Loan Agreement with BCA Mezzanine Fund, LLP and Amendments 1-3

“Subsidiary” of a Person (the “parent”), shall mean a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, by such parent.  For purposes of this definition, “controlled by” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.  Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of a Credit Party.

 

“Tax” shall mean any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not.

 

“Tax Return” shall mean any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

 

“Tel Holdings” shall mean Tel Holdings Inc., a New Jersey corporation.

 

“Termination Event” shall mean (i) a Reportable Event with respect to any Plan or Multiemployer Plan; (ii) the withdrawal of any Credit Party or any member of the Controlled Group from a Plan or Multiemployer Plan during a plan year in which such entity was a “substantial employer” as defined in Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to terminate a Plan in a distress termination described in Section 4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to terminate a Plan or Multiemployer Plan; (v) any event or condition (a) which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan or Multiemployer Plan, or (b) that may result in termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the partial or complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of any Credit Party or any member of the Controlled Group from a Multiemployer Plan.

 

“Total Leverage Ratio” shall mean, with respect to each measuring period, the ratio of (a) the aggregate principal balance of all Funded Debt outstanding on the last day of such measuring period to (b) EBITDA for such measuring period.

 

“Trademark License” shall mean any agreement, whether written or oral, providing for the grant by or to a Person of any right to use any Trademark, including, without limitation, any thereof referred to in Schedule 5.23(c).

“Trademarks” shall mean (a) all trademarks, trade names, corporate names, company names, business names, fictitious business names, service marks, elements of package or trade dress of goods or services, logos and other source or business identifiers (other than such items that are of de minimis value), together with the goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, including, without limitation, any thereof referred to in Schedule 5.23(b), and (b) all renewals thereof including, without limitation, any thereof referred to in Schedule 5.23(b).

“Trade Secrets” means confidential and proprietary information, trade secrets and know-how, including, but not limited to, processes, schematics, databases, formulae, drawings, prototypes, models, designs, price lists, cost data, financial data, and customer lists.

“Trading with the Enemy Act” shall mean the foreign assets control regulations of the United States Treasury Department (31CFR, Subtitle B, Chapter V, as amended) and any enabling legislation, regulations or executive order relating thereto.

 

“Transaction Documents” shall mean collectively, this Agreement, the Note, any Guaranty, the Security Documents, the Equity Documents, the Subordination Agreement and the SBA Side Letter, as each may be amended, modified, supplemented or restated from time to time.

 

“Transactions” shall have the meaning assigned to that term in Section 5.11(c) hereof.

 

“Uniform Commercial Code” shall have assigned to that term in Section 1.04 hereof.

 

“USA PATRIOT Act” shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.

 

“Warrant” shall have the meaning assigned to that term in the recitals to this Agreement.

 

1.02. Accounting Terms; Financial Statements.  All accounting terms used herein and not expressly defined in this Agreement shall have the respective meanings given to them in conformance with GAAP, as consistently applied to the applicable Person.  Financial statements and other information furnished after the date hereof pursuant to the Agreement or the other Transaction Documents shall be prepared in accordance with GAAP as in effect at the time of such preparation, provided, however, that if at any time any change in GAAP would affect the computation of any financial ratio or financial requirement set forth in any Transaction Document, and either the Issuer or the Purchaser shall so request, the Purchaser and the Issuer shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP; provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Credit Parties shall provide to the Purchaser financial statements and other documents required under this Agreement which include a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.

 

1.03. Knowledge of the Credit Parties.  All references to the knowledge of any Credit Party or to facts known by any Credit Party shall mean actual knowledge or notice of a senior officer of such Credit Party or of any of such Credit Party’s Subsidiaries or any division of such Credit Party, as the case may be, or knowledge which such Person could reasonably have acquired through the exercise of reasonable inquiry regarding the accuracy of any representation, warranty, covenant or agreement contained in this Agreement.

1.04. Uniform Commercial Code Terms.  All terms used herein and defined in the Uniform Commercial Code as adopted in the State of New York from time to time (the “Uniform Commercial Code”) shall have the meaning given therein unless otherwise defined herein.  Without limiting the foregoing, the terms “accounts”, “chattel paper”, “instruments”, “general intangibles”, “payment intangibles”, “supporting obligations”, “securities”, “investment property”, “documents”, “deposit accounts”, “software”, “letter of credit rights”, “inventory”, “equipment” and “fixtures”, as and when used shall have the meanings given to such terms in Articles 8 or 9 of the Uniform Commercial Code.  To the extent the definition of any category or type of collateral is expanded by any amendment, modification or revision to the Uniform Commercial Code, such expanded definition will apply automatically as of the date of such amendment, modification or revision.

 

1.05. Certain Matters of Construction.  The terms “herein”, “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision.  All references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement.  Any pronoun used shall be deemed to cover all genders.  Wherever appropriate in the context, terms used herein in the singular also include the plural and vice versa.  All references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations.  Unless otherwise provided, all references to any instruments or agreements to which Purchaser is a party, including references to any of the Transaction Documents, shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof.  All references herein to the time of day shall mean the time in New York, New York.  Whenever the words “including” or “include” shall be used, such words shall be understood to mean “including, without limitation” or “include, without limitation”.  Unless the context otherwise requires, “or” is not exclusive.  A Default or Event of Default shall be deemed to exist at all times during the period commencing on the date that such Default or Event of Default occurs to the date on which such Default or Event of Default is waived in writing pursuant to this Agreement or, in the case of a Default, is cured within any period of cure expressly provided for in this Agreement; and an Event of Default shall “continue” or be “continuing” until such Event of Default has been waived in writing by the Purchaser.  Any Lien referred to in this Agreement or any of the Security Documents as having been created in favor of Purchaser, any agreement entered into by Purchaser pursuant to this Agreement or any of the Transactions Documents, any payment made by or to or funds received by Purchaser pursuant to or as contemplated by this Agreement or any of the Transaction Documents, or any act taken or omitted to be taken by Purchaser, shall, unless otherwise expressly provided, be created, entered into, made or received, or taken or omitted, for the benefit or account of Purchaser.  All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or otherwise within the limitations of, another covenant shall not avoid the occurrence of a default if such action is taken or condition exists.  In addition, all representations and warranties hereunder shall be given independent effect so that if a particular representation or warranty proves to be incorrect or is breached, the fact that another representation or warranty concerning the same or similar subject matter is correct or is not breached will not affect the incorrectness of a breach of a representation or warranty hereunder.

2.01. Purchase and Sale of the Note.  Subject to the terms and conditions herein set forth, Issuer agrees that it will issue and sell to Purchaser, and Purchaser agrees that it will acquire from the Issuer, on the Closing Date, the Note substantially in the form attached hereto as Exhibit A, appropriately completed in conformity herewith, in the principal amount of $2,500,000, at the purchase price of $2,385,633.

 

2.02. Purchase and Sale of the Warrant.  Subject to the terms and conditions herein set forth, Issuer agrees that it will issue and sell to Purchaser, and Purchaser agrees that it will acquire from Issuer, on the Closing Date, the Warrant in substantially the form attached hereto as Exhibit B, appropriately completed in conformity herewith initially exercisable for 136,920 shares of Common Stock at the purchase price of $114,367.

 

2.03. Fees; Expenses.  Purchaser hereby acknowledges receipt of a $25,000 application fee previously paid by Issuer to Purchaser.  At the Closing, the Issuer shall (a) pay to, or as directed by, the Purchaser a transaction fee in an amount equal to $37,500 and (b) reimburse all of the Purchaser’s reasonable out-of-pocket expenses (including fees, charges and disbursements of counsel and consultants) incurred in connection with (i) the negotiation and execution and delivery of this Agreement and the other Transaction Documents and the Purchaser’s due diligence investigation and (ii) the transactions contemplated by this Agreement and the other Transaction Documents against receipt of reasonably detailed invoices therefor, which payments shall be made by wire transfer of immediately available funds to an account or accounts designated by the Purchaser.

 

2.04. Closing.  The purchase and issuance of the Securities shall take place at the closing (the “Closing”) to be held at the offices of Morrison Cohen LLP, 909 Third Avenue, New York, NY 10022 at 10:00 a.m., New York time, on September 10, 2010 (the “Closing Date”).  At the Closing, the Issuer shall deliver the Note and the Warrant to the Purchaser against delivery by the Purchaser to the Issuer of the respective purchase prices therefor.  Payment of the purchase price for the Note and the purchase price for the Warrant shall be by wire transfer of immediately available funds to an account designated by the Issuer at least two (2) Business Days prior to the Closing.

 

2.05. Financial Accounting Positions; Tax Reporting.  Each of the parties hereto agrees to take reporting and other positions with respect to the Securities which are consistent with the purchase price of the Securities set forth herein for all financial accounting purposes, unless otherwise required by applicable GAAP or Commission rules (in which case the parties agree only to take positions inconsistent with the purchase price of the Securities set forth herein provided that the Purchaser has consented thereto, which consent shall not be unreasonably withheld).  If any position inconsistent with the purchase price of the Securities set forth herein is taken, the covenants shall be adjusted to the extent necessary to eliminate any impact caused by such inconsistent position.  Each of the parties to this Agreement agrees to take reporting and other positions with respect to the Securities which are consistent with the purchase price of the Securities set forth herein for all other purposes, including for all federal, state and local tax purposes, except as otherwise required by Applicable Law.

