, signed by a duly
authorized officer of the Borrower.

 

(d)  Borrower Certificate.  The Administrative Agent shall have received
a certificate of the Borrower, dated the Closing Date, substantially in the
form of Exhibit C, with appropriate insertions and attachments,
signed by a Responsible Officer.

 

(e)  Corporate Proceedings of the Loan Parties.  The Administrative Agent shall have received
a copy of resolutions, in form and substance reasonably satisfactory to the
Administrative Agent, of the Board of Directors (or similar governing body) of
each Loan Party authorizing (i) the execution, delivery and performance of
the Loan Documents to which it is a party, (ii) in the case of the
Borrower, the borrowings contemplated hereunder and (iii) the granting (to
the extent applicable) of the Liens created pursuant to the Pledge Agreements,
in each case certified by the Secretary or an Assistant Secretary of such Loan
Party as of the Closing Date, which certificate shall be in form and substance
reasonably satisfactory to the Administrative Agent and shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded.

 

(f)  Incumbency Certificate.  The Administrative Agent shall have received
a certificate of each Loan Party, dated the Closing Date, as to the incumbency
and signatures of the officers of such Loan Party signing any Loan Document,
reasonably satisfactory in form and substance to the Administrative Agent,
signed by the President or any Vice President and the Secretary or any
Assistant Secretary of such Loan Party.

 

(g)  Corporate Documents.  The Administrative Agent shall have received
true and complete copies of the certificate of incorporation and by-laws (or
similar organizational documents) of each Loan Party, certified as of the
Closing Date as complete and correct copies thereof by the Secretary or an
Assistant Secretary of such Loan Party.

 

(h)  Fees.  All fees payable by the Borrower to the
Administrative Agent, the Arranger and any Lender on or prior to the Closing
Date pursuant to this Agreement or

 

38

 

pursuant to the Commitment Letter and Fee Letter, each
dated September 6, 2005, among Bank of America, the Arranger and the
Borrower shall have been paid in full, in each case in the amounts and on the
dates set forth herein or therein.

 

(i)  Attorney
Costs.  The Administrative Agent
shall have received evidence of payment by the Borrower of all Attorney Costs
of the Administrative Agent to the extent invoiced prior to or on the Closing
Date, plus such additional amounts
of Attorney Costs as shall constitute the Administrative Agent’s reasonable
estimate of Attorney Costs incurred or to be incurred by it through the closing
proceedings (provided that such estimate shall not thereafter preclude a
final settling of accounts between the Borrower and the Administrative Agent).

 

(j)  Legal Opinion.  The Administrative Agent shall have received
the legal opinion of Ropes & Gray LLP, counsel to the Borrower and its
Subsidiaries, substantially in the form of Exhibit D.  Such legal opinion shall cover such other
matters incident to the transactions contemplated by this Agreement as the
Administrative Agent may reasonably require.

 

(k)  Pledged Stock and other Equity Interests;
Transfer Powers.  The Administrative
Agent shall have received all certificates representing the shares of Capital
Stock pledged pursuant to the Pledge Agreements, together with an undated
transfer power, in form and substance reasonably satisfactory to the
Administrative Agent, for each such certificate executed in blank by a duly
authorized officer of the pledgor thereof.

 

(l)  Actions to
Perfect Liens.  The
Administrative Agent shall have received evidence in form and substance
reasonably satisfactory to it that all filings, recordings, registrations and
other actions, including the filing of duly executed financing statements on
form UCC-1, necessary or, in the reasonable opinion of the Administrative
Agent, desirable to perfect the Liens created by the Pledge Agreements have
been completed.

 

(m)  Lien Searches.  The Administrative Agent shall have received
the results of a recent search, by a Person satisfactory to the Administrative
Agent, of the Uniform Commercial Code, judgment and tax lien filings which may
have been filed with respect to personal property of the Borrower and the other
Loan Parties, and the results of such search shall be reasonably satisfactory
to the Administrative Agent.

 

(n)  Existing Credit
Agreement.  The Administrative
Agent shall have received evidence reasonably satisfactory to it that all
accrued but unpaid interest and fees payable under the Existing Credit
Agreement have been, or concurrently with the effectiveness hereof will be,
paid in full.

 

(o)  No Default, etc.  The conditions precedent to the making of a
Loan set forth in Section 5.2(a) and (b) shall be
satisfied

 

5.2.          Conditions to Each Loan.  The agreement of each Lender to make any Loan
(excluding any repricing or conversion of any then outstanding Loan) is subject
to the satisfaction of the following conditions precedent:

 

39

 

(a)  Representations and Warranties.  Each representation and warranty made by any
Loan Party in or pursuant to the Loan Documents shall be true and correct in
all material respects on and as of such date as if made on and as of such date;
provided
that (i) representations and warranties made with reference to a specific
date shall remain true and correct as of such date only and (ii) representations
and warranties shall not be required to remain true to the extent changes have
resulted from actions permitted hereunder.

 

(b)  No Default. 
No Default shall have occurred and be continuing on such date or after
giving effect to the Loans requested to be made on such date.

 

(c)  Notice of Borrowing.  The Administrative Agent shall have received
a notice of borrowing pursuant to Section 2.2 (or in the case of
Swingline Loans, pursuant to Section 2.8).

 

Each borrowing
by the Borrower hereunder shall constitute a representation and warranty by the
Borrower as of the date thereof that the conditions contained in this Section 5.2
have been satisfied.

 

SECTION 6.  AFFIRMATIVE COVENANTS

 

The Borrower
hereby agrees that, so long as the Commitments remain in effect or any amount
is owing to any Lender or the Administrative Agent hereunder or under any other
Loan Document, the Borrower shall and (except in the case of delivery of
financial information, reports and notices) shall cause each of its
Subsidiaries to:

 

6.1.          Financial Statements.  Furnish to the Administrative Agent (which
shall promptly furnish to the Lenders):

 

(a)  as soon as
available, but in any event within 90 days after the end of each fiscal year of
the Borrower, copies of the consolidated and consolidating balance sheets of
the Borrower and its Subsidiaries as at the end of such year and the related
consolidated and consolidating statements of income and consolidated statements
of retained earnings and of cash flows for such year, setting forth in each
case in comparative form the figures for the previous year and, in the case of
the consolidated statements only, reported on without a “going concern” or like
qualification or exception, or qualification arising out of the scope of the
audit, by PricewaterhouseCoopers LLP or other independent certified public
accountants of nationally recognized standing; and

 

(b)  as soon as
available, but in any event not later than 45 days after the end of each of the
first three quarterly periods of each fiscal year of the Borrower,  copies of the unaudited consolidated and
consolidating balance sheets of the Borrower and its Subsidiaries as at the end
of such quarter and the related unaudited consolidated and consolidating
statements of income and retained earnings and of cash flows for such quarter
and the portion of the fiscal year through the end of such quarter, setting
forth in each case in comparative form the figures for the previous year,
certified by a Responsible Officer as being fairly stated in all material
respects (subject to normal year-end audit adjustments).

 

40

 

All such
financial statements shall be complete and correct in all material respects and
shall be prepared in reasonable detail and in accordance with GAAP applied
consistently throughout the periods reflected therein and with prior periods
(subject, in the case of interim financial statements, to year end adjustments
and the absence of footnotes).

 

6.2.          Certificates; Other Information.  Furnish to the Administrative Agent (which
shall promptly furnish to the Lenders):

 

(a)  concurrently
with the delivery of the financial statements referred to in Section 6.1(a),
a certificate of the independent certified public accountants reporting on such
financial statements stating that in making the examination necessary therefor
no knowledge was obtained of any Default, except as specified in such
certificate;

 

(b)  concurrently
with the delivery of the financial statements referred to in Sections 6.1(a) and
(b), (i) a duly completed Compliance Certificate signed by a
Responsible Officer (A) stating that, to the best of such Officer’s
knowledge, no Default exists, except as specified in such certificate; (B) containing
a computation of each of the financial ratios and restrictions set forth in Section 7.1;
and (C) describing in reasonable detail any material change in accounting
policies or financial reporting practices by the Borrower or any Subsidiary and
(ii) a listing for each Investment Firm of its aggregate assets under
management as of the end of the period covered by such financial statements;

 

(c)  within five
days after the same are filed, copies of all financial statements and reports
which the Borrower may make to, or file with, the Securities and Exchange
Commission or any successor or analogous Governmental Authority;

 

(d)  within five
Business Days after the consummation of any Acquisition of a new Investment
Firm for which more than $25,000,000 in aggregate consideration was paid
(including any non-cash consideration), (A) copies of the most recent
audited (and, if later, or, if audited statements are not available, unaudited)
financial statements of the Investment Firm which is the subject of such
Acquisition, (B) copies of the purchase agreement or other acquisition
document (including any Revenue Sharing Agreement) executed or to be executed
by the Borrower or any Subsidiary in connection with such Acquisition, (C) an
unaudited pro  forma consolidated balance sheet of the
Borrower and its Subsidiaries as at a recent date but prepared as though the
closing of such Acquisition had occurred on or prior to such date and related pro  forma
calculations, indicating compliance on a pro
forma basis as at such date and for the
periods then ended with the financial covenants set forth in Section 7.1
and (D) a copy of the most recent Form ADV, if any, filed under the
Investment Advisers Act in respect to any Investment Firm which is the subject
of such Acquisition;

 

(e)  concurrently
with the delivery of the financial statements referred to in Sections 6.1(a) and
(b), with respect to the consummation of any Acquisition during the most
recently ended fiscal quarter of the Borrower of a new Investment Firm for
which no more than $25,000,000 in aggregate consideration was paid (including
any non-cash consideration), (A) copies of the most recent audited (and,
if later, or, if audited

 

41

 

statements are not available, unaudited) financial
statements of the Investment Firm which is the subject of such Acquisition, (B) copies
of the purchase agreement or other acquisition document (including any Revenue
Sharing Agreement) executed or to be executed by the Borrower or any Subsidiary
in connection with such Acquisition, (C) an unaudited pro  forma
consolidated balance sheet of the Borrower and its Subsidiaries as at a recent
date but prepared as though the closing of such Acquisition had occurred on or
prior to such date and related pro  forma calculations, indicating compliance on
a pro  forma
basis as at such date and for the periods then ended with the financial
covenants set forth in Section 7.1 and (D) a copy of the most
recent Form ADV, if any, filed under the Investment Advisers Act in
respect to any Investment Firm which is the subject of such Acquisition;

 

(f)  concurrently
with the delivery of the financial statements referred to in Sections 6.1(a) and
(b), notice of the consummation of any Acquisition of additional Capital
Stock of an existing Investment Firm during the most recently ended fiscal
quarter of the Borrower; and

 

(g)  promptly, such
additional financial and other information and documents (including a copy of
any debt instrument, security agreement or other material contract to which the
Borrower or any Subsidiary may be party) as any Lender may, through the
Administrative Agent, from time to time reasonably request.

 

Documents required to be
delivered pursuant to Section 6.1(a) or (b) or Section 6.2(c) (to
the extent any such documents are included in materials otherwise filed with
the SEC) may be delivered electronically and if so delivered, shall be deemed
to have been delivered on the date (i) on which the Borrower posts such
documents, or provides a link thereto, on the Borrower’s website on the
Internet at the website address listed on Schedule 10.2; or (ii) on
which such documents are posted on the Borrower’s behalf on
IntraLinks/IntraAgency or another relevant website, if any, to which each
Lender and the Administrative Agent have access (whether a commercial,
third-party website or a website sponsored by the Administrative Agent); provided
that: (i) the Borrower shall deliver paper copies of such documents to
the Administrative Agent or any Lender that requests the Borrower to deliver
such paper copies until a written request to cease delivering paper copies is
given by the Administrative Agent or such Lender and (ii) the Borrower
shall notify (which may be by facsimile or electronic mail) the Administrative
Agent and each Lender of the posting of any such documents and immediately
following such notification the Borrower shall provide to the Administrative
Agent by electronic mail electronic versions (i.e.,
soft copies) of such documents. 
Notwithstanding anything contained herein, in every instance the
Borrower shall be required to provide paper copies of the Compliance
Certificates required by Section 6.2(b) to the Administrative
Agent.  Except for such Compliance
Certificates, the Administrative Agent shall have no obligation to request the
delivery or to maintain copies of the documents referred to above, and in any
event shall have no responsibility to monitor compliance by the Borrower with
any such request for delivery, and each Lender shall be solely responsible for
requesting delivery to it or maintaining its copies of such documents.

 

The Borrower hereby
acknowledges that (a) the Administrative Agent and/or the Arranger will
make available to the Lenders materials and/or information provided by or on
behalf of the Borrower hereunder (collectively, “Borrower Materials”) by
posting the Borrower

 

42

 

Materials on IntraLinks or another similar electronic
system (the “Platform”) and (b) certain of the Lenders may be “public-side”
Lenders (i.e., Lenders that do
not wish to receive material non-public information with respect to the
Borrower or its securities) (each, a “Public Lender”).  The Borrower hereby agrees that so long as the Borrower is the issuer of any
outstanding debt or equity securities that are registered with the Securities
and Exchange Commission or is actively contemplating issuing any such
securities (w) all Borrower Materials that are to be made available to
Public Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a
minimum, shall mean that the word “PUBLIC” shall appear prominently on the
first page thereof; (x) by marking Borrower Materials “PUBLIC,” the
Borrower shall be deemed to have authorized the Administrative Agent, the
Arranger and the Lenders to treat such Borrower Materials as not containing any
material non-public information with respect to the Borrower or its securities
for purposes of United States Federal and state securities laws (provided,
that to the extent such Borrower Materials constitute information subject to
the confidentiality provisions in Section 10.15, they shall be
treated as set forth in Section 10.15); (y) all Borrower Materials
marked “PUBLIC” are permitted to be made available through a portion of the
Platform designated “Public Investor;” and (z) the Administrative Agent and the
Arranger shall be entitled to treat any Borrower Materials that are not marked “PUBLIC”
as being suitable only for posting on a portion of the Platform not designated “Public
Investor.”  Notwithstanding the foregoing, the Borrower shall be under no obligation
to mark any Borrower Materials “PUBLIC.”

 

6.3.          Payment of Obligations.  Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature (including taxes and other governmental levies),
except (i) where the amount or validity thereof is currently being
contested in good faith by appropriate actions and reserves in conformity with
GAAP with respect thereto have been provided on the books of the Borrower or
the applicable Subsidiary, as the case may be, and (ii) where the failure
to do so could not reasonably be expected to have a Material Adverse Effect.

 

6.4.          Conduct of Business and Maintenance of Existence.  Continue to engage in business of the same
general type as now conducted and purported to be conducted by it and
activities reasonably related or complementary thereto, and preserve, renew and
keep in full force and effect its corporate existence and take all reasonable
action to maintain all rights, registrations, licenses, privileges and
franchises necessary or desirable in the normal conduct of its business
(including all such registrations under the Investment Advisers Act and all
material investment advisory agreements, distribution agreements and
shareholding and other administrative servicing contracts) except as otherwise
permitted pursuant to Section 7.5 and except for failures which
individually and in the aggregate could not reasonably be expected to have a
Material Adverse Effect; comply, and to the extent reasonably within its
control, cause each Investment Firm and Fund (which is sponsored by an
Investment Firm) to comply, with all Contractual Obligations and Requirements
of Law except to the extent that failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.

 

6.5.          Maintenance of Property; Insurance.  Keep all property useful and necessary in its
business in good working order and condition, except where the failure to do so
would not reasonably be expected to have a Material Adverse Effect; maintain
with financially sound and reputable insurance companies insurance on its
property in at least such amounts and against at least such risks as are
usually insured against in the same general area by companies

 

43

 

engaged in the same or a similar business, except
where the failure to do so would not reasonably be expected to have a Material
Adverse Effect, and furnish to the
Administrative Agent, upon request, full information as to the insurance
carried.

 

6.6.          Inspection of Property; Books and Records; Discussions.  Keep proper books of records and account in
which full, true and correct entries, in all material respects in conformity
with all Requirements of Law and sufficient to permit the preparation of
financial statements in accordance with GAAP, shall be made of all dealings and
transactions in relation to its business and activities, except, in the case of
Requirements of Law, where the failure to do so could not reasonably be
expected to have a Material Adverse Effect; and permit representatives of the
Administrative Agent or any Lender to visit and inspect any of its properties
and examine and make abstracts from any of its books and records at any reasonable
time and as often as may reasonably be desired and upon at least three days
prior notice or such lesser period of time as may be acceptable to the Borrower
or the relevant Subsidiary, as the case may be, and to discuss the business,
operations, properties and financial and other condition of the Borrower and
its Subsidiaries with officers and employees of the Borrower and its
Subsidiaries and with its independent certified public accountants (provided
that with respect to Subsidiaries, other than during the existence of a
Default, the Borrower shall have complied with this obligation if it shall have
used its commercially reasonable efforts to cause its Subsidiaries to allow the
Administrative Agent and/or the applicable Lender pursuant to the foregoing
terms and conditions to visit and inspect the properties of such Subsidiaries
and examine and make abstracts from any of the books and records of such
Subsidiaries and to discuss the business, operations, properties and financial
and other condition of such Subsidiaries with officers and employees of such
Subsidiaries and with their independent certified public accountants).

 

6.7.          Notices. 
Promptly after obtaining knowledge thereof, notify the Administrative
Agent and each Lender of:

 

(a)  the occurrence
of any Default;

 

(b)  any (i) default
or event of default under any Contractual Obligation of the Borrower or any
Subsidiary or (ii) litigation, proceeding or, if known to the Borrower,
investigation which may exist at any time between the Borrower or any
Subsidiary and any Governmental Authority, which in either case, if not cured
or if adversely determined, as the case may be, could reasonably be expected to
have a Material Adverse Effect;

 

(c)  any litigation
or proceeding affecting the Borrower or any Subsidiary or any “affiliated
person” of the Borrower or any Subsidiary within the meaning of the Investment
Company Act in which (i) the amount involved is $7,500,000 or more and not
covered by insurance or (ii) injunctive or similar relief is sought and
which, in the case of this clause (ii), could reasonably be expected to
have a Material Adverse Effect;

 

(d)  the following
events, as soon as possible and in any event within 30 days after the Borrower
knows or has reason to know thereof:  (i) the
occurrence or expected occurrence of any Reportable Event with respect to any
Plan, or any withdrawal from, or the termination, Reorganization or Insolvency
of any Multiemployer Plan or (ii)

 

44

 

the institution of proceedings or the taking of any
other action by the PBGC or the Borrower or any Commonly Controlled Entity or
any Multiemployer Plan with respect to the withdrawal from, or the terminating,
Reorganization or Insolvency of, any Plan;

 

(e)  any suspension
or termination of the registration of any Subsidiary or other Investment Firm
as an investment adviser under the Investment Advisers Act, or of any
registration as a broker-dealer under the Securities Acts or under any
applicable state statute which is material to the business thereof, or any
cancellation or expiration without renewal of any investment advisory
agreement, distribution agreement or shareholder or other administrative
servicing contract to which the Borrower or any Subsidiary or other Investment
Firm is a party the revenues under which have exceeded in the most recent
fiscal year of the Borrower or such Investment Firm, as the case may be,
$10,000,000;

 

(f)  any event which
could reasonably be expected to have a Material Adverse Effect on the Borrower
and its Subsidiaries taken as a whole;

 

(g)  any public
announcement by S&P, Fitch or Moody’s of any change in the Debt Rating;

 

(h)  the creation or
acquisition of a new Subsidiary; and

 

(i)  the remarketing
and/or replacement of the Feline Prides II Senior Notes and the automatic
extension of the scheduled Termination Date pursuant to the definition thereof.

 

Each notice
pursuant to this Section 6.7 shall
be accompanied by a statement of a Responsible Officer setting forth details of
the occurrence referred to therein and stating what action the Borrower
proposes to take with respect thereto, if any.

 

6.8.          Stock Pledges.  Promptly upon the consummation of the
Acquisition of an Investment Firm or the formation of any new Subsidiary,
execute and deliver or cause to be executed and delivered to the Administrative
Agent, with a copy to the Administrative Agent’s counsel, a Pledge Agreement
Supplement with respect to the pledge of the Capital Stock of such Investment
Firm or new Subsidiary, held directly or indirectly (through a wholly-owned
Subsidiary) by the Borrower, in form and substance reasonably satisfactory to
the Administrative Agent, together with evidence in form and substance
reasonably satisfactory to the Administrative Agent that all deliveries,
filings, recordings, registrations and other actions, including the delivery of
any certificates representing such Capital Stock, together, in the case of
stock certificates, with an undated transfer power, in form and substance
reasonably satisfactory to the Administrative Agent, for each such certificate
executed in blank by a duly authorized officer of the pledgor thereof, and the
filing of duly executed financing statements on form UCC-1, necessary or, in
the opinion of the Administrative Agent, desirable to perfect the Liens created
by such Pledge Agreement Supplement shall have been completed.  Notwithstanding the foregoing, (i) neither
the Borrower nor any Domestic Subsidiary shall be required to pledge to the
Administrative Agent (x) interests in either MAS Fixed Income LLC or Gofen and
Glossberg Incentive LLC until January 31, 2006 or (y) more than 65% of the
Capital Stock of any Foreign

 

45

 

Subsidiary; and (ii) no
Foreign Subsidiary shall be required to pledge the stock of any of its
Subsidiaries.

