Document:

EX-10.2 Letter Agreement, dated June 27, 2008

Exhibit 10.2

June 27, 2008

Mr. Jack Silver, Trustee

Sherleigh Associates Inc. Profit Sharing Plan

80 Columbus Circle PH 76A

New York, NY 10023

Dear Mr. Silver:

This letter agreement between Sherleigh Associates Inc. Profit Sharing Plan (the “Warrantholder”)
and ChinaCast Education Corporation (the “Company”) sets forth the understanding between the
parties in connection with the exercise by the Warrantholder of 365,282 warrants (the “Warrants”)
currently held by the Warrantholder.

Pursuant to Section 3.1 of the Warrant Agreement dated on or about March 17, 2004 (the “Warrant
Agreement”), the Company hereby agrees to reduce the Warrant Price (as defined in the Warrant
Agreement) for the Warrantholder from $5.00 per share to $4.25 per share. In connection with this
reduction of the Warrant Price, the Warrantholder hereby elects to exercise all of the Warrants,
and to purchase the shares of common stock issuable upon the exercise of such Warrants (the “Common
Stock”). Such exercise shall occur when the Company receives a minimum of an aggregate of thirteen
million ($13,000,000) dollars from the exercise of Warrants from all Warrantholders exercising
pursuant to the reduced Warrant Price.

Further, pursuant to Section 3.3.1 of the Warrant Agreement, in connection with the exercise of the
Warrants, upon exercise hereof, the Warrantholder shall execute the attached Subscription Form and
submit it to the Warrant Agent and shall pay, in full to the Company, the Warrant Price, as hereby
reduced, in cash, certified check or wire transfer, for each share of Common Stock as to which the
Warrant is exercised.

In further consideration for the Warrantholder exercising the Warrants in full and in consideration
for the current market price of the Warrants, upon such exercise and payment in full of the Warrant
Price, the Company hereby agrees to issue to the Warrantholder 55,867 shares of restricted stock
(the “Shares”), which was determined by the following formula:

Warrants exercised by the Warrantholder x 0.65

$4.25

The Warrantholder represents that it is an “accredited investor” as such term is defined in Rule
501 of Regulation D (“Reg. D”) promulgated under the Securities Act of 1933, as amended (the
“Act”). The Warrantholder represents that the Shares are purchased for its own account, for
investment and not for distribution except pursuant to an effective registration statement or a
transfer exempt from registration under the Act..

 

 

The Warrantholder consents to the placement of a legend on any certificate or other document
evidencing the Shares stating that they have not been registered under the Act and setting forth or
referring to the restrictions on transferability and sale thereof. Each certificate evidencing the
Shares shall bear the legends set forth below, or legends substantially equivalent thereto,
together with any other legends that may be required by federal or state securities laws at the
time of the issuance of the Shares:

THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE “ACT”), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL (I) REGISTERED UNDER THE ACT OR (II) (A) THE ISSUER OF THE SHARES
(THE “ISSUER”) HAS RECEIVED AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH THE ACT AND (B)
THE TRANSFEREE IS ACCEPTABLE TO THE ISSUER

Unless otherwise set forth herein, all terms shall have the meaning ascribed to them in the Warrant
Agreement.

Except as expressly set forth in this letter agreement, all of the terms of the Warrant Agreement
shall remain unchanged and in full force and effect.

The parties expressly agree that all the terms and provisions hereof shall be construed in
accordance with and governed by the internal laws of the State of New York.

This letter agreement may be signed in counterparts, which may be delivered by facsimile or other
electronic transmission (which delivery shall not affect the validity of such counterparts).

Very truly yours,

CHINACAST EDUCATION CORPORATION

	 	 	 	 	 
	By:  	/s/ Ron Cahn
 	 	 
	Name:  	Ron Chan 	 	 
	Title:  	CEO 	 	 	 

Accepted and agreed to as of the date first above written:

SHERLEIGH ASSOCIATES INC. PROFIT SHARING PLAN

	 	 	 	 	 
	By:  	/s/ Jack Silver 	 	 
	Name:  	Jack Silver 	 	 
	Title:  	Trustee 	 	 	 

 

 

SUBSCRIPTION FORM

To Be Executed by the Registered Holder in Order to Exercise Warrants

The undersigned Registered Holder irrevocably elects to exercise _____________ Warrants
represented by this Warrant Certificate, and to purchase the shares of Common Stock issuable upon
the exercise of such Warrants, and requests that Certificates for such shares shall be issued in
the name of

 

(PLEASE TYPE OR PRINT NAME AND ADDRESS)

 

 

 

(SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER)

	 	 	 
	and be delivered to
	 	 
	 

	 	 
	 

	 	(PLEASE PRINT OR TYPE NAME AND ADDRESS)

 

and, if such number of Warrants shall not be all the Warrants evidenced by
this Warrant Certificate, that a new Warrant Certificate for the balance of
such Warrants be registered in the name of, and delivered to, the Registered
Holder at the address stated below:

	 	 	 	 	 
	Dated:
	 	 	 	 
	 

	 	 
	 	 
	 

	 	 	 	(SIGNATURE)
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	(ADDRESS)
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	(TAX IDENTIFICATION NUMBER)

 

June 27, 2008

Mr. Jack Silver, Trustee

Sherleigh Associates Inc. Defined Benefit Pension Plan

80 Columbus Circle PH 76A

New York, NY 10023

Dear Mr. Silver:

This letter agreement between Sherleigh Associates Inc. Defined Benefit Pension Plan (the
“Warrantholder”) and ChinaCast Education Corporation (the “Company”) sets forth the understanding
between the parties in connection with the exercise by the Warrantholder of 46,600 warrants (the
“Warrants”) currently held by the Warrantholder.

Pursuant to Section 3.1 of the Warrant Agreement dated on or about March 17, 2004 (the “Warrant
Agreement”), the Company hereby agrees to reduce the Warrant Price (as defined in the Warrant
Agreement) for the Warrantholder from $5.00 per share to $4.25 per share. In connection with this
reduction of the Warrant Price, the Warrantholder hereby elects to exercise all of the Warrants,
and to purchase the shares of common stock issuable upon the exercise of such Warrants (the “Common
Stock”). Such exercise shall occur when the Company receives a minimum of an aggregate of thirteen
million ($13,000,000) dollars from the exercise of Warrants from all Warrantholders exercising
pursuant to the reduced Warrant Price.

Further, pursuant to Section 3.3.1 of the Warrant Agreement, in connection with the exercise of the
Warrants, upon exercise hereof, the Warrantholder shall execute the attached Subscription Form and
submit it to the Warrant Agent and shall pay, in full to the Company, the Warrant Price, as hereby
reduced, in cash, certified check or wire transfer, for each share of Common Stock as to which the
Warrant is exercised.