2.06. Interest.  The Issuer shall pay interest (“Interest”) on the outstanding principal amount of the Note at the rate of fourteen percent (14%) per annum (the “Interest Rate”).  Interest on the Note shall accrue from and including the date of issuance through and until repayment of the principal amount of the Note and payment of all Interest in full, and all computations of Interest hereunder shall be made based on the actual number of days elapsed over a year of 360 days.  Interest shall be paid as provided in this Section 2.06 and Section 10.02 and all Interest accrued and unpaid through the Maturity Date shall be paid in full on the Maturity Date:

 

(a) Basic Interest.  Interest shall be paid monthly in arrears on the last day of each calendar month of each year or, if any such date shall not be a Business Day, on the immediately preceding Business Day to occur prior to such date (each date upon which interest shall be so payable, an “Interest Payment Date”), beginning on September 30, 2010, by wire transfer of immediately available funds to an account at a bank designated in writing by the Purchaser.  In the absence of any such written designation, any such Interest payment shall be deemed made on the date a check in the applicable amount payable to the order of the Purchaser is delivered to the Purchaser at its last address as reflected in the Note Register of the Issuer; if no such address appears, then to the Purchaser in care of the last address in such Note Register of any predecessor holder of the Note (or its predecessor).

 

(b) Default Interest.  Notwithstanding any provision of this Agreement to the contrary, but subject to Section 2.06(c), any overdue principal of and overdue Interest on the Note shall bear interest, payable on demand in immediately available funds, for each day from the date payment thereof was due to the date of actual payment, at a rate equal to the sum of (i) the Interest Rate and (ii) an additional five percent (5%) per annum.  Additionally, upon and during the occurrence of an Event of Default, the Note shall bear interest in addition to (and not in substitution of) the Interest Rate, from the date of the occurrence of such Event of Default until such Event of Default is cured or waived, payable on demand in immediately available funds, at a rate equal to five percent (5%) per annum.  Subject to Applicable Law, any interest that shall accrue on overdue interest on the Note (as provided in this Section 2.06(b)) and shall not have been paid in full on or before the next Interest Payment Date to occur after the date on which the overdue interest became due and payable shall itself be deemed to be overdue interest to which this Section 2.06(b) shall apply.

 

(c) No Usurious Interest. In the event that any interest rate(s) or premiums provided for in this Section 2.06 or otherwise in this Agreement, shall be determined to be unlawful, such interest rate(s) shall be computed at the highest rate permitted by Applicable Law.  Any payment by the Credit Parties of any interest amount in excess of that permitted by Applicable Law shall be considered a mistake, with the excess being applied to the principal amount of the Note without prepayment premium or penalty; if no such principal amount is outstanding, such excess shall be returned to the Credit Parties.

The obligation of the Purchaser to purchase the Securities and to pay the purchase price therefor at the Closing and to perform any obligations hereunder shall be subject to the satisfaction as determined by, or waiver by, the Purchaser of the following conditions on or before the Closing Date; provided, however, that any waiver of a condition shall not be deemed a waiver of any breach of any representation, warranty, agreement, term or covenant or of any misrepresentation by the Credit Parties.

 

3.01. Representations and Warranties.  The representations and warranties of the Credit Parties contained in Article 5 hereof shall be true and correct at and as of the date hereof and the Closing Date as if made at and as of such date, and the Purchaser shall have received at the Closing a certificate to the foregoing effect, dated the Closing Date, and executed by the Chief Executive Officer, President or a Vice President of each Credit Party.

 

3.02. Compliance with this Agreement.  The Credit Parties shall have performed and complied with all of their agreements and conditions set forth or contemplated herein that are required to be performed or complied with by the Credit Parties on or before the Closing Date, and the Purchaser shall have received at the Closing certificates to the foregoing effect, dated the Closing Date, and executed by the Chief Executive Officer, President or a Vice President of each Credit Party.

 

3.03. Secretary’s Certificates.  The Purchaser shall have received a certificate from each Credit Party, dated the Closing Date and signed by the Secretary or an Assistant Secretary of such Credit Party, certifying (a) that the attached copies of the Organization Documents of such Credit Party, as the case may be, (or other applicable organizational or constituent documents), and resolutions of the Board of Directors (or other applicable authority) of such Credit Party approving the Transaction Documents to which it is a party and the transactions contemplated hereby and thereby are all true, complete and correct and remain unamended and in full force and effect, and (b) the incumbency and specimen signature of each officer of such Credit Party executing any Transaction Document to which it is a party or any other document delivered in connection herewith and therewith on behalf of such Credit Party.

 

3.04. Transaction Documents.  The Purchaser shall have received duly executed Transaction Documents and true, complete and correct copies of such agreements, schedules, exhibits, certificates, documents, financial information and filings as it may reasonably request in connection with or relating to the transactions contemplated hereby, all in form and substance satisfactory to the Purchaser.

 

3.05. Purchase of Securities Permitted by Applicable Laws.  The acquisition of and payment for the Securities to be acquired by the Purchaser hereunder and the consummation of the transactions contemplated hereby and by the Transaction Documents (a) shall not be prohibited by any Requirement of Law, (b) shall not subject the Purchaser to any penalty or other onerous condition under or pursuant to any Requirement of Law, and (c) shall be permitted by all Requirements of Law to which the Purchaser or the transactions contemplated by or referred to herein or in the Transaction Documents are subject; and the Purchaser shall have received such certificates or other evidence as the Purchaser may reasonably request to establish compliance with this condition.

3.06. Opinions of Counsel.  The Purchaser shall have received an opinion of outside counsel to the Credit Parties, dated as of the Closing Date, relating to the transactions contemplated by or referred to herein, in form and substance acceptable to the Purchaser.

 

3.07. Approval of Counsel to the Purchaser.  All actions and proceedings hereunder and all agreements, schedules, exhibits, certificates, financial information, filings and other documents required to be delivered by the Credit Parties and each of their respective Subsidiaries hereunder or in connection with the consummation of the transactions contemplated hereby, and all other related matters, shall have been in form and substance acceptable to Morrison Cohen LLP, counsel to the Purchaser, in its reasonable judgment (including the opinions of counsel referred to in Section 3.06 hereof).

 

3.08. Consents and Approvals.  All Consents, exemptions, authorizations, or other actions by, or notices to, or filings with, Governmental Authorities and other Persons in respect of all Requirements of Law and with respect to those Contractual Obligations of each Credit Party and each of its Subsidiaries necessary, desirable, or required in connection with the execution, delivery or performance (including the payment of interest on the Note and the issuance of Common Stock upon the exercise of the Warrant) by such Credit Party, or enforcement against such Credit Party of the Transaction Documents to which it is a party, shall have been obtained and be in full force and effect, and the Purchaser shall have been furnished with appropriate evidence thereof, and all waiting periods shall have lapsed without extension or the imposition of any conditions or restrictions.

 

3.09. Lien Searches; Payment of Outstanding Indebtedness; Security Documents.  The Purchaser shall have received copies of all uniform commercial code financing statements and federal and state tax lien searches as Purchaser shall have reasonably requested of the Credit Parties, and such termination statements, releases or other documents as may be reasonably necessary to confirm that the Collateral is subject to no other Liens in favor of any Persons (other than Permitted Liens, and Liens to be terminated on the Closing Date).  Without limiting the foregoing, all Prior Debt (including all interest, all payment premiums and all other amounts due and payable with respect thereto) shall have been paid in full from the proceeds of the issuance of the Securities and all commitments in respect of such Indebtedness shall have been permanently terminated, and all Liens securing payment of any such Indebtedness shall have been released, and the Purchaser shall have received all payoff and release letters, Uniform Commercial Code Form UCC-3 termination statements or other instruments or agreements as may be suitable or appropriate in connection with the release of any such Liens.

 

3.10. No Material Judgment or Order.  There shall not be on the Closing Date any judgment or order of a court of competent jurisdiction or any ruling of any Governmental Authority or any condition imposed under any Requirement of Law which, in the judgment of the Purchaser, would prohibit the purchase of the Securities hereunder or subject the Purchaser to any penalty or other onerous condition under or pursuant to any Requirement of Law if the Securities were to be purchased hereunder.

3.11. Pro Forma Balance Sheet.  The Credit Parties shall have delivered to the Purchaser as of the Closing Date the Pro Forma Financial Statements, certified by the chief financial officer of the Issuer that they fairly present the pro forma adjustments reflecting the consummation of the transactions contemplated by the Transaction Documents, including all fees and expenses in connection therewith.

 

3.12. Good Standing Certificates.  Each Credit Party shall have its delivered to the Purchaser as of the Closing Date, good standing certificates for itself and each of its Subsidiaries for each of their respective jurisdictions of incorporation and all other jurisdictions where they are qualified to do business.