 

6.9.          Guarantees. 
Promptly (and in any event within 10 days) after any Person becomes a
wholly-owned Domestic Subsidiary of the Borrower, cause such wholly-owned
Domestic Subsidiary to (a) become a guarantor by executing and delivering
to the Administrative Agent, with a copy to the Administrative Agent’s counsel,
a counterpart of the Subsidiary Pledge Agreement or such other document as the
Administrative Agent shall deem appropriate for such purpose, and (b) deliver
to the Administrative Agent documents of the types referred to in Sections
5.1(e), (f) and (g) and, if requested by the
Administrative Agent, a favorable opinion of counsel to such Person (which
shall cover, among other things, the legality, validity, binding effect and
enforceability of the documentation referred to in clause (a)), all in
form, content and scope reasonably satisfactory to the Administrative Agent; provided
that neither MAS Fixed Income LLC nor Gofen and Glossberg Incentive LLC shall
be required to be guarantor hereunder unless such entity (i) has a
material increase in its assets or its revenues after the date hereof or (ii) is
not liquidated and dissolved prior to January 31, 2006.

 

SECTION 7. 
NEGATIVE COVENANTS

 

The Borrower
hereby agrees that, from and after the Closing Date and so long as the
Commitments remain in effect or any amount is owing to any Lender or the
Administrative Agent hereunder or under any other Loan Document, the Borrower
shall not, and shall not permit any Subsidiary to, directly or indirectly:

 

7.1.          Financial Condition Covenants.

 

(a)  Maintenance of Net Worth.  Subject to the proviso below, permit
Consolidated Net Worth at any time to be less than the sum of (i) $689,000,000,
plus (ii) 100% of the net cash
proceeds (including any cash proceeds of non-cash proceeds) of any net
issuances by the Borrower of any Capital Stock and any equity contributions to
it after the Closing Date, plus (iii) 50%
of the positive Consolidated Net Income, if any, for each completed fiscal
quarter of the Borrower ending after the Closing Date, minus (iv) 100%
of repurchases of equity in connection with COBRAs, Feline Prides II Senior
Notes and Zero-Coupon Bonds after the Closing Date.

 

(b)  Interest Coverage Ratio.  Permit the ratio of (i) Consolidated
EBITDA to (ii) Consolidated Interest Expense for any Computation Period to
be less than 3.00 to 1.00.

 

(c)  Leverage Ratio.  Permit the ratio of (i) the remainder of
Total Indebtedness minus all (but not more than $50,000,000) cash and
Cash Equivalents of the Borrower and its Subsidiaries, in each case as of the
last day of any Computation Period, to (ii) Adjusted Consolidated EBITDA
for such Computation Period to exceed 3.50 to 1.00.

 

7.2.          Limitation on Indebtedness.  Create, incur, assume or suffer to exist any
Indebtedness, except:

 

(a)  Indebtedness of
the Borrower under this Agreement and the other Loan Documents;

 

46

 

(b)  unsecured
Indebtedness of any Subsidiary owing to the Borrower or any other Subsidiary or
secured Indebtedness of any Subsidiary owing to the Borrower or any other
Subsidiary;

 

(c)  Indebtedness of
any Subsidiary incurred to finance its working capital (or the working capital
of any of its Subsidiaries), in an aggregate principal amount not exceeding as
to any Subsidiary $5,000,000 at any time outstanding;

 

(d)  Indebtedness of
the Borrower incurred to finance its acquisition of fixed or capital assets
(whether pursuant to a deferred purchase arrangement with a vendor, a loan, a
Financing Lease or otherwise) in an aggregate principal amount not exceeding
$5,000,000 at any time outstanding;

 

(e)  Indebtedness of
a Person which becomes a Subsidiary after the date hereof; provided
that (i) such Indebtedness existed at the time such Person became a
Subsidiary and was not created in anticipation thereof and (ii) immediately
after such Person becomes a Subsidiary, no Default shall have occurred and be
continuing;

 

(f)  Subordinated
Indebtedness;

 

(g)  Indebtedness of
the Borrower and its Subsidiaries existing on the date hereof and described on Schedule 7.2(g),
and any Indebtedness exchanged for any such scheduled Indebtedness that (i) has
economic terms, as of the date of issuance, consistent with market terms for a
similarly creditworthy issuer and (ii) has other terms, as a whole, not
more onerous to the Borrower or the relevant Subsidiary than the applicable
scheduled Indebtedness;

 

(h)  Indebtedness of
the type described in clause (g) of the definition of Indebtedness
incurred by the Borrower or any Subsidiary in the ordinary course of business
with reputable financial institutions and not for speculative purposes;

 

(i)  Indebtedness in
the nature of deferred compensation to employees in an aggregate principal amount
not exceeding as to the Borrower and its Subsidiaries $10,000,000 at any time
outstanding;

 

(j)  Indebtedness of any Subsidiary in an
aggregate principal amount not exceeding $50,000,000 at any time outstanding;
provided that the sum of all Indebtedness of all Subsidiaries under this Section 7.2(j)
shall not exceed $50,000,000 at any time outstanding;

 

(k)  unsecured Indebtedness of the Borrower owing
to any Subsidiary or any Affiliate of the Borrower or any Subsidiary not
exceeding $80,000,000 in the aggregate at any time outstanding, in each case
related to the Borrower’s cash management program with its Affiliates;

 

(l)  Indebtedness of the Borrower incurred to
finance its working capital (including any working capital lines of credit) in
an aggregate principal amount not exceeding $10,000,000 at any time
outstanding;

 

47

 

(m)  Guarantee Obligations in respect of
Indebtedness otherwise permitted under this Section 7.2; and

 

(n)  senior unsecured notes, bonds, debentures or
similar instruments of the Borrower, including Zero-Coupon Bonds and COBRAs
(but, for the avoidance of doubt, excluding any Indebtedness described in clause
(g) above), not at any time exceeding $575,000,000; provided
that such instruments shall not be guaranteed by any Person that is not a Loan
Party.

 

7.3.          Limitation on Liens.  Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:

 

(a)  Liens for
taxes, assessments and other governmental charges not yet due or which are
being contested in good faith by appropriate proceedings; provided
that adequate reserves with respect thereto are maintained on the books of the
Borrower or its Subsidiaries, as the case may be, in conformity with GAAP;

 

(b)  carriers’,
warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens
arising in the ordinary course of business which are not overdue for a period
of more than 60 days or which are being contested in good faith by appropriate
proceedings;

 

(c)  pledges or
deposits in connection with workers’ compensation, unemployment insurance and
other social security legislation;

 

(d)  deposits to
secure the performance of bids, trade contracts (other than for borrowed
money), leases, statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature incurred in the ordinary course of
business;

 

(e)  easements,
rights-of-way, restrictions and other similar encumbrances incurred in the
ordinary course of business which, in the aggregate, are not substantial in
amount and which do not in any case materially detract from the value of the
property subject thereto or materially interfere with the ordinary conduct of
the business of the Borrower or such Subsidiary;

 

(f)  Liens securing
Indebtedness of the Borrower or any Subsidiary permitted by Section 7.2(d) or
7.2(j) incurred to finance the acquisition of fixed or capital assets; provided
that (i) such Liens shall be created substantially simultaneously with the
acquisition of such fixed or capital assets, (ii) such Liens do not at any
time encumber any property other than the property financed by such
Indebtedness, (iii) the amount of Indebtedness secured thereby is not increased
and (iv) the principal amount of Indebtedness secured by such Lien shall
at no time exceed the purchase price of such property;

 

(g)  Liens on the
property or assets of a Person which becomes a Subsidiary after the date hereof
securing Indebtedness permitted by Section 7.2(e); provided
that (i) such Liens existed at the time such Person became a Subsidiary
and were not created in anticipation thereof, (ii) any such Lien is not
spread to cover any property or assets of

 

48

 

such Person after the time such Person becomes a
Subsidiary, and (iii) the amount of Indebtedness secured thereby is not
increased;

 

(h)  Liens arising
by reason of any judgment, decree or order of any court or other Governmental
Authority, (i) if appropriate legal proceedings which have been initiated
for the review of such judgment, decree or order are being diligently
prosecuted and shall not have been finally terminated or the period within
which such proceedings may be initiated shall not have expired or (ii) if
such judgment, decree or order shall have been discharged within 45 days of the
entry thereof or execution thereof has been stayed pending appeal;

 

(i)  Liens created
pursuant to the Pledge Agreements;

 

(j)  Liens existing,
or provided for under arrangements existing, as of the date hereof as described
on Schedule 7.3(j); and

 

(k)  Liens securing Synthetic Lease Obligations
permitted under Section 7.15.

 

7.4.          Limitation on Guarantee Obligations.  Create, incur, assume or suffer to exist any
Guarantee Obligation except guarantees by the Borrower or any Subsidiary or
Investment Firm of obligations of any of the Subsidiaries, which obligations
are otherwise permitted under this Agreement, and except for (a) other
Guarantee Obligations not exceeding $1,500,000 in the aggregate at any time, (b) Guarantee
Obligations which constitute Indebtedness permitted under Section 7.2,
(c) Guarantee Obligations of Subsidiaries created pursuant to the
Subsidiary Pledge Agreement, or (d) Guarantee Obligations with respect to
Indebtedness of any Person which shall be incurred by such Person in
anticipation of a majority interest in such Person being acquired by the
Borrower or a Subsidiary, and of the obligations of any other Person that
anticipates being a minority investor in such Person, provided that (i) any
such Guarantee Obligations shall be outstanding for no more than 30 days and (ii) the
principal amount of all such Guarantee Obligations shall not exceed $10,000,000
at any one time outstanding.

 

7.5.          Limitation on Fundamental Changes.  Enter into any merger, consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, assign, transfer or
otherwise dispose of, all or substantially all of its property, business or
assets (each a “disposition”), or make any material change in its present
method of conducting business; unless (i) with respect to a merger,
consolidation or amalgamation of a Subsidiary, if prior to such event the
Borrower owned in excess of a 50% ownership interest, then after such event the
Borrower shall (x) own in excess of a 50% ownership interest in, (y) be the managing
member or general partner (or a Person with similar rights and obligations) of (whether
directly or through a wholly-owned Subsidiary), or (z) have no ownership
interest in, such Subsidiary or the surviving Person of such
merger, consolidation or amalgamation, (ii) with respect to the
liquidation, winding up or dissolution of a direct or indirect Subsidiary, the
assets of such Subsidiary shall have been transferred to the Borrower or
another Loan Party and the other shareholders, partners or members of such
Subsidiary, and (iii) with respect to any disposition described above, the
Net Proceeds thereof shall have been applied as set forth in Section 3.2
to the extent required.

 

49

 

7.6.          Limitation on Sale of Assets.  Convey, sell, lease, assign, transfer or
otherwise dispose (including in connection with sale leaseback transactions) of
any of its property, business or assets (including receivables and leasehold
interests), whether now owned or hereafter acquired, or, in the case of any
Subsidiary, issue or sell any shares of such Subsidiary’s Capital Stock to any
Person other than the Borrower or any wholly-owned Subsidiary, except:

 

(a)  the sale or
other disposition of obsolete or worn out property in the ordinary course of
business;

 

(b)  the sale or
other disposition of any property in the ordinary course of business;

 

(c)  the sale or
discount without recourse of accounts receivable arising in the ordinary course
of business in connection with the compromise or collection thereof;

 

(d)  the sale,
issuance or other disposition of the Capital Stock or other ownership interest
of any Subsidiary or of an Investment Firm in which the Borrower owns an
ownership interest to partners, officers, directors or employees of such
Subsidiary or Investment Firm; provided
that the Borrower shall comply with the terms of Section 3.2; and

 

(e)  the sale or
other disposition of (i) all or substantially all the Capital Stock of a
Subsidiary or Investment Firm (including both Capital Stock held by the
Borrower and its Subsidiaries and by the other holders of Capital Stock of such
Subsidiary or Investment Firm), or (ii) all or substantially all the
assets of a Subsidiary or Investment Firm; provided that the Borrower
shall comply with the terms of Section 3.2.

 

7.7.          Limitation on Leases.  Permit the amount paid by the Borrower for
lease obligations under operating leases to which the Borrower is a party
(including any such leases entered into in connection with sale leaseback
transactions) for any fiscal year of the Borrower to exceed $5,000,000 in the
aggregate or permit a Subsidiary to make any such payment in respect of lease
obligations except to the extent that any such payment is made out of that
portion of its revenues designated as Operating Cash Flow (and not Free Cash
Flow) under the relevant Revenue Sharing Agreement.

 

7.8.          Limitation on Dividends.  Declare or pay any dividend (other than
dividends payable solely in common stock of the Borrower) on, or make any
payment on account of, or set apart assets for a sinking or other analogous
fund for, the purchase, redemption, defeasance, retirement or other acquisition
of, any shares of any class of Capital Stock of the Borrower or any warrants or
options to purchase any such Capital Stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or property (other than stock of the Borrower)
or in obligations of the Borrower or any Subsidiary in an aggregate amount
exceeding, for the Borrower and its Subsidiaries, $500,000 in any one fiscal
year; provided
that the Borrower may repurchase shares of its common stock as long as no
Default shall have occurred and be continuing or would result therefrom.

 

50

 

7.9.          Limitation
on Capital Expenditures.  Make or
commit to make any expenditure in respect of the purchase or other acquisition
of fixed or capital assets, except (a) expenditures for assets acquired
in connection with normal replacement and maintenance programs properly charged
to current operations; (b) expenditures for assets acquired pursuant to an
Acquisition (and not purchased or otherwise acquired by the applicable
Investment Firm in anticipation of such Acquisition); (c) expenditures for
assets made with the proceeds of Asset Sales or Shareholder Asset Sales or with
insurance or condemnation proceeds; (d) in the case of the Borrower, additional
expenditures in the ordinary course of business not exceeding, in the aggregate
for the Borrower during the Commitment Period $30,000,000; and (e) in the case
of a Subsidiary, additional expenditures that are made out of that portion of
its revenues designated as Operating Cash Flow (and not Free Cash Flow) under
the relevant Revenue Sharing Agreement.

 

7.10.        Limitation on Investments, Loans and Advances.  Make any advance, loan, extension of credit
or capital contribution to, or purchase any stock, bonds, notes, debentures or
other securities of or any assets constituting a business unit of, or make any
other investment in, any Person, except:

 

(a)  extensions of
trade credit in the ordinary course of business;

 

(b)  investments in
Cash Equivalents, including any such investment that may be readily sold or
otherwise liquidated in any Fund for which any Subsidiary or other Investment
Firm provides management, advisory or administrative services and which
principally invests in Cash Equivalents;

 

(c)  any investment
in or loan or advance to a Subsidiary or an Investment Firm or a Person that
after giving effect to such investment will be a Subsidiary or an Investment
Firm, if, after giving effect to such investment, no Default shall have
occurred and be continuing (provided that such Investment Firm or
Subsidiary is engaged primarily in the Investment Management Business);

 

(d)  loans to (i) officers
of the Borrower in an aggregate principal amount not at any time exceeding
$1,000,000; and (ii) officers of any operating Subsidiary to facilitate the
purchase by such officers of equity interests in such Subsidiary, provided
(x) that any loan described in this clause (ii) shall be secured by
a security interest in the equity so purchased and (y) the aggregate principal
amount of all such loans at any time outstanding shall not at any time exceed
$25,000,000;

 

(e)  (i) loans and advances to employees of the Borrower
or any Subsidiary for travel, entertainment and relocation expenses in the
ordinary course of business in an aggregate amount for the Borrower and its
Subsidiaries not to exceed $500,000 at any one time outstanding (other than as
permitted in Section 7.10(f)) and (ii) in the case of a
Subsidiary, loans and advances to employees for travel, entertainment and
relocation expenses in the ordinary course of business to the extent that such
loans and advances are made out of that portion of its revenues designated as
Operating Cash Flow (and not Free Cash Flow) under the relevant Revenue Sharing
Agreement;

 

51

 

(f)  to the extent
made out of the portion of the revenues of a Subsidiary which is designated as
Operating Cash Flow (and not Free Cash Flow) under the relevant Revenue Sharing
Agreements;

 

(g)  other than as
permitted in Section 7.10(f), investments in any Fund or financial
product for which any Subsidiary provides management, advisory or administrative
services in an aggregate amount not to exceed $5,000,000 at any one time
outstanding;

 

(h)  so long as no
Default exists, any purchase by the Borrower of Feline Prides I Senior Notes or
Zero Coupon Bonds;

 

(i)  Indebtedness
received by the Borrower or any Subsidiary as consideration in a sale or other
disposition permitted under Section 7.6(d) or (e) in
an aggregate principal amount not to exceed $25,000,000 at any time
outstanding;

 

(j)  so long as no Default exists, any purchase of
COBRAs or Feline Prides II Senior Notes; provided that the aggregate
principal amount of all such purchases in any year shall not exceed
$50,000,000;

 

(k)  any purchase of Indebtedness of the Borrower
with proceeds from a substantially contemporaneous issue of Indebtedness by the
Borrower so long as such newly issued Indebtedness (i) has economic terms,
as of the date of issuance, consistent with market terms for a similarly
creditworthy issuer and (ii) has other terms, as a whole, not more onerous
to the Borrower than the applicable purchased Indebtedness; and

 

(l)  any investment by an Unrestricted Entity in
an entity; provided that (i) the Borrower and its Subsidiaries and
the Unrestricted Entities, taken as a whole, shall only have a minority
investment in such entity, (ii) such entity is engaged in investment
advisory, management or distribution services or activities reasonably related
or complementary thereto, and (iii) neither the Borrower nor any
Subsidiary has guaranteed, or is otherwise liable for, any obligation of such
entity (any such entity, an “Unrestricted Investment Firm”).

 

7.11.        Limitation on Payments of Subordinated Indebtedness.  Make any payment (including any cash payment
of interest) or prepayment on or redemption, defeasance or purchase of any Subordinated
Indebtedness; provided
that as long as no Default exists or would result therefrom and the terms of
such Subordinated Indebtedness otherwise permit, the Borrower may make payments
(including redemptions, defeasances or repurchases) in cash or otherwise due on
(a) the Subordinated Payment Notes as required thereunder in an aggregate
amount not exceeding $60,000,000 during the term of this Agreement, (b) Subordinated
Indebtedness constituting intercompany Indebtedness otherwise permitted
hereunder, as required thereunder and (c) other Subordinated Indebtedness
in an aggregate amount not exceeding $10,000,000 during the term of this
Agreement.

 

52

 

7.12.        Restriction on Amendments to Revenue Sharing Agreements.  Amend or modify the terms of a Revenue
Sharing Agreement such that, as a result of such amendment or modification, a
material adverse effect on the business, operations, property, condition
(financial or otherwise) or prospects of the Borrower and its Subsidiaries,
taken as a whole, would occur.

 

7.13.        Limitation on Transactions with Affiliates.  Except as described on Schedule 7.13
and as otherwise expressly permitted under this Agreement, enter into any
transaction, including any purchase, sale, lease or exchange of property or the
rendering of any service, with any Affiliate (other than the Borrower or a
Subsidiary) unless such transaction is (a) otherwise expressly permitted
under this Agreement or (b) in the ordinary course of the Borrower’s or such
Subsidiary’s business and upon fair and reasonable terms no less favorable to
the Borrower or such Subsidiary, as the case may be, than it would obtain in a
comparable arm’s length transaction with a Person which is not an Affiliate; provided
that the following transactions shall be permitted under this Section 7.13:
(i) the providing of business services by the Borrower or any Subsidiary
to any Investment Firm in the ordinary course of business and (ii) transactions
among the Borrower or any Subsidiary or any officer, director, individual
stockholder, partner or member (or an entity wholly owned by such an
individual) and any Fund or other Investment Company sponsored by the Borrower
or any Subsidiary or for which the Borrower or any Subsidiary provides
advisory, administrative, supervisory, management, consulting or similar
services, that are otherwise permissible under the Investment Company Act, the
Investment Advisers Act and the applicable management contracts.

 

7.14.        Limitation on Changes in Fiscal Year.  Permit the fiscal year of the Borrower to end
on a day other than December 31.

 

7.15.        Limitation
on Synthetic Lease Obligations. 
Create, incur, assume or suffer to exist Synthetic Lease Obligations
representing principal in an amount exceeding $25,000,000 in the aggregate at
any one time outstanding.

 

7.16.        Limitation
on Certain Acquisitions.  Make any
Acquisition of an Investment Firm where the Capital Stock of such Investment
Firm is held directly by any Person other than the Borrower or a wholly-owned
Subsidiary, unless at the time of consummation of any such Acquisition, the
EBITDA of all Investment Firms (for the four fiscal quarters of the Borrower
most-recently ended) held directly by Persons other than the Borrower or a
wholly-owned Subsidiary (including the EBITDA of the Investment Firm being
acquired) does not exceed 5% of Consolidated EBITDA for the four fiscal
quarters of the Borrower most recently ended (adjusted by giving effect on a
pro forma basis to such Acquisition) (it being understood and agreed that the
EBITDA of Investment Firms held directly by Persons other than the Borrower or
a wholly-owned Subsidiary shall not be taken into account in calculating such
5% limit if such Person has pledged an amount of the Capital Stock of such
Investment Firm that is at least proportionate to the Borrower’s direct or
indirect ownership interest in such Person). 
By way of illustration, if Subsidiary A, a non-wholly-owned direct
Subsidiary of which the Borrower owns 80% of the Capital Stock, acquires 1,000
shares of the Capital Stock of Investment Firm A, the EBITDA of Investment Firm
A would not count towards the 5% limit if Subsidiary A pledges at least 800
shares of the Capital Stock of Investment Firm A (i.e., 1,000 shares times 80%).