In further consideration for the Warrantholder exercising the Warrants in full and in consideration
for the current market price of the Warrants, upon such exercise and payment in full of the Warrant
Price, the Company hereby agrees to issue to the Warrantholder 7,127 shares of restricted stock
(the “Shares”), which was determined by the following formula:

Warrants exercised by the Warrantholder x 0.65

$4.25

The Warrantholder represents that it is an “accredited investor” as such term is defined in Rule
501 of Regulation D (“Reg. D”) promulgated under the Securities Act of 1933, as amended (the
“Act”). The Warrantholder represents that the Shares are purchased for its own account, for
investment and not for distribution except pursuant to an effective registration statement or a
transfer exempt from registration under the Act..

 

 

The Warrantholder consents to the placement of a legend on any certificate or other document
evidencing the Shares stating that they have not been registered under the Act and setting forth or
referring to the restrictions on transferability and sale thereof. Each certificate evidencing the
Shares shall bear the legends set forth below, or legends substantially equivalent thereto,
together with any other legends that may be required by federal or state securities laws at the
time of the issuance of the Shares:

THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE “ACT”), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL (I) REGISTERED UNDER THE ACT OR (II) (A) THE ISSUER OF THE SHARES
(THE “ISSUER”) HAS RECEIVED AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH THE ACT AND (B)
THE TRANSFEREE IS ACCEPTABLE TO THE ISSUER

Unless otherwise set forth herein, all terms shall have the meaning ascribed to them in the Warrant
Agreement.

Except as expressly set forth in this letter agreement, all of the terms of the Warrant Agreement
shall remain unchanged and in full force and effect.

The parties expressly agree that all the terms and provisions hereof shall be construed in
accordance with and governed by the internal laws of the State of New York.

This letter agreement may be signed in counterparts, which may be delivered by facsimile or other
electronic transmission (which delivery shall not affect the validity of such counterparts).

Very truly yours,

	 	 	 	 	 
	CHINACAST EDUCATION CORPORATION
 	 	 
	By:  	/s/ Ron Cahn 	 	 
	Name:  	Ron Chan 	 	 
	Title:  	CEO 	 	 
	 

Accepted and agreed to as of the date first above written:

	 	 	 	 	 
	SHERLEIGH ASSOCIATES INC. DEFINED BENEFIT PENSION PLAN
 	 
	By:  	/s/ Jack Silver 	 	 
	Name:  	Jack Silver 	 	 
	Title:  	Trustee 	 	 
	 

 

 

SUBSCRIPTION FORM

To Be Executed by the Registered Holder in Order to Exercise Warrants

The undersigned Registered Holder irrevocably elects to exercise _____________ Warrants
represented by this Warrant Certificate, and to purchase the shares of Common Stock issuable upon
the exercise of such Warrants, and requests that Certificates for such shares shall be issued in
the name of

 

(PLEASE TYPE OR PRINT NAME AND ADDRESS)

 

 

 

(SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER)

	 	 	 
	and be delivered to
	 	 
	 

	 	 
	 

	 	(PLEASE PRINT OR TYPE NAME AND ADDRESS)

 

and, if such number of Warrants shall not be all the Warrants evidenced by
this Warrant Certificate, that a new Warrant Certificate for the balance of
such Warrants be registered in the name of, and delivered to, the Registered
Holder at the address stated below:

	 	 	 	 	 
	Dated:
	 	 	 	 
	 

	 	 
	 	 
	 

	 	 	 	(SIGNATURE)
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	(ADDRESS)
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	(TAX IDENTIFICATION NUMBER)Execution Copy 

EIGHTH AMENDMENT AND WAIVER TO

THIRD AMENDED AND RESTATED CREDIT AGREEMENT

          EIGHTH
AMENDMENT AND WAIVER, dated as of July 1, 2008, to the Credit Agreement
referred to below (this “Amendment”), by and among BUTLER SERVICE GROUP,
INC., a New Jersey corporation, as Borrower (“Borrower”), the other
Credit Parties signatory hereto, GENERAL ELECTRIC CAPITAL CORPORATION, a
Delaware corporation, for itself, as Lender, and as Agent for Lenders (in such
capacity, “Agent”) and the other Lenders signatory hereto. 

W I T N
E S S E T H:

          WHEREAS,
Borrower, the other Credit Parties signatory thereto, Agent, and Lenders
signatory thereto are parties to that certain Third Amended and Restated Credit
Agreement, dated as of August 29, 2007, as amended as of February 1, 2008, as
further amended as of February 28, 2008, as further amended as of April 14,
2008, as further amended as of April 28, 2008, as further amended as of May 12,
2008, as further amended as of May 30, 2008, and as further amended as of June
13, 2008 (including all annexes, exhibits and schedules thereto, and as
amended, supplemented or otherwise modified from time to time prior to the date
hereof, the “Credit Agreement”); and 

          WHEREAS,
Agent and Lenders have agreed to amend the Credit Agreement in the manner and
on the terms and conditions provided for herein. 

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

          1.          Definitions.
Capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in Annex A of the Credit Agreement.  

          2.          Waiver
of Existing Defaults and Events of Default. All Defaults and Events of
Default in existence prior to the Eighth Amendment Effective Date are hereby
waived by the Agent and the Lenders as of the Effective Date; provided, that Agent and Lenders may exercise all of their respective rights and remedies as
may be available under the Credit Agreement and under applicable law, upon or
after the occurrence of any other Default or Event of Default under the Credit
Agreement or any Loan Document from and after the Effective Date.  

          3.          Amendments
to the Credit Agreement. 

                       (a)          Section
1.3(b)(iii) of the Credit Agreement is hereby amended as of the Eighth
Amending Effective Date (as defined below) by deleting “6.14(f), or 6.14(g).”
where it appears in the last sentence of such Section 1.3(b)(iii). 