 

3.13. No Litigation.  No Litigation shall have been commenced or threatened, and no investigation by any Governmental Authority shall have been commenced or threatened:  (i) seeking to restrain, prevent or change the transactions contemplated hereby or questioning the validity or legality of any of such transactions, or (ii) which, if resolved adversely to any such Person, could reasonably be expected to have a Material Adverse Effect.

 

3.14. Interim Financial Statements; Projections.  The Purchaser shall have received and reviewed to its reasonable satisfaction copies of the Credit Parties’ financial statements for the three (3) month period ended on June 30, 2010.  In addition, Purchaser shall have received and reviewed to its reasonable satisfaction a set of financial projections (i) prepared on a quarterly basis, for each of the Credit Parties’ fiscal years ending March 31, 2011 and March 31, 2012 and (ii) prepared on a year-by-year basis, for each of the Credit Parties’ fiscal years ending March 31, 2013 and March 31, 2014 (such projections to be prepared by or under the direction of an Authorized Officer of the Credit Parties).

 

3.15. Flow of Funds.  The Purchaser shall have received a certificate executed by an Authorized Officer of the Issuer setting forth a flow of funds evidencing the accounts to which the loans evidenced by the Note being made on the Closing Date are to be funded and the amounts being funded into each account.

 

3.16. Adverse Change.  Nothing shall have occurred since March 31, 2010, which the Purchaser shall determine has had, or could reasonably be expected to have, a Material Adverse Effect.

 

3.17. Solvency Certificate; Insurance Certificates.  On the Closing Date, the Purchaser shall have received:

 

(a) a solvency certificate from an authorized officer of each Credit Party in the form of Exhibit F; and

 

3.18. Fees and Expenses.  On the Closing Date, the Purchaser shall have received all costs, fees and expenses contemplated by Section 2.03.

 

3.19. Conduct of Business.  Since March 31, 2010, the Credit Parties shall have conducted their business in the Ordinary Course of Business.

 

3.20. Transfer Taxes.  The Credit Parties shall pay all (i) sales, use, transfer, real property transfer and other similar Taxes, if any, arising out of or in connection with the transactions effected pursuant to this Agreement and (ii) costs relating to the preparation and filing of any Tax Returns relating thereto.

 

3.21. Landlord Waivers and Agreements. The Purchaser shall have received the waivers and agreements in accordance with Section 8.16.

The obligations of the Issuer to issue and sell the Securities and to perform their other obligations hereunder relating thereto shall be subject to the satisfaction as determined by, or waiver by, the Issuer of the following conditions on or before the Closing Date:

 

4.01. Representations and Warranties.  The representations and warranties of the Purchaser contained in Article 6 hereof shall be true and correct at and as of the date hereof and the Closing Date as if made at and as of such date.

 

4.02. Compliance with this Agreement.  The Purchaser shall have performed and complied with all of the agreements and conditions set forth or contemplated herein that are required to be performed or complied with by the Purchaser on or before the Closing Date.

The Credit Parties, jointly and severally, represent and warrant to the Purchaser that the following are, and after giving effect to the transactions contemplated by the Transaction Documents will be, true, correct and complete:

 

5.01. Corporate Existence and Power.  Each Credit Party and each of its Subsidiaries:  (a) is a corporation, limited liability company or limited partnership, as applicable, duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization; (b) has all requisite power and authority to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently, or is currently proposed to be, engaged; (c) is duly qualified as a foreign entity, licensed and in good standing under the laws of its state of organization and of each other jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that the failure to so qualify would not have a Material Adverse Effect; and (d) has the power and authority to execute, deliver and perform its obligations under each Transaction Document to which it is or will be a party and to borrow hereunder.  Schedule 5.01 contains a true, complete and correct list of each Credit Party’s and each of its Subsidiaries’ jurisdiction of organization and each jurisdiction where it is qualified to do business as a foreign entity.  Neither ITI nor Tel Holdings engages in any business or otherwise conducts any activities.

5.02. Authorization; No Contravention.  The execution, delivery and performance by each Credit Party of this Agreement and each other Transaction Document to which it is or will be a party and the consummation of the transactions contemplated hereby and thereby, including the issuance of, or performance of the terms of, the Securities:  (a) has been duly authorized by all necessary action (including, obtaining approval of its stockholders, partners, general partners, members or other applicable equity owners, if necessary); (b) do not and will not contravene the terms of the Organization Documents of such Credit Party or any of its Subsidiaries (or any other applicable organizational or constituent documents), or any amendment thereof or any Requirement of Law applicable to such Person or such Person’s assets, business or properties; (c) do not and will not (i) conflict with, contravene, result in any violation or breach of or default under (with or without the giving of notice or the lapse of time or both), (ii) create in any other Person a right or claim of termination or amendment of, or (iii) require modification, acceleration or cancellation of, any Contractual Obligation of any Credit Party or any of its Subsidiaries; and (d) do not and will not result in the creation of any Lien (or obligation to create a Lien) against any property, asset or business of any Credit Party or any of its Subsidiaries (other than Permitted Liens).

 

5.03. Governmental Authorization; Third Party Consents.  No approval, consent, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person in respect of any Requirement of Law or Contractual Obligation, and no lapse of a waiting period under a Requirement of Law or Contractual Obligation, is necessary or required in connection with the execution, delivery or performance by (including the payment of interest on the Note), or enforcement against, any Credit Party of the Transaction Documents to which it is a party or the consummation of the transactions contemplated hereby or thereby.

 

5.04. Binding Effect.  This Agreement has been, and each of the Transaction Documents to which any Credit Party will be a party will be, duly executed and delivered by such Credit Party and this Agreement constitutes, and such Transaction Documents will constitute, the legal, valid and binding obligation of such Credit Party enforceable against such Credit Party in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency or other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity relating to enforceability.

 

5.05. Litigation.  Except as set forth on Schedule 5.05, there are no legal actions, suits, proceedings, claims or disputes pending or, to the knowledge of any Credit Party, threatened, at law, in equity, in arbitration or before any Governmental Authority against or affecting such Credit Party or any of its Subsidiaries that (a) purport to affect or pertain to this Agreement, any other Transaction Document, or any of the transactions contemplated hereby or thereby, or (b) could reasonably be expected to result in equitable relief or in monetary judgments, individually or in the aggregate, in excess of $100,000.  No injunction, writ, temporary restraining order, decree or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of the Transaction Documents.

5.06. Compliance with Laws.  Each Credit Party and each of its Subsidiaries is in compliance with all Requirements of Law.

 

5.07. No Default or Breach.  No event has occurred and is continuing or would result from the incurring of obligations by the Credit Parties under the Transaction Documents which constitutes or, with the giving of notice or lapse of time or both, would constitute an Event of Default.  Neither any Credit Party nor any of its Subsidiaries is in default under or with respect to any Contractual Obligation in any material respect.

 

5.08. Title to Properties.

 

(a) Schedule 5.08(a) contains a true, complete and correct list of all owned real property reflected on the Pro Forma Balance Sheet or used in connection with the respective businesses of the Credit Parties and each of their respective Subsidiaries.  Each Credit Party and/or each of its Subsidiaries has good indefeasible and marketable title in and to all real property and good title to all other properties reflected on the Pro Forma Balance Sheet or used in connection with their respective businesses, in each case, free and clear of all Liens, liabilities and rights except as provided on Schedule 5.08(a).

 

(b) Schedule 5.08(b) contains a list of all real property leases reflected on the Pro Forma Balance Sheet or used in connection with the respective businesses of the Credit Parties and each of their respective Subsidiaries.  Each Credit Party and/or each of its Subsidiaries holds all of the right, title and interest of the tenant under the leases reflected on the Pro Forma Balance Sheet or used in connection with their respective businesses free and clear of all Liens, liabilities and rights except as provided on Schedule 5.08(b).

 

5.09. Use of Real Property.  None of the Credit Parties nor any of their Subsidiaries owns any Real Property.  Except as set forth on Schedule 5.09, (x) the leased real properties reflected on the Pro Forma Balance Sheet or used in connection with the respective businesses of the Credit Parties and their respective Subsidiaries are used and operated in compliance and conformity with all Contractual Obligations and Requirements of Law, except to the extent that the failure so to comply would not have a Material Adverse Effect, and (y) neither any Credit Party nor any of its Subsidiaries has received notice of violation of any applicable zoning or building regulation, ordinance or other law, order, regulation or other Requirements of Law relating to the operations of any Credit Party or any of its Subsidiaries and there is no such violation.  Except as set forth on Schedule 5.09, all structures, improvements and other buildings that are owned or covered by leases reflected on the Pro Forma Balance Sheet or used in connection with the business of the Credit Parties and their respective Subsidiaries comply with all applicable ordinances, codes, regulations and other Requirements of Law, have a valid and subsisting certificate of occupancy for their present use, and neither any Credit Party nor any of its Subsidiaries has received any written notice from any Governmental Authority which is still outstanding of any failure to obtain any certificate, permit, license, authorization or approval with respect to the real property, or any intended revocation, modification or cancellation of same, and no Requirement of Law presently in effect or condition precludes or materially restricts continuation of the present use of such properties.  Each lease relating to leased real property reflected on the Pro Forma Balance Sheet or used in connection with the business of the Credit Parties or any of their respective Subsidiaries, is in full force and effect, and the applicable Credit Party and/or Subsidiary enjoys peaceful and undisturbed possession thereunder.  There is no default on the part of any Credit Party or any of its Subsidiaries or event or condition which (with notice or lapse of time, or both) would constitute a default on the part of any Credit Party or any of its Subsidiaries, under any such lease.  There are no service contracts, maintenance contracts, union contracts, concession agreements, licenses, agency agreements or any other Contractual Obligations affecting the real property or the leased property reflected on the Pro Forma Balance Sheet or used in connection with the business of the Credit Parties and their respective Subsidiaries or the operation thereof, other than those listed on Schedule 5.09, except for Contractual Obligations which are cancelable on no more than thirty (30) days’ notice.  There are no pending or, to the knowledge of any Credit Party, threatened condemnation or eminent domain proceedings that would affect any part of the leased property reflected on the Pro Forma Balance Sheet or used in connection with the business of the Credit Parties and their respective Subsidiaries.  There is no Litigation pending or, to the knowledge of any Credit Party, threatened against the real property or the leased property on the Pro Forma Balance Sheet or used in connection with the business of the Credit Parties and their respective Subsidiaries which would in any way affect title to such real property or leased property.