 

53

 

SECTION 8. 
EVENTS OF DEFAULT

 

If any of the
following events shall occur and be continuing:

 

(a)  The Borrower
shall fail to pay any principal of any Loan when due in accordance with the
terms hereof; or the Borrower shall fail to pay any interest on any Loan, or
any other amount payable hereunder, within five days after any such interest or
other amount becomes due in accordance with the terms hereof; or

 

(b)  Any
representation or warranty made or deemed made by the Borrower or any other
Loan Party herein or in any other Loan Document or which is contained in any
certificate, document or financial or other statement furnished by it at any
time under or in connection with this Agreement or any such other Loan Document
shall prove to have been incorrect in any material respect on or as of the date
made or deemed made; or

 

(c)  The Borrower or
any other Loan Party shall default in the observance or performance of any
agreement contained in (i) Section 6.4, 6.7(a), 6.8
or 6.9 or Section 7 and, if such default is by a Loan Party
other than the Borrower, such default shall continue unremedied for a period of
10 days after an officer of the Borrower obtains knowledge thereof; or (ii) Section 5
of either Pledge Agreement; or

 

(d)  The Borrower or
any other Loan Party shall default in the observance or performance of any
other agreement contained herein or in any other Loan Document (other than as
provided in subsections (a) and (c) of this Section),
and such default shall continue unremedied for a period of 30 days after an
officer of the Borrower obtains knowledge thereof; or

 

(e)  The Borrower or
any Subsidiary shall (i) default in any payment of principal of or
interest on any Indebtedness (other than the Loans) or in the payment of any
other Guarantee Obligation, in either case in an outstanding principal amount
in excess of $5,000,000, beyond the period of grace (not to exceed 30 days), if
any, provided in the instrument or agreement under which such Indebtedness or Guarantee
Obligation was created; or (ii) default in the observance or performance
of any other agreement or condition relating to any such Indebtedness or
Guarantee Obligation or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is to cause, or
to permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of
such holder or holders or beneficiary or beneficiaries) to cause, with the
giving of notice if required, such Indebtedness to become due prior to its
stated maturity or such Guarantee Obligation to become payable; or

 

(f)  (i)  The Borrower or any Subsidiary shall commence
any case, proceeding or other action (A) under any existing or future law
of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation,

 

54

 

dissolution, composition or other relief with respect
to it or its debts, or (B) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for all or any
substantial part of its assets, or the Borrower or any Subsidiary shall make a
general assignment for the benefit of its creditors; or (ii) there shall
be commenced against the Borrower or any Subsidiary any case, proceeding or
other action of a nature referred to in clause (i) above which (A) results
in the entry of an order for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of 60 days; or (iii) there
shall be commenced against the Borrower or any Subsidiary, any case, proceeding
or other action seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial part of its assets
which results in the entry of an order for any such relief which shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60 days from
the entry thereof; or (iv) the Borrower or any Subsidiary shall take any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii) or
(iii) above; or (v) the Borrower or any Subsidiary shall
generally not, or shall be unable to, or shall admit in writing its inability
to, pay its debts as they become due; or

 

(g)  (i)  Any Person shall engage in any “prohibited
transaction” (as defined in Section 406 of ERISA or Section 4975 of
the Code) involving any Plan maintained by the Borrower or any Subsidiary, (ii) any
“accumulated funding deficiency” (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to any Plan, (iii) a
Reportable Event shall occur with respect to, or proceedings shall commence to
have a trustee appointed, or a trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of the
Required Lenders, likely to result in the termination of such Plan for purposes
of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for
purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled
Entity shall, or in the reasonable opinion of the Required Lenders is likely
to, incur any liability in connection with a withdrawal from, or the Insolvency
or Reorganization of, a Multiemployer Plan or (vi) any other event or
condition shall occur or exist, with respect to a Plan; and in each case in clauses
(i) through (vi) above, such event or condition, together with
all other such events or conditions, if any, could reasonably be expected to
have a Material Adverse Effect; or

 

(h)  One or more
judgments or decrees shall be entered against the Borrower or any Subsidiary
involving in the aggregate a liability (not paid or fully covered by insurance
or indemnification) of $5,000,000 or more, and all such judgments or decrees
shall not have been vacated, discharged, stayed or bonded pending appeal within
60 days from the entry thereof; or

 

(i)  (i)  Any Loan Document shall cease, for any reason,
to be in full force and effect, or any Loan Party that is a party thereto shall
so assert, (ii) any Loan Party contests in any manner the validity or
enforceability of any Loan Document or (iii) the Lien created by any of
the Pledge Agreements shall cease to be enforceable and of the same effect and
priority purported to be created thereby; or

 

55

 

(j)  A Change of Control shall have occurred;

 

then, and in
any such event, (A) if such event is an Event of Default specified in Section 8(f) with respect to the
Borrower, automatically the Commitments shall immediately terminate and the
Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement shall immediately become due and payable, and (B) if
such event is any other Event of Default, either or both of the following
actions may be taken:  (i) with the
consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, by notice to
the Borrower declare the Commitments to be terminated forthwith, whereupon the
Commitments shall immediately terminate; and (ii) with the consent of the
Required Lenders, the Administrative Agent may, or upon the request of the
Required Lenders, the Administrative Agent shall, by notice to the Borrower,
declare the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement to be due and payable forthwith, whereupon
the same shall immediately become due and payable.  Except as expressly provided above in this
Section, presentment, demand, protest and all other notices of any kind are
hereby expressly waived.

 

SECTION 9.  THE ADMINISTRATIVE AGENT

 

9.1.          Appointment and Authorization.  Each Lender hereby irrevocably appoints Bank
of America to act on its behalf as the Administrative Agent hereunder and under
the other Loan Documents and authorizes
the Administrative Agent to take such actions on its behalf and to exercise
such powers as are delegated to the Administrative Agent by the terms hereof or
thereof, together with such actions and powers as are reasonably incidental
thereto.  The provisions of this Article are
solely for the benefit of the Administrative Agent and the Lenders, and neither the Borrower nor any other Loan Party
shall have rights as a third party beneficiary of any such provision.

 

9.2.          Rights as a
Lender.  The Person serving as the Administrative
Agent hereunder shall have the same rights and powers in its capacity as a
Lender as any other Lender and may exercise the same as though it were not the
Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise
expressly indicated or the context otherwise requires, include the Person
serving as the Administrative Agent hereunder in its individual capacity.  Such Person and its Affiliates may accept
deposits from, lend money to, act as the financial advisor or in any other
advisory capacity for and generally engage in any kind of business with the
Borrower or any Subsidiary or other Affiliate thereof as if such Person were
not the Administrative Agent hereunder and without any duty to account therefor
to the Lenders.

 

9.3.          Exculpatory Provisions.  The
Administrative Agent shall not have any duties or obligations except those
expressly set forth herein and in the other Loan Documents.  Without limiting the generality of the foregoing,
the Administrative Agent:

 

(a)      shall not be subject to any fiduciary or
other implied duty, regardless of whether a Default has occurred and is
continuing;

 

(b)     shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated hereby or

 

56

 

by the other Loan Documents that the Administrative Agent is required
to exercise as directed in writing by the Required Lenders (or such other
number or percentage of the Lenders as shall be expressly provided for herein
or in the other Loan Documents), provided that the Administrative Agent
shall not be required to take any action that, in its opinion or the opinion of
its counsel, may expose the Administrative Agent to liability or that is
contrary to any Loan Document or applicable law; and

 

(c)     shall not, except as expressly set forth
herein and in the other Loan Documents, have any duty to disclose, and shall not
be liable for the failure to disclose, any information relating to the Borrower
or any of its Affiliates that is communicated to or obtained by the Person
serving as the Administrative Agent or any of its Affiliates in any capacity.

 

The Administrative Agent shall not be liable for any
action taken or not taken by it (i) with the consent or at the request of
the Required Lenders (or such other number or percentage of the Lenders as
shall be necessary, or as the Administrative Agent shall believe in good faith
shall be necessary under the circumstances) or (ii) in the absence of its
own gross negligence or willful misconduct. 
The Administrative Agent shall be deemed not to have knowledge of any
Default unless and until notice describing such Default is given to the
Administrative Agent by the Borrower or a Lender.

 

The Administrative Agent shall not be responsible
for or have any duty to ascertain or inquire into (i) any statement,
warranty or representation made in or in connection with this Agreement or any
other Loan Document, (ii) the contents of any certificate, report or other
document delivered hereunder or thereunder or in connection herewith or
therewith, (iii) the performance or observance of any covenant, agreement
or other term or condition set forth herein or therein or the occurrence of any
Default, (iv) the validity, enforceability, effectiveness or genuineness
of this Agreement, any other Loan Document or any other agreement or document
or (v) the satisfaction of any condition set forth in Section 5
or elsewhere herein, other than to confirm receipt of items expressly required
to be delivered to the Administrative Agent.

 

9.4.          Reliance by
Administrative Agent.  The Administrative Agent shall be entitled to
rely upon, and shall not incur any liability for relying upon, any notice,
request, certificate, consent, statement, instrument, document or other writing
(including any electronic message, Internet or intranet website posting or
other distribution) believed in good faith by it to be genuine and to have been
signed, sent or otherwise authenticated by the proper Person.  The Administrative Agent also may rely upon
any statement made to it orally or by telephone and believed by it to have been
made by the proper Person, and shall not incur any liability for relying
thereon.  In determining compliance with
any condition hereunder to the making of a Loan that by its terms must be
fulfilled to the satisfaction of a Lender, the Administrative Agent may presume
that such condition is satisfactory to such Lender unless the Administrative
Agent shall have received notice to the contrary from such Lender prior to the
making of such Loan.  The Administrative
Agent may consult with legal counsel (who may be counsel for the Borrower),
independent accountants and other experts selected by it, and shall not be
liable for any action taken or not taken by it in accordance with the advice of
any such counsel, accountants or experts.

 

57

 

9.5.          Delegation of
Duties.  The Administrative Agent may perform any and
all of its duties and exercise its rights and powers hereunder or under any
other Loan Document by or through any one or more sub-agents appointed by the
Administrative Agent.  The Administrative
Agent and any such sub-agent may perform any and all of its duties and exercise
its rights and powers by or through their respective Related Parties.  The exculpatory provisions of this Article shall
apply to any such sub-agent and to the Related Parties of the Administrative
Agent and any such sub-agent, and shall apply to their respective activities in
connection with the syndication of the credit facilities provided for herein as
well as activities as Administrative Agent.

 

9.6.          Resignation of
Administrative Agent.  The Administrative Agent may at any time give
notice of its resignation to the Lenders and the Borrower.  Upon receipt of any such notice of
resignation, the Required Lenders shall have the right, in consultation with
the Borrower, to appoint a successor, which shall be a bank with an office in
the United States, or an Affiliate of any such bank with an office in the
United States.  If no such successor
shall have been so appointed by the Required Lenders and shall have accepted
such appointment within 30 days after the retiring Administrative Agent
gives notice of its resignation, then the retiring Administrative Agent may, on
behalf of the Lenders, appoint a successor Administrative Agent meeting the
qualifications set forth above; provided that if the Administrative
Agent shall notify the Borrower and the Lenders that no qualifying Person has
accepted such appointment, then such resignation shall nonetheless become
effective in accordance with such notice and (1) the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder and under the other Loan Documents (except that in the case of any collateral security held by the
Administrative Agent on behalf of the Lenders under any Loan Document, the
retiring Administrative Agent shall continue to hold such collateral security
until such time as a successor Administrative Agent is appointed) and (2) all
payments, communications and determinations provided to be made by, to or
through the Administrative Agent shall instead be made by or to each Lender
directly, until such time as the Required Lenders appoint a successor
Administrative Agent as provided for above. 
Upon the acceptance of a successor’s appointment as Administrative Agent
hereunder, such successor shall succeed to and become vested with all of the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from all of its duties
and obligations hereunder and under the other Loan Documents (if not already
discharged therefrom as provided above). 
The fees payable by the Borrower to a successor Administrative Agent
shall be the same as those payable to its predecessor unless otherwise agreed
between the Borrower and such successor. 
After the retiring Administrative Agent’s resignation hereunder and
under the other Loan Documents, the provisions of this Article and Section 10.5
shall continue in effect for the benefit of such retiring Administrative Agent,
its sub-agents and their respective Related Parties in respect of any action
taken or omitted to be taken by any of them while the retiring Administrative
Agent was acting as Administrative Agent.

 

Any resignation by Bank of America as Administrative
Agent pursuant to this Section shall also constitute its resignation as
Swingline Lender.  Upon the acceptance of
a successor’s appointment as Administrative Agent hereunder, (a) such
successor shall succeed to and become vested with all of the rights, powers,
privileges and duties of the retiring Swingline Lender, and (b) the
retiring Swingline Lender shall be discharged from all of its duties and
obligations as such hereunder and under the other Loan Documents.

 

58

 

9.7.          Non-Reliance on
Administrative Agent and Other Lenders.  Each Lender acknowledges that
it has, independently and without reliance upon the Administrative Agent or any
other Lender or any of their Related Parties and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. 
Each Lender also acknowledges that it will, independently and without
reliance upon the Administrative Agent or any other Lender or any of their
Related Parties and based on such documents and information as it shall from
time to time deem appropriate, continue to make its own decisions in taking or
not taking action under or based upon this Agreement, any other Loan Document
or any related agreement or any document furnished hereunder or thereunder.

 

9.8.          Administrative
Agent May File Proofs of Claim.  In the case of the pendency of
any receivership, insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition or other judicial proceeding relative to
any Loan Party, the Administrative Agent (irrespective of whether the principal
of any Loan shall then be due and payable and whether the Administrative Agent
shall have made any demand on the Borrower) shall be entitled and empowered, by
intervention in such proceeding or otherwise:

 

(a)      to file and prove a claim for the whole
amount of the principal and interest owing and unpaid in respect of the Loans
and all other obligations of any Loan Party that are owing and unpaid and to
file such other documents as may be necessary or advisable in order to have the
claims of the Lenders and the Administrative Agent (including any claim for the
reasonable compensation, expenses, disbursements and advances of the Lenders
and the Administrative Agent and their respective agents and counsel and all
other amounts due the Lenders and the Administrative Agent hereunder) allowed
in such judicial proceeding; and

 

(b)     to collect and receive any monies
or other property payable or deliverable on any such claims and to distribute
the same;

 

and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial proceeding is
hereby authorized by each Lender to make such payments to the Administrative
Agent and, if the Administrative Agent shall consent to the making of such
payments directly to the Lenders, to pay to the Administrative Agent any amount
due for the reasonable compensation, expenses, disbursements and advances of
the Administrative Agent and its agents and counsel, and any other amount due
the Administrative Agent under Section 2.4 or 10.5.

 

Nothing contained herein shall be deemed to
authorize the Administrative Agent to authorize or consent to or accept or
adopt on behalf of any Lender any plan of reorganization, arrangement,
adjustment or composition affecting the obligations of the Borrower hereunder
or the rights of any Lender or to authorize the Administrative Agent to vote in
respect of the claim of any Lender in any such proceeding.

 

9.9.          Collateral and Guaranty Matters.  The
Lenders irrevocably authorize the Administrative Agent, at its option and in
its discretion,

 

(a) 
to release any Lien on any property granted to or held by the Administrative
Agent under any Loan Document (i) upon termination of the Commitments and
payment

 

59

 

in full of the Loans and all
other obligations under the Loan Documents (other than contingent
indemnification obligations), (ii) that is sold or to be sold as part of
or in connection with any sale permitted hereunder or under any other Loan
Document or (iii) if approved, authorized or ratified in writing by the
Supermajority Lenders or, if required by Section 10.1, all Lenders;
and

 

(b) 
to release any guarantor from its obligations under any guarantee if such
Person ceases to be a Subsidiary as a result of a transaction permitted
hereunder.

 

Upon request by the
Administrative Agent at any time, the Supermajority Lenders will confirm in
writing the Administrative Agent’s authority to release any guarantor from its
obligations under any guarantee pursuant to this Section 9.9.  The Administrative Agent will use
commercially reasonable efforts to notify the Lenders of any release of a Lien
pursuant to Section 9.9(a)(ii) or release of a guarantor pursuant
to Section 9.9(b).

 

9.10.        Other Agents; Arrangers and Managers.  None
of the Lenders or other Persons identified on the cover page or signature pages of
this Agreement, or elsewhere herein, as a “co-syndication agent,” “co-documentation
agent,” “co-agent,” “book manager,” “lead manager,” “arranger,” “lead arranger”
or “co-arranger” shall have any right, power, obligation, liability,
responsibility or duty under this Agreement other than, in the case of a Person
that is a Lender, those applicable to all Lenders as such.  Without limiting the foregoing, none of the
Lenders or other Persons so identified shall have or be deemed to have any
fiduciary relationship with any Lender. 
Each Lender acknowledges that it has not relied, and will not rely, on
any of the Lenders or other Persons so identified in deciding to enter into
this Agreement or in taking or not taking action hereunder.

 

SECTION 10.  MISCELLANEOUS

 

10.1.        Amendments and Waivers.  (a)  Neither this Agreement nor any
other Loan Document, nor any terms hereof or thereof, may be amended,
supplemented or modified except in accordance with the provisions of this Section 10.1.  The Required Lenders may, or, with the
written consent of the Required Lenders, the Administrative Agent may, from
time to time, (x) enter into with the Borrower written amendments, supplements
or modifications hereto and to the other Loan Documents for the purpose of
adding any provisions to this Agreement or the other Loan Documents or changing
in any manner the rights of the Lenders or of the Borrower or other relevant
Loan Party hereunder or thereunder or (y) waive, on such terms and conditions
as the Required Lenders or the Administrative Agent, as the case may be, may
specify in such instrument, any of the requirements of this Agreement or the
other Loan Documents or any Default and its consequences; provided
that no such waiver and no such amendment, supplement or modification shall (i) reduce
the amount or extend the scheduled date of final maturity of any Loan or reduce
the stated rate of any interest or fee payable hereunder or extend the
scheduled date of any payment thereof or increase the amount or extend the
expiration date of any Lender’s Commitment, in each case without the consent of
each Lender directly affected thereby, or (ii) amend, modify or waive any
provision of this Section or reduce the percentage specified in the definition
of Required Lenders or change any other provision specifying the number or
percentage of Lenders required to amend, waive or otherwise modify any rights
hereunder or under any other Loan Document or make any determination or grant
any consent

 

60

 

hereunder or
thereunder, or consent to the assignment or transfer by the Borrower of any of
its rights and obligations under this Agreement and the other Loan Documents or
release all or substantially all of the Pledged Collateral or release any Loan
Party from its guarantee, in each case without the written consent of all the
Lenders, or (iii) amend, modify or waive any provision of Section 10.7
without the written consent of all of the Lenders, or (iv) amend, modify
or waive any provision of Section 9 without the written consent of
the then Administrative Agent; provided, further, that no
amendment, waiver or consent shall, unless in writing and signed by the
Swingline Lender in addition to the Lenders required above, affect the rights
or duties of the Swingline Lender under this Agreement.  Subject to the provisos in the prior
sentence, any such waiver and any such amendment, supplement or modification
shall apply equally to each of the Lenders and shall be binding upon the
Borrower, the Lenders, the Administrative Agent and all future holders of the
Loans.  In the case of any waiver, the
Borrower, the Lenders and the Administrative Agent shall be restored to their
former positions and rights hereunder and under the other Loan Documents, and
any Default waived shall be deemed to be cured and not continuing; no such
waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.

 

(b) 
In addition to amendments effected pursuant to the foregoing paragraph (a),
this Agreement shall be amended to include a prospective Lender as a party
hereto upon the execution and delivery of a Joinder Agreement as contemplated
in Section 2.3(c).

 

10.2.        Notices. 
(a)  Unless otherwise expressly provided herein, all notices,
requests and demands to or upon the respective parties hereto to be effective
shall be in writing (including by facsimile transmission and, subject to clause
(c) below, electronic mail transmission), and, unless otherwise
expressly provided herein, shall be deemed to have been duly given or made when
delivered, or five days after being deposited in the mail, postage prepaid, or,
in the case of facsimile, when received with electronic confirmation of
receipt, addressed (i) if to the Borrower, the Administrative Agent or the
Swingline Lender, to the address, facsimile number, electronic mail address or
telephone number specified for such Person on Schedule 10.2, (ii) if
to any other Lender, as set forth in its Administrative Questionnaire and (iii) in
the case of any party to this Agreement, to such other address as such party
may designate by notice to the other parties hereto.  Notwithstanding the foregoing, any notice,
request or demand to or upon the Administrative Agent or the Lenders pursuant
to Section 2.2, 2.5, 2.8, 3.1,
3.3 or 3.8
shall not be effective until received.

 

(b) 
The Administrative Agent and the Lenders shall be entitled to rely and act upon
any notices (including telephonic notices of requests for Swingline Loans)
purportedly given by or on behalf of the Borrower even if (i) such notices
were not made in a manner specified herein, were incomplete or were not
preceded or followed by any other form of notice specified herein, or (ii) the
terms of any telephonic notice, as understood by the recipient, varied from any
confirmation thereof.  The Borrower shall
indemnify the Administrative Agent, the Lenders and each of their respective
Related Parties from all losses, costs, expenses and liabilities resulting from
the reliance by such Person on each notice purportedly given by or on behalf of
the Borrower.  All telephonic notices to
and other communications with the Administrative Agent may be recorded by the
Administrative Agent, and each of the parties hereto hereby consents to such
recording.

 

61

 

(c) 
Electronic mail and Internet and intranet websites may be used only to
distribute routine communications, such as financial statements and other
information as provided in Section 6.2, and to distribute Loan
Documents for execution by the parties thereto and may not be used for any
other purpose.