                       (b)          Section
1.5(a) of the Credit Agreement is hereby amended and restated as of the
Eighth Amendment Effective Date by deleting such Section 1.5(a) in its
entirety and substituting in lieu thereof the following new Section 1.5(a):

	
 

	
 

	
 

	
“(a) As of
 the Eighth Amendment Effective Date, Borrower shall pay interest to Agent,
 for the ratable benefit of Lenders in accordance with the various Loans being
 made by each Lender, in arrears on each applicable Interest Payment Date, at
 the following rates: (i) for the period commencing on July 1, 2008 and ending
 on September 30, 2008, (A) with respect to Revolving Credit Advances, as
 determined by Agent, the Index Rate plus

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5.5% per
 annum, or, at the election of Borrower, the applicable LIBOR Rate plus
 7.0% per annum, or, at the election of Borrower, the applicable Commercial
 Paper Rate plus 7.0% per annum, based on the aggregate Revolving
 Credit Advances outstanding from time to time and (B) with respect to the
 Swing Line Loan, as determined by Agent, the Index Rate plus 5.5% per
 annum, and (ii) for the period commencing on October 1, 2008 and ending on
 the Commitment Termination Date, (A) with respect to Revolving Credit
 Advances, as determined by Agent, the Index Rate plus 7.5% per annum,
 or, at the election of Borrower, the applicable LIBOR Rate plus 9.0%
 per annum, or, at the election of Borrower, the applicable Commercial Paper
 Rate plus 9.0% per annum, based on the aggregate Revolving Credit
 Advances outstanding from time to time and (B) with respect to the Swing Line
 Loan, as determined by Agent, the Index Rate plus 7.5% per annum.” 

                    (c)          Section
1.6(r) of the Credit Agreement is hereby amended and restated as of the
Eighth Amendment Effective Date by deleting such Section 1.6(r) in its
entirety and substituting in lieu thereof the following new Section 1.6(r):

	
 

	
 

	
 

	
“(r)(i) to
 the extent that such Account (other than the Referenced Accounts), together
 with all other Accounts owing from such Account Debtor and its Affiliates as
 of any date of determination, exceed 10% of all Eligible Accounts, and (ii)
 to the extent that any Account that constitutes a Referenced Account together
 with all other Referenced Accounts owing from such Account Debtor and its
 Affiliates as of any date of determination, exceed 15% of all Eligible
 Accounts;” 

                    (d)          Section
1.9 of the Credit Agreement is hereby amended as of the Eighth Amendment
Effective Date by adding new clauses (d) and (e) respectively,
following clause (c) therein as follows: 

	
 

	
 

	
 

	
“(d)
 Borrower agrees to pay to Agent, for the ratable benefit of Revolving
 Lenders, a non-refundable fee in an amount equal to $10,000 for any day which
 the Borrowing Availability for such day is less than (i) during the period
 commencing on July 18, 2008 and ending on September 30, 2008, $2,000,000,
 (ii) during the period commencing on October 1, 2008 and ending on December
 31, 2008, $4,000,000 and (iii) during the period commencing on January 1,
 2009 and ending on the Commitment Termination Date, $5,000,000, and an
 additional fee in the amount equal to $2,500 for each consecutive day
 thereafter that the Borrowing Availability remains less than the applicable
 amount for such day identified above; provided, that for
 purposes of determining the amount of the minimum Borrowing Availability
 pursuant to this clause (d), such determination shall be made without
 regard to clause (ii) of the proviso set forth in clause (d) of
 Annex G. 

	
 

	
 

	
 

	
(e) Borrower
 agrees to pay to Agent, for the ratable benefit of the Revolving Lenders, a
 non-refundable fee in an amount equal to $25,000 for each day during which
 the outstanding principal amount of the Loans exceeds the Borrowing Base; provided,
 however, that the payment of such fee to Agent shall not constitute,
 or otherwise shall be deemed to constitute, a waiver of any Default or Event
 of Default which may exist as a result of such excess, or to affect, limit or
 impair any rights, powers or remedies of Agent or any Lender or any
 Obligations of Borrower under or in respect of the Credit Agreement or any
 other Loan Document.”

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                    (e)          Section
5 of the Credit Agreement is amended as of the Eighth Amendment Effective
Date by adding new Section 5.11 immediately following Section 5.10
thereof as follows: 

	
 

	
 

	
 

	
“5.11 Actions
 in Furtherance of Increased Liquidity. Borrower and the other Credit
 Parties, with the assistance of the Investment Banker, shall endeavor to
 effect a transaction or take other steps to increase liquidity to the extent
 necessary to avoid a breach of Section 8.1(n) and shall strictly and
 timely comply with each and every one of the following additional covenants
 regarding such process, the failure to do so constituting an immediate Event
 of Default as of such date: 

	
 

	
 

	
 

	
          (a)          On
 or before July 15, 2008, the Credit Parties shall have retained the
 Investment Banker; 

	
 

	
 

	
 

	
          (b)          From
 and after the date hereof until the Liquidity Test Date, management of the
 Credit Parties and the Investment Banker shall conduct a weekly (or more
 often as may be reasonably requested by Agent at any time) telephonic meeting
 to be attended by the respective management representatives of the Credit
 Parties, the Lenders and their respective representatives, and the Investment
 Banker, at which meeting the Credit Parties and the Investment Banker shall
 present an update on the process (including an assessment of any proposed
 steps to increase Liquidity); and 

	
 

	
 

	
 

	
          (c)          From
 and after the date hereof, the Credit Parties irrevocably authorize, and
 shall cause the Investment Banker to (i) disclose fully and promptly to Agent
 and the Lenders and their respective representatives all material
 developments in connection with the efforts of the Credit Parties and the
 Investment Banker described in this Section 5.11, and (ii) after
 consultations with the Borrower, respond to the inquiries of Agent and the
 Lenders and their respective representatives concerning any and all matters
 relating to the steps proposed to be taken to increase liquidity; 

	
 

	
 

	
 

	
provided,
 however, that no disclosure shall be required under clauses (ii)
 or (iii) hereof which would be inconsistent with a reasonable, good
 faith determination by the officers of the Borrower or any other Credit Party
 that such disclosure would violate the fiduciary duties of the officers of
 the Borrower or such other Credit Party. 

                    (f)          Section
6.8(b) and (c) of the Credit Agreement is amended and restated as of
the Eighth Amendment Effective Date by deleting such Section 6.8(b) and
(c) in its entirety and substituting in lieu thereof the following new Section
6.8(b) and (c): 

	
 

	
 

	
 

	
“(b) the
 sale, transfer, conveyance or other disposition by a Credit Party of
 Equipment, Fixtures or Real Estate that are obsolete or no longer used or
 useful in such Credit Party’s business and having a sales price not exceeding
 $50,000 in any single transaction or $100,000 in the aggregate in any Fiscal
 Year, and (c) the sale of the Montvale Property, provided that
 any proceeds thereof are applied as required by Section 1.3(b)(ii) of
 the Second Lien Credit Agreement.” 

                    (g)          Section
6.14 of the Credit Agreement is hereby amended as of the Eighth Amendment
Effective Date by (A) inserting “and” immediately before clause (e)
thereof, (B) deleting the comma at the end of clause (e) thereof and
replacing it with a period, and (C) deleting clauses (g) and (f)
in their entirety. 