5.10. Taxes.

 

(a) Each Credit Party and each of its Subsidiaries has filed all Tax Returns that it was required to file.  All such Tax Returns were true, correct and complete in all material respects.  All Taxes owed by any Credit Party or any of its Subsidiaries (whether or not shown on any Tax Return) have been paid.  Except as set forth on Schedule 5.10, neither any Credit Party nor any of its Subsidiaries currently is the beneficiary of any extension of time within which to file any Tax Return.  There are no Liens on any of the assets of any Credit Party or any of their respective Subsidiaries that arose in connection with any failure (or alleged failure) to pay any Tax, other than Permitted Liens as provided on Schedule 5.10.  The Issuer has, since its inception, been treated as a corporation for federal, state and local income Tax purposes.

 

(b) Each Credit Party and each of its Subsidiaries has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party.

 

(c) There is no dispute or claim concerning any Tax liability of any Credit Party or any of its Subsidiaries either (i) claimed or raised by any Governmental Authority in writing or (ii) as to which any Credit Party has knowledge based upon personal contact with any agent of such authority.

 

(d) Neither any Credit Party nor any of its Subsidiaries has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

(e) Neither any Credit Party nor any of its Subsidiaries has any liability for the Taxes of any Person other than such Credit Party and its Subsidiaries (i) as a transferee or successor, (ii) by contract, or (iii) otherwise.

 

(f) The Issuer has not been a United States real property holding corporation within the meaning of Code Sec. 897(c)(2) during the applicable period specified in Code Sec. 897(c)(1)(A)(ii).

 

(g) Neither any Credit Party nor any of its Subsidiaries has participated in any listed transaction, tax shelter or reportable transaction as described in the Code and Treasury Regulations.

 

(h) Neither any Credit Party nor any of its Subsidiaries (i) has been a member of an affiliated group (within the meaning of Code Section 1504) filing a consolidated federal income Tax Return (other than an affiliated group the common parent of which was the Issuer) or (ii) has any liability for the Taxes of any Person (other than any of the Credit Parties or its Subsidiaries) under Treas. Reg. § 1.1502-6 (or any similar provision of state, local, or foreign law).

 

(i) The unpaid Taxes of the Credit Parties do not, as of the Closing Date, exceed the reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the most recent balance sheet (rather than in any notes thereto).

 

(j) Neither any Credit Party nor any of its Subsidiaries has a permanent establishment or office or fixed place of business outside the United States.

 

(k) Any reference in this Section 5.10 to any Credit Party shall be deemed to include each predecessor of such Credit Party, each subsidiary of such Credit Party, and each entity with respect to which such Credit Party has successor or transferee liability.

 

5.11. SEC Reports; Financial Statements and Projections.

 

(a) Issuer has filed all SEC Reports and has made available to the Purchaser each SEC Report.  None of the Credit Parties has any knowledge of any event occurring on or prior to the Closing Date (other than the transactions contemplated by this Agreement) that would require the filing of a Form 8-K after the Closing.  The SEC Reports of Issuer, including, without limitation, any financial statements or schedules included or incorporated therein by reference, (i) comply in all material respects with the requirements of the Exchange Act or the Securities Act or both, as the case may be, applicable to those SEC Reports and (ii) did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated or necessary in order to make the statements made in those SEC Reports, in light of the circumstances under which they were made, not misleading.  None of the Credit Parties (other than Issuer) (i) is subject to the periodic reporting requirements of the Exchange Act or is otherwise required to file any documents with the Commission or any national securities exchange or quotation service or comparable Governmental Authority, or (ii) has filed a registration statement that has not yet become effective under the Securities Act.

(b) The Chief Executive Officer and the Chief Financial Officer of Issuer have signed, and Issuer has furnished to the Commission, all certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.  Such certifications contain no qualifications or exceptions to the matters certified therein and have not been modified or withdrawn; and none of the Credit Parties and any of their respective officers has received notice from any governmental entity questioning or challenging the accuracy, completeness, form or manner of filing or submission of such certifications.  The Credit Parties are otherwise in compliance in all material respects with all applicable effective provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations issued thereunder by the Commission.

 

(c) The pro-forma balance sheet of the Credit Parties on a Consolidated Basis dated as of June 30, 2010 (the “Pro Forma Balance Sheet”) furnished to the Purchaser on the Closing Date reflects the consummation of the transactions contemplated under this Agreement and under the Transaction Documents (all such transactions, collectively, the “Transactions”), is complete in all material respects (but without footnote disclosures) and fairly reflects the financial condition of the Credit Parties on Consolidated Basis as of the Closing Date after giving effect to the Transactions.  The Pro Forma Balance Sheet has been certified by an Authorized Officer of each Credit Party as fairly presenting the financial condition of the Credit Parties, on a pro forma basis, and as complete in all material respects.

 

(d) The twelve-month cash flow projections of the Credit Parties on a Consolidated Basis and their projected balance sheet as of the Closing Date, copies of which are annexed hereto as Exhibit G (the “Projections”) were prepared by an Authorized Officer of the Credit Parties in good faith, are based on underlying assumptions which provide a reasonable basis for the projections contained therein and reflect the Credit Parties’ judgment based on present circumstances of the most likely set of conditions and course of action for the projected period.  The Projections, together with the Pro Forma Balance Sheet, are referred to as the “Pro Forma Financial Statements”.

 

(e) Except as set forth on Schedule 5.11, each of the consolidated balance sheets of the Credit Parties and the related consolidated statements of income, stockholders’ equity and cash flow, together with the notes thereto (collectively, the “Financial Statements”), which are included in or incorporated by reference into the SEC Reports of the Issuer filed on or after January 1, 2007 fairly present, in all material respects, the financial position of each of the Credit Parties as of the respective dates thereof, and the results of operations and cash flows of each of the Credit Parties as of the respective dates or for the respective periods set forth therein, all in conformity with GAAP consistently applied during the periods involved, except as otherwise set forth in the notes thereto and subject, in the case of unaudited quarterly financial statements, to normal year-end audit adjustments.  Except as set forth on Schedule 5.11 or on the face of the balance sheets which are a part of the Financial Statements, none of the Credit Parties had any material obligation, indebtedness or liability (whether accrued, absolute, contingent or otherwise, and whether due or to become due), other than those incurred since March 31, 2010 in the Ordinary Course of Business and which are fully reflected on the Credit Parties’ books of account and which, individually or in the aggregate, would not have a Material Adverse Effect.

 

5.12. Operating Company.  Each Credit Party is “an entity that is primarily engaged, directly or through a majority owned subsidiary or subsidiaries, in the production or sale of a product or service other than the investment of capital” within the meaning of the U.S. Department of Labor plan asset regulations, 29 C.F. R. §2510.3 101.

5.13. Disclosure.

 

(a) Agreement and Other Documents.  This Agreement, together with all exhibits and schedules hereto, and the agreements, certificates and other documents furnished to the Purchaser by or on behalf of the Credit Parties and their respective Subsidiaries at the Closing, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein or therein, in the light of the circumstances under which they were made, not misleading.

 

(b) Material Adverse Effects.  There is no fact known to any Credit Party which such Credit Party has not disclosed to the Purchaser in writing which could reasonably be expected to have a Material Adverse Effect.

