Document:

Unassociated Document

     

    
      
        	  	
                Wachovia
                  Bank, National Association

                Wachovia
                  Capital Markets, LLC

                One
                  Wachovia Center

                301
                  South College Street

                Charlotte,
                  NC 28288-0737

              	 

      

       

    

     

    CONFIDENTIAL

    

    

    June
      30,
      2007

    

    Consolidated
      Communications Holdings, Inc.

    Consolidated
      Communications, Inc.

    Consolidated
      Communications Acquisition Texas, Inc.

    121
      South
      17th
      Street

    Mattoon,
      Illinois 61938

    

      Attention:     Steven
        L.
        Childers, Chief Financial Officer

      

      

      
        	
              	Re:	
                Project
                  Keystone Commitment Letter

                $950,000,000 Senior Secured
                  Facilities

              

      

    

    

    Ladies
      and Gentlemen:

    

    You
      have
      advised Wachovia Bank, National Association (“Wachovia
      Bank”),
      and
      Wachovia Capital Markets, LLC (“Wachovia
      Securities”
and,
      together with Wachovia Bank, the “Wachovia
      Parties”
or
      “we”
or
      “us”)
      that
      Consolidated Communications Holdings, Inc. (“Holdings”),
      Consolidated Communications, Inc. (the “CCI
      Borrower”)
      and
      Consolidated Communications Acquisition Texas, Inc. (the “CCAT
      Borrower”
and
      together with the CCI Borrower, the “Borrowers”)
      intend
      to acquire (the “Merger”)
      and
      directly own all of the assets and equity interests of North Pittsburgh Systems,
      Inc. (the “Acquired
      Company”),
      pursuant to a merger agreement among Holdings, a wholly-owned subsidiary of
      Holdings and the Acquired Company (the “Merger
      Agreement”).
      The
      date on which the Merger is consummated is referred to as the “Closing
      Date”.

     

    We
      understand that a portion of the aggregate consideration for the Merger will
      be
      in the form of equity of Holdings issued in exchange for outstanding equity
      of
      the Acquired Company at the exchange ratio set forth in the Merger Agreement.
      Further, we understand that the total funds needed to finance the cash portion
      of the consideration for the Merger, to repay certain existing debt of the
      Acquired Company and its subsidiaries and refinance certain existing debt of
      Holdings and its subsidiaries (collectively, the “Refinancing”),
      to
      pay fees, commissions and expenses in connection with the Transactions (as
      defined below) and to finance ongoing working capital requirements of Holdings
      and certain of its subsidiaries following the Transactions will include:

     

    (a) senior
      secured credit facilities of up to $950,000,000 to the Borrowers consisting
      of
      (i) a senior secured term loan facility in an aggregate principal amount of
      up
      to $900,000,000 (the “Term
      Loan Facility”)
      which
      shall be available in (A) an initial draw in an aggregate principal amount
      of
      $760,000,000 and (B) a delayed draw in an aggregate principal amount of up
      to
      $140,000,000 and (ii) a senior secured revolving credit facility of up to
      $50,000,000 (the “Revolving
      Credit Facility”
and,
      together with the Term Loan Facility, the “Facilities”),
      each
      as described in the Summary of Proposed Terms and Conditions attached hereto
      as
Annex
      A
      (the
“Term
      Sheet”);
      and

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b) approximately
      $66 million of existing unrestricted cash and cash equivalents of the Acquired
      Company and Holdings (the “Available
      Cash”).

     

    Following
      the Merger, none of Holdings, the Borrowers, the Acquired Company or any of
      their respective subsidiaries will have any debt outstanding except as described
      in this paragraph, indebtedness outstanding under the existing 9.75% Senior
      Notes due 2012 of Holdings (the “Senior Notes”)
      and
      certain other exceptions set forth in the definitive Financing Documentation,
      and Holdings will have no material assets other than its equity interest in
      the
      Borrowers. As used below, the term “Borrowers”
means
      both of the Borrowers prior to the Merger and both of the Borrowers, together
      with the Acquired Company, after giving effect to the Merger. As used herein,
      the term “Transactions”
means,
      collectively, the Merger, the Refinancing, the borrowings under the Facilities
      and the payments of fees, commissions and expenses in connection with each
      of
      the foregoing.

     

    1.
      Commitments.

     

    (a) You
      have
      requested that Wachovia Bank commit to provide the Facilities. Wachovia Bank
      is
      pleased to advise you of its commitment to provide to the Borrowers 100% of
      the
      principal amount of the Facilities (the “Commitments”),
      in
      each case upon the terms and subject to the conditions set forth in this
      Commitment Letter and in the Term Sheet. 

     

    (b) It
      is
      agreed that Wachovia Securities acting alone or through or with affiliates
      selected by it, will act as the sole lead bookrunner and sole lead arranger
      (in
      such capacity, the “Arranger”)
      for a
      syndicate of financial institutions and other entities (such financial
      institutions and other entities committing to the Facilities, including Wachovia
      Bank, the “Lenders”).
      It is
      also agreed that Wachovia Bank will act as the sole and exclusive administrative
      agent (in such capacity, the “Administrative
      Agent”)
      for
      the Facilities.

     

    2.
      Conditions
      to Commitments.
      The
      Commitments of Wachovia Bank and the undertakings of Wachovia Securities
      hereunder are subject to: 

     

    (a) your
      written acceptance, and compliance with the terms and conditions, of a letter
      dated the date hereof from the Wachovia Parties to you (the “Fee
      Letter”)
      pursuant to which you agree to pay, or cause to be paid, to the Wachovia Parties
      certain fees and expenses and to fulfill certain other obligations in connection
      with the Facilities to the extent that you have accepted this Commitment Letter
      with respect to such Facilities; 

     

    (b) our
      being
      satisfied that, after the date hereof and until the earlier of (i) completion
      of
      a successful syndication of the Facilities and (ii) 90 days after the Closing
      Date, neither of the Borrowers, nor Holdings, nor the Acquired Company nor
      any
      of their respective subsidiaries shall have announced, arranged, syndicated
      or
      issued any debt financing (including convertible securities) without our prior
      written consent, other than the Facilities; and

     

    
      
        
        

      

      
        PAGE
          2

        
          

        

      

      
        
        

      

    

     

    (c) since
      March 31, 2007, there not having occurred any events which have had or would
      be
      reasonably expected to have, individually or in the aggregate, a Material
      Adverse Effect (as defined below) with respect to either (i) Holdings and its
      subsidiaries, taken as a whole, or (ii) the Acquired Company and its
      subsidiaries, taken as a whole. For purposes of this Commitment Letter, the
      Term
      Sheet and the Fee Letter, the term “Material
      Adverse Effect”
means,
      with respect to any person, any material adverse effect on (A) the business,
      financial condition or results of operations of such person and its
      subsidiaries, taken as a whole, or (B) the ability of such person or its
      subsidiary to perform their respective obligations under the Merger Agreement;
      provided,
      however,
      that
      none of the following shall be deemed, either alone or in combination, to
      constitute, and none of the following shall be taken into account in determining
      whether there has been or will be, a Material Adverse Effect: (1) any
      failure by such person or any of its subsidiaries to meet any internal or
      published projections, forecasts, or revenue or earnings predictions for any
      period ending prior to, on or after the date of the Merger Agreement (it being
      understood that this clause (1) does not and shall not be deemed to apply to
      the
      underlying cause or causes of any such failure); (2) any adverse change,
      effect, event, occurrence, state of facts or development to the extent
      attributable to the announcement or pendency of the Merger including (I) the
      absence of consents, waivers or approvals relating to the Merger from any
      governmental entity or other person or (II) any litigation brought by any
      shareholders of such person in connection with the Merger Agreement or any
      of
      the Transactions; (3) any adverse change, effect, event, occurrence, state
      of facts or development attributable to conditions generally affecting
      (I) the telecommunications industry as a whole that are not specifically
      related to such person and its subsidiaries and do not have a materially
      disproportionate adverse effect on such person and its subsidiaries, taken
      as a
      whole, or (II) the United States economy as a whole, including, changes in
      economic and financial markets and regulatory or political conditions, whether
      resulting from acts of terrorism, war, natural disaster or otherwise, that
      do
      not have a materially disproportionate adverse effect on the such person and
      its
      subsidiaries, taken as a whole; (4) any change in the market price or trading
      volume of such person’s securities; (5) any adverse change, effect, event,
      occurrence, state of facts or development arising from or relating to any change
      in GAAP or any change in applicable laws or the interpretation or enforcement
      thereof that, in each case, do not have a materially disproportionate adverse
      effect on such person and its subsidiaries, taken as a whole; (6)
      with respect to the Acquired Company and its subsidiaries, any
      change, occurrence, development, event, series of events or circumstance arising
      out of, resulting from or attributable to any action taken or threatened to
      be
      taken by any member(s) of the Bulldog Group (as defined in the Merger Agreement)
      in connection with the Acquired Company’s 2007 annual meeting of shareholders,
      the Merger Agreement or any of the Transactions, or any related matter; (7)
      any
      costs or expenses incurred or accrued by such person and its subsidiaries in
      connection with the Merger Agreement or any of the Transactions; and (8) any
      actions taken, or failures to take action, or such other changes, occurrences,
      developments, events, series of events or circumstances, (I) with respect to
      the
      Acquired Company and its subsidiaries, to which Holdings has consented in
      writing, or the failure of the Acquired Company to take any action referred
      to
      in Section 6.1 of the Merger Agreement due to Holding’s withholding of consent
      or (II) with respect to Holdings and its subsidiaries, to which the Acquired
      Company has consented in writing, or the failure of Holdings to take any action
      referred to in Section 6.2 of the Merger Agreement due to the Acquired Company’s
      withholding of consent.

     

    3.
      Syndication.

    

    (a) You
      agree
      to actively assist us in achieving a timely syndication of the Facilities that
      is satisfactory to us, which we intend to conduct before the closing of the
      Facilities (but which we reserve the right to conduct, and continue to conduct,
      after the closing of the Facilities), and you agree that we shall have had
      a
      reasonable opportunity and reasonable period of time in which to complete such
      syndication (which shall be at least 30 days). To assist us in our syndication
      efforts, you agree, upon our request, to (i) provide, and cause your
      affiliates, advisors and, to the extent possible using your reasonable best
      efforts, the Acquired Company to provide, to the Arranger and each of the
      Lenders all information reasonably requested to successfully complete the
      syndication, (ii) assist, and cause your affiliates, advisors and, to the
extent
      possible using your reasonable best efforts,
      the
      Acquired Company to assist, the Arranger in the preparation of one or more
      confidential information memoranda and other marketing materials to be used
      in
      connection with the syndication, (iii) make available (including at one or
      more
      meetings of prospective Lenders) your representatives and, to the extent
      possible using your reasonable best efforts, representatives of the Acquired
      Company on reasonable prior notice and at reasonable times and places, (iv)
      use
      your reasonable best efforts to ensure that the Facilities have received a
      rating from Standard & Poor’s Ratings Services, a division of The
      McGraw-Hill Companies, Inc. (“S&P”)
      and
      Moody’s Investors Service, Inc. (“Moody’s”),
      at
      least 30 days prior to the Closing Date and (v) use your reasonable best efforts
      to assist our syndication efforts through your existing lending relationships.
      