 

(d) 
The Platform.  THE PLATFORM IS
PROVIDED “AS IS” AND “AS AVAILABLE.”  THE
AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF
THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM AND EXPRESSLY
DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS.  NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR
STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR
OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER
MATERIALS OR THE PLATFORM.  In no event
shall the Administrative Agent or any of its Related Parties (collectively, the
“Agent Parties”) have any liability to the Borrower, any Lender or any
other Person for losses, claims, damages, liabilities or expenses of any kind
(whether in tort, contract or otherwise) arising out of the Borrower’s or the
Administrative Agent’s transmission of Borrower Materials through the Internet,
except to the extent that such losses, claims, damages, liabilities or expenses
are determined by a court of competent jurisdiction by a final and
nonappealable judgment to have resulted from the gross negligence or willful
misconduct of such Agent Party; provided, that in no event shall any
Agent Party have any liability to the Borrower, any Lender or any other Person
for indirect, special, incidental, consequential or punitive damages (as
opposed to direct or actual damages).

 

10.3.        No Waiver; Cumulative Remedies.  No failure to exercise and no delay in
exercising, on the part of the Administrative Agent or any Lender, any right,
remedy, power or privilege hereunder or under the other Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege.  The rights, remedies, powers
and privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.

 

10.4.        Survival of Representations and Warranties.  All representations and warranties made
hereunder, in the other Loan Documents and in any document, certificate or
statement delivered pursuant hereto or in connection herewith shall survive the
execution and delivery of this Agreement and the making of the Loans hereunder
through the Termination Date.

 

10.5.        Expenses; Indemnity; Waiver of Damages.

 

(a)  The Borrower agrees to pay (i) all
reasonable and documented out-of-pocket expenses incurred by the Administrative
Agent and its Related Parties (including Attorney Costs), in connection with
the syndication of the credit facility provided for herein, the preparation,
negotiation, execution, delivery and administration of this Agreement and the
other Loan Documents and any amendment, modification or waiver of any provision
hereof or thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), and (ii)

 

62

 

all reasonable out-of-pocket expenses incurred by the
Administrative Agent or any Lender (including Attorney Costs of the
Administrative Agent or any Lender) in connection with the enforcement or
protection of its rights (A) in connection with this Agreement and the
other Loan Documents, including its rights under this Section, or (B) in
connection with the Loans made hereunder, including all such out-of-pocket
expenses incurred during any workout, restructuring or negotiations in respect
of such Loans.

 

(b)  The Borrower agrees to indemnify the
Administrative Agent (and any sub-agent thereof) and each Lender, and each
Related Party of any of the foregoing Persons (each such Person, an “Indemnitee”),
against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses (including Attorney Costs) incurred
by any Indemnitee or asserted against any Indemnitee by any third party or by
the Borrower or any other Loan Party arising out of, in connection with, or as
a result of (i) the execution or delivery of this Agreement, any other
Loan Document or any agreement or instrument contemplated hereby or thereby,
the performance by the parties hereto of their respective obligations hereunder
or thereunder or the consummation of the transactions contemplated hereby or
thereby, (ii) any Loan or the use or proposed use of the proceeds
therefrom, (iii) any actual or alleged presence or release of Hazardous
Materials on or from any property owned or operated by the Borrower or any
Subsidiary, or any Environmental Liability related in any way to the Borrower
or any Subsidiary, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory, whether brought by a third party or by the
Borrower or any other Loan Party, and regardless of whether any Indemnitee is a
party thereto; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses (x) are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the
gross negligence or willful misconduct of such Indemnitee or (y) result from
a claim brought by the Borrower or any other Loan Party against an Indemnitee
for breach in bad faith of such Indemnitee’s obligations hereunder or under any
other Loan Document, if the Borrower or such Loan Party has obtained a final
and nonappealable judgment in its favor on such claim as determined by a court
of competent jurisdiction.

 

(c)  Reimbursement by Lenders.  To the extent that the Borrower for any
reason fails to indefeasibly pay any amount required under subsection (a) or (b) above
to be paid by it to the Administrative Agent (or any sub-agent thereof) or any
of its Related Parties, each Lender severally agrees to pay to the
Administrative Agent (or any such sub-agent) or such Related Party, as the case
may be, such Lender’s Commitment Percentage (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 Administrative Agent (or any such sub-agent) in its
capacity as such or against such Related Party acting for the Administrative
Agent (or any such sub-agent) in connection with such capacity.

 

(d)  Consequential Damages, Etc.  To the fullest extent permitted by applicable
law, the Borrower agrees that it will not assert, and hereby waives, any claim
against any Indemnitee, on any theory of liability, for special, indirect,
consequential, exemplary or punitive damages (as opposed to direct or actual
damages) arising out of, in connection with, or

 

63

 

as a result of this Agreement, any other Loan Document
or any agreement or instrument contemplated hereby, the transactions contemplated
hereby or thereby, any Loan or the use of the proceeds thereof.  No Indemnitee 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 connection with this Agreement or the other
Loan Documents or the transactions contemplated hereby or thereby.

 

(e)  Payments.  All amounts payable under this Section 10.5
shall be due not later than ten Business Days after demand therefor.

 

(f)  Survival.  The agreements in this Section 10.5
shall survive the resignation of the Administrative Agent, the replacement of
any Lender, the termination of the Commitments and the repayment, satisfaction
or discharge of all other obligations hereunder.

 

10.6.        Successors and Assigns; Participations and Assignments.  (a)  This Agreement shall be binding
upon and inure to the benefit of the Borrower, the Lenders, the Administrative
Agent and their respective successors and assigns, except that the Borrower may
not assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of each Lender.

 

(b) 
Any Lender may, in the ordinary course of its commercial banking business and
in accordance with applicable law, at any time sell to one or more banks or
other entities (“Participants”)
participating interests in any Loan owing to such Lender, any Commitment of
such Lender or any other interest of such Lender hereunder and under the other Loan
Documents.  In the event of any such sale
by a Lender of a participating interest to a Participant, such Lender’s
obligations under this Agreement to the other parties to this Agreement shall
remain unchanged, such Lender shall remain solely responsible for the
performance thereof, such Lender shall remain the holder of any such Loan for
all purposes under this Agreement and the other Loan Documents, and the
Borrower and the Administrative Agent shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement and the other Loan Documents.  Any agreement or instrument pursuant to which
a Lender sells such participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement, except as to those
matters listed in the first proviso in Section 10.1(a).  The Borrower agrees that if amounts
outstanding under this Agreement are due or unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of
Default, each Participant shall, to the maximum extent permitted by applicable
law, be deemed to have the right of setoff in respect of its participating
interest in amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as a Lender
under this Agreement; provided
that, in purchasing such participating interest, such Participant shall be
deemed to have agreed to share with the Lenders the proceeds thereof as
provided in Section 10.7(a) as fully as if it were a Lender
hereunder.  The Borrower also agrees that
each Participant shall be entitled to the benefits of Sections 3.10, 3.11
and 3.12 with respect to its participation in the Commitments and the
Loans outstanding from time to time as if it was a Lender; provided
that, in the case of Section 3.11, such Participant shall have
complied with the requirements of said Section and provided,
further,
that no Participant shall be entitled to receive any greater amount pursuant to
any such Section than the transferor Lender

 

64

 

would have been
entitled to receive in respect of the amount of the participation transferred
by such transferor Lender to such Participant had no such transfer occurred.

 

(c) 
Any Lender may, in the ordinary course of its commercial banking business and
in accordance with applicable law, at any time and from time to time assign to
any Lender or any affiliate thereof or, with the consent of each of the
Administrative Agent and, so long as no Event of Default has been continuing
for a period of 30 or more consecutive days, the Borrower (which in each case
shall not be unreasonably withheld or delayed), to an additional bank or
financial institution (an “Assignee”)
all or any part of its rights and obligations under this Agreement and the
other Loan Documents pursuant to an Assignment and Assumption, substantially in
the form of Exhibit E, executed by such Assignee, such assigning
Lender (and, in the case of an Assignee that is not then a Lender or an
Affiliate thereof, by the Administrative Agent and the Borrower) and delivered
to the Administrative Agent for its acceptance and recording in the Register; provided
that, in the case of any such assignment to an additional bank or financial
institution (other than an assignment of all the assigning Lender’s rights and
obligations with respect to the Commitments), the sum of the aggregate
principal amount of the Loans and the aggregate amount of the unused
Commitments being assigned and, if such assignment is of less than all of the
rights and obligations of the assigning Lender, the sum of the aggregate
principal amount of the Loans and the aggregate amount of the unused
Commitments remaining with the assigning Lender are each not less than
$5,000,000 (or such lesser amount as may be agreed to by the Borrower and the
Administrative Agent).  Upon such
execution, delivery, acceptance and recording pursuant to clause (e) below,
from and after the effective date determined pursuant to such Assignment and
Assumption, (x) the Assignee thereunder shall be a party hereto and, to the
extent provided in such Assignment and Assumption, have (in addition to any
such rights and obligations preferably held by it) the rights and obligations
of a Lender hereunder with a Commitment as set forth therein, and (y) the
assigning Lender thereunder shall, to the extent provided in such Assignment
and Assumption, be released from its obligations under this Agreement (and, in
the case of an Assignment and Assumption covering all or the remaining portion
of an assigning Lender’s rights and obligations under this Agreement, such
assigning Lender shall cease to be a party hereto).

 

(d) 
The Administrative Agent, acting solely for this purpose as an agent of the
Borrower, shall maintain at the Administrative Agent’s Office a copy of each
Assignment and Assumption delivered to it and a register (the “Register”) for the recordation of the names
and addresses of the Lenders and the Commitments of, and principal amounts of
the Loans owing to, each Lender from time to time.  The Borrower, the Administrative Agent and
the Lenders may (and, in the case of any Loan or other obligation hereunder not
evidenced by a Note, shall) treat each Person whose name is recorded in the
Register as the owner of a Loan or other obligation hereunder as the owner
thereof for all purposes of this Agreement and the other Loan Documents,
notwithstanding any notice to the contrary. 
Any assignment of any Loan or other obligation hereunder not evidenced
by a Note shall be effective only upon appropriate entries with respect thereto
being made in the Register.  The Register
shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.

 

(e) 
Upon its receipt of an Assignment and Assumption executed by an assigning
Lender and an Assignee (and, in the case of an Assignee that is not then a
Lender or an Affiliate

 

65

 

thereof, by the Administrative Agent and the Borrower,
if required) together with payment by the Lenders parties thereto to the
Administrative Agent of a registration and processing fee of $2,500, the
Administrative Agent shall (i) promptly accept such Assignment and
Assumption and (ii) on the effective date determined pursuant thereto
record the information contained therein in the Register and give notice of
such acceptance and recordation to the Lenders and the Borrower.

 

(f) 
The Borrower authorizes each Lender to disclose to any Participant or Assignee
(each, a “Transferee”) and any
prospective Transferee approved by the Borrower (which approval shall not be
required if an Event of Default has been continuing for a period of 30 or more
consecutive days), which approval, if required, shall not be unreasonably
withheld or delayed, subject to the provisions of Section 10.15,
any and all financial information in such Lender’s possession concerning the
Borrower and its Affiliates which has been delivered to such Lender by or on
behalf of the Borrower pursuant to this Agreement or which has been delivered
to such Lender by or on behalf of the Borrower in connection with such Lender’s
credit evaluation of the Borrower and its Affiliates prior to becoming a party
to this Agreement; provided
that prior to such disclosure each such prospective Transferee shall have
executed a confidentiality agreement substantially in the form of Exhibit F.

 

(g) 
For avoidance of doubt, the parties to this Agreement acknowledge that the
provisions of this Section concerning assignments of Loans and Notes
relate only to absolute assignments and that such provisions do not prohibit
assignments creating security interests, including any pledge or assignment by
a Lender of any Loan or Note to any Federal Reserve Bank in accordance with
applicable law.

 

10.7.        Adjustments; Set-off.  (a)  If any Lender (a “benefited
Lender”) shall at any time receive any payment of all or part of
its Loans, or interest thereon, or receive any collateral in respect thereof
(whether voluntarily or involuntarily, by set–off, pursuant to events or
proceedings of the nature referred to in Section 8(f),
or otherwise), in a greater proportion than any such payment to or collateral
received by any other Lender, if any, in respect of such other Lender’s Loans,
or interest thereon, such benefited Lender shall purchase for cash from the
other Lenders a participating interest in such portion of each such other
Lender’s Loan, or shall provide such other Lenders with the benefits of any
such collateral, or the proceeds thereof, as shall be necessary to cause such
benefited Lender to share the excess payment or benefits of such collateral or
proceeds ratably with each of the Lenders; provided that if all or any
portion of such excess payment or benefits is thereafter recovered from such
benefited Lender, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without interest.

 

(b) 
In addition to any rights and remedies of the Lenders provided by law, each
Lender shall have the right, without prior notice to the Borrower, any such
notice being expressly waived by the Borrower to the extent permitted by
applicable law, upon any amount becoming due and payable by the Borrower
hereunder (whether at the stated maturity, by acceleration or otherwise) to set-off
and appropriate and apply against such amount any and all deposits (general or
special, time or demand, provisional or final), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case whether direct
or indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Lender or any branch or

 

66

 

agency thereof to or for the credit or the account of
the Borrower.  Each Lender agrees
promptly to notify the Borrower and the Administrative Agent after any such set-off
and application made by such Lender; provided that the failure to
give such notice shall not affect the validity of such set-off and application.

 

10.8.        Counterparts. 
This Agreement may be executed by one or more of the parties to this
Agreement on any number of separate counterparts (including by facsimile
transmission), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. 
A set of the copies of this Agreement signed by all the parties shall be
lodged with the Borrower and the Administrative Agent.

 

10.9.        Severability. 
Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

10.10.      Integration. 
This Agreement and the other Loan Documents represent the agreement of
the Borrower, the Administrative Agent and the Lenders with respect to the
subject matter hereof, and there are no promises, undertakings, representations
or warranties by the Administrative Agent or any Lender relative to the subject
matter hereof not expressly set forth or referred to herein or in the other
Loan Documents.

 

10.11.      GOVERNING LAW.  THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

10.12.      Submission To Jurisdiction; Waivers.  The Borrower hereby irrevocably and
unconditionally:

 

(a)  submits for
itself and its property in any legal action or proceeding relating to this Agreement
and the other Loan Documents to which it is a party, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive general
jurisdiction of the Courts of the State of New York, the courts of the United
States of America for the Southern District of New York, and appellate courts
from any thereof;

 

(b)  consents that
any such action or proceeding may be brought in (or removed to) such courts and
waives any objection that it may now or hereafter have to the venue of any such
action or proceeding in any such court or that such action or proceeding was
brought in an inconvenient court and agrees not to plead or claim the same;

 

(c)  agrees that
service of process in any such action or proceeding may be effected by mailing
a copy thereof by registered or certified mail (or any substantially similar
form of mail), postage prepaid, to the Borrower at its address determined
pursuant to Section 10.2(a) or at such other address of which
the Administrative Agent shall have been notified pursuant thereto;

 

67

 

(d)  agrees that
nothing herein shall affect the right to effect service of process in any other
manner permitted by law or shall limit the right to sue in any other
jurisdiction; and

 

(e)  waives, to the
maximum extent not prohibited by law, any right it may have to claim or recover
in any legal action or proceeding referred to in this Section any special,
exemplary, punitive or consequential damages.

 

10.13.      Acknowledgements.  The Borrower hereby acknowledges that:

 

(a)  it has been
advised by counsel in the negotiation, execution and delivery of this Agreement
and the other Loan Documents;

 

(b)  neither the
Administrative Agent nor any Lender has any fiduciary relationship with or duty
to the Borrower arising out of or in connection with this Agreement or any of
the other Loan Documents, and the relationship between Administrative Agent and
Lenders, on one hand, and the Borrower, on the other hand, in connection
herewith or therewith is solely that of debtor and creditor; and

 

(c)  no joint
venture is created hereby or by the other Loan Documents or otherwise exists by
virtue of the transactions contemplated hereby among the Lenders or among the
Borrower and the Lenders.

 

10.14.      WAIVERS OF JURY
TRIAL.  TO THE EXTENT PERMITTED BY
LAW, THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN.

 

10.15.      Confidentiality.  Each Lender agrees to keep confidential any
written or oral information (a) provided to it by or on behalf of the
Borrower or any Subsidiary pursuant to or in connection with this Agreement or (b) obtained
by such Lender based on a review of the books and records of the Borrower or
any Subsidiary; provided
that nothing herein shall prevent any Lender from disclosing any such
information (i) to the Administrative Agent or any other Lender or to any
Person who evaluates, approves, structures or administers the Loans on behalf
of a Lender and who is subject to this confidentiality provision, (ii) to
any Transferee or prospective Transferee which agrees in writing to comply with
the provisions of this Section, (iii) to its employees, directors, agents,
attorneys, accountants and other professional advisors who are directly
involved in the execution of the transactions contemplated by this Agreement
and have been informed of their obligations under this Section 10.15,
(iv) upon the request or demand of any Governmental Authority having
jurisdiction over such Lender, (v) in response to any order of any court
or other Governmental Authority or as may otherwise be required pursuant to any
Requirement of Law (notice of which shall be provided promptly to the
Borrower), (vi) which has been publicly disclosed other than in breach of
this Agreement, or (vii) in connection with the exercise of any remedy
hereunder.

 

10.16.      Effect of Amendment and Restatement.  This Agreement amends and restates the
Existing Credit Agreement in its entirety. 
After the effectiveness hereof pursuant to

 

68

 

Section 5, the provisions of
the Existing Credit Agreement shall be of no further force or effect, except
for provisions thereof that by their express terms survive termination thereof.

 

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

 

69

 

IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered by their proper and duly authorized officers as of the day and year
first above written.

 

 

	
   

  	
   

  	
  AFFILIATED MANAGERS GROUP, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Darrell W. Crate

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Executive Vice President and

  Chief Financial Officer

  

 

Signature Page to Credit Agreement

 

S-1

 

	
   

  	
   

  	
  BANK OF AMERICA, N.A., as Administrative

  Agent, as Swingline Lender and as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ George Kinne

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Vice President

  

 

S-2

 

	
   

  	
   

  	
  JPMORGAN CHASE BANK, N.A., as

  Co-Syndication Agent and as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jeanne O’Connell Horn

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Vice President

  

 

S-3

 

	
   

  	
   

  	
  THE BANK OF NEW YORK, as Co-Syndication

  Agent and as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Michael Pensari

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Vice President

  

 

S-4

 

	
   

  	
   

  	
  U.S. BANK NATIONAL ASSOCIATION, as

  Co-Documentation Agent and as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Monika K. Kump

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Assistant Vice President

  

 

S-5

 

	
   

  	
   

  	
  ING CAPITAL, LLC, as Co-Documentation Agent

  and as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Kunduck Moon

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Managing Director

  

 

S-6

 

	
   

  	
   

  	
  CALYON NEW YORK BRANCH, as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Sebastion Rocco

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Gina Harth-Cryde

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Managing Director

  

 

S-7

 

	
   

  	
   

  	
  CITIZENS BANK OF MASSACHUSETTS, as a

  Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Cindy Chen

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Senior Vice President

  

 

S-8

 

	
   

  	
   

  	
  LASALLE BANK, NATIONAL ASSOCIATION,

  as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Amy K. Weidner

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Vice President

  

 

S-9

 

	
   

  	
   

  	
  THE BANK OF NOVA SCOTIA, as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Todd S. Meller

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Managing Director

  

 

S-10

 

	
   

  	
   

  	
  TD BANKNORTH, N.A., as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Linda A. Moulton

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Vice President

  

 

S-11

 

	
   

  	
   

  	
  UNION BANK OF CALIFORNIA, N.A., as a

  Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Clifford F. Cho

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Vice President

  

 

S-12

 

	
   

  	
   

  	
  ALLIED IRISH BANKS PLC, as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Anthony O’Reilly

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Senior Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Germaine Reusch

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Director

  

 

S-13

 

	
   

  	
   

  	
  HARRIS N.A., as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Scott M. Ferris

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Managing Director

  

 

S-14

 

	
   

  	
   

  	
  ROYAL BANK OF CANADA, as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Evan Glass

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Authorized Signatory

  

 

S-15

 

	
   

  	
   

  	
  SOCIỀTỀ GỀNỀRALE, as a
  Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Barry Groveman

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Vice President

  

 

S-16

 

	
   

  	
   

  	
  CHANG HWA COMMERCIAL BANK, LTD., as

  a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jim C.Y. Chen

  	
   

  
	
   

  	
   

  	
   

  	
  Title: VP & General Manager

  

 

S-17

 

	
   

  	
   

  	
  SOVEREIGN BANK, as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Kenneth G. Ahrens

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Senior Vice President

  

 

S-18

 

	
   

  	
   

  	
  COMERICA BANK, as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Stacy V. Judd

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Vice President

  

 

S-19

 

	
   

  	
   

  	
  MALAYAN BANKING BERHAD, NEW YORK

  BRANCH, as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Fauzi Zulkifli

  	
   

  
	
   

  	
   

  	
   

  	
  Title: General Manager

  

 

S-20EXHIBIT 10.1

 

SECURITIES PURCHASE AGREEMENT

 

This Securities
Purchase Agreement (this “Agreement”) is dated as of December 5, 2005,
among Wave Systems Corp., a Delaware corporation (the “Company”), and
each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and collectively the “Purchasers”);
and

 

WHEREAS, subject
to the terms and conditions set forth in this Agreement, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not
jointly, desires to purchase from the Company in the aggregate, up to
$3,500,000 of shares of Common Stock and Warrants pursuant to an effective
Registration Statement on Form S-3, file no. 333-114476.