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                    (h)          Section
8.1 of the Credit Agreement is hereby amended as of the Eighth Amendment
Effective date by adding new clause (n) immediately following clause
(m) thereof as follows: 

	
 

	
 

	
 

	
“(n)
Borrower fails to have (i) Funded Debt on January 2, 2009 of less than
$44,872,006.67, (ii) an average Borrowing Availability over the four weekly
measurement periods immediately preceding December 31, 2008 of at least
$5,000,000, (iii) a Leverage Ratio for Holdings and its Subsidiaries on a
consolidated basis (using Funded Debt as of January 2, 2009 and EBITDA as of
the fiscal month ending nearest December 31, 2008) of less than 3.50:1.00, or
(iv) delivered to Agent (A) the financial information necessary to determine
EBITDA as of December 31, 2008, and (B) a Compliance Certificate signed by a
responsible officer of the Borrower in a form reasonably satisfactory to the
Agent demonstrating that no Event of Default exists under this clause (n).”  

                    (i)          Section
8.1(b) of the Credit Agreement is hereby amended and restated as of the
Eighth Amendment Effective Date by deleting such Section 8.1(b) in its
entirety and substituting in lieu thereof the following new Section 8.1(b):

	
 

	
 

	
 

	
“Any Credit
 Party fails or neglects to perform, keep or observe any of the provisions of Sections
 1.4, 1.8, 5.4(a), 5.11, or 6, or any of the provisions set forth
 in Annexes C or G, respectively; provided, that it shall
 not constitute a Default or Event of Default hereunder if the Credit Parties
 fail to comply with (i) clause (d)(i) of Annex G during the
 period commencing on July 1, 2008 and ending on July 17, 2008 (it being
 understood and agreed that any failure to comply with clause (d)(i) of
 Annex G shall result in an Event of Default if such failure to comply
 is not cured or waived on or prior to July 18, 2008) or (ii) clause
 (d)(ii) of Annex G during the period commencing on October 1, 2008
 and ending on October 15, 2008 (it being understood and agreed that any
 failure to comply with clause (d)(ii) of Annex G shall result
 in an Event of Default if such failure to comply is not cured or waived on or
 prior to October 16, 2008).” 

                    (j)          Annex
A of the Credit Agreement is hereby amended as of the Eighth Amendment
Effective Date by: 

                                 (i)          amending
the definition of “Borrowing Availability” by deleting the word
“Account” in clause (i) of such definition and substituting in lieu
thereof the word “Amount”. 

                                 (ii)         amending
the definition of “Borrowing Base” by deleting the period where it
appears at the end of the second to last line of such definition and
substituting in lieu thereof a comma. 

                                 (iii)        amending
the definition of “Commitment Termination Date” by deleting the language
“July 1, 2008” in clause (a) of such definition and substituting in lieu
thereof the language “August 1, 2009”. 

                                 (iv)        amending
the definition of “EBITDA” by removing the “and” where it appears
immediately before clause (v) thereof and substituting in lieu thereof a
comma, and deleting the period where it appears at the end of clause (v)
and adding in lieu thereof, “(vi) charges recorded in the first Fiscal Quarter
of 2008 (not to exceed $2,055,000 in the aggregate) related to the one time
effect of (A) recording bad debt expense for certain accounts receivables from
American Airlines and Vought and (B) recording the sale of the Montvale
Property, and (vii) actual costs and expenses 

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incurred by
the Investment Banker and any restructuring advisor hired by Borrower along
with charges related to implementing any plans or recommendations thereof, in
each case, in amounts reasonably acceptable to Agent.” 

                              (v)          amending
the definition of “Funded Debt” by deleting the proviso where it appears
at the end of such definition and substituting in lieu thereof, the following
new proviso: 

	
 

	
 

	
 

	
“provided,
 that solely for the purposes of calculating the Leverage Ratio for the
 periods ending on or before December 31, 2008 (other than with respect to the
 Leverage Ratio calculation required to determine compliance with Section
 8.1(n)), there shall be added to Funded Debt (i) the net proceeds from
 any sale, transfer, conveyance, assignment or other disposition of any
 property other than as permitted by Section 6.8(a) or (b) and
 (ii) the net proceeds from any sale or offering of Holdings Stock after the
 Eighth Amendment Effective Date.” 

                              (vi)         amending
and restating the definition of “Daily Reserve” in its entirety by
deleting such definition in its entirety and substituting in lieu thereof the
following new definition: 

	
 

	
 

	
 

	
“‘Daily
 Reserve’ means with respect to the Borrowing Base of Borrower, a reserve
 against the Borrowing Availability of Borrower in an amount, which shall
 accrue Monday through Friday of each calendar week in daily equal
 installments of (i) for the period commencing on the Eighth Amendment
 Effective Date and ending on July 31, 2008, $5,000, (ii) for the period
 commencing on August 1, 2008 and ending on August 31, 2008, $30,000, (iii)
 for the period commencing on September 1, 2008 and ending on September 30,
 2008, $40,000, (iv) for the period commencing on October 1, 2008 and ending
 on October 31, 2008, $20,000, and (v) for the period commencing on November
 1, 2008 and ending on the date in which the cumulative aggregate Daily
 Reserves reach $4,000,000 (the “Daily Reserve Cap”), $50,000; provided,
 that the Daily Reserves shall be increased by an amount equal to fifty
 percent (50%) of the amount by which the face amount of Letters of Credit are
 reduced pursuant to the terms thereof (or otherwise cancelled) on terms and
 conditions satisfactory to Agent, but in no event shall the aggregate amount
 of Daily Reserves exceed the Daily Reserve Cap. Commencing on January 1,
 2009, Agent may, in its sole discretion, release an amount up to $2,000,000
 of such Daily Reserves to be used for working capital needs of Borrower on an
 “as needed” basis subject to conditions and criteria satisfactory to Agent; provided,
 that Agent shall retain the right to reinstitute the amount of such
 Daily Reserves until it reaches the Daily Reserve Cap.” 

                              (vii)        amending
and restating clause (a) of the definition of “Reserves” in its
entirety and substituting in lieu thereof the following new clause (a): 

	
 

	
 

	
 

	
“(a) a
 reserve for the face amount of all Letters of Credit issued hereunder as in
 effect on the Second Amendment Effective Date, which amount shall be reduced
 by an amount equal to one hundred percent (100%) of the amount by which the
 face amount of such Letters of Credit are reduced pursuant to the terms
 thereof (or are otherwise cancelled) on terms and conditions satisfactory to
 Agent,” 

                              (viii)      adding
the following new definitions in the appropriate alphabetical order: 

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“‘Eighth
  Amendment Effective Date’ means July 1, 2008. 

	
 

	
 

	
 

	
‘Daily
  Reserve Cap’ has the meaning specified in the definition of “Daily
  Reserve”. 