     

    
      
        
        

      

      
        PAGE
          3

        
          

        

      

      
        
        

      

    

     

    (b) The
      Arranger and/or one or more of its affiliates will exclusively manage all
      aspects of the syndication of the Facilities (in consultation with you),
      including decisions as to the selection and number of potential Lenders to
      be
      approached, when they will be approached, whose commitments will be accepted,
      when they will participate and the final allocations of the commitments and
      any
      related fees among the Lenders, and the Arranger will exclusively perform all
      functions and exercise all authority as is customarily performed and exercised
      in such capacities. Any agent or arranger or other titles or roles awarded
      to
      other Lenders are subject to the Arranger’s prior written approval. You agree
      that no Lender will receive compensation outside the terms contained herein
      and
      in the Fee Letter in order to obtain its commitment to participate in the
      Facilities and that the Arranger shall have sole discretion with respect to
      the
      allocation and distribution of fees among the Lenders. 

     

    4.
      Information

     

    (a) You
      hereby represent and warrant that (i) all information (other than the
      Projections, as defined below) concerning the Borrowers, Holdings, the Acquired
      Company and their respective subsidiaries and the Transactions (the
“Information”)
      that
      has been or will be made available to the Wachovia Parties or the Lenders by
      you, the Acquired Company or any of your or its respective representatives,
      subsidiaries or affiliates is, or will be when furnished, complete and correct
      in all material respects and does not, or will not when furnished, contain
      any
      untrue statement of a material fact or omit to state a material fact necessary
      in order to make the statements contained therein not misleading in light of
      the
      circumstances under which such statements are made, and (ii) all financial
      projections concerning the Borrowers, Holdings, the Acquired Company and their
      respective subsidiaries that have been or will be made available to the Wachovia
      Parties or the Lenders by you, the Acquired Company or any of your or its
      respective representatives, subsidiaries or affiliates (the “Projections”)
      have
      been or will be prepared in good faith based upon reasonable assumptions at
      the
      time they were made. You agree to supplement, or cause to be supplemented,
      the
      Information and the Projections from time to time until the Closing Date and,
      if
      requested by the Arranger, for a period after the Closing Date, such period
      to
      end upon the completion of a successful syndication of the Facilities so that
      the conditions and representations and warranties contained in the preceding
      sentence remain correct in all material respects. In syndicating the Facilities,
      we will be entitled to use and rely primarily on the Information and the
      Projections without responsibility for independent check or verification
      thereof.

     

    (b) You
      hereby acknowledge and agree that the Wachovia Parties will make available
      the
      Information, Projections and other marketing materials and presentations,
      including confidential information memoranda (collectively, the “Informational
      Materials”),
      to
      the potential Lenders by posting the Informational Materials on SyndTrak Online
      or by other similar electronic means (collectively, the “Electronic
      Means”).
      You
      hereby further acknowledge and agree that (i) potential Lenders (the
“Public
      Lenders”)
      may
      not wish to receive material non-public information with respect to the
      Borrowers, Holdings, the Acquired Company and their respective subsidiaries
      or
      any of their respective securities, (ii) you will assist, and cause your
      affiliates, advisors, and to the extent possible using your reasonable best
      efforts, the Acquired Company to assist, the Arranger in the preparation of
      Informational Materials to be used in connection with the syndication of the
      Facilities to Public Lenders, which will only include data and materials that
      are either (A) publicly available or (B) not material with respect to the
      Borrowers, Holdings, the Acquired Company and their respective subsidiaries
      or
      any of their respective securities for purposes of United States federal and
      state securities laws (such Informational Materials and any other information,
      data and materials, collectively, “Public
      Information”),
      (iii)
      you will identify and conspicuously mark any Informational Materials that
      consist solely of Public Information as “PUBLIC”,
      and
      (iv) you will identify and conspicuously mark any Informational Materials that
      include any information, data and materials that are not Public Information
      as
“PRIVATE
      AND CONFIDENTIAL”.

     

    
      
        
        

      

      
        PAGE
          4

        
          

        

      

      
        
        

      

    

     

    5.
      Indemnification.

     

    (a) Each
      of
      you hereby jointly and severally agrees to indemnify and hold harmless the
      Wachovia Parties and each of their respective affiliates, directors, officers,
      employees, partners, representatives and agents and each of their respective
      heirs, successors and assigns (each, an “Indemnified
      Party”)
      from
      and against any and all actions, suits, losses, claims, damages, liabilities
      and
      expenses of any kind or nature, joint or several, to which such Indemnified
      Party may become subject, related to or arising out of (i) any element of the
      Transactions, including, without limitation, the execution and delivery of
      this
      Commitment Letter, the Financing Documentation (as defined in Annex
      A)
      and the
      closing of the Transactions and (ii) the use or the contemplated use of the
      proceeds of the Facilities, and to reimburse any Indemnified Party for all
      out-of-pocket expenses (including reasonable attorneys’ fees, expenses and
      charges) on demand as they are incurred in connection with the investigation
      of,
      preparation for, or defense of any pending or threatened claim or any action
      or
      proceeding arising therefrom; provided
      that no
      Indemnified Party shall have any right to indemnification for any of the
      foregoing to the extent resulting from its own gross negligence or willful
      misconduct as determined by a final non-appealable judgment of a court of
      competent jurisdiction. This Commitment Letter is addressed solely to you,
      and
      none of the Wachovia Parties nor any other Indemnified Party shall be liable
      to
      you, your affiliates or any other person for any indirect or consequential
      damages that may be alleged as a result of this Commitment Letter or any element
      of the Transactions or in respect of transmission of Informational Materials
      by
      Electronic Means. 

     

    (b) You
      shall
      not settle any such claim or action arising out of the Transactions without
      the
      prior written consent of each Indemnified Party affected thereby, which consent
      will not be unreasonably withheld, unless such settlement provides for a full
      and unconditional release of all liabilities arising out of such claim or action
      against such Indemnified Party and does not include any statement as to or
      an
      admission of fault, culpability or failure to act by or on behalf of any
      Indemnified Party.

     

    (c) You
      agree
      that no Indemnified Party shall have any liability to you or any person
      asserting claims by or on behalf of you in connection with or as a result of
      the
      Commitments or any matter referred to in this Commitment Letter except to the
      extent that any losses, claims, damages, liabilities or expenses incurred by
      you
      results from the gross negligence or willful misconduct of the Wachovia Parties
      in performing the services that are the subject of this Commitment
      Letter.

     

    6.
      Confidentiality. This
      Commitment Letter and the Fee Letter, together with the contents hereof and
      thereof, are confidential and, except for the disclosure hereof or thereof
      on a
      confidential basis to your accountants, attorneys and other professional
      advisors retained in connection with the Transactions or as otherwise required
      by law, may not be disclosed by you in whole or in part to any person or entity
      without our prior written consent; provided
      that it
      is understood and agreed that you may disclose, after your acceptance of this
      Commitment Letter, and the Fee Letter, (a) this Commitment Letter, but not
      the
      Fee Letter, on a confidential basis to the board of directors, officers and
      advisors of the Acquired Company in connection with their consideration of
      the
      Transactions and (b) such documents (excluding the Fee Letter) in any required
      filings with the Securities and Exchange Commission and other applicable
      regulatory authorities and stock exchanges. In addition, the Wachovia Parties
      shall be permitted to use information related
      to the syndication and arrangement of the Facilities in connection with
      obtaining a CUSIP number, marketing, press releases or other transactional
      announcements or updates provided to investor or trade publications, subject
      to
      confidentiality obligations or disclosure restrictions reasonably requested
      by
      you. Furthermore, the Wachovia Parties hereby notify you that pursuant to the
      requirements of the USA Patriot Act, Title III of Pub. L. 107-56 (signed into
      law October 26, 2001) (the “Patriot
      Act”),
      each
      of them is required to obtain, verify and record information that identifies
      you
      in accordance with the Patriot Act. Prior to the Closing Date, Wachovia Bank
      and
      Wachovia Securities shall have the right to review and approve any public
      announcement or public filing made by you, or the Acquired Company or its
      representatives after the date hereof relating to the Facilities or to any
      of
      the Wachovia Parties in connection therewith, before any such announcement
      or
      filing is made (such approval not to be unreasonably withheld or
      delayed).

     

    
      
        
        

      

      
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          5

        
          

        

      

      
        
        

      

    

     

    7.
      Other
      Services.

     

    (a) Nothing
      contained herein shall limit or preclude the Wachovia Parties or any of their
      affiliates from carrying on any business with, providing banking or other
      financial services to, or from participating in any capacity, including as
      an
      equity investor in, any party whatsoever, including, without limitation, any
      competitor, supplier or customer of you, the Acquired Company or any of your
      or
      its affiliates, or any other party that may have interests different than or
      adverse to such parties.

     

    (b) You
      acknowledge that the Arranger and its affiliates (the term “Arranger”
as
      used
      in this paragraph being understood to include such affiliates) may be providing
      debt financing, equity capital or other services (including financial advisory
      services) to other companies with which you, the Acquired Company or your or
      its
      respective affiliates may have conflicting interests regarding the Transactions
      and otherwise and that the Arranger may act as it deems appropriate in acting
      in
      such capacities. You and your affiliates further acknowledge and agree that
      in
      connection with all aspects of the Transactions and the transactions
      contemplated by this Commitment Letter, you and your affiliates, on the one
      hand, and the Arranger, on the other hand, have an arm’s length business
      relationship that creates no fiduciary duty on the part of the Arranger and
      each
      expressly disclaims any fiduciary relationship. The Arranger will not use
      confidential information obtained from you or the Acquired Company in connection
      with the performance by the Arranger of services for other companies and will
      not furnish any such information to other companies. You also acknowledge that
      the Arranger has no obligation in connection with the Transactions to use,
      or to
      furnish to you, the Acquired Company or your or its respective subsidiaries,
      confidential information obtained from other companies or entities.

     

    8.
      Expiration
      of Commitments.
      This
      Commitment Letter and the Commitments of Wachovia Bank and the undertakings
      of
      Wachovia Securities set forth herein shall, in the event this Commitment Letter
      is accepted by you as provided in the last paragraph hereof, automatically
      terminate without further action or notice at 5:00 p.m. (Eastern Standard Time)
      on July 1, 2008 (the “Expiration
      Date”),
      if
      the Closing Date shall not have occurred by such time. 

     

    9.
      Survival
      and Joint and Several Liability of Acquired Company and
      Guarantors.

     

    (a) The
      sections of this Commitment Letter relating to Indemnification, Confidentiality
      and Other Services shall survive any termination or expiration of this
      Commitment Letter or the Commitments of Wachovia Bank or the undertakings of
      Wachovia Securities set forth herein, and the Sections relating to Syndication
      and Information shall survive until completion of the syndication of the
      Facilities.

     

    (b) You
      hereby agree to cause the Acquired Company and the Guarantors (as defined in
      Annex
      A)
      to
      become jointly and severally liable, effective upon the Closing Date, for any
      and all liabilities and obligations of you relating to or arising out of any
      of
      your duties, responsibilities and obligations hereunder.