 

NOW, THEREFORE, IN
CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration the receipt and adequacy of which are
hereby acknowledged, the Company and each Purchaser agree as follows:

 

ARTICLE I.

DEFINITIONS

 

1.1           Definitions.  In addition to the terms defined elsewhere in
this Agreement, for all purposes of this Agreement, the following terms have
the meanings indicated in this Section 1.1:

 

“Affiliate” means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is under
common control with a Person as such terms are used in and construed under Rule
144.  With respect to a Purchaser, any
investment fund or managed account that is managed on a discretionary basis by
the same investment manager as such Purchaser will be deemed to be an Affiliate
of such Purchaser.

 

“Closing” means the closing of the purchase and sale of the
Securities pursuant to Section 2.1.

 

“Closing Date” means the Trading Day when all conditions
precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and
(ii) the Company’s obligations to deliver the Securities have been satisfied or
waived.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock”
means the Class A common stock of the Company, par value $0.01 per share, and
any other class of securities into which such common stock may hereafter have
been reclassified or changed into.

 

“Common Stock
Equivalents” means any securities of the Company or the Subsidiaries which
would entitle the holder thereof to acquire at any time Common Stock, including
without limitation, any debt, preferred stock, rights, options, warrants or

 

1

 

other instrument that is
at any time convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.

 

“Company
Counsel” means Bingham McCutchen LLP.

 

“Disclosure
Schedules” means the Disclosure Schedules of the Company delivered
concurrently herewith.

 

“Effective Date” means the date that the Registration Statement
was first declared effective by the Commission.

 

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

 

“Exempt
Issuance” means the issuance of (a) shares of Common Stock or options to
employees, officers or directors of the Company pursuant to any stock or option
plan duly adopted by a majority of the non-employee members of the Board of
Directors of the Company or a majority of the members of a committee of
non-employee directors established for such purpose, (b) securities upon the
exercise of or conversion of any securities issued hereunder, convertible
securities, options or warrants issued and outstanding on the date of this Agreement,
provided that such securities have not been amended since the date of this
Agreement to increase the number of such securities or to decrease the exercise
or conversion price of any such securities, other than by express mechanics
contained in such convertible securities, options or warrants prior to the date
of this Agreement,  (c) securities issued
pursuant to acquisitions or strategic transactions, including such a
transaction involving Wavexpress, Inc., provided any such issuance shall only
be to a Person which is, itself or through its subsidiaries, an operating
company in a business synergistic with the business of the Company and in which
the Company receives benefits in addition to the investment of funds, but shall
not include a transaction in which the Company is issuing securities primarily
for the purpose of raising capital or to an entity whose primary business is
investing in securities; and (d) up to, in the aggregate, 250,000 shares of
Common Stock or Common Stock Equivalents in any 12 month period to consultants
as payment for services rendered.

 

“FW”
means Feldman Weinstein, LLP with offices located at 420 Lexington Avenue,
Suite 2620, New York, new York 10170-0002.

 

“Liens” means a lien, charge, security interest, encumbrance,
right of first refusal, preemptive right or other restriction.

 

“Material Adverse Effect” shall have the meaning ascribed to
such term in Section 3.1(b).

 

“Per Share Purchase Price” equals $0.585, subject
to adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur
after the date of this Agreement.

 

2

 

“Person” means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.

 

“Pre-Notice” shall have the meaning ascribed to such term in
Section 4.11.

 

“Proceeding” means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.

 

“Registration Statement” means the registration statement of the
Company, Commission File No. 333-114476 covering the sale to the Purchasers of
the Shares, the Warrants and the Warrant Shares.

 

“Required Approvals” shall have the meaning ascribed to such
term in Section 3.1(e).

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.

 

“Securities” means the Shares, the Warrants and the Warrant
Shares.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Shares” means the shares of Common Stock issued or issuable to
each Purchaser pursuant to this Agreement.

 

“Subscription Amount” means, as to each Purchaser, the amounts
set forth below such Purchaser’s signature block on the signature page hereto,
in the United States dollars and in immediately available funds.

 

“Subsequent Financing” shall have the meaning ascribed to such
term in Section 4.11.

 

“Subsequent Financing Notice” shall have the meaning ascribed to
such term in Section 4.11.

 

“Subsidiary” shall mean the subsidiaries of the Company, if any,
set forth in the Company’s most recent Annual Report on Form 10-K.

 

“Trading Day” means a day on which the Common Stock is traded on
a Trading Market.

 

“Trading Market” means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in question:
the Nasdaq

 

3

 

SmallCap Market, the American Stock Exchange, the New York Stock
Exchange, the Nasdaq National Market or the OTC Bulletin Board.

 

“Transaction Documents” means this Agreement and the Warrants
and any other documents or agreements executed in connection with the transactions
contemplated hereunder.

 

“Warrants” means collectively the Common Stock purchase
warrants, in the form of Exhibit B delivered to the Purchasers at the
Closing in accordance with Section 2.2(a) hereof, which Warrants shall be
exercisable immediately and have a term of exercise equal to 6 months.

 

“Warrant Shares” means the shares of Common Stock issuable upon
exercise of the Warrants.

 

ARTICLE II.

PURCHASE AND SALE

 

2.1           Closing.  On the Closing Date, each Purchaser shall
purchase from the Company, severally and not jointly with the other Purchasers,
and the Company shall issue and sell to each Purchaser a number of Shares equal
to such Purchaser’s Subscription Amount divided by the Per Share Purchase Price
and Warrants.  The aggregate Subscription
Amounts for Shares sold hereunder shall be up to $3,500,000.  Upon satisfaction of the conditions set forth
in Section 2.2, the Closing shall occur at the offices of Company Counsel or
such other location as the parties shall mutually agree.

 

2.2           Deliveries.  

 

(a)   On
or prior to the Closing Date, the Company shall deliver or cause to be
delivered to each Purchaser the following:

 

(i)                this
Agreement duly executed by the Company;

 

(ii)               a
prospectus supplement to the Registration Statement;

 

(iii)              the
receipt by each Purchaser, via the DTC DWAC system, of the number of Shares
equal to such Purchaser’s Subscription Amount divided by the Per Share Purchase
Price, registered in the name of directed by such Purchaser;

 

(iv)              a
Warrant registered in the name of such Purchaser to purchase up to a number of
shares of Common Stock equal to 312,500 for each $1,000,000 of Subscription
Amount of such Purchaser’s (pro-rata for lesser amounts) with an exercise price
equal to $0.80, subject to adjustment therein;

 

(v)               an
officer’s certificate of the Company’s Chief Executive Officer or Chief
Financial Officer, in form reasonably acceptable to the Purchasers, certifying
the continuing accuracy of the Company’s representations and

 

4

 

warranties made in this Agreement and the Company’s
performance of the covenants to be performed by it pursuant to this Agreement
at or prior to Closing; and

 

(vi)              a
legal opinion of Company Counsel, in the form of Exhibit A attached
hereto.

 

(b)           On
or prior to the Closing Date, each Purchaser shall deliver or cause to be
delivered to the Company the following:

 

(i)                this
Agreement duly executed by such Purchaser; and

 

(ii)               such
Purchaser’s Subscription Amount by wire transfer to the account as specified in
writing by the Company.

 

2.3           Closing
Conditions. 

 

(a)           The
obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:

 

(i)                the accuracy in all material respects when made and
on the Closing Date of the representations and warranties of the Purchasers
contained herein;

 

(ii)               all
obligations, covenants and agreements of the Purchasers required to be
performed at or prior to the Closing Date shall have been performed; and

 

(iii)              the delivery by the Purchasers of the items set forth
in Section 2.2(b) of this Agreement.

 

(b)           The respective obligations of the Purchasers
hereunder in connection with the Initial Closing are subject to the following
conditions being met:

 

(i)                the accuracy in all material respects on the Closing
Date of the representations and warranties of the Company contained herein;

 

(ii)               all
obligations, covenants and agreements of the Company required to be performed
at or prior to the Closing Date shall have been performed;

 

(iii)              the delivery by the Company of the items set forth in
Section 2.2(a) of this Agreement;

 

(iv)              there shall have been no Material Adverse Effect with
respect to the Company since the date hereof, which shall not have been
reasonably cured by the Company; and

 

5

 

(v)               from
the date hereof to the Closing Date, trading in the Common Stock shall not have
been suspended by the Commission (except for any suspension of trading of
limited duration agreed to by the Company, which suspension shall be terminated
prior to the Closing), and, at any time prior to the Closing Date, trading in
securities generally as reported by Bloomberg Financial Markets shall not have
been suspended or limited, or minimum prices shall not have been established on
securities whose trades are reported by such service, or on any Trading Market,
nor shall a banking moratorium have been declared either by the United States
or New York State authorities nor shall there have occurred any material outbreak
or escalation of hostilities or other national or international calamity of
such magnitude in its effect on, or any material adverse change in, any
financial market which, in each case, in the reasonable judgment of each
Purchaser, makes it impracticable or inadvisable to purchase the Shares at the
Closing.

 

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

 

3.1           Representations
and Warranties of the Company. 
Except as set forth under the corresponding section of the Disclosure
Schedules which Disclosure Schedules shall be deemed a part hereof, the Company
hereby makes the representations and warranties set forth below to each
Purchaser:

 

(a)           Organization
and Qualification.  Each of the
Company and the Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted.  Neither the
Company nor any Subsidiary is in violation or default of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. 
Each of the Company and the Subsidiaries is duly qualified to conduct
business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not have or
reasonably be expected to result in (i) a material adverse effect on the
legality, validity or enforceability of any of the Transaction documents, (ii)
a material adverse effect on the results of operations, assets, business,
prospects or financial condition of the Company and the Subsidiaries, taken as
a whole, or (iii) a material adverse effect on the Company’s ability to perform
in any material respect on a timely basis its obligations under any of the
Transaction Documents (any of (i), (ii) or (iii), a “Material Adverse Effect”)
and no Proceeding has been instituted in any such jurisdiction revoking,
limiting or curtailing or seeking to revoke, limit or curtail such power and
authority or qualification.

 

6

 

(b)           Authorization;
Enforcement.  The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by any of the Transaction Documents and otherwise to
carry out its obligations thereunder. 
The execution and delivery of any of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated thereby
have been duly authorized by all necessary action on the part of the Company
and no further action is required by the Company in connection therewith other
than in connection with the Required Approvals. 
Each Transaction Documents has been duly executed by the Company and,
when delivered in accordance with the terms hereof and thereof, will constitute
the valid and binding obligation of the Company enforceable against the Company
in accordance with its terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally and (ii) as limited by
laws relating to the availability of specific performance, injunctive relief or
other equitable remedies.

 

(c)           No
Conflicts.  The execution, delivery
and performance of each of the Transaction Documents by the Company, the
issuance and sale of the Shares and the consummation by the Company of the
other transactions contemplated hereby and thereby do not and will not (i)
conflict with or violate any provision of the Company’s or any Subsidiary’s
certificate or articles of incorporation, bylaws or other organizational or
charter documents, or (ii) conflict with, or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, result
in the creation of any Lien upon any of the properties or assets of the Company
or any Subsidiary, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of, any agreement, credit facility, debt or other instrument (evidencing a
Company or Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or asset of the
Company or any Subsidiary is bound or affected, or (iii) subject to the
Required Approvals, conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound or affected, or (iv)
conflict with or violate the terms of any agreement by which the Company or any
Subsidiary is bound or to which any property or asset of the Company or any
Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), such as could not have or reasonably be expected to result in a Material
Adverse Effect.

 

(d)           Filings,
Consents and Approvals.  The Company
is not required to obtain any consent, waiver, authorization or order of, give
any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of each
of the Transaction Documents, other than (i) the Notification Form: Listing of
Additional Shares required by the NASDAQ Stock Market, (ii) filings required
pursuant to Section 4.3 of this Agreement, and (iii) such filings as are
required to be made under applicable state securities laws (collectively, the “Required
Approvals”).

 

7

 

(e)           Issuance
of the Securities.  The Securities
are duly authorized and, when issued and paid for in accordance with each of
the Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company.  The Company has reserved from its duly
authorized capital stock the maximum number of shares of Securities issuable
pursuant to each of the Transaction Documents.

 

(f)            Capitalization.  The Company has issued and outstanding
87,358,848 shares of Common Stock. The capitalization of the Company is as
described in the Company’s most recent periodic report filed with the
Commission.  The Company has not issued
any capital stock since such filing other than pursuant to the exercise of
employee stock options under the Company’s stock option plans, the issuance of
shares of Common Stock to employees pursuant to the Company’s employee stock
purchase plan and pursuant to the conversion or exercise of outstanding Common
Stock Equivalents.  No Person has any
right of first refusal, preemptive right, right of participation, or any
similar right to participate in the transactions contemplated by this
Agreement.  The issue and sale of the
Shares will not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Purchasers) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities. No further approval or
authorization of any stockholder, the Board of Directors of the Company or
others is required for the issuance and sale of the Shares.

 

(g)           Certain
Fees.  No brokerage or finder’s fees
or commissions are or will be payable by the Company to any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by this Agreement,
other than a fee to Corpfin Inc. in connection with the sale of the Shares at
the Closing.  The Purchasers shall have
no obligation with respect to any fees or with respect to any claims made by or
on behalf of other Persons for fees of a type contemplated in this Section that
may be due in connection with the transactions contemplated by this Agreement.

 

(h)           Disclosure.  The Company confirms that, neither the
Company nor any officer, director or employee of the Company acting on its
behalf has provided any of the Purchasers or their agents or counsel with any
information that constitutes or might constitute material, non-public
information.   The Company understands
and confirms that the Purchasers will rely on the foregoing representations and
covenants in effecting transactions in securities of the Company.  All disclosure provided to the Purchasers
regarding the Company, its business and the transactions contemplated hereby
furnished by or on behalf of the Company, including the prospectus supplement
delivered at the Closing, with respect to the representations and warranties
made herein are true and correct with respect to such representations and
warranties and do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. The Company acknowledges and agrees that no Purchaser makes or has
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 3.2
hereof.

 

8

 

(i)            Effective
Registration Statement.  The
Registration Statement has been declared effective by the Commission, is
effective as of the date hereof, and the Company knows of no reason why the
Registration Statement will not continue to remain effective for the
foreseeable future.

 

(j)            Acknowledgment
Regarding Purchasers’ Purchase of Shares. 
The Company acknowledges and agrees that each of the Purchasers is
acting solely in the capacity of an arm’s length purchaser with respect to this
Agreement and the transactions contemplated hereby.  The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by any Purchaser or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to the Purchasers’
purchase of the Shares.  The Company
further represents to each Purchaser that the Company’s decision to enter into
this Agreement has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives.

 

(k)           Approvals.  The issuance and listing on the Nasdaq
National Market of the Shares requires no further approvals, including but not
limited to, the approval of shareholders.

 

(l)            Acknowledgement Regarding
Purchasers’ Trading Activity. 
Anything in each of the Transaction Documents or elsewhere herein to the
contrary notwithstanding, it is understood and agreed by the Company (i) that none of the Purchasers have been asked
to agree, nor has any Purchaser agreed, to desist from purchasing or selling,
long and/or short, securities of the Company, or “derivative” securities based
on securities issued by the Company or to hold the Securities for any specified
term; (ii) that past or future open market or other transactions by any
Purchaser, including Short Sales, and specifically including, without
limitation, Short Sales or “derivative” transactions, before or after the
closing of this or future private placement transactions, may negatively impact
the market price of the Company’s publicly-traded securities; (iii) that any
Purchaser, and counter parties in “derivative” transactions to which any such
Purchaser is a party, directly or indirectly, presently may have a “short”
position in the Common Stock, and (iv) that each Purchaser shall not be deemed
to have any affiliation with or control over any arm’s length counter-party in
any “derivative” transaction. The Company further understands and acknowledges that (a) one or more
Purchasers may engage in hedging activities at various times during the period
that the Securities are outstanding, including, without limitation, during the
periods that the value of the Warrant Shares deliverable with respect to
Securities are being determined and (b) such hedging activities (if any) could
reduce the value of the existing stockholders’ equity interests in the Company
at and after the time that the hedging activities are being conducted.  The Company acknowledges that such
aforementioned hedging activities do not constitute a breach of any of the
Transaction Documents.

 

(m)          Manipulation
of Price.  The Company has not, and to its knowledge no one acting on
its behalf has, (i) taken, directly or indirectly, any action designed to cause

 

9

 

or to result in the stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of
any of the Securities, (ii) sold, bid for, purchased, or, paid any compensation
for soliciting purchases of, any of the Securities (other than for the
placement agent’s placement of the Securities), or (iii) paid or agreed to pay
to any person any compensation for soliciting another to purchase any other
securities of the Company.

 

3.2           Representations and Warranties of the
Purchasers.  Each Purchaser hereby, for
itself and for no other Purchaser, represents and warrants as of the date
hereof and as of the Closing Date to the Company as follows:

 

(a)           Organization;
Authority.  Such Purchaser is an
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization with full right, corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by this Agreement and otherwise to carry out its obligations
hereunder and thereunder. The execution, delivery and performance by such
Purchaser of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate or similar action on the part of such
Purchaser.  This Agreement has been duly
executed by such Purchaser, and when delivered by such Purchaser in accordance
with the terms hereof, will constitute the valid and legally binding obligation
of such Purchaser, enforceable against it in accordance with its terms, except
(i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.

 

(b)           Purchaser
Representation.  Such Purchaser does
not have any agreement or understanding, directly or indirectly, with any
Person to distribute any of the Securities. Such Purchaser is not required to
be registered as a broker-dealer under Section 15 of the Exchange Act.

 

(c)           Short
Sales.  Each Purchaser represents
that from the date that it was approached to participate in the transaction
contemplated by this Agreement through the moment this transaction is publicly
disclosed pursuant to Section 4.3 or otherwise, neither it nor any of its
Affiliates over which Purchaser exercises investment discretion have made any
net short sales of, or granted any option for the purchase of or entered into
any hedging or similar transaction with the same economic effect as a net short
sale, in the Common Stock.

 

(d)           Securities
Laws.  If a Purchaser engaged in any
of the trading activities described in Section 3.1(l) above, such Purchaser did
so in compliance with federal securities laws, including Regulation M.

 

The Company
acknowledges and agrees that each Purchaser does not make or has not made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.

 

10

 

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

 

4.1           No
Legends.  If the Shares or Warrant
Shares are issued in certificated form, such certificates shall not contain any
legend restricting their transferability by the Purchaser. The Company shall
cause its counsel to issue a legal opinion to the Company’s transfer agent if
required by the Company’s transfer agent to effect a transfer of any of the
Shares or Warrant Shares. The Company shall not give any instructions to its
transfer agent which would impair the free transferability of the Shares or
Warrant Shares by any Purchaser.(a)

 

4.2           Furnishing
of Information.  As long as any
Purchaser owns Securities, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
the Exchange Act.  As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell such Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.

 

4.3           Securities
Laws Disclosure; Publicity.  The
Company shall, by 9:00 a.m. Eastern time on the Trading Day immediately
following the date hereof issue a press release disclosing the material terms
of each of the Transaction Documents and within 2 Trading Days of the date
hereof, file a Current Report on Form 8-K which attaches as exhibits all
agreements relating to this transaction, in each case reasonably acceptable to
each Purchaser, if such Purchaser is readily available to review such public
disclosure in a timely manner, disclosing the material terms of the
transactions contemplated hereby. 
Notwithstanding the foregoing, the Company shall not publicly disclose
the name of any Purchaser, or include the name of any Purchaser in any filing
with the Commission or any regulatory agency or Trading Market, except as set
forth in the exhibits to be attached to the Form 8-K contemplated above,
without the prior written consent of such Purchaser (such consent not to be
unreasonably withheld), except (i) as required by federal securities law and
(ii) to the extent such disclosure is required by law or Trading Market
regulations, in which case the Company shall provide the Purchasers with prior
notice of such disclosure permitted under subclause (i) or (ii).

 

4.4           Shareholders
Rights Plan.  No claim will be made
or enforced by the Company or, to the knowledge of the Company, any other
Person that any Purchaser is an “Acquiring Person” under any shareholders
rights plan or similar plan or arrangement in effect or hereafter adopted by
the Company, or that any Purchaser could be deemed to trigger the provisions of
any such plan or arrangement, by virtue of receiving Securities under any of
the Transaction Documents. The Company shall conduct its business in a manner
so that it will not become subject to the Investment Company Act.

 

4.5           Non-Public
Information.  The Company covenants
and agrees that neither it nor any other Person acting on its behalf will
provide any Purchaser or its agents or counsel with any

 

11

 

information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser shall have executed a written
agreement regarding the confidentiality and use of such information.  The Company understands and confirms that
each Purchaser shall be relying on the foregoing representations in effecting
transactions in securities of the Company.