	
 

	
 

	
 

	
‘Investment
  Banker’ shall mean an investment banking firm selected by the Credit
  Parties and reasonably acceptable to the Lenders. 

	
 

	
 

	
 

	
‘Liquidity
  Test Date’ shall mean January 16, 2009. 

	
 

	
 

	
 

	
‘Referenced
  Accounts’ means any Account with UTC, Boeing, Verizon, AT&T, Avon
  Products, Northrop Grumman, Spirit Aerosystems, BAE Systems or Caterpillar,
  or such other Accounts as may be agreed to by Agent in its reasonable
  discretion following consultation with Borrower.” 

                              (ix)          deleting
the following definitions in their entirety: “Applicable Commercial Paper Margin”,
“Applicable Margin”, “Applicable Revolver Index Margin”, “Applicable
Revolver LIBOR Margin” and “Tangible Net Worth”. 

                   (k)       Annex
E of the Credit Agreement is hereby amended as of the Eighth Amendment
Effective Date by: 

                               (i)            amending
and restating the second sentence of clause (a) as follows: 

	
 

	
 

	
 

	
“Such
  financial information shall be accompanied by (i) a statement in reasonable
  detail in the form attached hereto as Schedule I to Annex E
  (each, a “Compliance Certificate”) showing the calculations used in
  determining compliance with each of the Financial Covenants that is tested on
  a monthly basis, and (ii) a certification of the Chief Financial Officer of
  Borrower that (A) such financial information presents fairly in accordance
  with GAAP (subject to normal year-end adjustments) the financial position and
  results of operations of Borrower and its Subsidiaries, on a consolidated and
  consolidating basis, in each case as at the end of such Fiscal Month and for
  that portion of the Fiscal Year then ended and (B) any other information
  presented is true, correct and complete in all material respects and that
  there was no Default or Event of Default in existence as of such time or, if
  a Default or Event of Default shall have occurred and be continuing,
  describing the nature thereof and all efforts undertaken to cure such Default
  or Event of Default.” 

                              (ii)          amending
clause (b) thereof by (A) inserting “(except as set forth in clause
(r) of this Annex E)” immediately following “45 days” where it
appears in the first sentence of such clause (b) and (B) deleting “a
statement in reasonable detail (each, a “Compliance Certificate”)” where
it appears in clause (A) of the second sentence of clause (b) and
substituting in lieu thereof “a Compliance Certificate”.

                              (iii)          adding
new clause (r) following clause (q) therein as follows: 

	
 

	
 

	
 

	
“(r) Financial
  and Other Information Related to 2007 and 2008. To Agent, on or prior to
  September 15, 2008, such financial and other information required to be
  delivered pursuant to (i) clause (b) of Annex E with respect to
  the Fiscal Quarters ending on or about September 30, 2007, March 31, 2008 and
  June 30, 2008 and (ii) clause (d) of Annex E with respect to
  the Fiscal Year ending on or about December 31, 2007.” 

6

Execution Copy 

                                     (iv)          attaching
a new Schedule I to the end of Annex E which Schedule I shall be
in the form attached hereto as Exhibit A. 

                       (l)          Annex
F of the Credit Agreement is hereby amended as of the Eighth Amendment
Effective Date by amending and restating clause (a) thereto in its
entirety and substituting in lieu thereof the following new clause (a): 

	
 

	
 

	
 

	
“(a) To
  Agent, on a weekly basis delivered on each Friday, or at such more frequent
  intervals as Agent may request from time to time, a Borrowing Base
  Certificate with respect to Borrower, accompanied by such supporting detail
  and documentation as shall be requested by Agent in its reasonable
  discretion;” 

                       (m)        Annex
G of the Credit Agreement is hereby amended and restated as of the Eighth
Amendment Effective Date by deleting such Annex G in its entirety and
substituting in lieu thereof a new Annex G in the form attached hereto
as Exhibit B. 

          4.          Waiver
of Default Rate. Borrower and the other Credit Parties acknowledge and
agree that Agent provided notice to Borrower that, commencing on January 3,
2008, all outstanding Obligations bore interest at the Default Rate in
accordance with Section 1.5(d) of the Credit Agreement through the date
hereof. As of the Eighth Amendment Effective Date, Agent and Lenders waive
collection of the Default Rate interest from the period commencing January 3,
2008 through and including the Eighth Amendment Effective Date. 

          5.          Representations
and Warranties. To induce Agent and Lenders to enter into this Amendment,
each of Borrower and Credit Parties make the following representations and
warranties to Agent and Lenders: 

                       (a)          The
execution, delivery and performance of this Amendment and the performance of
the Credit Agreement, as amended by this Amendment (the “Amended Credit
Agreement”) by Borrower and the other Credit Parties: (a) is within such
Person’s organizational power, (b) has been duly authorized by all necessary or
proper corporate and shareholder action, (c) does not contravene any provision
of such Person’s charter or bylaws or equivalent organizational documents, (d)
does not violate any law or regulation, or any order or decree of any court or
Governmental Authority, (e) does not conflict with or result in the breach or
termination of, constitute a default under or accelerate or permit the
acceleration of any performance required by, any indenture, mortgage, deed of
trust, lease, agreement or other instrument to which such Person is a party or
by which such Person or any of its property is bound, (f) does not result in
the creation or imposition of any Lien upon any of the property of such Person
other than those in favor of Agent pursuant to the Loan Documents, and (g) does
not require the consent or approval of any Governmental Authority or any other
Person. 

                       (b)          This
Amendment has been duly executed and delivered by or on behalf of each of
Borrower and the other Credit Parties. 

                       (c)          Each
of this Amendment and the Amended Credit Agreement constitutes a legal, valid
and binding obligation of Borrower and each of the other Credit Parties party
thereto, enforceable against each in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights
generally and by general equitable principles (whether enforcement is sought by
proceedings in equity or at law). 

7

Execution Copy 

                       (d)          No
Default or Event of Default has occurred and is continuing after giving effect
to this Amendment and no “Default” or “Event of Default” (as such terms are
defined in the Second Lien Credit Agreement) has occurred and is continuing
after giving effect to the Second Lien Credit Agreement Fifth Amendment (as
defined below). 

                       (e)          No
action, claim, lawsuit, demand, investigation or proceeding is now pending or,
to the knowledge of any Credit Party, threatened against any Credit Party, at
law, in equity or otherwise, before any court, board, commission, agency or
instrumentality of any Governmental Authority, or before any arbitrator or
panel of arbitrators, (a) which challenges Borrower’s or, to the extent
applicable, any other Credit Party’s right, power, or competence to enter into
this Amendment or perform any of their respective obligations under this
Amendment, the Amended Credit Agreement or any other Loan Document, or the
validity or enforceability of this Amendment, the Amended Credit Agreement or
any other Loan Document or any action taken under this Amendment, the Amended
Credit Agreement or any other Loan Document or (b) which if determined
adversely, is reasonably likely to have or result in a Material Adverse Effect.
To the knowledge of Holdings or Borrower, there does not exist a state of facts
which is reasonably likely to give rise to such proceedings. 