     

    
      
        
        

      

      
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          6

        
          

        

      

      
        
        

      

    

     

    10.
      Governing
      Law, Etc.
      This
      Commitment Letter, together with the Term Sheet, and the Fee Letter, embody
      the
      entire agreement and understanding among the Wachovia Parties and you with
      respect to the specific matters set forth above and supersede all prior
      agreements and understandings relating to the subject matter hereof, including,
      without limitation, the prior commitment letter, term sheet and fee letter
      from
      the Wachovia Parties to you dated as of June 27, 2007 (the “Prior
      Commitment Documents”).
      Upon
      acceptance of this Commitment Letter, together with the Term Sheet, and the
      Fee
      Letter by you, the Prior Commitment Documents shall be terminated and will
      be of
      no further force and effect. No party has been authorized by any of the Wachovia
      Parties to make any oral or written statements inconsistent with this Commitment
      Letter. This Commitment Letter and the Fee Letter shall not be assignable by
      you
      without the prior written consent of the Wachovia Parties, and any purported
      assignment without such consent shall be void. This Commitment Letter is
      intended to be for the benefit of the parties hereto and is not intended to
      confer any benefits upon, or create any rights in favor of, any person other
      than the parties hereto, the Lenders and, with respect to the indemnification
      provided under the heading “Indemnification,” each Indemnified Party. This
      Commitment Letter may be executed in separate counterparts and delivery of
      an
      executed signature page of this Commitment Letter by facsimile or electronic
      mail shall be effective as delivery of manually executed counterpart hereof;
      provided
      that
      such facsimile transmission or electronic mail transmission shall be promptly
      followed by the original thereof. This Commitment Letter may only be amended
      or
      modified by an agreement in writing signed by each of you and the Wachovia
      Parties, and shall remain in full force and effect and not be superseded by
      any
      other documentation (including definitive Financing Documentation) unless such
      other documentation is signed by each of you and the Wachovia Parties and
      expressly states that this Commitment Letter is superseded thereby. This
      Commitment Letter shall be governed by, and construed in accordance with, the
      laws of the State of New York without regard to principles of conflicts of
      law
      to the extent that the application of the laws of another jurisdiction will
      be
      required thereby. The
      parties hereby waive any right to trial by jury with respect to any claim or
      action arising out of this Commitment Letter.
      The
      parties hereto hereby submit to the non-exclusive jurisdiction of the federal
      and New York State courts located in the City of New York (and appellate courts
      thereof) in connection with any dispute related to this Commitment Letter or
      any
      of the matters contemplated hereby, and agree that service of any process,
      summons, notice or document by registered mail addressed to each of you or
      each
      of the Wachovia Parties shall be effective service of process against each
      of
      you or each of the Wachovia Parties for any suit, action or proceeding relating
      to any such dispute. The parties hereto irrevocably and unconditionally waive
      any objection to the laying of such venue of any such suit, action or proceeding
      brought in any such court and any claim that any such suit, action or proceeding
      has been brought in an inconvenient forum. A final judgment in any such suit,
      action or proceeding brought in any such court may be enforced in any other
      courts to whose jurisdiction each of you or each of the Wachovia Parties are
      or
      may be subject by suit upon judgment. 

     

    [Signature
      Pages Follow]

     

    
      
        
        

      

      
        PAGE
          7

        
          

        

      

      
        
        

      

    

     

    If
      you
      are in agreement with the foregoing, please indicate acceptance of the terms
      hereof by signing the enclosed counterpart of this Commitment Letter and
      returning it to the Arranger, together with executed counterparts of the Fee
      Letter by no later than 5:00 p.m. (Eastern Standard Time) on
      July 2, 2007. This Commitment Letter, the Commitments of Wachovia Bank
      and the undertakings of Wachovia Securities set forth herein and the agreement
      of the Arranger to provide the services set forth herein, shall automatically
      terminate at such time without further action or notice unless signed
      counterparts of this Commitment Letter and the Fee Letter shall have been
      delivered to the Arranger in accordance with the terms of the immediately
      preceding sentence.

     

    
      	 	Sincerely,
	 	 	 
	 	WACHOVIA
              BANK,
              NATIONAL ASSOCIATION
	 
 	 
 	 
 
	 	By:  	
              /s/ Mark
                Birenbaum

            
	 	
              
Name:
              Mark Birenbaum
	 	Title:
              Director

      	 	 	 
	 	WACHOVIA
              CAPITAL
              MARKETS, LLC
	 
 	 
 	 
 
	 	By:  	
              /s/ Mark
                Birenbaum

            
	 	
              
Name:
              Mark Birenbaum
	 	Title:
              Director

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    Agreed
      to
      and accepted as of the date first 

    above
      written:

    

    CONSOLIDATED
      COMMUNICATIONS HOLDINGS, INC.

    

    

    By:
       /s/
      Steven L. Childers  

    Name:
      Steven L. Childers

    Title:
      Chief Financial Officer

    

    CONSOLIDATED
      COMMUNICATIONS, INC.

    

    

    By:
       /s/
      Steven L. Childers  

    Name:
      Steven L. Childers

    Title:
      Chief Financial Officer

    

    CONSOLIDATED
      COMMUNICATIONS ACQUISITION TEXAS, INC.

    

    

    By:
       /s/
      Steven L. Childers  

    Name:
      Steven L. Childers

    Title:
      Chief Financial Officer

    

    
      
        
        

      

      
        PAGE
          9

        
          

        

      

      
        
        

      

    

     

    
      

    

    

    ANNEX
      A

    

     

    $950,000,000

    SENIOR
      SECURED CREDIT FACILITIES

    SUMMARY
      OF PROPOSED TERMS AND CONDITIONS

     

    Capitalized
      terms not otherwise defined herein have the same meanings as specified therefor
      in the Commitment Letter to which this Summary of Proposed Terms and Conditions
      is attached.

     

    

      
        	
                Borrowers:

              	
                Consolidated
                  Communications, Inc. (the “CCI
                  Borrower”)
                  and Consolidated Communications Acquisition Texas, Inc. (the “CCAT
                  Borrower”
                  and together with the CCI Borrower, the “Borrowers”)

              
	 	 
	
                Sole
                  Lead Arranger and Sole Bookrunner:

              	
                Wachovia
                  Capital Markets, LLC will act as sole lead arranger and sole bookrunner
                  (in such capacity, the “Arranger”).

              
	 	 
	
                Lenders:

              	
                Wachovia
                  Bank, National Association and a syndicate of financial institutions
                  and
                  other entities (each a “Lender”,
                  and collectively, the “Lenders”)
                  arranged by the Arranger in consultation with Holdings (as defined
                  below).

              
	 	 
	
                Administrative
                  Agent, Issuing Bank and Swingline Lender:

              	
                Wachovia
                  Bank, National Association (in such capacity, the “Administrative
                  Agent”,
                  the “Issuing
                  Bank”
                  or the “Swingline
                  Lender”,
                  as the case may be).

              
	 	 
	
                Facilities:

              	
                Senior
                  secured credit facilities (the “Facilities”)
                  in an aggregate principal amount of up to $950,000,000, such Facilities
                  to
                  consist of:

                 

                (a)
                   Revolving
                  Credit Facility.
                  A
                  six (6) year revolving credit facility (with subfacilities for
                  letters of
                  credit and swingline loans, each in a maximum amount to be mutually
                  determined and on customary terms and conditions with compensation
                  to be
                  agreed) in an aggregate principal amount of up to $50,000,000 (the
                  “Revolving
                  Credit Facility”);
                  and 

                 

                (b)
                   Term
                  Loan Facility.
                  A
                  seven (7) year senior secured term loan facility (the “Term
                  Loan Facility”)
                  in an aggregate principal amount of up to $900,000,000. The Term
                  Loan
                  Facility shall be available in up to two (2) separate draws as
                  follows:

                 

                (i)
                   the
                  first of such draws, in an aggregate principal amount of $760,000,000
                  (the
                  “Initial
                  Draw”),
                  will be made on the Closing Date; and

                 

                (ii)
                   a
                  subsequent draw in an aggregate principal amount of up to $140,000,000
                  (the “Delayed
                  Draw”)
                  may be requested by the Borrowers during the period after the Closing
                  Date
                  until May 1, 2008 for the sole purpose of completing the Note Redemption
                  (as defined in Schedule II
                  attached hereto); provided
                  that the Delayed Draw shall automatically terminate on May 1, 2008
                  if not
                  funded prior to such date.

              

      

       

      
        
          
          

        

        
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            1

          
            

          

        

        
          
          

        

      

       

      
        

      

       

      
        	
                Use
                  of Proceeds:

              	
                The
                  Initial Draw, together with the Available Cash and, if applicable,
                  the
                  Revolving Credit Facility, will be used on the Closing Date, to
                  finance
                  (a) a portion of the aggregate consideration for the consummation
                  of the
                  Merger, and (b) the Refinancing and (c) the payment of fees and
                  expenses
                  incurred in connection with the Merger, the Refinancing and the
                  Facilities
                  (collectively, the “Transactions”).

                 

                The
                  Revolving Credit Facility will be used to provide ongoing working
                  capital
                  and for other general corporate purposes of Holdings and its subsidiaries.
                  

                 

                The
                  Delayed Draw will be used solely for
                  the Note Redemption and to pay fees and expenses related to the
                  Note
                  Redemption.

              
	 	 
	
                Availability:

              	
                The
                  Revolving Credit Facility will be available on a revolving basis
                  from and
                  after the Closing Date until the final maturity date thereof.
                  

              
	 	 
	
                Documentation:

              	
                The
                  documentation for the Facilities will include, among other items,
                  a credit
                  agreement (the “Credit
                  Agreement”),
                  guarantees and appropriate pledge, security, mortgage and other
                  collateral
                  documents (collectively, the “Financing
                  Documentation”),
                  all consistent with this Term Sheet; provided
                  that the Financing Documentation will not be in a form or upon
                  terms that
                  would impair the availability of funding thereunder if the conditions
                  to
                  the Commitment Letter (and the annexes and schedules thereto) are
                  met. It
                  is anticipated that the Credit Agreement will be documented as
                  an
                  amendment and restatement of the Borrowers’ existing Second Amended and
                  Restated Credit Agreement dated as of February 23, 2005 (as amended,
                  restated, supplemented or otherwise modified prior to the Closing
                  Date,
                  the “Existing
                  Credit Facility”)
                  among the Borrowers, the lenders party thereto and the agents and
                  arrangers identified therein.

              
	 	 
	
                Guarantors:

              	
                The
                  obligations of the Borrowers under the Facilities and under any
                  hedging
                  agreements entered into between any Loan Party (as defined below)
                  and any
                  counterparty that is a Lender (or any affiliate thereof) at the
                  time such
                  hedging agreement is executed will be unconditionally guaranteed,
                  on a
                  joint and several basis, by Consolidated Communications Holdings,
                  Inc.
                  (“Holdings”)
                  and each existing and subsequently acquired or organized direct
                  and
                  indirect subsidiary of Holdings (including, without limitation,
                  the
                  Acquired Company and certain of its subsidiaries), other than Illinois
                  Consolidated Telephone Company (“ICTC”),
                  North Pittsburgh Telephone Company (“NPTC”),
                  Penn Telecom, Inc. (“PTI”)
                  or any such entity that is a Borrower (each a “Guarantor”;
                  and such guarantee being referred to herein as a “Guarantee”);
                  provided
                  that (a) Guarantees by foreign subsidiaries will be required only
                  to the
                  extent such Guarantees do not cause the incurrence of material
                  tax costs,
                  (b) at such time as NPTC is no longer prohibited from being a Guarantor
                  by
                  the terms of the order approving the Merger issued by the Pennsylvania
                  Public Utility Commission, NPTC shall be required to become a Guarantor
                  and (c) at such time as PTI is no longer prohibited from being
                  a Guarantor
                  by the terms of the order approving the Merger issued by the Pennsylvania
                  Public Utility Commission, PTI shall be required to become a Guarantor.
                  The Borrowers and the Guarantors are herein referred to as the
                  “Loan
                  Parties,”
                  and individually, as a “Loan
                  Party.”