 

5.14. Absence of Certain Changes or Events.  Since March 31, 2010, except as set forth on Schedule 5.14, neither any Credit Party nor any of its Subsidiaries has (i) issued any stock, bonds or other corporate securities, (ii) borrowed any amount or incurred any liabilities (absolute or contingent), other than in the Ordinary Course of Business, in excess of $25,000, (iii) discharged or satisfied any Lien or incurred or paid any obligation or liability (absolute or contingent), other than in the Ordinary Course of Business, in excess of $25,000, (iv) declared or made any payment or distribution to the holders of its Equity Interests or purchased or redeemed any shares of its Equity Interests, (v) mortgaged, pledged or subjected to Lien any of its assets, tangible or intangible, (vi) sold, assigned or transferred any of its tangible assets, or canceled any debts or claims, (vii) sold, assigned or transferred any patents, trademarks, trade names, copyrights, trade secrets or other intangible assets, (viii) suffered any losses of property, or waived any rights of substantial value, (ix) suffered any Material Adverse Effect, (x) expended any material amount, granted any bonuses or extraordinary salary increases, (xi) entered into any transaction involving consideration in excess of $50,000, except in connection with such Person’s performance, in the Ordinary Course of Business, under any Government Contract in effect as of March 31, 2010, or as otherwise contemplated hereby, or (xii) entered into any agreement or transaction, or amended or terminated any agreement, with an Affiliate.

 

5.15. O.S.H.A. and Environmental Compliance.

 

(a) Each Credit Party and each of its Subsidiaries has duly complied in all material respects with, and its facilities, business, assets, property, leaseholds, Real Property and equipment are in compliance in all material respects with and (the provisions of the Federal Occupational Safety and Health Act, the Environmental Protection Act, RCRA and all other Environmental Laws; there are no outstanding citations, notices or orders of non-compliance issued to any Credit Party or any of its Subsidiaries as of the Closing Date or relating to their business, assets, property, leaseholds, Real Property or equipment under any such laws, rules or regulations;

(b) Each Credit Party and each of its Subsidiaries has all federal, state and local licenses, certificates or permits relating to all applicable Environmental Laws necessary to operate the business of the Credit Parties and its Subsidiaries; and

 

(c) (i) There are no signs of releases, spills, discharges, leaks or disposal (collectively referred to as “Releases”), of Hazardous Substances at, upon, under or within any Real Property owned or leased by any Credit Party or any of its Subsidiaries, (ii) there are no underground storage tanks or to the best of any Credit Party’s knowledge polychlorinated biphenyls on any Real Property owned or leased by any Credit Party or any of its Subsidiaries, (iii) no Real Property owned or leased by any Credit Party or any of its Subsidiaries has ever been used as a treatment, storage or disposal facility of Hazardous Waste; (iv) no Hazardous Substances or substances governed by an Environmental Law are present on any Real Property owned or leased by any Credit Party or any of its Subsidiaries excepting such quantities as are handled in compliance with all applicable manufacturer’s instructions and Environmental Laws and in proper storage containers and as are necessary for the operation of the commercial business of the Credit Parties, their respective Subsidiaries or of their respective tenants; and (v) all underground storage tanks on the Real Property are in good condition and are being maintained in compliance with all applicable federal, state and local laws and regulations, including all Environmental Laws.

 

5.16. Investment Company

 

.  No Credit Party is an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

 

5.17. Subsidiaries.

 

(a) Schedule 5.17 sets forth a complete and accurate list of all of the Subsidiaries of each Credit Party as of the Closing Date together with their respective jurisdictions of incorporation or organization.  All of the outstanding Equity Interests in, the Subsidiaries are validly issued, fully paid and non-assessable.  Except as set forth on Schedule 5.17, as of the Closing Date, all of the outstanding Equity Interests in each of the Subsidiaries are owned by a Credit Party or by a wholly-owned Subsidiary free and clear of any Liens.  No Subsidiary has outstanding options, warrants, subscriptions, calls, rights, convertible securities or other agreements or commitments obligating the Subsidiary to issue, transfer or sell any securities of the Subsidiary.

 

(b) Except for the Subsidiaries of the Credit Parties, no Credit Party owns of record or beneficially, directly or indirectly, (i) any Equity Interests convertible into Equity Interests any other Person, and (ii) any Equity Interest in any limited liability company, partnership, joint venture or other non-corporate business enterprises.

 

5.18. Capitalization.

 

(a) Schedule 5.18 sets forth, as of the Closing Date (after giving effect to the transactions contemplated hereby), a true and complete listing of each class of authorized Equity Interests of each Credit Party and its Subsidiaries, of which all of such issued Equity Interests are validly issued and outstanding, and, with respect to the Equity Interests of Issuer’s Subsidiaries, such Equity Interests are owned beneficially and of record by the Persons and in the amounts listed on Schedule 5.18.  Schedule 5.18 also sets forth a list of all holders of warrants, rights and securities convertible into Equity Interests of each Credit Party, together with the number of Equity Interests to be issued upon the exercise or conversion of such warrants, rights and convertible securities.  No Credit Party has any Equity Interests held in treasury.  As of the Closing Date, after giving effect to the transactions contemplated hereby and in the other Transaction Documents, there will be:  (i) 2,625,323 shares of Common Stock issued and outstanding; (ii) 136,920 shares of Common Stock reserved for issuance upon exercise of the Warrant; (iii) 434,070 shares of Common Stock reserved for issuance pursuant to the exercise of stock options issued or issuable in accordance with the terms of the 2003 and 2006 Employee Stock Option Plans of the Credit Parties (which options shall not in the aggregate exceed 14.27% of the fully diluted capital stock of the Issuer) (“Employee Options”); and (iv) 10,416 shares of Common Stock reserved for issuance upon exercise of the warrants issued to Semaphore Capital Advisors LLC (the “Semaphore Warrants”).  The Warrant, the Employee Options, the Semaphore Warrants and all outstanding Equity Interests of the Issuer have been duly authorized by all necessary corporate action.  All outstanding Equity Interests of the Issuer are, and upon exercise of the Warrant, the Employee Options and the Semaphore Warrants, when issued and paid for in accordance with their terms, will be, validly issued, fully paid and non-assessable and shall be free and clear of all Liens and the issuance of the foregoing has not been or will not be, as the case may be, subject to preemptive rights in favor of any Person and will not result in the issuance of any additional Equity Interests of the Issuer or the triggering of any anti-dilution or similar rights contained in any options, warrants, debentures or other securities or agreements of the Issuer.

(b) On the Closing Date, except for the Warrant, the Semaphore Warrants and the Employee Options, there will be no outstanding securities convertible into or exchangeable for the Equity Interests of any Credit Party or any of its Subsidiaries or options, warrants or other rights to purchase or subscribe to the Equity Interests of any Credit Party or any of its Subsidiaries or contracts, commitments, agreements, understandings or arrangements of any kind to which any Credit Party or any of its Subsidiaries is a party relating to the issuance of any Equity Interests of any Credit Party or any of its Subsidiaries, any such convertible or exchangeable securities or any such options, warrants or rights.

 

5.19. Private Offering.  No form of general solicitation or general advertising was used by any Credit Party or any of its Subsidiaries, or their respective representatives in connection with the offer or sale of the Securities.  No registration of the Securities pursuant to the provisions of the Securities Act or the state securities or “blue sky” laws will be required for the offer, sale or issuance of the Securities pursuant to this Agreement.  Assuming the accuracy of Purchaser’s representations and warranties contained in Section 6.04, each Credit Party agrees that neither it, nor anyone acting on its behalf, will offer or sell the Securities or any other security so as to require the registration of the Securities pursuant to the provisions of the Securities Act or any state securities or “blue sky” laws, unless such Securities are so registered.

 

5.20. Broker’s, Finder’s or Similar Fees.  Except as set forth on Schedule 5.20, there are no brokerage commissions, finder’s fees or similar fees or commissions payable in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with any Credit Party or any of its Subsidiaries, or any action taken by any such Person.

5.21. Labor Relations.  Neither any Credit Party nor any of its Subsidiaries has committed or is engaged in any unfair labor practice.  Except as set forth in Schedule 5.21, there is (a) no unfair labor practice complaint pending or threatened against any Credit Party or any of its Subsidiaries before the National Labor Relations Board or any other Governmental Authority and no grievance or arbitration proceeding arising out of or under collective bargaining agreements is so pending or threatened, (b) no strike, labor dispute, slowdown or stoppage pending or threatened against any Credit Party or any of its Subsidiaries, (c) no union representation question existing with respect to the employees of any Credit Party or any of its Subsidiaries and no union organizing activities are taking place, and (d) no employment contract with any employee or independent contractor of any Credit Party or any of its Subsidiaries.  Each Credit Party and each of its Subsidiaries is in compliance in all material respects with all Applicable Laws respecting employment and employment practices, terms and conditions of employment and wages and hours.  Neither any Credit Party nor any of its Subsidiaries is a party to any collective bargaining agreement.