                       (f)          The
representations and warranties of Borrower and the other Credit Parties
contained in the Credit Agreement and each other Loan Document shall be true
and correct on and as of the date hereof with the same effect as if such
representations and warranties had been made on and as of such date, except
that any such representation or warranty which is expressly made only as of a
specified date need be true only as of such date. 

          6.          No
Other Amendments/Waivers. Except as expressly amended herein, the Credit
Agreement and the other Loan Documents shall be unmodified and shall continue
to be in full force and effect in accordance with their terms. In addition,
this Amendment shall not be deemed a waiver of any term or condition of any
Loan Document and shall not be deemed to prejudice any right or rights which
Agent, for itself and Lenders, may now have or may have in the future under or
in connection with any Loan Document or any of the instruments or agreements
referred to therein, as the same may be amended from time to time. 

          7.          Outstanding
Indebtedness; Waiver of Claims. Each of Borrower and the other Credit
Parties hereby acknowledges and agrees that as of July 1, 2008, the aggregate
outstanding principal amount of the Revolving Loan is $40,736,895.20 and the
aggregate outstanding Letters of Credit Obligations is $3,327,640.85, and that
such principal amounts are payable pursuant to the Credit Agreement without
defense, offset, withholding, counterclaim or deduction of any kind. Borrower
and each other Credit Party hereby waives, releases, remises and forever
discharges Agent, Lenders and each other Indemnified Person from any and all
claims, suits, actions, investigations, proceedings or demands arising out of
or in connection with the Credit Agreement (collectively, “Claims”),
whether based in contract, tort, implied or express warranty, strict liability,
criminal or civil statute or common law of any kind or character, known or
unknown, which Borrower or any other Credit Party ever had, now has or might
hereafter have against Agent or Lenders which relates, directly or indirectly,
to any acts or omissions of Agent, Lenders or any other Indemnified Person on
or prior to the date hereof; provided, that neither Borrower nor
any other Credit Party waives any Claim solely to the extent such Claim relates
to Agent’s or any Lender’s gross negligence or willful misconduct. 

          8.          Amendment
Fee. Borrower and the other Credit Parties hereby, jointly and severally
agree to pay to Agent, for the ratable benefit of the Lenders, an amendment fee
in the aggregate amount equal to $50,000, which shall be fully earned, due and
payable in immediately available funds on the Eighth Amendment Effective Date
(the “Amendment Fee”), together with interest, fees, expenses, 

8

Execution Copy

attorneys fees
and any other charges hereafter accruing through the date of payment, under the
Loan Documents. 

          9.          Amendment
to Second Lien Credit Agreement. Agent and the Lenders hereby consent as of
the Eighth Amendment Effective Date to the amendment of the Second Lien Credit
Agreement pursuant to the Fifth Amendment thereto in the form attached hereto
as Exhibit C (the “Second Lien Credit Agreement Fifth Amendment”).

          10.        Expenses.
Borrower and the other Credit Parties hereby reconfirm their respective obligations
pursuant to Sections 1.9 and 11.3 of the Credit Agreement to pay
and reimburse Agent, for itself and Lenders, for all reasonable costs and
expenses (including, without limitation, reasonable fees of counsel) incurred
in connection with the negotiation, preparation, execution and delivery of this
Amendment and all other documents and instruments delivered in connection
herewith. 

          11.        Effectiveness.
This Amendment shall be deemed effective as of the date hereof (the “Eighth
Amendment Effective Date”) only upon satisfaction in full in the judgment of
Agent of each of the following conditions: 

                       (a)          Amendment.
Agent shall have received five (5) original copies of this Amendment duly
executed and delivered by Agent, the Lenders, Borrower and the other Credit
Parties. 

                       (b)          Amendment
Fee. Agent shall have received payment of the Amendment Fee. 

                       (c)          Payment
of Fees and Expenses. Borrower shall have paid to Agent all documented
costs, fees and expenses owing to Agent (including, without limitation, all
reasonable legal fees and expenses). 

                       (d)          Second
Lien Credit Agreement Fifth Amendment. The Second Lien Credit Agreement
Fifth Amendment shall have been duly executed and delivered by the parties
thereto and shall have become effective in accordance with the terms thereof
and Agent shall have received a complete and correct copy of the Second Lien
Credit Agreement Fifth Amendment. 

                       (e)          Representations
and Warranties. The representations and warranties of or on behalf of
Borrower and the Credit Parties in this Amendment shall be true and correct on
and as of the date hereof, except that any such representation or warranty
which is expressly made only as of a specified date need be true only as of
such date. 

          12.        GOVERNING
LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK. 

          13.        Counterparts.
This Amendment may be executed by the parties hereto on any number of separate
counterparts and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. 

[SIGNATURE PAGES
FOLLOW]

9

          IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year
first above written.

	
   

  	
   

  	
   

  
	
   

  	
  BUTLER SERVICE GROUP INC., as Borrower

  
	
   

  	
   

  
	
   

  	
  By: 

  	
        /s/ Antonio Mateo

  
	
   

  	
  

  
	
   

  	
  Name:  ANTONIO MATEO

  
	
   

  	
  Title:  VICE PRESIDENT FINANCE & TREASURER

  

Signature Page to Eighth Amendment to Third Amended and Restate
Credit
Agreement

	
   

  	
   

  	
   

  
	
   

  	
  GENERAL
  ELECTRIC CAPITAL

  CORPORATION, as Agent and Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James H. Kautman

  
	
   

  	
  

  
	
   

  	
  Name:  James H. Kautman

  
	
   

  	
  Title:
  Duly Authorized Signatory

  

The following Persons are
signatories to this Amendment in their capacity as Credit Parties and not as Borrower.

BUTLER INTERNATIONAL, INC.

BUTLER SERVICES INTERNATIONAL, INC.

BUTLER TELECOM, INC.

BUTLER PUBLISHING, INC.

BUTLER OF NEW JERSEY REALTY CORP.

BUTLER SERVICES, INC.

BUTLER UTILITY SERVICE, INC.

	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  

Signature Page to Eighth Amendment to Third Amended and Restate
Credit
Agreement

	
   

  	
   

  	
   

  
	
   

  	
  GENERAL
  ELECTRIC CAPITAL

  CORPORATION, as Agent and Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  

  
	
   

  	
  Title:
  Duly Authorized Signatory

  

The following Persons are
signatories to this Amendment in their capacity as Credit Parties and not as Borrower.