              

      

       

      
        
          
          

        

        
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            2

          
            

          

        

        
          
          

        

      

      
         

        
          

        

      

       

      
        	
                Security:

              	
                There
                  will be granted to the Administrative Agent, for the benefit of
                  the
                  Lenders and any counterparty to any hedging agreement that is a
                  Lender (or
                  any affiliate thereof) at the time such hedging agreement is executed,
                  valid and perfected first priority (subject to certain customary
                  exceptions to be set forth in the Financing Documentation and to
                  be
                  satisfactory to the Administrative Agent) liens and security interests
                  in
                  all of the following:

                 

                (a)  all
                  present and future capital stock or other membership, equity, ownership
                  or
                  profit interests of or in (collectively, “Equity
                  Interests”)
                  each of the Loan Parties (other than Holdings), ICTC, NPTC and
                  PTI, and
                  sixty-five percent (65%) of the voting stock (and one hundred percent
                  (100%) of the non-voting stock) of all present and future first-tier
                  foreign subsidiaries of any Loan Party
                  (to the extent, and for so long as, the pledge of any greater percentage
                  or any other foreign subsidiary would have material adverse tax
                  consequences for Holdings);
                  and

                 

                (b)  substantially
                  all of the tangible and intangible properties and assets (including,
                  without limitation, all equipment, inventory, accounts, deposit
                  accounts,
                  licenses, contract and other intangible rights, investment property,
                  fixtures, cash, material owned real property interests, material
                  leased
                  real property interests and material intellectual property and
                  all
                  proceeds of the foregoing) of the Loan Parties.

                 

                All
                  of the foregoing are collectively referred to as the “Collateral”.
                  All such security interests will be created pursuant to and will
                  comply
                  with Financing Documentation reasonably satisfactory to the Administrative
                  Agent. On the Closing Date, such security interests will have become
                  perfected (or arrangements for the perfection thereof reasonably
                  satisfactory to the Administrative Agent will have been made).
                  Notwithstanding the foregoing, (i) assets will be excluded from
                  the
                  Collateral in circumstances where the Administrative Agent and
                  Holdings
                  agree that the cost of obtaining a security interest in such assets
                  are
                  excessive in relation to the value afforded thereby, or if the
                  granting of
                  a security interest in such asset would be prohibited by contract
                  or
                  applicable law, and (ii) if required under the terms of the Indenture
                  pursuant to which the Senior Notes were issued, the Senior Notes
                  shall be
                  secured equally and ratably with the obligations of the Borrowers
                  under
                  the Facilities on terms reasonably satisfactory to the Administrative
                  Agent.

              
	 	 
	
                Final
                  Maturity:

              	
                The
                  final maturity of the Revolving Credit Facility will occur on the
                  sixth
                  (6th)
                  anniversary of the Closing Date (the “Revolving
                  Credit Maturity Date”)
                  and the commitments with respect to the Revolving Credit Facility
                  will
                  automatically terminate on such date.

                 

                The
                  final maturity of the Term Loan Facility will occur on the seventh
                  (7th)
                  anniversary of the Closing Date (the “Term
                  Loan Maturity Date”).

              

      

       

      
        
          
          

        

        
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            3

          
            

          

        

        
          
          

        

      

       

      
        
          

        

      

       

      
        	
                Amortization:

              	
                The
                  Revolving Credit Facility will be payable in full upon the Revolving
                  Credit Maturity Date.

                 

                The
                  Term Loan Facility will be payable in full upon the Term Loan Maturity
                  Date. 

              
	 	 
	
                Incremental
                  Term Loans:

              	
                The
                  Borrowers will be entitled to incur additional term loans under
                  a new term
                  facility that will be included in the Facilities (the “Incremental
                  Term Loans”)
                  in an aggregate principal amount for all such Incremental Term
                  Loans of up
                  to $250,000,000 with such Incremental Term Loans having the same
                  Guarantees from the Guarantors, and being secured on a pari passu
                  basis by the same Collateral as the other Facilities; provided
                  that (a) no default or event of default will exist immediately
                  prior to or
                  after giving effect thereto, (b) the other terms and documentation
                  in
                  respect of any Incremental Term Loans, to the extent not consistent
                  with
                  the Term Loan Facility, will be reasonably satisfactory to the
                  Administrative Agent and (c) no Lender will be required to provide
                  any
                  such Incremental Term Loan.

                 

                The
                  yield on the Incremental Term Loans (taking into account upfront
                  fees
                  payable to the lenders making such Incremental Term Loans) may
                  be higher
                  than the then-current yield on the Term Loan Facility, but in each
                  case by
                  no more than 0.25% (it being understood that the Term Loan Facility
                  pricing will be increased and/or additional fees will be paid to
                  Term Loan
                  Facility lenders to the extent necessary to satisfy such requirement).
                  

              
	 	 
	
                Interest
                  Rates and Fees:

              	
                Interest
                  rates and fees in connection with the Facilities will be as specified
                  in
                  the Fee Letter and on Schedule
                  I
                  attached hereto.

              
	 	 
	
                Mandatory
                  Prepayments:

              	
                The
                  Facilities will be required to be prepaid with:

                (a)
                   100%
                  of the net cash proceeds of the issuance or incurrence of debt
                  by the
                  Borrowers or any of their respective subsidiaries, subject to baskets
                  and
                  other exceptions to be mutually agreed upon;

                 

                (b)
                   100%
                  of the net cash proceeds of all asset sales and other asset dispositions
                  (including insurance and condemnation recoveries) by the Borrowers
                  or any
                  of their respective subsidiaries, subject to baskets, reinvestment
                  provisions and other limited exceptions to be mutually agreed
                  upon;

                 

                (c)
                   An
                  amount equal to 50% (the “Required
                  Percentage”)
                  of any Excess Subject Payment Amount (as defined in Schedule II
                  attached hereto); provided
                  that the Required Percentage shall be reduced to 0% at all times
                  as the
                  Total Net Leverage Ratio (as defined in Schedule II
                  attached hereto) is less than 3.00 to 1.00; and

                 

                (d)
                   During
                  any Dividend Suspension Period (as defined in Schedule II
                  attached hereto) 50% of any increase in Available Cash (as defined
                  in
                  Schedule II
                  attached hereto) during the most recently ended fiscal
                  quarter.

                 

                Any
                  application of a mandatory prepayment will be applied to Loans
                  outstanding
                  under the Term Loan Facility equal to the aggregate amount of such
                  required prepayments. Prepayments shall be applied first to Base
                  Rate
                  Loans and then LIBOR Rate Loans, and so long as no default or event
                  of
                  default has occurred and is continuing and the Borrowers deposit
                  the
                  amount of any applicable prepayment with the Administrative Agent
                  as
                  collateral for the Loans, prepayment of any LIBOR Rate Loan may
                  be
                  deferred until the end of the applicable interest period to avoid
                  breakage
                  costs.

              

      

       

      
        
          
          

        

        
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            4

          
            

          

        

        
          
          

        

      

      
         

        
          

        

      

       

      
        	
                Optional
                  Prepayments and Commitment Reductions:

              	
                Advances
                  under the Facilities may be prepaid and unused commitments under
                  the
                  Revolving Credit Facility may be reduced at any time, in whole
                  or in part,
                  at the option of the Borrowers, upon notice and in minimum principal
                  amounts and in multiples to be agreed upon, without premium or
                  penalty
                  (except LIBOR breakage costs). Any optional prepayment of the Term
                  Loan
                  Facility will be applied as directed by the Borrowers.

              
	 	 
	
                Conditions
                  to Initial Extensions of Credit:

              	
                The
                  making of the initial extensions of credit under the Facilities
                  will be
                  subject to satisfaction of the conditions precedent set forth in
                  Section 2
                  of the Commitment Letter and in Schedule
                  III
                  attached hereto.

              
	 	 
	
                Conditions
                  to Delayed Draw:

              	
                The
                  Delayed Draw under the Facilities will be subject to the Senior
                  Notes being contemporaneously repurchased or redeemed in full in
                  accordance with the terms of the Indenture
                  pursuant to which the Senior Notes were issued
                  and all applicable laws; and satisfactory review of all documentation
                  relating to the Note Redemption.

              
	 	 
	
                Conditions
                  to All Extensions of Credit:

              	
                Each
                  extension of credit under the Facilities will be subject to the
                  (a) absence of any default and (b) continued accuracy of
                  representations and warranties in all
                  material respects (except to the extent that any such representation
                  and
                  warranty is qualified by
                  materiality).

              

      

       

      
        
          
          

        

        
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            5

          
            

          

        

        
          
          

        

      

       

      
        
          

        
 

       

      
        	
                Representations
                  and Warranties:

              	
                Usual
                  and customary for facilities of this type and such others as may
                  be
                  reasonably requested by the Arranger, including, without limitation,
                  (which will be applicable to Holdings and its subsidiaries and
                  be subject
                  to materiality thresholds and exceptions to be mutually agreed):
                  corporate
                  status; corporate power and authority; due authorization and
                  non-contravention; governmental approval and regulations; validity
                  and
                  enforceability; financial information; no Material Adverse Effect;
                  absence
                  of material litigation; compliance with laws (including Regulations
                  U and
                  X, Investment Company Act, the Patriot Act, environmental laws
                  and as to
                  not being a sanctioned person) and material agreements; capital
                  structure
                  and capitalization; ownership or properties; payment of taxes;
                  ERISA;
                  environmental regulations and liabilities; accuracy of disclosure;
                  insurance; labor matters; solvency; and liens.

              
	 	 
	
                Affirmative
                  Covenants:

              	
                Usual
                  and customary for facilities of this type and such others as may
                  be
                  reasonably requested by the Arranger, including, without limitation,
                  (which will be applicable to Holdings and its subsidiaries and
                  be subject
                  to materiality thresholds and exceptions to be mutually agreed):
                  financial
                  information (including annual audited and quarterly unaudited financial
                  statements and annual updated budgets) and reporting (notices of
                  defaults,
                  litigation and other material events); compliance with laws and
                  regulations (including environmental laws, ERISA and the Patriot
                  Act);
                  maintenance of property and insurance; maintenance of books and
                  records;
                  visitation rights; information regarding collateral; existence
                  and conduct
                  of business; performance of obligations; casualty and condemnation;
                  additional collateral; further assurances; use of proceeds; payment
                  of
                  taxes; equal and ratable security for obligations under the Facilities;
                  additional guarantees; and subordination of intercompany
                  loans.