 

4.6           Reimbursement.  If any Purchaser becomes involved in any
capacity in any Proceeding by or against any Person who is a stockholder of the
Company (except as a result of sales, pledges, margin sales and similar
transactions by such Purchaser to or with any current stockholder), solely as a
result of such Purchaser’s acquisition of the Shares under the Transaction
Documents, the Company will reimburse such Purchaser for its reasonable legal
and other expenses (including the cost of any investigation preparation and
travel in connection therewith) incurred in connection therewith, as such
expenses are incurred.  The reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same
terms and conditions to any Affiliates of the Purchasers who are actually named
in such action, proceeding or investigation, and partners, directors, agents,
employees and controlling persons (if any), as the case may be, of the Purchasers
and any such Affiliate, and shall be binding upon and inure to the benefit of
any successors, assigns, heirs and personal representatives of the Company, the
Purchasers and any such Affiliate and any such Person.  The Company also agrees that neither the
Purchasers nor any such Affiliates, partners, directors, agents, employees or
controlling persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company solely as a result of
acquiring the Securities under the Transaction Documents.

 

4.7           Indemnification
of Purchasers.  Subject to the
provisions of this Section 4.9, the Company will indemnify and hold each
Purchaser and its directors, officers, shareholders, members, partners,
employees and agents (and any other Persons with a functionally equivalent role
of a Person holding such titles notwithstanding a lack of such title or any
other title), each Person who controls such Purchaser (within the meaning of
Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents, members, partners or employees (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such controlling
persons (each, a “Purchaser Party”) harmless from any and all losses,
liabilities, obligations, claims (each, a “Purchaser Party”) harmless
from any and all losses, liabilities, obligations, claims, contingencies,
damages, costs and expenses, including all judgments, amounts paid in
settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such Purchaser Party may suffer or incur as a result of
or relating to (a) any breach of any of the representations, warranties, covenants
or agreements made by the Company in the Transaction Documents or (b) any
action instituted against a Purchaser, or any of them or their respective
Affiliates, by any stockholder of the Company who is not an Affiliate of such
Purchaser, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is based upon a breach of such
Purchaser’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser may have with any
such stockholder or any violations by the Purchaser of state or federal
securities laws or any conduct by such Purchaser which constitutes fraud, gross
negligence, willful misconduct or malfeasance). 
If any action shall be brought against any Purchaser Party in respect of
which indemnity may be sought pursuant to the Transaction Documents, such
Purchaser Party shall promptly notify the Company in writing, and the Company
shall have the right to assume the

 

12

 

defense thereof with counsel of its own choosing.  Any Purchaser Party shall have the right to
employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Purchaser Party except to the extent that (i) the employment thereof has
been specifically authorized by the Company in writing, (ii) the Company has
failed after a reasonable period of time to assume such defense and to employ
counsel or (iii) in such action there is, in the reasonable opinion of such
separate counsel, a material conflict on any material issue between the
position of the Company and the position of such Purchaser Party.  The Company will not be liable to any
Purchaser Party under the Transaction Documents (i) for any settlement by a
Purchaser Party effected without the Company’s prior written consent, which
shall not be unreasonably withheld or delayed; or (ii) to the extent, but only
to the extent that a loss, claim, damage or liability is attributable to any
Purchaser Party’s breach of any of the representations, warranties, covenants
or agreements made by the Purchasers in this Agreement.

 

4.8           Reservation
of Common Stock. As of the date hereof, the Company has reserved and the
Company shall continue to reserve and keep available at all times, free of
preemptive rights, a sufficient number of shares of Common Stock for the
purpose of enabling the Company to issue Securities pursuant to the Transaction
Documents including the Warrant Shares pursuant to any exercise of the
Warrants. 

 

4.9           Listing
of Common Stock.  The Company hereby
agrees to use best efforts to maintain the listing of the Common Stock on a
Trading Market. The Company further agrees, if the Company applies to have the
Common Stock traded on any other Trading Market, it will include in such
application all of the Shares and Warrant Shares and will take such other
action as is necessary to cause all of the Shares and the Warrant Shares to be
listed on such other Trading Market as promptly as possible.  The Company will take all action reasonably
necessary to continue the listing and trading of its Common Stock on a Trading
Market and will comply in all respects with the Company’s reporting, filing and
other obligations under the bylaws or rules of the Trading Market.

 

4.10         Equal
Treatment of Purchasers.  No
consideration shall be offered or paid to any person to amend or consent to a
waiver or modification of any provision of the Transaction Documents unless the
same consideration is also offered to all of the parties to the Transaction
Documents.  For clarification purposes,
this provision constitutes a separate right granted to each Purchaser by the
Company and negotiated separately by each Purchaser, and is intended to treat
for the Company the Purchasers as a class and shall not in any way be construed
as the Purchasers acting in concert or as a group with respect to the purchase,
disposition or voting of Securities or otherwise.

 

4.11         Participation
in Future Financing.  

 

(a)           From the
date hereof until the date that is the earlier of (i) the 120th day
following the Closing Date and (ii) the date that the Warrants are no longer
outstanding, upon any proposed financing by the Company or any of its
Subsidiaries of Common Stock or Common Stock Equivalents to be issued pursuant
to the Registration Statement or, if permitted by the securities laws, any
other effective shelf registration statement of the Company for the issuance or
sale of securities by the Company (a “Subsequent

 

13

 

Financing”), each Purchaser shall
have the right to participate (A) in not less than an amount equal to the
lesser of (y) $3,500,000 less any amounts subscribed to in the Subsequent
Financing by the other Purchasers and (z) the Subsequent Financing less any
amounts subscribed to in the Subsequent Financing by the other Purchasers and
(B) up to an amount equal to 100% of the Subsequent Financing; provided,
however, the 120 day period set forth in this Section 4.11(a)(i) shall
be extended for the number of Trading Days during such period in which (i)
trading in the Common Stock is suspended by any Trading Market, or (ii) the
Registration Statement is not effective.

 

(b)           At least 2
full Trading Days prior to the closing of the Subsequent Financing with any
third party, the Company shall deliver to each Purchaser a written notice of
its intention to effect such Subsequent Financing (“Pre-Notice”), which
Pre-Notice shall ask such Purchaser if it wants to review the details of such
financing (such additional notice, a “Subsequent Financing Notice”). 
Upon the request of a Purchaser, and only upon a request by such Purchaser, for
a Subsequent Financing Notice, the Company shall promptly, but no later than 1
Trading Day after such request, deliver a Subsequent Financing Notice to such
Purchaser.  The Subsequent Financing Notice shall describe in reasonable
detail the proposed terms of such Subsequent Financing, the amount of proceeds
intended to be raised thereunder and attached to which shall be a term sheet or
similar document relating thereto.

 

(c)           Any
Purchaser desiring to participate in such Subsequent Financing must provide
written notice to the Company by not later than 5:30 p.m. (New York City time)
on the 2nd full Trading Day after all of the Purchasers have
received the Pre-Notice that the Purchaser is willing to participate in the
Subsequent Financing, the amount of the Purchaser’s participation, and that the
Purchaser has such funds ready, willing, and available for investment on the
terms set forth in the Subsequent Financing Notice.  If the aggregate subscriptions of all the
Purchasers in the new Subsequent Financing are less than $3,500,000, the
Company shall notify the participating Purchasers of the shortfall and provide
such Purchasers 1 full Trading Day to revise their participation amounts to
meet the minimum requirement.  If the
Company receives no notice from a Purchaser at or before 5:30 p.m. (New York
City time) on such 2nd full Trading Day after all the Purchasers
have received the Pre-Notice such Purchaser shall be deemed to have notified
the Company that it does not elect to participate.  If by 5:30 p.m. (New York City time) on the 1st
Trading Day after the Company provides the participating Purchasers an
opportunity to increase their respective subscriptions the Purchasers have not
notified the company of elections to purchase additional amounts such that the
aggregate subscription of all participating Purchasers in the Subsequent Financing
is at least $3,500,000, all Purchasers shall be deemed to have notified the
Company that they do not elect to participate.

 

(d)           If by 5:30
p.m. (New York City time) on the 2nd full Trading Day after all of
the Purchasers have received the Pre-Notice (or, in the case of an
under-subscription, by 5:30 p.m. (New York City time) on the 1st
Trading Day after the Company provides the participating Purchasers notice of
an under-subscription), notifications by the Purchasers of their willingness to
participate for at least the minimum required pursuant to Section 4.11(a) in
the Subsequent Financing (or to cause their designees to participate)

 

14

 

is, in the aggregate, less than the total amount of
the Subsequent Financing, then the Company may effect the remaining portion of
such Subsequent Financing with any third party on terms that are not
substantially more favorable to the investors than the terms set forth in the
Subsequent Financing Notice.

 

(e)           If by 5:30
p.m. (New York City time) on the 2nd full Trading Day after all of
the Purchasers have received the Pre-Notice, the Company receives responses to
a Subsequent Financing Notice from Purchasers seeking to purchase more than the
aggregate amount of the Subsequent Financing, each such Purchaser shall have
the right to purchase, the greater of (a) their Pro Rata Portion (as defined
below) of the Subsequent Financing and (b) the difference between the
Subsequent Financing and the aggregate amount of participation by all other
Purchasers. “Pro Rata Portion” is the ratio of (x) the Subscription
Amount of Securities purchased on the Closing Date by a Purchaser participating
under this Section 4.11 and (y) the sum of the aggregate Subscription Amounts
of Securities purchased on the Closing Date by all Purchasers participating
under this Section 4.11.

 

(f)            The
closing of any Subsequent Financing in which the Purchasers participate under
this Section 4.11 shall be held not later than the 5th full Trading
Day after the date of the Pre-Notice (subject to mutually satisfactory
documentation being completed in a reasonable period to time prior thereto)
provided that if a participating Purchaser fails to purchase its elected
portion of the Subsequent Financing at such closing and the other participants,
on reasonable notice from the Company, fail to agree to purchase the minimum
aggregate amount required by Section 4.11(a) at such closing, the participation
rights under this Section 4.11 shall terminate and the Company may thereafter
effect the entire Subsequent Financing with any third party on terms that are
not substantially more favorable to the investors than the terms set forth in
the Subsequent Financing Notice.

 

(g)           The
Company must provide the Purchasers with an additional Pre-Notice, and the
Purchasers will again have the right of participation set forth above in this
Section 4.11, if the Subsequent Financing subject to the initial Subsequent
Financing Notice is not consummated for any reason on the terms set forth in
such Subsequent Financing Notice within 60 Trading Days after the date of the
initial Pre-Notice.

 

(h)           Notwithstanding
the foregoing, this Section 4.11 shall not apply in respect of an Exempt
Issuance.

 

4.12         Subsequent
Equity Sales.   From the date hereof
until the earlier of (a) 60 days after the Closing Date and the date that the
Warrants are no longer outstanding, neither the Company nor any Subsidiary
shall issue shares of Common Stock or Common Stock Equivalents..  Notwithstanding the foregoing, this Section
4.11 shall not apply in respect of an Exempt Issuance.

 

4.13         Approval
of Subsequent Equity Sales.  The
Company shall not issue shares of Common Stock or Common Stock Equivalents if
such issuance would require shareholder

 

15

 

approval pursuant to Rule 4350 of the NASD Marketplace Rules, unless
and until such shareholder approval is obtained.

 

ARTICLE V.

MISCELLANEOUS

 

5.1           Termination.  This Agreement may be terminated by any
Purchaser, as applied to such Purchaser, by written notice to the other
parties, if the Closing has not been consummated on or before December 9, 2005
provided however that no such termination will affect the right of any party to
sue for any breach by the other party (or parties).

 

5.2           Fees
and Expenses.   The Company shall pay
the legal fees and expenses of FW, legal counsel to Corpfin, Inc., of $15,000
out of the proceeds of the Initial Closing. Except as otherwise set forth in
this Agreement, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement.  The
Company shall pay all stamp and other taxes and duties levied in connection
with the sale of the Securities.

 

5.3           Entire
Agreement.  This Agreement contains
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings, oral or written,
with respect to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.

 

5.4           Notices.  Any and all notices or other communications
or deliveries required or permitted to be provided hereunder shall be in
writing and shall be deemed given and effective on the earliest of (a) the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile number set forth on the signature pages attached hereto prior to 6:30
p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the
date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages attached
hereto on a day that is not a Trading Day or later than 6:30 p.m. (New York
City time) on any Trading Day, (c) the second Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or
(d) upon actual receipt by the party to whom such notice is required to be
given.  The address for such notices and
communications shall be as set forth on the signature pages attached hereto.

 

5.5           Amendments;
Waivers.  No provision of this
Agreement may be waived or amended except in a written instrument signed, in
the case of an amendment, by the Company and each Purchaser or, in the case of
a waiver, by the party against whom enforcement of any such waiver is
sought.  No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof,
nor shall any delay or omission of either party to exercise any right hereunder
in any manner impair the exercise of any such right.

 

5.6           Construction.  The headings herein are for convenience only,
do not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.

 

16

 

The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.

 

5.7           Successors
and Assigns.  This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
permitted assigns.  The Company may not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of each Purchaser.  Any
Purchaser may assign any or all of its rights under this Agreement to any
Person to whom such Purchaser assigns or transfers any Securities, provided
such transferee agrees in writing to be bound, with respect to the transferred
Securities, by the provisions hereof that apply to the “Purchasers”.

 

5.8           No
Third-Party Beneficiaries.  This
Agreement is intended for the benefit of the parties hereto and their
respective successors and permitted assigns and is not for the benefit of, nor
may any provision hereof be enforced by, any other Person, except as otherwise
set forth in Section 4.7.

 

5.9           Governing
Law.  All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by and construed and enforced in accordance with the internal laws
of the State of New York, without regard to the principles of conflicts of law
thereof.  Each party agrees that all
legal proceedings concerning the interpretations, enforcement and defense of
the transactions contemplated by this Agreement (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. 
Each party hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in the City of New York, borough of
Manhattan for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of this Agreement), and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is improper or inconvenient venue
for such proceeding.  Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof.  Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law.  The
parties hereby waive all rights to a trial by jury.  If either party shall commence an action or
proceeding to enforce any provisions of this Agreement, then the prevailing
party in such action or proceeding shall be reimbursed by the other party for
its attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.

 

5.10         Survival.  The representations and warranties herein
shall survive the Closing and delivery of the Shares.

 

5.11         Execution.  This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it

 

17

 

being understood that both parties need not sign the same
counterpart.  In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such facsimile
signature page were an original thereof.

 

5.12         Severability.  If any provision of this Agreement is held to
be invalid or unenforceable in any respect, the validity and enforceability of
the remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

 

5.13         Rescission
and Withdrawal Right. 
Notwithstanding anything to the contrary contained in (and without
limiting any similar provisions of) the Transaction Documents, whenever any
Purchaser exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within
the periods therein provided, then such Purchaser may rescind or withdraw, in
its sole discretion from time to time upon written notice to the Company, any
relevant notice, demand or election in whole or in part without prejudice to
its future actions and rights.

 

5.14         Replacement
of Securities.  If any certificate or
instrument evidencing any Securities is mutilated, lost, stolen or destroyed,
the Company shall issue or cause to be issued in exchange and substitution for
and upon cancellation thereof, or in lieu of and substitution therefor, a new
certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary
and reasonable indemnity, if requested. 
The applicants for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs associated with
the issuance of such replacement Securities.

 

5.15         Remedies.  In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, each
of the Purchasers and the Company will be entitled to specific performance
under the Transaction Documents.  The
parties agree that monetary damages may not be adequate compensation for any
loss incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be adequate.

 

5.16         Independent
Nature of Purchasers’ Obligations and Rights.  The obligations of each Purchaser under this
Agreement are several and not joint with the obligations of any other
Purchaser, and no Purchaser shall be responsible in any way for the performance
of the obligations of any other Purchaser under this Agreement.  Nothing contained herein, and no action taken
by any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers
as a partnership, an association, a joint venture or any other kind of entity,
or create a presumption that the Purchasers are in any way acting in concert or
as a group with respect to such obligations or the transactions contemplated by
this Agreement.  Each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation, the rights arising out of this Agreement, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.  Each
Purchaser has been represented by its own

 

18

 

separate legal counsel in their review and negotiation of the
Transaction Documents.  For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through FW.  FW does not represent all of the Purchasers
but only Corpfin, Inc. who has acted as placement agent to the transaction.  The Company has elected to provide all
Purchasers with the same Agreement for the convenience of the Company and not
because it was required or requested to do so by the Purchasers.

 

5.17         Construction.
The parties agree that each of them and/or their respective counsel has
reviewed and had an opportunity to revise this Agreement and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of this Agreement or any amendments hereto.

 

(Signature Page Follows)

 

19

 

IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

 

 

	
  Wave Systems
  Corp.

  	
  Address for
  Notice:

  
	
   

  	
   

  
	
   

  	
   

  
	
  By: 

  	
  /s/ Gerard T.
  Feeney

  	
   

  	
  Wave Systems
  Corp

  
	
   

  	
  Name: Gerard T.
  Feeney 

  	
  480 Pleasant
  Street 

  
	
   

  	
  Title: Chief
  Financial Officer

  	
  Lee, MA 01238

  
				

 

 

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOR
PURCHASERS FOLLOW]

 

20

 

[PURCHASER SIGNATURE
PAGES TO WAVX SECURITIES PURCHASE AGREEMENT]

 

IN WITNESS WHEREOF, the undersigned have caused this
Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

 

Name of Investing Entity: Whalehaven Capital Fund Limited

	
  Signature of Authorized Signatory of Investing
  Entity: 

  	
  /s/ Evan Schemenauer

  	
   

  

Name of Authorized Signatory: Evan Schemenauer

Title of Authorized Signatory: Director

Email Address of Authorized Entity:

 

Address for Notice of Investing Entity:

 

 

DWAC Instructions for Common Stock:

 

 

Subscription Amount: $500,000.00

Shares: 854,701

Warrant Shares: 156,250

 

[SIGNATURE PAGES
CONTINUE]

 

21

 

[PURCHASER SIGNATURE
PAGES TO WAVX SECURITIES PURCHASE AGREEMENT]

 

IN WITNESS WHEREOF, the undersigned have caused this
Securities Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.

 

Name of Investing Entity: Platinum Long Term Growth II LLC

	
  Signature of Authorized Signatory of Investing
  Entity:

  	
  /s/ Mark Nordlicht

  	
   

  

Name of Authorized Signatory: 
Mark Nordlicht

Title of Authorized Signatory: President

Email Address of Authorized Entity:

 

Address for Notice of Investing Entity:

 

 

DWAC Instructions for Common Stock:

 

 

Subscription Amount: $1,100,000

Shares: 1,880,342

Warrant Shares: 348,750

 

 

[SIGNATURE PAGES
CONTINUE]

 

22

 

[PURCHASER SIGNATURE
PAGES TO WAVX SECURITIES PURCHASE AGREEMENT]

 

IN WITNESS WHEREOF, the undersigned have caused this
Securities Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.

 

Name of Investing Entity: Alpha Capital AG

	
  Signature of Authorized Signatory of Investing
  Entity:

  	
  /s/ Kounod Ackerman

  	
   

  

Name of Authorized Signatory: Kounod Ackerman

Title of Authorized Signatory: Director

Email Address of Authorized Entity:

 

Address for Notice of Investing Entity:

 

 

DWAC Instructions for Common Stock:

 

Subscription Amount: $1,500,000

Shares: 2,564,102

Warrant Shares: 468,750

 

 

[SIGNATURE PAGES
CONTINUE]

 

23

 

[PURCHASER SIGNATURE
PAGES TO WAVX SECURITIES PURCHASE AGREEMENT]

 

IN WITNESS WHEREOF, the undersigned have caused this
Securities Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.

 

Name of Investing Entity: Ellis International

	
  Signature of Authorized Signatory of Investing
  Entity:

  	
  /s/ Wilhelm Ungar

  	
   

  

Name of Authorized Signatory: Wilhelm Ungar

Title of Authorized Signatory: Officer

Email Address of Authorized Entity:

 

Address for Notice of Investing Entity:

 

 

DWAC Instructions for Common Stock:

 

Subscription Amount: $400,000

Shares: 683,761

Warrant Shares: 125,000

 

24

 

SCHEDULE 3.1(f) to the

SECURITIES PURCHASE AGREEMENT DATED DECEMBER 5, 2005

 

FOR

WAVE SYSTEMS CORP.

 

OPTIONS AND WARRANTS
OUTSTANDING:

 

	
  Options granted
  pursuant to Employee and Non-employee

  	
   

  	
   

  	
   

  
	
  Director Stock Option plans

  	
   

  	
  12,237,185

  	
   

  
	
  Warrants Outstanding(1)

  	
   

  	
  2,215,412

  	
   

  
	
  Total

  	
   

  	
  14,452,597

  	
   

  

 

(1) Includes a Series B Common Stock Purchase Warrant, granted in
connection with the August 2, 2004 offering, to purchase 882,353 Class A Common
Shares, initially granted with an exercise price of $1.30 adjusted to an
exercise price of $1.20. The Series B Stock Purchase Warrant contains a
provision whereby the exercise price of the Series B Stock Purchase Warrant is
adjusted in the event that Wave sells or offers additional shares at prices
below the exercise prices contained therein.

 

 

EXHIBIT A

 

December
5, 2005

 

To the Purchasers
identified on Schedule 1.

 

Re:          Securities
Purchase Agreement.

 

Ladies and
Gentlemen:

 

This opinion is
furnished to you pursuant to the Securities Purchase Agreement (the “Purchase
Agreement”), by and between the purchasers signatory thereto (the “Purchasers”)
and Wave Systems Corp., a Delaware corporation (the “Company”), dated as
of December 5, 2005 (the “Purchase  Agreement”), which provides
for the issuance and sale by the Company of 5,892,905 shares of Class A Common
Stock (the “Shares”) and the Warrants. 
All terms used herein have the meanings defined for them in the Purchase
Agreement unless otherwise defined herein.

 

We have acted as
counsel for the Company in connection with the Purchase Agreement and the
Warrants (collectively, the “Agreements”).