BUTLER INTERNATIONAL, INC.

BUTLER SERVICES INTERNATIONAL, INC.

BUTLER TELECOM, INC.

BUTLER PUBLISHING, INC.

BUTLER OF NEW JERSEY REALTY CORP.

BUTLER SERVICES, INC.

BUTLER UTILITY SERVICE, INC.

	
   

  	
   

  	
   

  
	
  By:

  	
        /s/ Antonio Mateo

  	
   

  
	
  

  	
   

  
	
  Name: ANTONIO MATEO

  	
   

  
	
  Title: VICE PRESIDENT FINANCE & TREASURER

  	
   

  

Signature Page to Eighth Amendment to Third Amended and Restate
Credit
Agreement

Execution
Copy

EXHIBIT A

Schedule I to Annex E

FORM
OF COMPLIANCE CERTIFICATE

______________, 20__

                    Please
refer to the Credit Agreement, dated as of August 29, 2007 (the “Credit Agreement”), among Butler Service Group, Inc.
(the “Borrower”), the other Credit Parties signatory thereto, the Lenders party thereto and General Electric Capital
Corporation, as Agent (the “Agent”). Capitalized terms used herein have
the meanings assigned to them in the Credit Agreement. The undersigned hereby certifies, in his or her
capacity as the Chief Financial Officer of the Borrower, as follows:  

                    (i)          Enclosed
herewith is a copy of the [annual audited/quarterly/monthly] financial statements of the
Borrower as at _________________________ (the “Computation Date”), which
statements present fairly
in accordance with GAAP [(subject to normal year-end adjustments)] the
financial position, results of operations and statements of cash flows of Borrower
and its Subsidiaries, on both a consolidated and consolidating basis, as at the end of such [month
and for that portion of the Fiscal Year then ended] [Fiscal Quarter and for
that portion of the Fiscal Year then ended] [Fiscal Year] and any other
information presented
therewith is true, correct and complete in all material respects.

                    (ii)       
No Default or Event of Default has occurred or is continuing as of the date of
this certificate. [If a
Default or Event of Default has occurred and is continuing, describe the nature
thereof and all efforts undertaken to cure
such Default or Event of Default.]

                    (iii)        The
computations set forth on Schedule I attached hereto correspond to the
ratios and/or financial
restrictions contained in Annex G of the Credit Agreement and such
computations are true and correct as at the
Computation Date.

	
 

	
 

	
 

	
 

	
BUTLER
  SERVICE GROUP, INC.

	
 

	
 

	
 

	
By:

	
 

	
 

	

	
 

	
Name:

	
 

	
 

	
 

	

	
 

	
Title:

	
 

	
 

	
 

	

12

Paul Hastings Draft: 6/30/08 

Schedule I to
Compliance Certificate

Dated as of ________________

  (a) – Maximum
  Capital Expenditures

	
 

	
 

	
 

	
 

	
 

	
 

	
  A.

	
Capital Expenditures

	
 

	
 

	
$ ________

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Maximum Allowed: 3,000,000 per Fiscal Year

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
In Compliance

	
 

	
 

	
YES/NO

	
 

	
 

	
 

	
 

	
 

	
 

  (b) – Minimum
  Fixed Charge Coverage Ratio

	
 

	
 

	
 

	
 

	
 

	
 

	
  A.

	
EBITDA

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(i) 

	
Consolidated Net Income

	
 

	
 

	
$ ________

	
 

	
 

	
 

	
 

	
 

	
 

	
(ii) 

	
Consolidated Interest Expense

	
 

	
 

	
$ ________

	
 

	
 

	
 

	
 

	
 

	
 

	
(iii) 

	
Deferred financing cost amortization

	
 

	
 

	
$ ________

	
 

	
 

	
 

	
 

	
 

	
 

	
(iv) 

	
Charges in period for federal, state and local
  income taxes

	
 

	
 

	
$ ________

	
 

	
 

	
 

	
 

	
 

	
 

	
(v) 

	
Sum of (A(i) – (iv))

	
 

	
 

	
$ ________

	
 

	
 

	
 

	
 

	
 

	
 

	
(vi) 

	
Extraordinary nonrecurring
  items of income or loss

	
 

	
 

	
$ ________

	
 

	
 

	
 

	
 

	
 

	
 

	
(vii) 

	
EBIT (A(v) minus
  A(vi))

	
 

	
 

	
$ ________

	
 

	
 

	
 

	
 

	
 

	
 

	
(viii) 

	
Charges in period for
  amortization of intangibles, depletion and depreciation

	
 

	
 

	
$ ________

	
 

	
 

	
 

	
 

	
 

	
 

	
(ix) 

	
Non-cash charges as the result
  of any grant of stock or other non-cash consideration

	
 

	
 

	
$ ________

	
 

	
 

	
 

	
 

	
 

	
 

	
(x) 

	
Non-recurring, extraordinary
  items deducted in determining A(i) for period

	
 

	
 

	
$ ________

	
 

	
 

	
 

	
 

	
 

	
 

	
(xi) 

	
charges recorded in the first
  Fiscal Quarter of 2008 (not to exceed $2,055,000 in the aggregate)
  related to the one time effect of (A) recording bad debt expense for certain
  accounts receivables from American Airlines and Vought and (B) recording the
  sale of the Montvale Property
 

	
 

	
 

	
$ ________

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	 

	 

	 

	 

	 

	 

	 

	
 

	
(xii)

	
actual costs
  and expenses incurred by the Investment Banker and any restructuring advisor
  hired by Borrower along with charges related to implementing any plans or
  recommendations thereof, in each case, in amounts reasonably acceptable to
  Agent

	
 

	
 

	
$

	
________

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	 

	 

	 

	 

	 

	 

	 

	
 

	
(xiii)

	
Sum of
  (A(viii) – (xii))

	
 

	
 

	
$

	
________

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	 

	 

	 

	 

	 

	 

	 

	
 

	
(xiv)

	
EBITDA (A(vii) plus A(xiii)) 

	
 

	
 

	
$

	
________

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	 

	 

	 

	 

	 

	 

	 

	
B.