              
	 	 
	
                Negative
                  Covenants:

              	
                Subject
                  to the immediately following section below, usual and customary
                  for
                  facilities of this type and such others as may be reasonably requested
                  by
                  the Arranger, including, without limitation, (which will be applicable
                  to
                  Holdings and its subsidiaries and be subject to materiality thresholds
                  and
                  exceptions to be mutually agreed): limitation on debt (including
                  issuance
                  of certain equity securities); limitation on liens; limitation
                  on mergers
                  and other fundamental changes; limitation on changes in line of
                  business;
                  limitations on assets and actions of Holdings; limitation on investments,
                  loans, advances, guarantees and acquisitions (subject to Permitted
                  Acquisitions described below); limitation on asset sales; limitation
                  on
                  sale-leaseback transactions; limitation on (a) dividends, distributions,
                  redemptions and repurchases of equity interests and (b) prepayments,
                  redemptions and purchases of subordinated and certain other debt
                  (in each
                  case described in the foregoing clause (a) and (b), excluding permitted
                  Subject Payments); limitation on transactions with affiliates;
                  limitation
                  on further negative pledges; limitation on dividend and other payment
                  restrictions affecting subsidiaries; limitation on amendment of
                  organic
                  documents and material contracts; no violation of anti-terrorism
                  laws.

              

      

       

      
        
          
          

        

        
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            6

          
            

          

        

        
          
          

        

      

       

      
        
          

        

      

       

      
        	
                Permitted
                  Acquisitions:

              	
                The
                  Borrowers and their subsidiaries shall be permitted to make non-hostile
                  acquisitions in the existing lines of business of the Borrower
                  and their
                  subsidiaries, subject to satisfaction of the following conditions
                  precedent: (a) prior to and after giving effect to each acquisition,
                  no
                  default or event of default shall have occurred and be continuing
                  under
                  the Financing Documentation, (b) the Borrowers shall demonstrate
                  pro forma
                  compliance with the financial covenants both prior to and after
                  giving
                  effect to the proposed acquisition (or series of related acquisitions)
                  and
                  any financing relating thereto, (c) the Borrowers shall provide
                  customary
                  advance written notice to the Administrative Agent and (d) at all
                  times
                  when the Total Net Leverage Ratio equals or exceeds 4.00 to 1.00,
                  the
                  total cash consideration (including any assumed debt) in respect
                  of all
                  acquisitions consummated during the term of the Facilities (excluding
                  any
                  acquisitions permitted pursuant to the following proviso)
                  shall not exceed $250,000,000 in the aggregate (the “Acquisition
                  Limit”);
                  provided
                  that the Acquisition Limit shall not apply to any acquisition (or
                  series
                  of related acquisitions) (i) which causes the Total Net Leverage
                  Ratio,
                  calculated on a pro forma
                  basis after giving effect to such acquisition (or series of related
                  acquisitions) and any financing relating thereto, to be lower than
                  the
                  Total Net Leverage Ratio calculated immediately prior to giving
                  effect to
                  such acquisition (or series of related acquisitions) or
                  (ii) which is consummated at any time when the Total Net Leverage
                  Ratio is
                  less than 4.00 to 1.00. 

              
	 	 
	
                Financial
                  Covenants:

              	
                (a) Maximum
                  Total Net Leverage Ratio (5.50 to 1.00; provided
                  that on the fiscal quarter end occurring immediately after the
                  first
                  anniversary of the Closing Date (such date, the “Step-Down
                  Date”),
                  the Maximum Total Net Leverage Ratio will step-down to 5.25 to
                  1.00);
                  and

                 

                (b) Minimum
                  Interest Coverage Ratio (2.25 to 1.00).

                 

                The
                  financial covenants will apply to Holdings and its subsidiaries
                  on a
                  consolidated basis, with definitions set forth on Schedule
                  II
                  hereto and as otherwise mutually agreed.

              
	 	 
	
                Required
                  Interest Rate Hedging:

              	
                The
                  Borrowers will obtain interest rate protection from one or more
                  Lenders or
                  others acceptable to the Arranger in respect of not less than fifty
                  percent (50%) of the Term Loan Facility for at least two (2) years
                  on
                  terms to be agreed in the Financing Documentation.

              
	 	 
	
                Events
                  of Default:

              	
                Usual
                  and customary for facilities of this type and such others as may
                  be
                  reasonably requested by the Arranger, including, without limitation,
                  (which will be applicable to Holdings and its subsidiaries and
                  be subject
                  to materiality thresholds and exceptions to be mutually agreed):
                  non-payment of obligations; breach of representation or warranty;
                  non-performance of covenants and obligations; default on other
                  material
                  debt (including secured hedging agreements); material judgments;
                  ERISA;
                  change of control (to be defined as mutually agreed); bankruptcy
                  or
                  insolvency; actual or asserted invalidity or unenforceability of
                  the
                  Financing Documentation or liens securing obligations under the
                  Financing
                  Documentation; or impairment of security. 

              
	 	 
	
                Yield
                  Protection and Increased Costs:

              	
                Usual
                  and customary for facilities of this
                  type.

              

      

       

      
        
          
          

        

        
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            7

          
            

          

        

        
          
          

        

      

       

      
        
          

        

         

      

      
        	
                Assignments
                  and Participations:

              	
                Each
                  Lender will, subject in certain circumstances to the approval of
                  the
                  Administrative Agent and the Borrowers (such consents not to be
                  unreasonably withheld or delayed), be permitted to make assignments
                  in
                  acceptable minimum amounts; provided
                  that no consent by the Borrowers shall be required for assignments
                  (a)
                  during
                  the period commencing on the Closing Date and ending on the date
                  that is
                  ninety (90) days following the Closing Date, (b) to a Lender, an
                  affiliate
                  of a Lender or an approved fund, or (c) after the occurrence and
                  during
                  the continuance of an event of default.
                  Participations will be permitted without the consent of the Borrowers
                  or
                  the Administrative Agent.

              
	 	 
	
                Required
                  Lenders:

              	
                On
                  any date of determination, those Lenders who collectively hold
                  more than
                  fifty percent (50%) of the outstanding loans and unfunded commitments
                  under the Facilities,
                  or if the Facilities
                  have been terminated, those Lenders who collectively hold more
                  than fifty
                  percent (50%) of the aggregate outstandings (the “Required
                  Lenders”).

              
	 	 
	
                Amendments
                  and Waivers:

              	
                Amendments
                  and waivers of the provisions of the Financing Documentation will
                  require
                  the approval of the Required Lenders, except that the consent of
                  all the
                  Lenders affected thereby will be required with respect to (a) increases
                  in
                  the commitment of such Lenders, (b) reductions of principal, interest
                  or
                  fees, (c) extensions of scheduled maturities or times for payment,
                  (d)
                  changes in the voting percentages and (e) releases of all or substantially
                  all of the value of the Collateral or Guarantees (other than in
                  connection
                  with transactions permitted pursuant to the Financing
                  Documentation).

              
	 	 
	
                Indemnification:

              	
                The
                  Loan Parties will indemnify the Arranger, the Administrative Agent,
                  each
                  of the Lenders and their respective affiliates, partners, directors,
                  officers, agents and advisors and hold them harmless from and against
                  all
                  liabilities, damages, claims, costs, expenses (including reasonable
                  fees,
                  disbursements, settlement costs and other charges of counsel) relating
                  to
                  the Transactions or any transactions related thereto
                  and the Borrowers’ use of the loan proceeds or the commitments;
                  provided,
                  that such
                  indemnity will not, as to any indemnitee, be available to the extent
                  that
                  such losses, claims, damages, liabilities or related expenses 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.

              
	 	 
	
                Expenses:

              	
                The
                  Loan Parties will reimburse the Arranger and the Administrative
                  Agent (and
                  all Lenders in the case of enforcement costs and documentary taxes)
                  for
                  all reasonable out-of-pocket costs and expenses in connection with
                  the
                  syndication, negotiation, execution, delivery and administration
                  of the
                  Financing Documentation and any amendment or waiver with respect
                  thereto.

              
	 	 
	
                Governing
                  Law and Forum:

              	
                New
                  York.

              

      

       

      
        
          
          

        

        
          PAGE
            8

          
            

          

        

        
          
          

        

      

      
         

        
          

        

      

       

      
        	
                Waiver
                  of Jury Trial and Punitive and Consequential Damages:

              	
                All
                  parties to the Financing Documentation waive the right to trial
                  by jury
                  and the right to claim punitive or consequential
                  damages.

              
	 	 
	
                Counsel
                  for the Arranger:

              	
                Kennedy
                  Covington Lobdell & Hickman,
                  L.L.P.

              

      

    

     

    
      
        
        

      

      
        PAGE
          9

        
          

        

      

      
        
        

      

    

     

    
      

    

     

    SCHEDULE
      I TO ANNEX A

    

    INTEREST
      AND FEES 

    

      
        	
                Interest:

              	
                At
                  the Borrowers’ option, loans will bear interest based on the Base Rate or
                  LIBOR, as described below:

              
	 	 
	 	
                A.
                  Base
                  Rate Option

              
	 	 
	 	
                Interest
                  will be at the Base Rate plus
                  the applicable Interest Margin (as described below). The “Base Rate” is
                  defined as the higher of (a) the Federal Funds Rate, as published
                  by the
                  Federal Reserve Bank of New York plus
                  1/2 of 1% and (b) the prime commercial lending rate of the Administrative
                  Agent, as established from time to time at is principal U.S. office
                  (which
                  such rate is
                  an index or base rate and will not necessarily be its lowest or
                  best rate
                  charged to its customers or other banks). Interest shall be payable
                  quarterly in arrears and (i) with respect to Base Rate Loans based
                  on the
                  Federal Funds Rate, shall be calculated on the basis of the actual
                  number
                  of days elapsed in a year of 360 days and (ii) with respect to
                  Base Rate
                  loans based on the prime commercial lending rate of the Administrative
                  Agent, shall be calculated on the basis of the actual number of
                  days
                  elapsed in a year of 365/366 days.

              
	 	 
	 	
                Base
                  Rate borrowings will be made on same day notice and will be in
                  minimum
                  amounts to be agreed upon.

              
	 	 
	 	
                B.
                  LIBOR
                  Option

              
	 	 
	 	
                Interest
                  will be determined for periods (“Interest
                  Periods”)
                  of one, two, three or six months (or nine or twelve months if agreed
                  to by
                  all relevant Lenders) as
                  selected by the Borrowers and will be at an annual rate equal to
                  the
                  London Interbank Offered Rate (“LIBOR”)
                  for the corresponding deposits of U.S. dollars plus
                  the applicable Interest Margin (as described below). LIBOR will
                  be
                  determined by the Administrative Agent at the start of each Interest
                  Period and will be fixed through such period. Interest will be
                  paid at the
                  end of each Interest Period or, in the case of Interest Periods
                  longer
                  than three months, quarterly, and will be calculated on the basis
                  of the
                  actual number of days elapsed in a year of 360 days. LIBOR will
                  be
                  adjusted for maximum statutory reserve requirements (if
                  any).

              
	 	 
	 	
                LIBOR
                  borrowings will be made on three business days’ prior notice and will be
                  in minimum amounts to be agreed upon.

              
	 	 
	 	
                Swingline
                  loans will bear interest at the Base Rate plus
                  the applicable Interest Margin.