 

As to all matters
of fact (including factual conclusions and characterizations and descriptions
of purpose, intention or other state of mind), we have relied upon (a) the
representations and warranties of the Company set forth in the Agreements, (b)
the representations and warranties of the Purchasers set forth in the Purchase
Agreement, and (c) certificates of the Secretary and the Chief Financial
Officer of the Company and have assumed, without independent inquiry, the
accuracy of those representations, warranties, and certificates.  For purposes of our opinion rendered in
paragraph 1 below, with respect to the incorporation, organization, existence,
or standing of the Company, our opinion relies entirely upon and is limited by
those certificates of public officials attached hereto as Exhibit A.

 

In connection with this opinion, we have examined originals or copies
of the following documents:

 

(i)            the
Purchase Agreement;

 

(ii)           the
Warrants;

 

(iii)          the
Registration Statement on Form S-3, File No. 333-114476 of the Company;

 

(iv)          the
Restated Certificate of Incorporation of the Company (the “Charter”),
certified by the Secretary of State of the State of Delaware as of November 29,
2005, and certified by an officer of the Company as of the date hereof as being
true, complete and correct and in full force and effect;

 

(v)           the
By-Laws of the Company (the “By-Laws”, the
Charter and the By-Laws are, collectively, the “Governing
Documents”), certified by an officer of the Company

 

 

as of the date hereof as being true, complete and
correct and in full force and effect;

 

(vi)          the
certificate of an officer of the Company, as of the date hereof, as to certain
actions taken by the Board of Directors of the Company by unanimous written
consent dated November 29, 2005, and as to the titles, incumbency, and specimen
signatures of certain officers of the Company;

 

(vii)         the
certificate of the Chief Financial Officer, as of the date hereof, certifying
the continuing accuracy of the Company’s representations and warranties made in
the Purchase Agreement and the Company’s performance of the covenants to be
performed by it pursuant to the Purchase Agreement at or prior to the Closing;
and

 

(viii)        those
certificates of certain public officials with respect to the Company attached
hereto as Exhibit A.

 

We have examined
the documents listed in the preceding paragraph and such other corporate and
public records and agreements, instruments, certificates and other documents as
we have deemed necessary or appropriate for the purposes of this opinion.

 

We have assumed
the genuineness of all signatures, the conformity to the originals of all
documents reviewed by us as copies, the authenticity and completeness of all
original documents reviewed by us in original or copy form and the legal
competence of each individual executing any document.  We have also assumed that, upon any exercise
of the Warrants, a sufficient number of authorized but unissued shares will be
available for purposes of the issuance of the Warrant Stock.

 

For purposes of
this opinion, we have made such examination of law as we have deemed
necessary.  This opinion is limited
solely to the internal substantive laws of the State of New York as applied by
courts located in New York without regard to choice of law, the Federal laws of
the United States of America and the Delaware General Corporation Law (the “DGCL”)
(except for federal and state tax, antitrust, foreign trade, insurance,
securities, or blue sky laws, as to which we express no opinion in this
letter), and we express no opinion as to the laws of any other jurisdiction.

 

Our opinion is
further subject to the following exceptions, qualifications and assumptions,
all of which we understand to be acceptable to you:

 

(a)           When
any opinion set forth below is given to our knowledge, or to the best of our
knowledge, or with reference to matters of which we are aware or which are
known to us, or with a similar qualification, that knowledge is limited to the
actual knowledge of the individual lawyers in this firm who have participated
directly and substantively in the specific transactions to which this opinion
relates and without any special or additional investigation undertaken for the
purposes of this opinion.

 

2

 

(b)           We
express no opinion as to the effect of events occurring, circumstances arising,
conduct, acts or omissions occurring, or changes of law becoming effective or
occurring, after the date hereof on the matters addressed in this opinion
letter, and we assume no responsibility to inform you of additional or changed
facts, or changes in law, of which we may become aware.

 

(c)           We
express no opinion as to compliance with the listing requirements of The Nasdaq
National Market or any other securities exchange.

 

Based upon and subject to the foregoing, we are of the
opinion that:

 

1.             The
Company is a corporation validly existing and in corporate good standing under
the laws of the State of Delaware.

 

2.             The
execution and delivery by the Company of the Agreements, and the performance by
the Company of its obligations under each of the Agreements, are within the
Company’s corporate powers and have been duly authorized by all requisite
corporate action on the part of the Company. 
The Company has duly executed and delivered each of the Agreements.

 

3.             The
execution and delivery by the Company of the Agreements and performance by the
Company of its obligations thereunder will not violate (a) any of the
provisions of the Governing Documents or any provision of law, statute, rule or
regulation of the State of New York or the United States of America or any
provision of the DGCL applicable to the Company, except for such violations as
would, not, individually or in the aggregate, have a Material Adverse Effect or
(b) any judgment, order, writ, injunction or decree of any court or other
tribunal of which we are aware, naming the Company.  The Shares issued on the Closing Date (the “Closing
Date Stock”) and the shares issuable upon exercise of the Warrants (the “Warrant
Stock”) are not subject to any preemptive rights under the Governing
Documents.

 

4.             No
action of, or filing with, any federal, New York State or Delaware State
governmental or public body or authority is required to be effected by the
Company under any federal or New York State law, statute, rule or regulation or
the DGCL to authorize the execution, delivery and performance by the Company of
the Agreements, other than the filing of a prospectus supplement pursuant to
Rule 424(b) of the Securities Act of 1933, as amended.

 

5.             The
issuance and delivery of the shares of Closing Date Stock has been duly
authorized by all requisite corporate action on the part of the Company.  All of the shares of Closing Date Stock, when
issued and paid for in accordance with the Purchase Agreement, will be duly and
validly issued, fully paid and nonassessable.

 

6.             The
issuance, sale and delivery of the Warrants in accordance with the terms of the
Purchase Agreement, and the issuance and delivery of the shares of Warrant
Stock upon exercise of the Warrants in accordance the terms thereof, have been
duly authorized by all requisite corporate action on the part of the Company,
and no further consent or authorization of the Company or its Board of
Directors or stockholders is required. 
All

 

3

 

such shares of Warrant Stock, when issued and paid for
in accordance with the Warrants, will be duly and validly issued, fully paid
and nonassessable.

 

This opinion is
delivered solely to you and for your benefit in connection with the Purchase
Agreement and the Warrants and may not be relied upon by you for any other
purpose or furnished or referred to, or relied upon, by any other person or
entity for any reason without our prior written consent.

 

	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BINGHAM
  McCUTCHEN LLP

  

 

4

 

Schedule  1

 

Purchasers

 

Alpha Capital AG

Whalehaven Capital Fund Limited

Ellis International

Platinum Long Term Growth II, LLC

 

 

Exhibit  A

 

	
   

  	
  

  	
   

  
	
   

  	
  The First State

  	
   

  

 

I,
HARRIET SMITH WINDSOR, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THAT “WAVE SYSTEMS CORP.” IS DULY INCORPORATED UNDER THE LAWS OF THE
STATE OF DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL CORPORATE EXISTENCE
NOT HAVING BEEN CANCELLED OR DISSOLVED SO FAR AS THE RECORDS OF THIS OFFICE
SHOW AND IS DULY AUTHORIZED TO TRANSACT BUSINESS.

 

THE
FOLLOWING DOCUMENTS HAVE BEEN FILED:

 

CERTIFICATE
OF INCORPORATION, FILED THE TWELFTH DAY OF AUGUST, A.D. 1988, AT 9:10 O’CLOCK A.M.

 

CERTIFICATE
OF AMENDMENT, CHANGING ITS NAME FROM “INDATA CORPORATION” TO “CRYPTOLOGICS
INTERNATIONAL INC.”, FILED THE FOURTH DAY OF DECEMBER, A.D. 1989, AT 9 O’CLOCK A.M.

 

CERTIFICATE
OF AMENDMENT, FILED THE EIGHTH DAY OF MAY, A.D. 1990, AT 9 O’CLOCK A.M.

 

CERTIFICATE
OF RENEWAL, FILED THE TWENTY-NINTH DAY OF APRIL, A.D. 1992, AT 4:15 O’CLOCK P.M.

 

CERTIFICATE
OF DESIGNATION, FILED THE NINETEENTH DAY OF OCTOBER, A.D. 1992, AT 1 O’CLOCK P.M.

 

CERTIFICATE
OF AMENDMENT, FILED THE TENTH DAY OF NOVEMBER, A.D. 1992, AT 9 O’CLOCK A.M.

 

 

	
   

  	
   

  	
  

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  Harriet Smith Windsor

  
	
   

  	
   

  	
   

  	
  Harriet Smith Windsor, Secretary of State

  
	
   

  	
   

  	
   

  	
   

  
	
  2169395      8310

  	
   

  	
   

  	
  AUTHENTICATION: 4323091

  
	
   

  	
   

  	
   

  	
   

  
	
  050961954

  	
   

  	
   

  	
   

  	
  DATE:
  11-28-05

  

 

1

 

CERTIFICATE
OF AMENDMENT, CHANGING ITS NAME FROM “CRYPTOLOGICS INTERNATIONAL INC.” TO “WAVE
SYSTEMS CORP.”, FILED THE TWENTY-SECOND DAY OF JANUARY, A.D. 1993, AT 9 O’CLOCK A.M.

 

RESTATED
CERTIFICATE, FILED THE FIRST DAY OF JULY, A.D. 1994, AT 1:15 O’CLOCK P.M.

 

CERTIFICATE
OF DESIGNATION, FILED THE TWENTY-FOURTH DAY OF MAY, A.D. 1996, AT 9 O’CLOCK A.M.

 

CERTIFICATE
OF DESIGNATION, FILED THE TWENTY-SEVENTH DAY OF DECEMBER, A.D. 1996, AT 3 O’CLOCK P.M.

 

CERTIFICATE
OF MERGER, FILED THE THIRTIETH DAY OF DECEMBER, A.D. 1996, AT 4:30 O’CLOCK P.M.

 

CERTIFICATE
OF DESIGNATION, FILED THE THIRTIETH DAY OF MAY, A.D. 1997, AT 1 O’CLOCK P.M.

 

CERTIFICATE
OF AMENDMENT, FILED THE SEVENTEENTH DAY OF JULY, A.D. 1997, AT 9 O’CLOCK A.M.

 

CERTIFICATE
OF DESIGNATION, FILED THE ELEVENTH DAY OF SEPTEMBER, A.D. 1997, AT 1 O’CLOCK P.M.

 

CERTIFICATE
OF DESIGNATION, FILED THE NINTH DAY OF OCTOBER, A.D. 1997, AT 1 O’CLOCK P.M.

 

CERTIFICATE
OF DESIGNATION, FILED THE FIFTH DAY OF MARCH,

 

	
   

  	
   

  	
  

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  Harriet Smith Windsor

  
	
   

  	
   

  	
   

  	
  Harriet Smith Windsor, Secretary of State

  
	
   

  	
   

  	
   

  	
   

  
	
  2169395      8310

  	
   

  	
   

  	
  AUTHENTICATION: 4323091

  
	
   

  	
   

  	
   

  	
   

  
	
  050961954

  	
   

  	
   

  	
   

  	
  DATE:
  11-28-05

  

 

2

 

A.D.
1998, AT 9 O’CLOCK A.M.

 

CERTIFICATE
OF AMENDMENT, FILED THE TENTH DAY OF NOVEMBER, A.D. 1998, AT 9 O’CLOCK A.M.

 

CERTIFICATE
OF RENEWAL, FILED THE TWELFTH DAY OF MARCH, A.D. 1999, AT 9 O’CLOCK A.M.

 

CERTIFICATE
OF DESIGNATION, FILED THE THIRTIETH DAY OF APRIL, A.D. 2003, AT 2:41 O’CLOCK P.M.

 

CERTIFICATE
OF AMENDMENT, FILED THE TWENTY-EIGHTH DAY OF AUGUST, A.D. 2003, AT 12:15 O’CLOCK P.M.

 

CERTIFICATE
OF AMENDMENT, FILED THE TWENTY-FOURTH DAY OF MAY, A.D. 2005, AT 10:02 O’CLOCK A.M.

 

AND
I DO HEREBY FURTHER CERTIFY THAT THE AFORESAID CERTIFICATES ARE THE ONLY
CERTIFICATES ON RECORD OF THE AFORESAID CORPORATION.

 

AND
I DO HEREBY FURTHER CERTIFY THAT THE ANNUAL REPORTS HAVE BEEN FILED TO DATE.

 

AND
I DO HEREBY FURTHER CERTIFY THAT THE FRANCHISE TAXES HAVE BEEN PAID TO DATE.

 

 

	
   

  	
   

  	
  

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  Harriet Smith Windsor

  
	
   

  	
   

  	
   

  	
  Harriet Smith Windsor, Secretary of State

  
	
   

  	
   

  	
   

  	
   

  
	
  2169395      8310

  	
   

  	
   

  	
  AUTHENTICATION: 4323091

  
	
   

  	
   

  	
   

  	
   

  
	
  050961954

  	
   

  	
   

  	
   

  	
  DATE:
  11-28-05

  

 

3

 

EXHIBIT B

 

COMMON STOCK PURCHASE WARRANT

 

To Purchase                
Shares of Common Stock of

 

WAVE SYSTEMS CORP.

 

THIS COMMON STOCK
PURCHASE WARRANT (the “Warrant”) certifies that, for value received,                        
(the “Holder”), is entitled, upon the terms and subject to the
limitations on exercise and the conditions hereinafter set forth, at any time
on or after the date hereof (the “Initial Exercise Date”) and on or
prior to the close of business on the 180th day following the
Initial Exercise Date (the “Termination Date”) but not thereafter, to
subscribe for and purchase from Wave Systems Corp., a Delaware corporation (the
“Company”), up to               
shares (the “Warrant Shares”) of Common Stock, par value $0.01 per
share, of the Company (the “Common Stock”); provided, however,
the 180 day period set forth above as the Termination Date shall be extended
for the number of Trading Days during such period in which (i) trading in the
Common Stock is suspended by any Trading Market, or (ii) the Registration
Statement is not effective but in no event later than January 2, 2007.  The purchase price of one share of Common
Stock under this Warrant shall be equal to the Exercise Price, as defined in
Section 2(b).

 

Section 1.               Definitions.  Capitalized
terms used and not otherwise defined herein shall have the meanings set forth
in that certain Securities Purchase Agreement (the “Purchase Agreement”),
dated December 5, 2005, among
the Company and the purchasers signatory thereto.

 

Section 2.               Exercise.

 

a)             Exercise
of Warrant.  Exercise of the purchase
rights represented by this Warrant may be made, in whole or in part, at any
time or times on or after the Initial Exercise Date and on or before the
Termination Date by delivery to the Company of a duly executed facsimile copy
of the Notice of Exercise Form annexed hereto (or such other office or agency
of the Company as it may designate by notice in writing to the registered
Holder at the address of such Holder appearing on the books of the Company); provided,
however, within 5 Trading Days of the date said Notice of Exercise is
delivered to the Company, if this Warrant is exercised in full, the Holder
shall have surrendered this Warrant to the Company and the Company shall have
received payment of the aggregate Exercise Price of the shares thereby purchased
by wire transfer or cashier’s check drawn on a United States bank.  Notwithstanding anything herein to the
contrary, the Holder shall not be required to physically surrender this Warrant
to the Company until the Holder has purchased all of the Warrant Shares
available hereunder and the Warrant has been exercised in full.  Partial exercises of this Warrant resulting
in purchases of a portion of the total number of Warrant Shares available
hereunder shall

 

1

 

have the effect of
lowering the outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable number of Warrant Shares purchased.  The Holder and the Company shall maintain
records showing the number of Warrant Shares purchased and the date of such
purchases.  The Company shall deliver any
objection to any Notice of Exercise Form within 1 Business Day of receipt of
such notice.  In the event of any dispute
or discrepancy, the records of the Holder shall be controlling and
determinative in the absence of manifest error. The Holder and any assignee, by
acceptance of this Warrant, acknowledge and agree that, by reason of the
provisions of this paragraph, following the purchase of a portion of the
Warrant Shares hereunder, the number of Warrant Shares available for purchase
hereunder at any given time may be less than the amount stated on the face
hereof.

 

b)            Exercise Price.  The exercise price of the Common Stock under
this Warrant shall be $0.80, subject
to adjustment hereunder (the “Exercise Price”).

 

c)             Cashless
Exercise.  If at any time during the
term of this Warrant either (i) there is no effective Registration Statement
registering, or no current prospectus available for, the resale of the Warrant
Shares by the Holder for continuous period of at least 3 months, or (ii) after
one year there is no effective Registration Statement registering, or no
current prospectus available for, the resale of the Warrant Shares by the
Holder, then this Warrant may also be exercised at such time by means of a “cashless
exercise” in which the Holder shall be entitled to receive a certificate for
the number of Warrant Shares equal to the quotient obtained by dividing [(A-B)
(X)] by (A), where:

 

 (A) = the VWAP on the Trading Day immediately
preceding the date of such election;

 

(B) =  the Exercise Price of this Warrant, as
adjusted; and

 

(X) = the number
of Warrant Shares issuable upon exercise of this Warrant in accordance with the
terms of this Warrant by means of a cash exercise rather than a cashless
exercise.

 

d)            Exercise
Limitations.

 

i.              Holder’s
Restrictions.  The Company shall not
effect any exercise of this Warrant, and a Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 2(c) or otherwise, to
the extent that after giving effect to such issuance after exercise, such
Holder (together with such Holder’s affiliates, and any other person or entity
acting as a group together with such Holder or any of such Holder’s
affiliates), as set forth on the applicable Notice of Exercise, would
beneficially own in excess of the Beneficial Ownership Limitation (as defined
below).  For purposes of the foregoing sentence, the number of shares of
Common Stock beneficially owned by such Holder and its affiliates shall include
the number of shares of Common Stock issuable upon exercise of this Warrant
with respect to which the determination of such sentence is being made, but
shall exclude the number of shares of Common Stock which

 

2

 

would be issuable
upon (A) exercise of the remaining, nonexercised portion of this Warrant
beneficially owned by such Holder or any of its affiliates and (B) exercise or
conversion of the unexercised or nonconverted portion of any other securities
of the Company (including, without limitation, any other Warrants) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by such Holder or any of its affiliates.  Except
as set forth in the preceding sentence, for purposes of this Section 2(d),
beneficial ownership shall be calculated in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated thereunder, it being
acknowledged by a Holder that the Company is not representing to such Holder
that such calculation is in compliance with Section 13(d) of the Exchange Act
and such Holder is solely responsible for any schedules required to be filed in
accordance therewith.   To the extent
that the limitation contained in this Section 2(d) applies, the determination
of whether this Warrant is exercisable (in relation to other securities owned
by such Holder) and of which a portion of this Warrant is exercisable shall be
in the sole discretion of a Holder, and the submission of a Notice of Exercise
shall be deemed to be each Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by such Holder) and of which
portion of this Warrant is exercisable, in each case subject to such aggregate
percentage limitation, and the Company shall have no obligation to verify or
confirm the accuracy of such determination.  
In addition, a determination as to any group status as contemplated
above shall be determined in accordance with Section 13(d) of the Exchange Act
and the rules and regulations promulgated thereunder.  For purposes of this Section 2(d), in
determining the number of outstanding shares of Common Stock, a Holder may rely
on the number of outstanding shares of Common Stock as reflected in (x) the
Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more
recent public announcement by the Company or (z) any other notice by the
Company or the Company’s Transfer Agent setting forth the number of shares of
Common Stock outstanding.  Upon the written or oral request of a Holder,
the Company shall within two Trading Days confirm orally and in writing to such
Holder the number of shares of Common Stock then outstanding.  In any
case, the number of outstanding shares of Common Stock shall be determined
after giving effect to the conversion or exercise of securities of the Company,
including this Warrant, by such Holder or its affiliates since the date as of
which such number of outstanding shares of Common Stock was reported.  The “Beneficial Ownership Limitation” shall
be 4.99% of the number of shares of the Common Stock outstanding immediately
after giving effect to the issuance of shares of Common Stock issuable upon
exercise of this Warrant.  The Beneficial
Ownership Limitation provisions of this Section 2(d) may be waived by such
Holder, at the election of such Holder, upon not less than 61 days’ prior
notice to the Company to change the Beneficial Ownership Limitation to 9.99% of
the number of shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock upon exercise of this Warrant,
and the provisions of this Section 2(d) shall continue to apply.  Upon such a change by a Holder of the
Beneficial Ownership Limitation from such 4.99% limitation to such 9.99%

 

3

 

limitation, the
Beneficial Ownership Limitation may not be waived by such Holder.  The provisions of this paragraph shall be
implemented in a manner otherwise than in strict conformity with the terms of
this Section 2(d) to correct this paragraph (or any portion hereof) which may
be defective or inconsistent with the intended Beneficial Ownership Limitation
herein contained or to make changes or supplements necessary or desirable to
properly give effect to such limitation. The limitations contained in this
paragraph shall apply to a successor holder of this Warrant.