	
Fixed
  Charges

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	 

	 

	 

	 

	 

	 

	 

	
 

	
(i)

	
Aggregate of
  all Interest Expense paid in cash

	
 

	
 

	
$

	
________

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	 

	 

	 

	 

	 

	 

	 

	
 

	
(ii)

	
Scheduled
  payments of principal of Indebtedness

	
 

	
 

	
$

	
________

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	 

	 

	 

	 

	 

	 

	 

	
 

	
(iii)

	
Capital
  Expenditures (excluding any financed portion thereof)

	
 

	
 

	
$

	
________

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	 

	 

	 

	 

	 

	 

	 

	
 

	
(iv)

	
Amount
  actually paid for federal state and local income taxes in period

	
 

	
 

	
$

	
________

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	 

	 

	 

	 

	 

	 

	 

	
 

	
(v)

	
Restricted
  Payments paid to anyone other than a Credit Party

	
 

	
 

	
$

	
________

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	 

	 

	 

	 

	 

	 

	 

	
 

	
(vi)

	
Sum of (B(i)
  – B(v))

	
 

	
 

	
$

	
________

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	 

	 

	 

	 

	 

	 

	 

	
 

	
(vii)

	
Tax Refunds
  Received

	
 

	
 

	
$

	
________

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	 

	 

	 

	 

	 

	 

	 

	
 

	
(viii)

	
Fixed Charges (B(vi) minus B(vii))

	
 

	
 

	
$

	
________

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	 

	 

	 

	 

	 

	 

	 

	
C.

	
Fixed Charge
  Coverage Ratio

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	 

	 

	 

	 

	 

	 

	 

	
 

	
(i)

	
Ratio of
  EBITDA (from A(xiv)) to Fixed Charges (from B(viii))

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
________ to ________

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Maximum
  allowed:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
[1.05][1.10]:1.00

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
In
  Compliance

	
 

	
 

	
YES/NO

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	 

	 

	 

	 

	 

	 

	 

(c) –
Maximum Leverage Ratio

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
A.

	
Funded Debt

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	 

	 

	 

	 

	 

	 

	 

	
 

	
(i)

	
all Indebtedness for
 borrowed money evidenced by notes, bonds, debentures, or similar evidences of Indebtedness and that by its terms matures
 more than one year from, or is
 directly or indirectly renewable or extendible at such Person’s option under a revolving credit or similar agreement obligating
the
 lender or lenders to extend
 credit over a period of more than one year from the date of creation thereof, and specifically including Capital Lease Obligations,
 current maturities of long term debt,
 revolving credit and short term debt extendible beyond one year at the option of the debtor, and also including, in the case of
 Borrower, the Obligations, the First
 Lien Indebtedness and, without duplication,
 Guaranteed Indebtedness consisting of guaranties of Funded Debt of other Persons, but excluding, without duplication, unmatured
 obligations with respect to
 letters of credit; provided, that solely for the purposes of calculating the Leverage
 Ratio for the periods ending on or
 before March 31, 2009 (other than with
 respect to the Leverage Ratio calculation required to determine compliance with Section
 8.1(n)), there shall be
 added to Funded Debt (i) the net proceeds from any sale, transfer, conveyance, assignment or
 other disposition of any property
 other than as permitted by Section
 6.8(a) or (b) of
 the Credit Agreement and (ii) the net
 proceeds from any sale or offering of Holdings Stock after the Eighth Amendment Effective Date

	
 

	
 

	
$ ________

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	 

	 

	 

	 

	 

	 

	 

	
B.

	
EBITDA (from (b)A(xiii))

	
 

	
 

	
$ ________

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	 

	 

	 

	 

	 

	 

	 

	
C.

	
Leverage Ratio

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	 

	 

	 

	 

	 

	 

	 

	
 

	
(i)

	
Ratio of Funded Debt
 (A(i)) to EBITDA (B)

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
______ to ______

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Maximum Allowed:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
[7.00][6.50][6.00][3.50]:1.00

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
In Compliance

	
 

	
 

	
YES/NO

	
 

	
 

	
 

	
 

	
 

	
 

	
 

EXHIBIT B

ANNEX G (Section 6.10) 

to 

CREDIT AGREEMENT

FINANCIAL COVENANTS

          Borrower
shall not breach or fail to comply with any of the following financial
covenants, each of which shall be calculated in accordance with GAAP
consistently applied:

               
(a)
          Maximum
Capital Expenditures. Holdings and its Subsidiaries on a consolidated basis
shall not make Capital Expenditures that exceed $3,000,000 in the aggregate in
any Fiscal Year. 

               
(b)
          Minimum
Fixed Charge Coverage Ratio. Holdings and its Subsidiaries shall have on a
consolidated basis at the end of each period set forth below, a Fixed Charge
Coverage Ratio of not less than the following: 

	
 

	
 

	
(i)

	
          1.05:1.00
  for the Fiscal Quarter ending June 30, 2008; 

	
 

	
 

	
(ii)

	
          1.05:1.00
  for the period of two (2) consecutive Fiscal Quarters ending September
   

	
          30, 2008;

	
 

	
 

	
 

	
(iii)

	
          1.05:1.00
  for the period of three (3) consecutive Fiscal Quarters ending December
   

	
          31, 2008;

	
 

	
 

	
 

	
(iv)

	
          1.05:1.00
  for each period of four (4) consecutive Fiscal Quarters ending March
   

	
          31, 2009;

	
 

	
 

	
 

	
(v)

	
          1.10:1.00
  for each period of four (4) consecutive Fiscal Quarters ending thereafter. 

               (c)
           Maximum
Leverage Ratio. Holdings and its Subsidiaries on a consolidated basis shall
have at the end of each period set forth below, a Leverage Ratio of not more
than the following 

	
 

	
 

	
(i)

	
          7.00:1.00
  for the Fiscal Quarter ending June 30, 2008; 

	
 

	
 

	
(ii)

	
          6.50:1.00
  for the Fiscal Quarter ending September 30, 2008; 

	
 

	
 

	
(iii)

	
          6.00:1.00
  for the Fiscal Quarter ending December 31, 2008; and 

	
 

	
 

	
(iv)

	
          3.50:1.00
  for the Fiscal Quarters ending March 31, 2009 and June 30, 2009. 

               (d)            Minimum
Borrowing Availability. Holdings and its Subsidiaries shall maintain
Borrowing Availability of not less than, (i) for the period commencing on July
1, 2008 and 

ending on
September 30, 2008, $2,000,000, (ii) for the period commencing on October 1,
2008 and ending on December 31, 2008, $4,000,000, and (iii) for the period
commencing on January 1, 2009 and ending on the Commitment Termination Date,
$5,000,000; provided, that in determining compliance with this minimum
Borrowing Availability covenant, (A) the aggregate amount of Daily Reserves
shall be excluded from the definition of “Reserves” for purposes of calculating
Borrowing Availability and (B) Borrowing Availability shall be calculated on
each Friday of each week as a daily average of the amount of Borrowing
Availability for the preceding 5-day period (including for such calculations
the Friday such calculation is made).  

EXHIBIT C

Second Lien Credit Agreement Fifth Amendment

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