              
	 	 
	
                Default
                  Interest:

              	
                (a)
                  Automatically upon the occurrence and during the continuance of
                  any
                  payment event of default or upon a bankruptcy event of default
                  of the
                  Borrowers or any other Loan Party, or (b) at the election of the
                  Required
                  Lenders, upon the occurrence and during the continuance of any
                  other event
                  of default, all amounts due and payable with respect to any loan
                  hereunder
                  shall bear interest at a rate per annum of two percent (2%) in
                  excess of
                  the rate then applicable to such loan (including the applicable
                  Interest
                  Margin) and shall be payable on demand of the Administrative
                  Agent.

              

      

       

      
        
          
          

        

        
          PAGE
            1

          
            

          

        

        
          
          

        

      

       

      
        

      

       

      
        	
                Interest
                  Margins:

              	
                The
                  initial applicable Interest Margin will be:

              
	 	 
	 	
                (a)
                  in the case of the Revolving Credit Facility, 2.00% for LIBOR Rate
                  loans
                  and 1.00% for Base Rate loans;
                  and

              
	 	 
	 	
                (b)
                  in the case of the Term Loan Facility, 2.00% for LIBOR Rate loans
                  and
                  1.00% for Base Rate loans; 

              
	 	 
	 	
                provided
                  that after the date on which the Borrowers will have delivered
                  financial
                  statements for the first full fiscal quarter after the Closing
                  Date, the
                  Interest Margin with respect to the Revolving Credit Facility will
                  be
                  determined in accordance with the applicable pricing grid to be
                  agreed.
                  

              
	 	 
	
                Commitment
                  Fees:

              	
                (a)
                  Revolving
                  Credit Facility.
                  A
                  commitment fee (the “Revolving
                  Credit Commitment Fee”)
                  will accrue on the unused amounts of the commitments under the
                  Revolving
                  Credit Facility. Swingline loans will, for purposes of the commitment
                  fee
                  calculations only, not be deemed to be a utilization of the Revolving
                  Credit Facility. Such Revolving Credit Commitment Fee will initially
                  be
                  0.50% per annum and after delivery of financial statements for
                  the first
                  full fiscal quarter ending after the Closing Date will be determined
                  in
                  accordance with the applicable pricing grid to be agreed. The Revolving
                  Credit Commitment Fee will be payable quarterly in arrears (calculated
                  on
                  a 360-day basis) for the account of the Lenders under the Facilities
                  and
                  will accrue on the Closing Date.

              
	 	 
	 	
                (b)
                  Delayed
                  Draw.
                  A
                  commitment fee (the “Delayed
                  Draw Commitment Fee”
                  will accrue on the unused amounts of the commitments under the
                  Delayed
                  Draw at
                  a rate per annum of 1.00%.
                  The Delayed Draw Commitment Fee will be payable quarterly in arrears
                  (calculated on a 360-day basis) for the account of the Lenders
                  under the
                  Facilities and will accrue from the Closing Date.

              
	 	 
	
                Letter
                  of Credit Fees:

              	
                The
                  Borrowers will pay (a) the Issuing Bank, a fronting fee equal to
                  25.0
                  basis points per annum and (b) the Lenders under the Revolving
                  Credit
                  Facility, standby letter of credit participation fees equal to
                  the
                  Interest Margin for LIBOR Rate loans under the Revolving Credit
                  Facility,
                  in each case, on the undrawn amount of all outstanding letters
                  of credit.
                  In addition, the Borrowers will pay the Issuing Bank customary
                  issuance
                  fees. 

              

      

    

     

    
      
        
        

      

      
        PAGE
          2

        
          

        

      

      
        
        

      

    

     

    
      

    

     

    SCHEDULE
      II TO ANNEX A

    

    CERTAIN
      DEFINED TERMS 

    

    “Available
      Cash”
means,
      for any date of determination, for the period commencing on the first day of
      the
      first full fiscal quarter commencing after the restatement effective date of
      the
      Existing Credit Facility and ending on the last day of the fiscal quarter most
      recently ended for which financial statements have been delivered to the
      Administrative Agent pursuant to the terms of the Financing Documentation,
      and
      amount equal to the sum (as calculated for Holdings and its subsidiaries on
      a
      consolidated basis) of:

    

    (a) consolidated
      EBITDA (to be defined in a manner consistent with the Existing Credit Facility,
      with such conforming modifications as are mutually agreed to by the Borrowers
      and the Arranger to permit add-backs associated with synergies resulting from
      the Merger as well as other non-recurring expenses relating to the integration
      of the Acquired Company) for such period;

    

    minus

    

    (b) to
      the
      extent not deducted in the determination of consolidated EBITDA, the sum of
      the
      following, in each case, for such period: (i) non-cash dividend income, (ii)
      consolidated interest expense, (iii) unfinanced capital expenditures, (iv)
      cash
      income taxes, (v) scheduled principal payments of debt, (vi) voluntary
      prepayments of debt, (vii) mandatory prepayments of the Term Loan Facility
      described in clauses (c) and (d) of the section of the Term Sheet entitled
      “Mandatory Prepayments” and net increases in the amount of outstanding Loans
      under the Revolving Credit Facility, (viii) the cash cost of any extraordinary
      or unusual losses or charges during such period, and (ix) all cash payments
      made
      during such period on account of losses or charges expensed during or prior
      to
      such period (to the extent not deducted in the determination of consolidated
      EBITDA for such prior period);

    

    plus 

    

    (c) to
      the
      extent not included in the determination of consolidated EBITDA, (i) cash
      interest income for such period, (ii) the cash amount realized in respect of
      extraordinary or unusual gains during such period and (iii) net decreases in
      the
      amount of outstanding Loans under the Revolving Credit Facility for such
      period.

    

    “Cumulative
      Available Cash”
means
      (a) $23,697,000 plus
      (b) the
      sum of the following (as calculated for Holdings and its subsidiaries, without
      duplication, on a consolidated basis) for the period commencing on the first
      day
      of the first full fiscal quarter commencing after the restatement effective
      date
      of the Existing Credit Facility and ending on the last day of the fiscal quarter
      of Holdings then most recently ended for which financial statements have been
      delivered to the Administrative Agent pursuant to the terms of the Financing
      Documentation: (i) Available Cash for such period minus
      (ii) the
      aggregate amount of all Subject Payments paid after the restatement effective
      date of the Existing Credit Facility.

    

    “Dividend
      Suspension Period”
means
      any period during which the Total Net Leverage Ratio is greater than 5.25 to
      1.00 (or any period during which the Borrowers have failed to deliver a
      financial covenant compliance certificate when required by the terms of the
      Financing Documentation); provided
      that on
      the Step-Down Date (as defined above), such Total Net Leverage Ratio limitation
      will step-down to 5.10 to 1.00.

     

    
      
        
        

      

      
        PAGE
          1

        
          

        

      

      
        
        

      

    

     

    
      

    

     

    “Excess
      Subject Payment Amount”
means,
      for any fiscal quarter, the amount by which the Subject Payments in such fiscal
      quarter exceeded the sum of (a) $10,410,000 for any fiscal quarter ended after
      June 30, 2006 plus
      (b) the
      amount of pro rata
      dividends paid on shares of Class A Common Stock of Holdings reserved for
      issuance on the restatement effective date of the Existing Credit Facility
      under
      Holdings’ restricted share plan plus
      (c) the
      amount of pro rata dividends paid on shares of Class A Common Stock of Holdings
      issued pursuant to the Merger Agreement.

    

    “Note
      Redemption”
means
      the repurchase or redemption in full of the Senior Notes.

    

    “Permitted
      Debt Redemptions”
means
      the repurchase or redemption of the Senior Notes (or any permitted refinancing
      thereof) with the proceeds of any Permitted Distribution to Holdings from any
      Borrower; provided
      that (a)
      no Dividend Suspension Period shall be in effect and (b) no default or event
      of
      default shall have occurred and be continuing. 

    

    “Permitted
      Distributions”
means
      any dividend or distribution (including any redemption, acquisition,
      cancellation or termination of any equity interest) made by Holdings to its
      shareholders on account of the capital stock owned thereby (and any dividend
      or
      distribution (including any redemption, acquisition, cancellation or termination
      of any equity interest) made by any Borrower to Holdings to enable Holdings
      to
      fund any such dividend, distribution or Permitted Debt Redemption); provided
      that (a)
      the amount thereof does not exceed Cumulative Available Cash at the time of
      making such payment, (b) no Dividend Suspension Period shall be in effect and
      (c) no default or event of default shall have occurred and be
      continuing.

    

    “Permitted
      Investments”
means
      any investment not otherwise permitted, in an amount not to exceed Cumulative
      Available Cash at the time any such investment is made.

    

    “Senior
      Notes”
means
      the existing 9.75% Senior Notes due 2012 of Holdings.

    

    “Subject
      Payments”
means,
      for any period without duplication, the aggregate amount of any Permitted
      Distributions during such period, Permitted Debt Redemptions during such period
      and Permitted Investments during such period (excluding the amount of any
      Permitted Distribution or Permitted Debt Redemption funded with the proceeds
      of
      the Delayed Draw for the purposes of funding the Note Redemption).

    

    “Total
      Net Debt”
means,
      at any date, consolidated debt as of such date, net of the lesser of (a) the
      amount of cash and cash equivalents in excess of $5,000,000 reflected on a
      consolidated balance sheet of Holdings as of such date other than any such
      amount that would be classified, in accordance with generally accepted
      accounting principles, as “restricted cash” (and excluding the cash and cash
      equivalents of any subsidiary that is not a Loan Party to the extent such
      subsidiary would be prohibited on such date from distributing such cash to
      a
      Loan Party) and (b) $25,000,000.

    

    “Total
      Net Leverage Ratio”
means,
      at any date, the ratio of (a) Total Net Debt as of such date to (b) consolidated
      EBITDA for the four (4) consecutive fiscal quarters ending on or immediately
      prior to such date.

    

    
      
        
        

      

      
        PAGE
          2

        
          

        

      

      
        
        

      

    

     

    
      
 

    SCHEDULE
      III TO ANNEX A

    

    CONDITIONS

     

    
      	
              Conditions
                to Closing and

              Initial
                Funding of the Facilities:

            	
              (a)  The
                Arranger will have received, in form and substance reasonably satisfactory
                to the Arranger, (i) copies of documentation for the Merger and other
                aspects of the Transactions, including the Merger Agreement and all
                exhibits and schedules thereto, and (ii) evidence of all consents and
                approvals required pursuant to the terms of the Merger Agreement,
                including the consent of the board of directors of the Acquired Company.
                The Merger will have been consummated in accordance with the terms
                and
                conditions of the Merger Agreement without any waiver, modification
                or
                consent thereunder that is materially adverse to the Lenders (as
                reasonably determined by the Arranger) unless approved by the Arranger
                and
                no law or regulation will be applicable, or event will have occurred,
                nor
                will any litigation or investigation be pending or threatened, that
                could
                reasonably be expected to impose materially adverse conditions or
                which
                could reasonably be expected to materially and adversely affect the
                consummation of the Merger or any of the other
                Transactions.