 

5.22. Employee Benefit Plans.  Neither any Credit Party nor any member of the Controlled Group maintains or contributes to any Plan other than those listed on Schedule 5.22(a) hereto.  Except as set forth in Schedule 5.22(b), (i) no Plan has incurred any “accumulated funding deficiency,” as defined in Section 302(a)(2) of ERISA and Section 412(a) of the Code, whether or not waived, and each Credit Party and each member of the Controlled Group has met all applicable minimum funding requirements under Section 302 of ERISA in respect of each Plan, (ii) each Plan which is intended to be a qualified plan under Section 401(a) of the Code as currently in effect has been determined by the Internal Revenue Service to be qualified under Section 401(a) of the Code and the trust related thereto is exempt from federal income Tax under Section 501(a) of the Code, (iii) neither any Credit Party nor any member of the Controlled Group has incurred any liability to the PBGC other than for the payment of premiums, and there are no premium payments which have become due which are unpaid, (iv) no Plan has been terminated by the plan administrator thereof nor by the PBGC, and there is no occurrence which would cause the PBGC to institute proceedings under Title IV of ERISA to terminate any Plan, (v) at this time, the current value of the assets of each Plan exceeds the present value of the accrued benefits and other liabilities of such Plan and neither any Credit Party nor any member of the Controlled Group knows of any facts or circumstances which would materially change the value of such assets and accrued benefits and other liabilities, (vi) neither any Credit Party nor any member of the Controlled Group has materially breached any of the responsibilities, obligations or duties imposed on it by ERISA with respect to any Plan, (vii) neither any Credit Party nor any member of a Controlled Group has incurred any material liability for any excise Tax arising under Section 4972 or 4980B of the Code, and, to the best of each Credit Party’s knowledge, no fact exists which could give rise to any such liability, (viii) neither any Credit Party nor any member of the Controlled Group nor any fiduciary of, nor any trustee to, any Plan, has engaged in a material non-exempt “prohibited transaction” described in Section 406 of the ERISA or Section 4975 of the Code, nor taken any action which would constitute or result in a Termination Event with respect to any such Plan which is subject to ERISA, (ix) each Credit Party and each member of the Controlled Group has made all contributions due and payable with respect to each Plan, (x) there exists no event described in Section 4043(b) of ERISA, for which the thirty (30) day notice period contained in 29 C.F.R. §2615.3 has not been waived, (xi) neither any Credit Party nor any member of the Controlled Group has any fiduciary responsibility for investments with respect to any Plan existing for the benefit of persons other than employees or former employees of the Credit Parties or any member of the Controlled Group, (xii) neither any Credit Party nor any member of the Controlled Group has withdrawn, completely or partially, from any Multiemployer Plan so as to incur liability under the Multiemployer Pension Plan Amendments Act of 1980; and (xiii) no Credit Party is, and no Credit Party shall become, a member of a Multiemployer Plan.

5.23. Intellectual Property.

 

(a)           Each Credit Party and each of its Subsidiaries owns, or has the legal right to use, all Intellectual Property necessary for each of them to conduct its respective business as currently conducted.

(b)       Schedule 5.23(b) (together with any supplements or modifications thereto provided by the Credit Parties from time to time) contains a list and description (including application number, registration number or equivalent identifying information, where applicable) of all registered and pending applications to register (x) Copyrights (y) Patents and (z) Trademarks, owned by any Credit Party or any Subsidiary of any Credit Party.

(c)           Schedule 5.23(c) (together with any supplements or modifications thereto provided by the Credit Parties from time to time) contains a list and description (stating the name of the licensee and licensor and either date of execution or effectiveness) of each Copyright License, Patent License and Trademark License to which any Credit Party or any Subsidiary of any Credit Party is a party, other than such licenses the lack of which, singly or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 

(d)       Except as disclosed in Schedule 5.23(d) hereto, (i) one or more of the Credit Parties and its Subsidiaries has the right to use the Intellectual Property disclosed in Schedule 5.23(b) for the duration of their legal existence and without payment of royalties, (ii) each Credit Party and its Subsidiaries, is currently in compliance in all material respects with legal requirements (including timely payment of filing, examination and maintenance fees, as well as timely post-registration filing of affidavits of use, incontestability and renewal applications) with respect to the Intellectual Property disclosed in Schedule 5.23(b), and (iii) to the knowledge of any Credit Party there are no restrictions on the direct or indirect transfer of any Contractual Obligation, or any interest therein, held by any of the Credit Parties or any of their respective Subsidiaries in respect of the Intellectual Property disclosed in Schedule 5.23(b) or 5.23(c).

(e)       Except as disclosed in Schedule 5.23(d), none of the Credit Parties is in default (or with the giving of notice or lapse of time or both, would be in default) under any Copyright License, Patent License or Trademark License listed on Schedule 5.23(c); no claim has been asserted and is pending by any Person challenging or questioning the use of any Intellectual Property licensed pursuant thereto or the validity or effectiveness of any such Intellectual Property license, nor does any Credit Party or any Subsidiary of any Credit Party know of any such claim; and, to the knowledge of any Credit Party, the use of Intellectual Property subject to such license by the any Credit Party or any Subsidiary of any Credit Party does not infringe on the rights of any Person.

(f)           Each Credit Party and each of its Subsidiaries has taken reasonable steps to maintain the confidentiality of all material Trade Secrets used, in development or for use in the Business, including the adoption and implementation of physical and electronic security measures and controls.  To any Credit  Party’s Knowledge, there has been no misappropriation of any such Trade Secrets by any Person, and no such Trade Secrets or other proprietary information have been used by, disclosed to or discovered by any Person except pursuant to valid and appropriate non-disclosure, assignment and/or license agreements that have not been breached.  Each Credit Party and each of its Subsidiaries owns and has the exclusive right to use in its Business all Trade Secrets relating to all of its existing and currently planned products, including product formulations, ingredient lists, and methods and processes of manufacture.

(g)        Either or both of Schedules 5.23 (b) and 5.23(c) may be updated from time to time by the Credit Parties to include new Intellectual Property acquired after the Closing Date by giving written notice thereof to the Purchaser.

5.24. Potential Conflicts of Interest.  Except as set forth on Schedule 5.24, no officer or director of any Credit Party or any of its Subsidiaries:  (a) owns, directly or indirectly, any interest in (excepting less than 5% holdings for investment purposes in Equity Interests of publicly held and traded companies), or is an officer, director, employee or consultant of, any Person that is, or is engaged in business as, a competitor, lessor, lessee, supplier, distributor, sales agent or customer of, or lender to or from, such Credit Party or any of such Credit Party’s Subsidiaries; (b) owns, directly or indirectly, in whole or in part, any tangible or intangible property that any Credit Party or any of its Subsidiaries uses in the conduct of business; or (c) has any cause of action or other claim whatsoever against, or owes or has advanced any amount to, any Credit Party or any of its Subsidiaries, except for claims in the Ordinary Course of Business such as for accrued vacation pay, accrued benefits under employee benefit plans, and similar matters and agreements existing on the date hereof.  Except as disclosed in the SEC Reports, none of the directors or officers of any of the Credit Parties or any Persons covered under Item 404(a), (b) or (c) of Regulation S-K of the Commission has entered into any transaction with any Credit Party that would be required to be disclosed pursuant to Item 404(a), (b) or (c) of Regulation S-K of the Commission.

 

5.25. Government Contracts.

 

(a) No Credit Party or any of its Subsidiaries is materially in default as to the terms of any Government Contract or has received any notices of default or notices to cure under any Government Contract for which the performance deficiency noted by any Governmental Authority has not been cured or otherwise resolved to such Governmental Authority’s satisfaction.

 

(b) Each Government Contract has been properly approved and executed by each Credit Party party thereto and, to the knowledge of such Credit Party, by the applicable Governmental Authority party thereto.

(c) No Credit Party is currently, or has ever been, debarred or suspended from (or has received notice that it is under investigation with respect to a possible debarment or suspension from) bidding on or entering into any Government Contract with or for any Governmental Authority.  No event has occurred and no condition exists that could reasonably be expected to result in the debarment or suspension of any Credit Party from any Government Contract.

 

(d) No Credit Party has been given notice (i) that any Government Contract may be or will be terminated for the convenience of a Governmental Authority, (ii) that a major program or contract of any Credit Party will be eliminated, substantially reduced or suspended, (iii) requiring or resulting in, loss of use or substantial impairment or interference of use by any Credit Party of any facilities owned by a Governmental Authority, or (iv) that any relevant budget authority or contract authority has been exceeded with respect to any Government Contract, in each case, that could reasonably be expected to have a Material Adverse Effect.  No Credit Party anticipates incurring cost overruns on any Government Contract which could reasonably be expected to have a Material Adverse Effect.  To each Credit Party’s knowledge, there are no offsets and there are not currently threatened or pending any claims or offsets against any Credit Party by any Governmental Authority, in each case, that could reasonably be expected to have a Material Adverse Effect.  All assignments of claims with respect to any Government Contract and notices of such assignments forwarded to or filed with any Person (including any Governmental Authority) pursuant to 48 C.F.R. Sections 32.802(e) and 32.805(b) shall have been fully released in accordance with 48 C.F.R. Section 32.805(e).  There are no other assignments of claims with respect to or Liens (other than Permitted Liens) on Government Contracts, other than in favor of a Governmental Authority in respect of set-off rights as provided in the Federal Acquisition Regulation (Title 48 of the Code of Federal Regulations, as amended, modified and supplemented from time to time).

 

5.26. Indebtedness.  Schedule 5.26 lists (i) the amount of all outstanding Indebtedness of the Credit Parties and their respective Subsidiaries (other than Indebtedness under this Agreement) as of the Closing Date, (ii) the Liens that relate to such Indebtedness and that encumber the assets of the Credit Parties and their respective Subsidiaries, (iii) the name of each lender thereof, and (iv) the amount of any unfunded commitments available to the Credit Parties or any of their respective Subsidiaries in connection with any such Indebtedness.