 

ii.                     Trading
Market Restrictions.  If the Company
has not obtained Shareholder Approval (as defined below), then the Company may
not issue upon exercise of this Warrant a number of shares of Common Stock, which, when aggregated with any
shares of Common Stock issued pursuant
to the Purchase Agreement and
upon prior exercise of this or any other Warrant issued pursuant to the
Purchase Agreement, would exceed 19.999% of the number of shares of
Common Stock outstanding on the Trading Day immediately preceding the Closing
Date (such number of shares, the “Issuable
Maximum”).  If on any
attempted exercise of this Warrant, the issuance of Warrant Shares would exceed
the Issuable Maximum and the Company shall not have previously obtained the
vote of shareholders to approve the issuance of shares of Common Stock in
excess of the Issuable Maximum pursuant to the terms hereof (the “Shareholder Approval”), then the
Company shall issue to the Holder requesting a Warrant exercise such number of
Warrant Shares as may be issued below the Issuable Maximum and, with respect to
the remainder of the aggregate number of Warrant Shares, this Warrant shall not
be exercisable until and unless Shareholder Approval has been obtained.

 

e)             Mechanics
of Exercise.

 

i.              Authorization
of Warrant Shares.  The Company
covenants that all Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of the purchase
rights represented by this Warrant, be duly authorized, validly issued, fully
paid and nonassessable and free from all taxes, liens and charges in respect of
the issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).

 

ii.             Delivery
of Certificates Upon Exercise. 
Certificates for shares purchased hereunder shall be transmitted by the
transfer agent of the Company to the Holder by crediting the account of the
Holder’s prime broker with the Depository Trust Company through its Deposit
Withdrawal Agent Commission (“DWAC”) system if the Company is a
participant in such system, and otherwise by physical delivery to the address specified
by the Holder in the Notice of Exercise within 3 Trading Days from the delivery
to the Company of the Notice of Exercise Form, surrender of this Warrant (if
required) and payment of the aggregate Exercise Price as set forth above (“Warrant
Share Delivery Date”).  This Warrant
shall be deemed to have been exercised on the date the Exercise Price is
received by the Company.  The Warrant
Shares shall be deemed to have

 

4

 

been issued, and Holder or any other person so designated to be named
therein shall be deemed to have become a holder of record of such shares for
all purposes, as of the date the Warrant has been exercised by payment to the
Company of the Exercise Price and all taxes required to be paid by the Holder,
if any, pursuant to Section 2(e)(vii) prior to the issuance of such shares,
have been paid.

 

iii.            Delivery
of New Warrants Upon Exercise.  If
this Warrant shall have been exercised in part, the Company shall, at the
request of a Holder and upon surrender of this Warrant certificate, at the time
of delivery of the certificate or certificates representing Warrant Shares,
deliver to Holder a new Warrant evidencing the rights of Holder to purchase the
unpurchased Warrant Shares called for by this Warrant, which new Warrant shall
in all other respects be identical with this Warrant.

 

iv.            Rescission
Rights.  If the Company fails to
cause its transfer agent to transmit to the Holder a certificate or
certificates representing the Warrant Shares pursuant to this Section 2(e)(iv)
by the Warrant Share Delivery Date, then the Holder will have the right to
rescind such exercise.

 

v.             Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon Exercise.  In addition to any other rights available to
the Holder, if the Company fails to cause its transfer agent to transmit to the
Holder a certificate or certificates representing the Warrant Shares pursuant
to an exercise on or before the Warrant Share Delivery Date, and if after such
date the Holder is required by its broker to purchase (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of
a sale by the Holder of the Warrant Shares which the Holder anticipated
receiving upon such exercise (a “Buy-In”), then the Company shall (1)
pay in cash to the Holder the amount by which (x) the Holder’s total purchase
price (including brokerage commissions, if any) for the shares of Common Stock
so purchased exceeds (y) the amount obtained by multiplying (A) the number of
Warrant Shares that the Company was required to deliver to the Holder in
connection with the exercise at issue times (B) the price at which the sell
order giving rise to such purchase obligation was executed, and (2) at the
option of the Holder, either reinstate the portion of the Warrant and
equivalent number of Warrant Shares for which such exercise was not honored or
deliver to the Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its exercise and delivery
obligations hereunder.  For example, if
the Holder purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted exercise of shares of Common Stock
with an aggregate sale price giving rise to such purchase obligation of
$10,000, under clause (1) of the immediately preceding sentence the Company
shall be required to pay the Holder $1,000. The Holder shall provide the
Company written notice indicating the amounts payable to the Holder in respect
of the Buy-In, together with applicable confirmations and other evidence
reasonably requested by the Company. 
Nothing herein shall limit a Holder’s right to pursue any other remedies
available to it hereunder, at law or in equity including, without limitation, a
decree of specific

 

5

 

performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.

 

vi.            No
Fractional Shares or Scrip.  No
fractional shares or scrip representing fractional shares shall be issued upon
the exercise of this Warrant.  As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to such fraction multiplied by the Exercise Price.

 

vii.           Charges,
Taxes and Expenses.  Issuance of
certificates for Warrant Shares shall be made without charge to the Holder for
any issue or transfer tax or other incidental expense in respect of the
issuance of such certificate, all of which taxes and expenses shall be paid by
the Company, and such certificates shall be issued in the name of the Holder or
in such name or names as may be directed by the Holder; provided, however,
that in the event certificates for Warrant Shares are to be issued in a name
other than the name of the Holder, this Warrant when surrendered for exercise
shall be accompanied by the Assignment Form attached hereto duly executed by
the Holder; and the Company may require, as a condition thereto, the payment of
a sum sufficient to reimburse it for any transfer tax incidental thereto.

 

viii.          Closing
of Books.  The Company will not close
its stockholder books or records in any manner which prevents the timely
exercise of this Warrant, pursuant to the terms hereof.

 

f)             Call
Provision.  Subject to the provisions
of Section 2(d) and this Section 2(f), if the Closing Price for each of any 10
out of 20 consecutive Trading Days (the “Measurement Period”) exceeds
$0.96 (subject to adjustment for forward and reverse stock splits,
recapitalizations, stock dividends and the like after the Initial Exercise
Date) (the “Threshold Price”) then the Company may, within three Trading
Days of the end of such period, call for cancellation of all or any portion of
this Warrant for which a Notice of Exercise has not yet been delivered (such
right, a “Call”).  To exercise
this right, the Company must deliver to the Holder an irrevocable written
notice (a “Call Notice”), indicating therein the portion of unexercised
portion of this Warrant to which such notice applies.  If the conditions set forth below for such
Call are satisfied from the period from the date of the Call Notice through and
including the Call Date (as defined below), then any portion of this Warrant
subject to such Call Notice for which a Notice of Exercise shall not have been
received by the Call Date will be cancelled at 6:30 p.m. (New York City time)
on the seventh Trading Day after the date the Call Notice is received by the
Holder (such date, the “Call Date”). 
Any unexercised portion of this Warrant to which the Call Notice does
not pertain will be unaffected by such Call Notice.  In furtherance thereof, the Company covenants
and agrees that it will honor all Notices of Exercise with respect to Warrant
Shares subject to a Call Notice that are tendered through 6:30 p.m. (New York
City time) on the Call Date.  The parties
agree that any Notice of Exercise delivered following a Call Notice shall first
reduce to zero the number of Warrant Shares

 

6

 

subject to such Call
Notice prior to reducing the remaining Warrant Shares available for purchase
under this Warrant.  For example, if (x)
this Warrant then permits the Holder to acquire 100 Warrant Shares, (y) a Call
Notice pertains to 75 Warrant Shares, and (z) prior to 6:30 p.m. (New York City
time) on the Call Date the Holder tenders a Notice of Exercise in respect of 50
Warrant Shares, then (1) on the Call Date the right under this Warrant to
acquire 25 Warrant Shares will be automatically cancelled, (2) the Company, in
the time and manner required under this Warrant, will have issued and delivered
to the Holder 50 Warrant Shares in respect of the exercises following receipt
of the Call Notice, and (3) the Holder may, until the Termination Date,
exercise this Warrant for 25 Warrant Shares (subject to adjustment as herein
provided and subject to subsequent Call Notices).  Subject again to the provisions of this
Section 2(f), the Company may deliver subsequent Call Notices for any portion
of this Warrant for which the Holder shall not have delivered a Notice of
Exercise.  Notwithstanding anything to
the contrary set forth in this Warrant, the Company may not deliver a Call
Notice or require the cancellation of this Warrant (and any Call Notice will be
void), unless, from the beginning of the 20 consecutive Trading Days used to
determine whether the Common Stock has achieved the Threshold Price through the
Call Date, (i) the Company shall have honored in accordance with the terms of
this Warrant all Notices of Exercise delivered by  6:30 p.m. (New York City time) on the Call
Date, (ii) the Registration Statement shall be effective as to all Warrant
Shares and (iii) the Common Stock shall be listed or quoted for trading on the
Trading Market, and (iv) there is a sufficient number of authorized shares of
Common Stock for issuance of all Securities under the Transaction Documents,
and (v) the issuance of the shares shall be in accordance with Section 2(d)
herein.  The Company’s right to Call the
Warrant shall be exercised ratably among the Holders based on each Holder’s
initial purchase of Common Stock.

 

“Closing Price” means on any particular Trading Day (a) the
last reported closing price per share of Common Stock on such date on the
Trading Market (as reported by Bloomberg L.P. at 4:00 PM (New York time) or at
such other time as regular trading hours end), or (b)  if the Common Stock
is not then listed or quoted on the Trading Market and if prices for the Common
Stock are then reported in the “pink sheets” published by the National
Quotation Bureau Incorporated (or a similar organization or agency succeeding
to its functions of reporting prices), the last closing price per share of the
Common Stock so reported as of the close of regular trading hours on such day,
or (c) if the shares of Common Stock are not then publicly traded the fair
market value of a share of Common Stock as determined by an appraiser selected
in good faith by the Purchasers of a majority in interest of the Shares then
outstanding.

 

Section 3.               Certain Adjustments.

 

a)             Stock
Dividends and Splits. If the Company, at any time while this Warrant is
outstanding: (A) pays a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of Common Stock (which, for avoidance
of doubt, shall not include any shares of Common Stock issued by the Company
pursuant to this Warrant), (B) subdivides outstanding shares of Common Stock into
a larger number of shares, (C) combines (including by way of reverse stock
split) outstanding shares of Common Stock

 

7

 

into a smaller number of
shares, or (D) issues by reclassification of shares of the Common Stock any
shares of capital stock of the Company, then in each case the Exercise Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event and the
number of shares issuable upon exercise of this Warrant shall be
proportionately adjusted.  Any adjustment
made pursuant to this Section 3(a) shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.

 

b)            [INTENTIONALLY
DELETED]

 

c)             Pro
Rata Distributions.  If the Company,
at any time prior to the Termination Date, shall distribute to all holders of
Common Stock (and not to Holders of the Warrants) evidences of its indebtedness
or assets (including cash and cash dividends) or rights or warrants to
subscribe for or purchase any security other than the Common Stock (which shall
be subject to Section 3(b)), then in each such case the Exercise Price shall be
adjusted by multiplying the Exercise Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the VWAP
determined as of the record date mentioned above, and of which the numerator
shall be such VWAP on such record date less the then per share fair market
value at such record date of the portion of such assets or evidence of
indebtedness so distributed applicable to one outstanding share of the Common
Stock as determined by the Board of Directors in good faith.  In either case the adjustments shall be
described in a statement provided to the Holder of the portion of assets or
evidences of indebtedness so distributed or such subscription rights applicable
to one share of Common Stock.  Such
adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned above.

 

d)            Fundamental
Transaction. If, at any time while this Warrant is outstanding, (A) the
Company effects any merger or consolidation of the Company with or into another
Person, (B) the Company effects any sale of all or substantially all of its
assets in one or a series of related transactions, (C) any tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (D) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (in any such case, a “Fundamental Transaction”),
then, upon any subsequent exercise of
this Warrant, the Holder shall have the
right to receive, for each Warrant Share that would have been issuable upon such
exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder, (a) upon exercise of this
Warrant, the number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation, and any
additional consideration (the “Alternate

 

8

 

Consideration”)
receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of assets
by a Holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such event or (b) if the Company is acquired
in an all cash transaction, cash equal to the value of this Warrant as
determined in accordance with the Black-Scholes option pricing formula.  For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted to apply to
such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration.  If holders of Common Stock are given any
choice as to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of this Warrant following such
Fundamental Transaction.  To the extent
necessary to effectuate the foregoing provisions, any successor to the Company
or surviving entity in such Fundamental Transaction shall issue to the Holder a
new warrant consistent with the foregoing provisions and evidencing the Holder’s
right to exercise such warrant into Alternate Consideration. The terms of any
agreement pursuant to which a Fundamental Transaction is effected shall include
terms requiring any such successor or surviving entity to comply with the
provisions of this Section 3(d) and insuring that this Warrant (or any such
replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.

 

e)             Calculations.
All calculations under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of this Section 3,
the number of shares of Common Stock deemed to be issued and outstanding as of
a given date shall be the sum of the number of shares of Common Stock
(excluding treasury shares, if any) issued and outstanding.

 

f)             Voluntary
Adjustment By Company. The Company may at any time during the term of this
Warrant reduce the then current Exercise Price to any amount and for any period
of time deemed appropriate by the Board of Directors of the Company.

 

g)            Notice
to Holders.

 

i.      Adjustment
to Exercise Price. Whenever the Exercise Price is adjusted pursuant to this
Section 3, the Company shall promptly mail to each Holder a notice setting
forth the Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.

 

ii.     Notice
to Allow Exercise by Holder. If (A) the Company shall declare a dividend
(or any other distribution) on the Common Stock; (B) the Company shall declare
a special nonrecurring cash dividend on or a redemption of the Common Stock;
(C) the Company shall authorize the granting to all holders of the Common Stock
rights or warrants to subscribe for or purchase any shares of capital stock of
any class or of any

 

9

 

rights; (D) the
approval of any stockholders of the Company shall be required in connection
with any reclassification of the Common Stock, any consolidation or merger to
which the Company is a party, any sale or transfer of all or substantially all
of the assets of the Company, of any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or property; (E) the
Company shall authorize the voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the Company; then, in each case, the Company
shall cause to be mailed to the Holder at its last address as it shall appear
upon the Warrant Register of the Company, at least 20 calendar days prior to
the applicable record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be
taken, the date as of which the holders of the Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation, merger,
sale, transfer or share exchange is expected to become effective or close, and
the date as of which it is expected that holders of the Common Stock of record
shall be entitled to exchange their shares of the Common Stock for securities,
cash or other property deliverable upon such reclassification, consolidation,
merger, sale, transfer or share exchange; provided that the failure to mail
such notice or any defect therein or in the mailing thereof shall not affect
the validity of the corporate action required to be specified in such
notice.  The Holder is entitled to
exercise this Warrant during the 20-day period commencing on the date of such
notice to the effective date of the event triggering such notice.

 

Section 4.               Transfer of Warrant.

 

a)             Transferability.  Subject to Section 5(a) below, this Warrant
and all rights hereunder are transferable, in whole or in part, upon surrender
of this Warrant at the principal office of the Company, together with a written
assignment of this Warrant substantially in the form attached hereto duly
executed by the Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such
payment, the Company shall execute and deliver a new Warrant or Warrants in the
name of the assignee or assignees and in the denomination or denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned, and this
Warrant shall promptly be cancelled.  A
Warrant, if properly assigned, may be exercised by a new holder for the
purchase of Warrant Shares without having a new Warrant issued.

 

b)            New
Warrants. This Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with Section 4(a),

 

10

 

as to any transfer which
may be involved in such division or combination, the Company shall execute and
deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be
divided or combined in accordance with such notice.

 

c)             Warrant
Register. The Company shall register this Warrant, upon records to be
maintained by the Company for that purpose (the “Warrant Register”), in
the name of the record Holder hereof from time to time.  The Company may deem and treat the registered
Holder of this Warrant as the absolute owner hereof for the purpose of any
exercise hereof or any distribution to the Holder, and for all other purposes,
absent actual notice to the contrary.

 

Section 5.               Miscellaneous.

 

a)             Title
to Warrant.  Prior to the Termination
Date and subject to compliance with applicable laws and Section 4 of this
Warrant, this Warrant and all rights hereunder are transferable, in whole or in
part, at the office or agency of the Company by the Holder in person or by duly
authorized attorney, upon surrender of this Warrant together with the
Assignment Form annexed hereto properly endorsed.

 

b)            No
Rights as Shareholder Until Exercise. 
This Warrant does not entitle the Holder to any voting rights or other
rights as a shareholder of the Company prior to the exercise hereof.  Upon the surrender of this Warrant and the
payment of the aggregate Exercise Price (or by means of a cashless exercise),
the Warrant Shares so purchased shall be and be deemed to be issued to such
Holder as the record owner of such shares as of the close of business on the
later of the date of such surrender or payment.

 

c)             Loss,
Theft, Destruction or Mutilation of Warrant. The Company covenants that
upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant or any stock certificate
relating to the Warrant Shares, and in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to it (which, in the case of the
Warrant, shall not include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated, the Company
will make and deliver a new Warrant or stock certificate of like tenor and
dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

d)            Saturdays,
Sundays, Holidays, etc.  If the last
or appointed day for the taking of any action or the expiration of any right
required or granted herein shall be a Saturday, Sunday or a legal holiday, then
such action may be taken or such right may be exercised on the next succeeding
day not a Saturday, Sunday or legal holiday.

 

e)             Authorized
Shares.

 

The Company covenants that during the period the Warrant is outstanding,
it will reserve from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of the Warrant Shares upon the
exercise of any purchase rights under this Warrant.  The Company further covenants that its
issuance of this Warrant shall constitute full authority to its

 

11

 

officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for the Warrant Shares upon the exercise of the purchase
rights under this Warrant.  The Company
will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of the Trading Market upon
which the Common Stock may be listed.

 

Except and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation, amending its
certificate of incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of Holder as set forth in this
Warrant against impairment.  Without
limiting the generality of the foregoing, the Company will (a) not increase the
par value of any Warrant Shares above the amount payable therefor upon such
exercise immediately prior to such increase in par value, (b) take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares upon the exercise
of this Warrant, and (c) use commercially reasonable efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Warrant.

 

Before taking any action which would result in an adjustment in the
number of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.

 

f)             Jurisdiction.
All questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance with the
provisions of the Purchase Agreement.

 

g)            Restrictions.  The Holder acknowledges that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.

 

h)            Nonwaiver
and Expenses.  No course of dealing
or any delay or failure to exercise any right hereunder on the part of Holder
shall operate as a waiver of such right or otherwise prejudice Holder’s rights,
powers or remedies, notwithstanding the fact that all rights hereunder
terminate on the Termination Date.  If
the Company willfully and knowingly fails to comply with any provision of this
Warrant, which results in any material damages to the Holder, the Company shall
pay to Holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable

 

12

 

attorneys’ fees,
including those of appellate proceedings, incurred by Holder in collecting any
amounts due pursuant hereto or in otherwise enforcing any of its rights, powers
or remedies hereunder.

 

i)              Notices.  Any notice, request or other document
required or permitted to be given or delivered to the Holder by the Company
shall be delivered in accordance with the notice provisions of the Purchase
Agreement.

 

j)              Limitation
of Liability.  No provision hereof,
in the absence of any affirmative action by Holder to exercise this Warrant or
purchase Warrant Shares, and no enumeration herein of the rights or privileges
of Holder, shall give rise to any liability of Holder for the purchase price of
any Common Stock or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.

 

k)             Remedies.  Holder, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Warrant.  The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of this Warrant and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.

 

l)              Successors
and Assigns.  Subject to applicable
securities laws, this Warrant and the rights and obligations evidenced hereby
shall inure to the benefit of and be binding upon the successors of the Company
and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended
to be for the benefit of all Holders from time to time of this Warrant and
shall be enforceable by any such Holder or holder of Warrant Shares.

 

m)            Amendment.  This Warrant may be modified or amended or
the provisions hereof waived with the written consent of the Company and the
Holder.

 

n)            Severability.  Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.

 

o)            Headings.  The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.

 

********************

 

13

 

IN WITNESS WHEREOF, the Company has caused this
Warrant to be executed by its officer thereunto duly authorized.

 

 

Dated:  December 5, 2005

 

 

	
   

  	
  WAVE
  SYSTEMS CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Gerard T.
  Feeney 

  
	
   

  	
   

  	
  Title:Chief
  Financial Officer

  

 

14

 

NOTICE OF EXERCISE

 

TO:         WAVE SYSTEMS CORP.

 

(1)   The
undersigned hereby elects to purchase           
Warrant Shares of the Company pursuant to the terms of the attached Warrant
(only if exercised in full), and tenders herewith payment of the exercise price
in full, together with all applicable transfer taxes, if any.

 

(2)   Payment
shall take the form of (check applicable box):

 

o
in lawful money of the United States; or

 

o
the cancellation of such number of Warrant Shares as is necessary, in
accordance with the formula set forth in subsection 2(c), to exercise this
Warrant with respect to the maximum number of Warrant Shares purchasable
pursuant to the cashless exercise procedure set forth in subsection 2(c).

 

(3)   Please
issue a certificate or certificates representing said Warrant Shares in the
name of the undersigned or in such other name as is specified below:

 

 

The Warrant Shares shall
be delivered to the following:

 

 

15

 

ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute

this form and supply required information. 

Do not use this form to exercise the warrant.)

 

FOR VALUE RECEIVED, the foregoing Warrant and all
rights evidenced thereby are hereby assigned to

 

                                                                                                                                                     
whose address is
                                                                                                                                                          .

 

 

	
   

  	
   

  	
   

  	
  Dated:

  	
   

  	
  ,

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Holder’s Signature:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Holder’s Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Signature Guaranteed: 

  	
   

  	
   

  	
   

  
								

 

NOTE:  The signature to this Assignment Form must
correspond with the name as it appears on the face of the Warrant, without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank or trust company.  Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.

 

16

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00094-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00094-of-00352.parquet"}]]