            
	 	 
	 	
              (b)  Financing
                Documentation reflecting and consistent with (i) the terms and conditions
                set forth herein and in the Term Sheet and (ii) otherwise reasonably
                satisfactory to the Borrowers and the Arranger, will have been executed
                and delivered, and the Administrative Agent will have received such
                customary legal opinions, documents and other instruments as are
                customary
                for transactions of this type including, without limitation, all
                necessary
                third party consents and approvals (including, without limitation,
                all
                necessary regulatory approvals), a certificate of the chief financial
                officer of Holdings as to the solvency of each Loan Party after giving
                effect to each element of the Transactions and all documents, instruments,
                reports and policies required to insure, perfect or evidence the
                Administrative Agent’s first priority security interest in the collateral
                securing the Facilities will have been executed and/or delivered
                and, to
                the extent applicable, be in proper form for filing (including UCC
                and
                other lien searches, intellectual property searches, insurance policies,
                surveys, title reports and policies, appraisals and environmental
                reports), subject to customary exceptions for post-closing completion
                of
                steps not practicable to be completed sooner. All representations
                and
                warranties set forth in the Financing Documentation shall be true
                and
                correct in all material respects
                (except to the extent that any such representation and warranty is
                qualified by materiality).

            

    

     

    
      
        
        

      

      
        PAGE
          1

        
          

        

      

      
        
        

      

    

     

    
      

    

     

    
      	 	
              (c)  The
                Arranger will have received, in form and substance reasonably satisfactory
                to the Arranger, (i) copies of satisfactory audited consolidated
                financial
                statements for the Acquired Company and its subsidiaries for the
                three (3)
                fiscal years most recently ended for which financial statements are
                available and interim unaudited financial statements for each quarterly
                period ended since the last audited financial statements for which
                financial statements are available, (ii) pro forma consolidated
                financial statements for Holdings and its subsidiaries for the four
                (4)
                quarter period most recently ended prior to the Closing Date for
                which
                financial statements are available giving pro forma effect
                to the Transactions (prepared in accordance with Regulation S-X under
                the
                Securities Act of 1933, as amended, and all other rules and regulations
                of
                the SEC under such Securities Act, and including other adjustments
                reasonably acceptable to the Arranger) and a pro forma
                balance sheet of Holdings and its subsidiaries as of the Closing
                Date
                giving pro forma effect
                to the Transactions and (iii) unless previously provided, projections
                prepared by management of balance sheets, income statements and cashflow
                statements of Holdings
                and
                its subsidiaries,
                which will be quarterly for the first fiscal year after the Closing
                Date
                and annually thereafter for the term of the Facilities (and which
                will not
                be inconsistent with information provided to the Arranger prior to
                the
                delivery of the Commitment Letter).

            

    

    

    
      
        
        

      

      
        PAGE
          2THIS
      NOTE
      AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), APPLICABLE
      STATE SECURITIES LAWS, OR APPLICABLE LAWS OF ANY FOREIGN JURISDICTION. THIS
      NOTE
      AND SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO
      DISTRIBUTION OR RESALE, AND MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED,
      RENOUNCED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
      STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS
      AND
      IN THE ABSENCE OF COMPLIANCE WITH APPLICABLE LAWS OF ANY FOREIGN JURISDICTION,
      OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
      IS
      NOT REQUIRED AND SUCH FOREIGN JURISDICTION LAWS HAVE BEEN
      SATISFIED.

    

    VIOQUEST
      PHARMACEUTICALS,
      INC.

    SENIOR
      CONVERTIBLE PROMISSORY NOTE

     

    
      	No. 2007-____	 	
              Basking
                Ridge, New Jersey

            
	$________	 	
              ______________
                ___, 2007

            

    

     

    1. Principal
      and Interest

    

    VIOQUEST
      PHARMACEUTICALS,
      INC.
      (the “Company”),
      a
      Delaware corporation, for value received, hereby promises to pay to the order
      of
      ______________________, or assigns (“Holder”),
      in
      lawful money of the United States of America at the address for notices to
      Holder set forth below (or such other address as Holder shall provide to the
      Company pursuant hereto), the principal amount of ____________ dollars
      ($___________), together with interest as set forth below.

     

    The
      Company promises to pay interest, compounded semi-annually, on the unpaid
      principal amount from the date hereof until such principal amount is paid in
      full at the rate of eight percent (8%), or such lesser rate as shall be the
      maximum rate allowable under applicable law (the “Initial
      Term Rate”).
      Interest from the date hereof shall be computed on the basis of a 365-day year,
      and shall be accrued and added to principal. Unless converted or prepaid earlier
      as set forth below, all unpaid principal and unpaid accrued interest on this
      Note shall be due and payable on the first anniversary of the final closing
      of
      the Company’s sale of Bridge Notes (as defined below) (the “Due
      Date”).
      Notwithstanding the foregoing, at the option of the Company, by written notice
      to the Holder prior to the Due Date, the Company may extend the Due Date until
      the date that is one year following the initial Due Date (the “Extended
      Term”);
      provided, that, during the Extended Term, the interest rate hereunder shall
      increase to twelve percent (12%), or such lesser rate as shall be the maximum
      rate allowable under applicable law (the “Extended
      Term Rate”);
      and
      provided further, that upon the occurrence of an Event of Default (as defined
      herein), the interest rate hereunder shall increase by four percent (4%) from
      the Initial Term Rate or Extended Term Rate, whichever is then in effect, or
      such lesser rate as shall be the maximum rate allowable under applicable law
      (the “Default
      Rate”).

     

    This
      Note
      is being issued pursuant to that certain Note and Warrant Purchase Agreement
      between the Company and the Holder (the “Purchase
      Agreement”),
      and
      is subject to its terms. This Note is being issued together with a series of
      convertible promissory notes issued by the Company in connection with an
      offering described in the Company’s Private Placement Memorandum dated June 20,
      2007 relating to an aggregate principal indebtedness of up to $3,500,000 (such
      notes shall be collectively referred to as the “Bridge
      Notes”).
      

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    2. Mandatory Conversion.

    

    2.1 All
      unpaid principal and accrued unpaid interest on this Note shall be automatically
      converted into units of the Company’s equity securities or securities
      convertible into or exchangeable for the Company’s equity securities (the
“Securities”)
      issued
      in the Company’s next equity financing (or series of related equity financings)
      involving the sale of Securities in which the Company receives at least
      $7,000,000 in gross aggregate cash proceeds (before brokers’ fees or other
      transaction related expenses, and excluding any such proceeds resulting from
      any
      conversion of Bridge Notes) (a “Qualified
      Financing”),
      at a
      conversion price equal to the lesser of (a) the lowest price paid per unit
      in
      cash for such Securities by investors in such Qualified Financing, or (b) $0.60
      per unit of Securities (subject to appropriate adjustment for stock splits,
      combintations and similar events), and in each case upon such other terms,
      conditions and agreements as may be applicable in such Qualified
      Financing.
      For
      example, if the Company sells units of securities consisting of shares of Common
      Stock and a warrant to purchase shares of Common Stock in a Qualified Financing,
      the Holder will receive such units of Common Stock and Warrants upon conversion.
      In the event the Company completes (in one or a series of related transactions)
      a merger, consolidation, sale or transfer of the Company’s capital stock, or
      completes the sale of all or substantially all of its assets, in each case
      which
      does not constitute a Sale of the Company (as defined below), then the term
      “Securities”
as
      used
      herein shall thereafter refer to the equity securities or securities convertible
      into or exchangeable for equity securities of the surviving, resulting, combined
      or acquiring entity in such merger, consolidation, sale or
      transfer.

     

    2.2 Immediately
      prior to the occurrence of a Sale of the Company (as defined below), all unpaid
      principal and accrued unpaid interest on this Note shall be automatically
      converted into shares of the Company’s Common Stock at a conversion price per
      share equal to the Sale Conversion Price (as defined below). The Company shall
      not issue fractional shares but shall round up the number of shares issued
      to
      the next whole number. Any conversion effected in accordance with this Section
      2.2 shall be binding upon the Holder hereof. “Sale
      of the Company”
shall
      mean a transaction (or series of related transactions) (whether by merger,
      consolidation, sale or transfer of the Company’s capital stock or otherwise)
      with one or more non-affiliates, pursuant to which such party or parties acquire
      (i) capital stock of the Company possessing the voting power to elect a majority
      of the board of directors of the Company; or (ii) other than a sale of all
      of
      the assets or stock of the Company’s Chiral Quest, Inc. subsidiary, all or
      substantially all of the Company’s assets determined on a consolidated basis;
provided,
      however,
      that a
      transaction (or series of related transactions) pursuant to which the
      then-existing holders of the Company’s capital stock immediately prior to such
      transaction (or series of related transactions) continue to own, directly or
      indirectly, a majority of the outstanding shares of the capital stock of the
      Company or such other resulting, surviving or combined company resulting from
      such transaction (or series of related transactions) shall not be deemed to
      be a
      Sale of the Company; provided
      further,
      however,
      that
      notwithstanding anything to the contrary contained herein, to the extent any
      transaction (or series of related transactions) qualifies as a Qualified
      Financing, such transaction(s) shall not be deemed to constitute a Sale of
      the
      Company. The “Sale
      Conversion Price”
shall
      mean a per share price equal to the quotient obtained by dividing (x) the
      aggregate value of the consideration received in a Sale of the Company less
      any
      indebtedness of the Company then outstanding by (y) the number of shares of
      the
      Company’s Common Stock then outstanding on a fully-diluted basis (not including
      the conversion of the Bridge Notes or exercise of the Warrants (as defined
      in
      the Purchase Agreement)). For purposes hereof, the phrase “value of the
      consideration” means the gross amount of: 

    

    	(i)  	
            amount
              of money and securities or any other compensation or investment paid
              or to
              be paid (including, without any limitation any payments under earnout
              or
              similar provisions) that a buyer pays to the Company or its shareholders
              and any other non-cash consideration
              delivered;

          

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    	(ii)  	
            the
              amount of all indebtedness of the Company that is assumed by the
              buyer;

          

    

    	(iii)  	
            the
              amount of any simultaneous investment made to the Company in the
              transaction, if applicable; and

          

    
      

      	(iv)  	
              
                the
                  amount of any license fees or similar fees payable to the
                  Company.

              

            

       

    

    2.3 Upon
      conversion of this Note in accordance with the terms of this Sections 2.1 and
      2.2, the applicable amount of outstanding principal and accrued unpaid interest
      of the Note shall be converted without any further action by the Holder and
      whether or not the Note is surrendered to the Company or its transfer agent.
      The
      Company shall not be obligated to issue certificates evidencing the shares
      of
      the securities issuable upon such conversion unless the Note is either delivered
      to the Company or its transfer agent, or the Holder notifies the Company or
      its
      transfer agent that such Note has been lost, stolen or destroyed and executes
      an
      agreement satisfactory to the Company to indemnify the Company from any loss
      incurred by it in connection with such Note. The Company shall, as soon as
      practicable after such delivery, or such agreement and indemnification, issue
      and deliver to such Holder of such Note, a certificate or certificates for
      the
      securities to which the Holder shall be entitled, a check payable to the Holder
      in the amount of any cash amounts payable as the result of a conversion into
      fractional shares of the Securities, as determined by the Board of Directors.
      Such conversion shall be deemed to have been made upon the surrender of this
      Note pursuant to a conversion by the Holder or concurrently with the close
      of
      the Qualified Financing or immediately prior to the occurrence of a Sale of
      the
      Company, as applicable. The person or persons entitled to receive securities
      issuable upon such conversion shall be treated for all purposes as the record
      holder or holders of such securities on such date.