 

5.27. Material Contracts.  Neither any Credit Party nor any of its Subsidiaries is or will be a party to any Contractual Obligation, or is subject to any charge, corporate restriction, judgment, injunction, decree, or Requirement of Law, that could reasonably be expected to have a Material Adverse Effect.  Schedule 5.27 lists (i) all Government Contracts and (ii) all other contracts, agreements, commitments and other Contractual Obligations of the Credit Parties and their Subsidiaries, whether written or oral, other than (a) the Transaction Documents, (b) purchase orders in the Ordinary Course of Business, and (c) any other contracts, agreements, commitments and other Contractual Obligations of the Credit Parties or any of their Subsidiaries that do not extend beyond one year and involve the receipt or payment of not more than $25,000.  The Government Contracts and each of the other contracts, agreements, commitments and other Contractual Obligations of the Credit Parties and their Subsidiaries required to be set forth on Schedule 5.27 are referred to herein as the “Material Contracts.”  Each Material Contract in full force and effect.  Each Credit Party and each of its Subsidiaries has satisfied in full or provided for all of its liabilities and obligations under each Material Contract requiring performance prior to the date hereof in all material respects, and are not in default under any of them, nor, to the knowledge of any Credit Party, does any condition exist that with notice or lapse of time or both would constitute such a default.  To the knowledge of any Credit Party, no other party to any such Material Contract is in default thereunder, nor does any condition exist that with notice or lapse of time or both would constitute such a default.  Except as set forth on Schedule 5.27, no approval or consent of any Person is needed for all of the Material Contracts to continue to be in full force and effect.

5.28. Insurance.  Schedule 5.28 accurately summarizes the Life Insurance Policy and all of the insurance policies or programs of the Credit Parties and their Subsidiaries in effect as of the date hereof, and indicates the insurer’s name, policy number, expiration date, amount of coverage, type of coverage and annual premiums, and also indicates any self insurance program that is in effect.  All such policies are in full force and effect, are underwritten by financially sound and reputable insurers, are sufficient for all applicable Requirements of Law and otherwise are in compliance with the criteria set forth in Section 8.09 hereof.  All such policies will remain in full force and effect and will not in any way be affected by, or terminate or lapse by reason of any of the transactions contemplated hereby.

 

5.29. Assignment of Payments.

 

Except with respect to contracts for which the government has determined that a prohibition on assignment of claims is in the government’s interest, each of the Credit Parties and their Subsidiaries has the right to assign to the Purchaser all payments due or to become due under each of such Person’s Government Contracts, and there exists no uncancelled prior assignment of payments under any of such Credit Party’s Government Contracts.

 

5.30. Compliance with the FCPA.

 

Each of the Credit Parties and their Subsidiaries is in compliance with the Foreign Corrupt Practices Act, 15 U.S.C. §§ 78dd-1, et seq., and any foreign counterpart thereto.  None of the Credit Parties or their Subsidiaries has made a payment, offering, or promise to pay, or authorized the payment of, money or anything of value (a) in order to assist in obtaining or retaining business for or with, or directing business to, any foreign official, foreign political party, party official or candidate for foreign political office, (b) to a foreign official, foreign political party or party official or any candidate for foreign political office, and (c) with the intent to induce the recipient to misuse his or her official position to direct business wrongfully to such Credit Party or its Subsidiary or to any other Person, in violation of the Foreign Corrupt Practices Act, 15 U.S.C. §§ 78dd-1, et seq.

 

5.31. Products Liability.  Except as set forth on Schedule 5.31, there is no action, suit, proceeding, inquiry or investigation pending, or, to the knowledge of any Credit Party, threatened, by or before any Governmental Authority against any Credit Party or any of its Subsidiaries relating to any product alleged to have been sold by any Credit Party or any of its Subsidiaries and alleged to have been defective, or improperly designed or manufactured, nor to the knowledge of any Credit Party is there any valid basis for any such action, proceeding or investigation.

5.32. Solvency.  The Credit Parties and their Subsidiaries, taken as a whole, are Solvent.

 

5.33. Questionnaire.  All statements made by the Credit Parties in the Questionnaire are true and correct and do not, as of the date of this Agreement, contain any untrue statement of material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading in any material respect.

 

5.34. Location of Assets.  The chief executive offices of each Credit Party and each of its Subsidiaries and the books and records of each Credit Party and each of its Subsidiaries concerning their respective accounts are located only at the address set forth on Schedule 5.34 identified as such, and the only other places of business and locations of assets of each Credit Party and each of its Subsidiaries, if any, are the addresses set forth on Schedule 5.34.

 

5.35. Certain Payments.  Except as set forth on Schedule 5.35, neither the execution, delivery and performance by any Credit Party of this Agreement, nor the execution, delivery and performance by any Credit Party or any of its Subsidiaries of any of the other Transaction Documents, nor the consummation of the transactions contemplated hereby or thereby shall require any payment by any Credit Party or any of its Subsidiaries, in cash or kind, under any other agreement, plan, policy, commitment or other arrangement.  There are no agreements, plans, policies, commitments or other arrangements with respect to any compensation, benefits or consideration which will be materially increased, or the vesting of benefits of which will be materially accelerated, as a result of this Agreement, the other Transaction Documents or the occurrence of any of the transactions contemplated hereby or thereby.  Except as set forth on Schedule 5.35, there are no payments or other benefits payable by any Credit Party or any of its Subsidiaries, the value of which will be calculated on the basis of any of the transactions contemplated by this Agreement or the other Transaction Documents.

 

5.36. Margin Requirements.  No part of the proceeds from the sale of the Securities hereunder will be used to purchase or carry any Margin Stock or to extend credit for the purpose of purchasing or carrying any Margin Stock.  Neither the sale of the Securities nor the use of the proceeds thereof will violate or be inconsistent with the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System.

 

5.37. Anti-Terrorism Laws

 

(a) General.  Neither any Credit Party nor any Subsidiary or Affiliate of any Credit Party is in violation of any Anti-Terrorism Law or engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

 

(b) Executive Order No. 13224.  Neither any Credit Party nor any Subsidiary or Affiliate of any Credit Party or their respective agents acting or benefiting in any capacity in connection with the Note or other transactions hereunder is a Blocked Person.

(c) Blocked Person or Transactions.  Neither any Credit Party nor to any Credit Party’s knowledge any of its Subsidiaries, Affiliates or agents acting in any capacity in connection with the Note or other transactions hereunder (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or (ii) deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224.

 

5.38. Trading with the Enemy.  Neither any Credit Party nor any of its Subsidiaries has engaged, nor does any Credit Party or any of its Subsidiaries intend to engage, in any business or activity prohibited by the Trading with the Enemy Act.

 

5.39. Interest Rate Hedges and Other Hedging Agreements.  As of the Closing Date, neither any Credit Party nor any of their Subsidiaries are a party to any Interest Rate Hedges or any Other Hedging Agreements.

Purchaser hereby represents and warrants to the Issuer as follows:

 

6.01. Authorization; No Contravention.  The execution, delivery and performance by it of this Agreement and the other Transaction Documents to which it is party:  (a) is within its power and authority and has been duly authorized by all necessary action; (b) does not contravene the terms of its organizational documents or any amendment thereof; and (c) will not violate, conflict with or result in any breach or contravention of any of its Contractual Obligations, or any order or decree directly relating to it.

 

6.02. Binding Effect.  This Agreement and the other Transaction Documents to which it is party have been duly executed and delivered by it, and this Agreement and each other Transaction Document constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability.

 

6.03. No Legal Bar.  The execution, delivery and performance of this Agreement and the other Transaction Documents by it will not violate any Requirement of Law applicable to it.

 

6.04. Purchase for Own Account.  The Securities to be acquired by it pursuant to this Agreement are being or will be acquired for its own account and with no intention of distributing or reselling such securities or any part thereof in any transaction that would be in violation of the securities laws of the United States of America, or any state, without prejudice, however, to the Purchaser’s right at all times to sell or otherwise dispose of all or any part of the Securities, in the case of the Purchaser under an effective registration statement under the Securities Act, or under an exemption from such registration available under the Securities Act, and subject, nevertheless, to the disposition of its property being at all times within its control.  If the Purchaser should in the future decide to dispose of any of the Securities, the Purchaser understands and agrees that it may do so only in compliance with the Securities Act and applicable state securities laws, as then in effect.

6.05. Broker’s, Finder’s or Similar Fees.  Except as set forth in Section 2.03 hereof, there are no brokerage commissions, finder’s fees or similar fees or commissions payable in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with Purchaser or any action taken by it.

 

6.06. Governmental Authorization; Third Party Consent.  No approval, consent, compliance, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person in respect of any Requirement of Law, and no lapse of a waiting period under a Requirement of Law, is necessary or required in connection with the execution, delivery or performance by it or enforcement against it of this Agreement or the transactions contemplated hereby, except for the matters described in the SBA Side Letter.