     

    3. Voluntary
      Conversion.

    

    3.1 Prior
      to
      a Qualified Financing or Sale of the Company, all unpaid principal and accrued
      unpaid interest on this Note may, at the election of the Holder, be converted
      into shares of the Company’s common stock, par value $0.001 per share (the
“Common
      Stock”),
      at a
      conversion price equal to $0.38, subject to appropriate adjustment for stock
      splits, combintations and similar events. Holder shall not be entitled to
      convert this Note into shares of Common Stock until it has surrendered this
      Note
      at the office of the Company and given written notice by mail in the form
      attached hereto as Exhibit
      A (the
      “Holder
      Conversion Notice”)
      to the
      Company at its principal corporate office, of the election to convert all or
      a
      portion of this Note pursuant to this Section 3.1. If this Note is converted
      in
      part only, the Company shall execute and deliver a new note to the Holder
      thereof in the principal amount equal to the portion of this Note not so
      converted. No fractional shares of Common Stock shall be issued upon conversion
      of this Note. Upon the conversion of this Note pursuant to this Section 3.1,
      the
      Holder shall surrender this Note, duly endorsed, at the principal office of
      the
      Company. At its expense, the Company shall, as soon as practicable thereafter
      but in no event later that three business days following the date on which
      the
      Holder duly surrenders this Note for conversion pursuant to this Section 3.1
      and
      delivers the Holder Conversion Notice (the “Share
      Delivery Date”),
      issue
      and deliver to such Holder at such principal office a certificate or
      certificates for the number of shares of Common Stock to which the Holder shall
      be entitled upon such conversion (bearing such legends as are required by the
      Agreement and applicable state and federal securities laws in the opinion of
      counsel to the Company), together with a new note for the principal amount
      of
      the Note that was not converted, if any. Upon conversion of all or a portion
      of
      the principal, interest and other amounts owing under this Note, the Company
      shall be forever released from all its obligations and liabilities under this
      Note, to the extent of the amount so converted.

    

    3.2 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 shares of Common Stock issuable upon a conversion of this
      Note
      pursuant to Section 3.1 on or before the 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 shares of Common Stock which the Holder anticipated
      receiving upon such conversion (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 for the shares of Common Stock so purchased
      exceeds (y) the amount obtained by multiplying (A) the number of shares of
      Common Stock that the Company was required to deliver to the Holder in
      connection with the conversion at issue by (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 Note and equivalent number
      of
      shares of Common Stock for which such conversion 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
      conversion 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
      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.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    3.3 Registration
      Rights.
      The
      Holder shall have the right to participate in the registration rights granted
      to
      purchasers of the Securities (as defined in the Purchase Agreement) pursuant
      to
      Article 5 of the Purchase Agreement. By acceptance of this Note, the Holder
      agrees to comply with the provisions of Article 5 of the Purchase Agreement
      to
      the same extent as if it were a party thereto.

     

    4. Other
      Covenants.
      

     

    4.1 As
      long
      as any Bridge Note remains outstanding, the Company will not, without the prior
      written consent of the holders of the Bridge Notes evidencing at least a
      majority of the principal indebtedness then outstanding under such notes, incur
      indebtedness for borrowed money (“New
      Debt”)
      in
      favor of any person or entity (each a “New
      Lender”)
      which
      indebtedness is secured or otherwise senior in priority to the Bridge Notes
      issued to any subscriber pursuant to the Purchase Agreement or any substantially
      similar agreement, unless the New Lenders execute and deliver to the holders
      of
      the Bridge Notes a subordination agreement (in a form acceptable to the such
      Bridge Note holders evidencing at least a majority of the principal indebtedness
      then outstanding under the Bridge Notes) providing for the subordination of
      the
      New Debt to any of the indebtedness evidenced by any Bridge Notes.

     

    4.2 As
      long
      as any Bridge Note remains outstanding, the Company will not take any action
      that results in (i) the repurchase of any securities of the Company for cash,
      except for isolated repurchases of securities issued to employees, officers,
      directors or consultants pursuant to the Company’s existing stock incentive
      plans, or (ii) the payment or declaration of any cash dividend on any shares
      of
      the Company’s capital stock.

     

    5. Prepayment.
      The
      Notes may not be prepaid at any time, in whole or in part, prior to their
      maturity.

     

    6. Attorney’s
      Fees.
      If the
      indebtedness represented by this Note or any part thereof is collected in
      bankruptcy, receivership or other judicial proceedings or if this Note is placed
      in the hands of attorneys for collection after default, the Company agrees
      to
      pay, in addition to the principal and interest payable hereunder, all fees
      and
      expenses incurred by the Holder (including reasonable fees and expenses of
      legal
      counsel to the Holder) in connection with the enforcement of the Note against
      the Company.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    7. Notices.
      Any
      notice, other communication or payment required or permitted hereunder shall
      be
      in writing and shall be deemed to have been given upon delivery to the address
      provided pursuant to the Purchase Agreement. 

     

    8. Notice
      of Proposed Transfers.
      Prior
      to any proposed transfer of this Note, unless there is in effect a registration
      statement under the Securities Act of 1933, as amended (the “Securities
      Act”),
      covering the proposed transfer, the holder hereof shall give written notice
      to
      the Company of such holder’s intention to effect such transfer. Each such notice
      shall describe the manner and circumstances of the proposed transfer in
      sufficient detail, and shall, if the Company so requests, be accompanied (except
      in transactions in compliance with Rule 144) by an unqualified written opinion
      of legal counsel, who shall be reasonably satisfactory to the Company, addressed
      to the Company and reasonably satisfactory in form and substance to the
      Company’s counsel, to the effect that the proposed transfer of the Note may be
      effected without registration under the Securities Act; provided, however,
      no
      such opinion of counsel shall be necessary for a transfer without consideration
      by a Holder to any affiliate of such Holder, or a transfer by a Holder which
      is
      a partnership to a partner of such partnership or a retired partner of such
      partnership who retires after the date hereof, or to the estate of any such
      partner or retired partner or the transfer by gift, will or intestate succession
      of any partner to his spouse or lineal descendants or ancestors, if the
      transferee agrees in writing to be subject to the terms hereof to the same
      extent as if such transferee were the original Holder hereunder. Each
      certificate evidencing the Note transferred as above provided shall bear an
      appropriate restrictive legend, except that the Note or certificate shall not
      bear such restrictive legend if in the opinion of counsel for the Company such
      legend is not required in order to establish compliance with any provisions
      of
      the Securities Act.

     

    9. Acceleration.
      This
      Note shall become immediately due and payable upon an Event of Default. For
      purposes hereof, the term “Event
      of Default”
means
      any of the following: (i) the Company commences any proceeding in bankruptcy
      or
      for dissolution, liquidation, winding-up, composition or other relief under
      state or federal bankruptcy laws; (ii) there is any material breach of any
      material covenant, warranty, representation or other term or condition of this
      Note, the Purchase Agreement or the Warrant (as defined in the Purchase
      Agreement) at any time which is not cured within the time periods permitted
      therein, or if no cure period is provided therein, within thirty (30) days
      after
      the date on which the Company receives notice of such breach; (iii) any
      outstanding principal or accrued interest owing hereunder is not repaid when
      due; (iv) the entry of any order, judgment or decree against the Company
      decreeing the dissolution or split-up of the Company or any money judgment
      in
      excess of $500,000 (exclusive of amounts covered by insurance or subject to
      indemnification by a person capable of fulfilling its indemnification
      obligations, for which the insurer or person providing indemnity has
      acknowledged responsibility), and, in each case, the order, judgment or decree
      is not paid, dismissed or stayed within 30 days, and (v) an event of default
      is
      declared on any senior or secured debt of the Company. 

     

    10. No
      Dilution or Impairment.
      The
      Company will not, by amendment of its Certificate of Incorporation or Bylaws
      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 Note,
      but will at all times in good faith assist in the carrying out of all such
      terms
      and in the taking of all such action as may be necessary or appropriate in
      order
      to protect the rights of the Holder of this Note against dilution or other
      impairment.

     

    11. Waivers.
      The
      Company hereby waives presentment, demand for performance, notice of
      non-performance, protest, notice of protest and notice of dishonor. No delay
      on
      the part of Holder in exercising any right hereunder shall operate as a waiver
      of such right or any other right. This Note is being delivered in and shall
      be
      construed in accordance with the laws of the State of New York, without regard
      to the conflicts of laws provisions thereof.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    12. No
      Stockholder Rights.
      Nothing
      contained in this Note shall be construed as conferring upon the Holder or
      any
      other person the right to vote or to consent or to receive notice as a
      stockholder of the Company.

     

    13. Amendments.
      Except
      as otherwise provided herein, any term of this Note may be amended with the
      written consent of the Company and the holders of not less than a majority
      of
      the then outstanding principal amount of the Bridge Notes, even without the
      consent of the Holder hereof; provided,
      however,
      that
      any amendment, modification or waiver of the terms and conditions of this Note
      that would adversely affect the Holder’s rights hereunder with respect to the
      date by which this Note must be repaid or the rate at which interest accrues
      hereunder, or any amendment or modification to Section 4.1 hereof, shall not
      be
      effective against any Holder who has not consented in writing to such amendment
      or modification or granted such waiver. Subject to the foreging sentence, any
      amendment effected in accordance with this Section 13 shall be binding upon
      each
      holder of any Bridge Note, each future holder of all such Bridge Notes, and
      the
      Company; provided,
      however,
      that no
      special consideration or inducement may be given to any such holder in
      connection with such consent that is not given ratably to all such holders,
      and
      that such amendment must apply to all such holders ratably in accordance with
      the principal amount of their then outstanding Bridge Notes. The Company shall
      promptly give notice to all holders of outstanding Bridge Notes of any amendment
      effected in accordance with this Section 13.

     

    ISSUED
      as
      of the date first above written.

     

    
      	 	 	VIOQUEST PHARMACEUTICALS,
              INC.
	 	 	 	 
	 	 	By:	__________________________
	 	 	Name:	__________________________
	 	 	Title:	__________________________

    

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    Exhibit
      A

    FORM
      OF NOTICE OF EXERCISE OF CONVERSION

     

    To: VioQuest
      Pharmaceuticals, Inc.

    

    The
      undersigned, the holder of the attached Senior Convertible Promissory Note
      (the
“Note”),
      hereby elects to exercise the conversion right, as permitted under Section
      3.1
      of the Note, to exchange the Note and all of the unpaid principal and accrued
      unpaid interest on such Note, for shares of Common Stock of VioQuest
      Pharmaceuticals, Inc., at the conversion price set forth in Section
      3.1.

    

    The
      undersigned requests that certificates for such shares be issued in the name
      of
      and delivered to:
      ______________________________________________________________________________________________________whose
      address
      is:_______________________________________________________________________         

    

    Dated:
      _________________ 

     

    
      
        	 	 	_____________________________________
	 	 	
                (Signature must conform in all respects to
                  name of
                  

                Holder as specified on the fact of the
                  Note)

              
	 	 	 	 
	 	 	Name:	__________________________
	 	 	 	 
	 	 	Title:	__________________________

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