7.01. Indemnification.  In addition to all other sums due hereunder or provided for in this Agreement, each Credit Party, jointly and severally, agrees to indemnify and hold harmless the Purchaser and its Affiliates and each of their respective officers, directors, agents, employees, Subsidiaries, partners, members, attorneys, accountants and controlling persons (each, an “Indemnified Party”) to the fullest extent permitted by law from and against any and all losses, claims, damages, expenses (including reasonable fees, disbursements and other charges of counsel and costs of investigation incurred by an Indemnified Party in any action or proceeding between any Credit Party or any of its Subsidiaries and such Indemnified Party (or Indemnified Parties) or between an Indemnified Party (or Indemnified Parties) and any third party or otherwise) or other liabilities, losses, or diminution in value (collectively, “Liabilities”) resulting from or arising out of any breach of any representation or warranty, covenant or agreement of any Credit Party in this Agreement, the Note, the Warrant, or any of the other Transaction Documents, including the failure to make payment when due of amounts owing pursuant to this Agreement, the Note, or any of the other Transaction Documents, on the due date thereof (whether at the scheduled maturity, by acceleration or otherwise) or any legal, administrative or other actions (including actions brought by the Purchaser, any Credit Party, any of its Subsidiaries or any holders of equity or indebtedness of any Credit Party or any of its Subsidiaries or derivative actions brought by any Person claiming through or in the name of any Credit Party or any of its Subsidiaries, proceedings or investigations (whether formal or informal), or written threats thereof, based upon, relating to or arising out of any of the Transaction Documents, the transactions contemplated thereby, or any Indemnified Party’s role therein or in the transactions contemplated thereby; provided, however, that neither any Credit Party nor any of its Subsidiaries shall be liable under this Section 7.01 to an Indemnified Party:  (a) for any amount paid by the Indemnified Party in settlement of claims by the Indemnified Party without such Credit Party’s consent (which consent shall not be unreasonably withheld or delayed), (b) to the extent that it is judicially determined in a final non-appealable judgment that such Liabilities resulted primarily from the willful misconduct or gross negligence of such Indemnified Party or (c) to the extent that it is judicially determined in a final non-appealable judgment that such Liabilities resulted primarily from the breach by such Indemnified Party of any representation, warranty, covenant or other agreement of such Indemnified Party contained in this Agreement; provided, further, that if and to the extent that such indemnification is unenforceable for any reason, the Credit Parties shall make the maximum contribution to the payment and satisfaction of such Liabilities which shall be permissible under Applicable Laws.  In connection with the obligation of the Credit Parties to indemnify for expenses as set forth above, each Credit Party further agrees, upon presentation of appropriate invoices containing reasonable detail, to reimburse each Indemnified Party for all such expenses (including fees, disbursements and other charges of counsel and costs of investigation incurred by an Indemnified Party in any action or proceeding between any Credit Party (or any of its Subsidiaries) and such Indemnified Party (or Indemnified Parties) or between an Indemnified Party (or Indemnified Parties) and any third party or otherwise) as they are incurred by such Indemnified Party; provided, however, that if an Indemnified Party is reimbursed hereunder for any expenses, such reimbursement of expenses shall be refunded to the extent it is finally judicially determined that the Liabilities in question resulted primarily from (i) the willful misconduct or gross negligence of such Indemnified Party or (ii) the breach by such Indemnified Party of any representation, warranty, covenant or other agreement of such Indemnified Party contained in this Agreement or any other Transaction Document.

7.02. Procedure; Notification.  Each Indemnified Party under this Article 7 will, promptly after the receipt of notice of the commencement of any action, investigation, claim or other proceeding against such Indemnified Party in respect of which indemnity may be sought from the Credit Parties under this Article 7, notify the Credit Parties in writing of the commencement thereof.  The omission of any Indemnified Party so to notify the Credit Parties of any such action shall not relieve the Credit Parties from any liability which they may have to such Indemnified Party unless, and only to the extent that, such omission results in the forfeiture of substantive rights or defenses of the Credit Parties.  In case any such action, claim or other proceeding shall be brought against any Indemnified Party and it shall notify the Credit Parties of the commencement thereof, the Credit Parties shall be entitled to assume the defense thereof at their own expense, with counsel satisfactory to such Indemnified Party in its reasonable judgment; provided, however, that, if the Credit Parties have assumed the defense of any such action, claim or other proceeding, any Indemnified Party may, at its own expense, retain separate counsel to participate in such defense.  Notwithstanding the foregoing, in any action, claim or proceeding in which the Credit Parties, on the one hand, and an Indemnified Party, on the other hand, is, or is reasonably likely to become, a party, such Indemnified Party shall have the right to employ separate counsel at the expense of the Credit Parties and to control its own defense of such action, claim or proceeding if, in the reasonable opinion of counsel to such Indemnified Party, a conflict or potential conflict exists between the Credit Parties, on the one hand, and such Indemnified Party, on the other hand, that would make such separate representation advisable; provided, however, that in no event shall the Credit Parties be required to pay fees and expenses under this Article 7 for more than one firm of attorneys in any jurisdiction in any one legal action or group of related legal actions.  Each Credit Party agrees that it will not, without the prior written consent of the Purchaser, settle, compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding relating to the matters contemplated hereby (if any Indemnified Party is a party thereto or has been actually threatened to be made a party thereto) unless such settlement, compromise or consent includes an unconditional release of the Purchaser and each other Indemnified Party from all liability arising or that may arise out of such claim, action or proceeding.  Neither any Credit Party nor any of its Subsidiaries shall be liable for any settlement of any claim, action or proceeding effected against an Indemnified Party without their written consent, which consent shall not be unreasonably withheld.  The rights accorded to Indemnified Parties hereunder shall be in addition to any rights that any Indemnified Party may have at common law, by separate agreement or otherwise.

7.03. Survival.  The obligations of the Credit Parties under this Article 7 shall survive termination of this Agreement and the Transaction Documents and payment in full of the Note.

Until the payment in full of all principal of and interest on the Note and all other amounts due to the Purchaser under this Agreement and the other Transaction Documents, including all fees, expenses and amounts due in respect of indemnity obligations under Article 7, each Credit Party hereby covenants and agrees with the Purchaser as set forth in this Article 8, provided, however, that following payment in full of all such amounts, for so long as the Warrant is outstanding, each Credit Party hereby covenants and agrees with the Purchaser only as set forth in Sections 8.01(a) and (b), 8.02, 8.10 and 8.13:

 

8.01. Financial Statements and Other Information.  Each Credit Party shall maintain, and cause each of its Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements in conformity with GAAP (it being understood that monthly financial statements are not required to have footnote disclosures).  The Credit Parties shall deliver to the Purchaser each of the financial statements and other reports described below:

 

(a) Annual Financial Statements.  Furnish Purchaser within one hundred twenty (120) days after the end of each fiscal year of the Credit Parties, audited financial statements of the Credit Parties, including statements of income and stockholders’ equity and cash flow from the beginning of such fiscal year to the end of such fiscal year and the balance sheet as at the end of such fiscal year, all prepared on a Consolidated Basis and Consolidating Basis in reasonable detail and fairly reflecting the financial position and the results of the operations of the Credit Parties as of the end of and for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, and reported upon without qualification by BDO Seidman, LLC or another independent certified public accounting firm selected by the Credit Parties and satisfactory to Purchaser (collectively, the “Accountants”).

 

(b) Quarterly Financial Statements.  Furnish Purchaser within forty-five (45) days after the end of each fiscal quarter, an unaudited balance sheet of the Credit Parties and unaudited statements of income and stockholders’ equity and cash flow of the Credit Parties fairly reflecting the financial position and the results of operations of the Credit Parties from the beginning of the fiscal year (or the Closing Date, in the case of the first such financial statement delivered after the Closing Date) to the end of such fiscal quarter and for such fiscal quarter, all prepared on a Consolidated Basis and Consolidating Basis in reasonable detail and setting forth in each case in comparative form the figures for the previous fiscal year and a comparison to budgeted amounts, subject to normal and recurring year-end adjustments that individually and in the aggregate are not material to the Credit Parties’ business.

(c) Monthly Financial Statements.  Furnish Purchaser within forty-five (45) days after the end of each month, an unaudited balance sheet of the Credit Parties and unaudited statements of income and stockholders’ equity and cash flow of the Credit Parties fairly reflecting the financial position and the results of operations of the Credit Parties from the beginning of the fiscal year (or the Closing Date, in the case of the first such financial statement delivered after the Closing Date) to the end of such month and for such month, all prepared on a Consolidated Basis and Consolidating Basis in reasonable detail and setting forth in each case in comparative form the figures for the previous fiscal year and a comparison to budgeted amounts, subject to normal and recurring year-end adjustments that individually and in the aggregate are not material to the Credit Parties’ business.

 

(d) Compliance Certificate.  Together with each delivery of financial statements of the Credit Parties and their Subsidiaries pursuant to Sections 8.01(a) and 8.01(b) above, the Credit Parties shall deliver or cause to be delivered a fully and properly completed compliance certificate (in substantially the form attached hereto as Exhibit C (or in such other form or substance as shall be satisfactory to Purchaser) and referred to as a “Compliance Certificate”) signed by the chief executive officer or chief financial officer of each Credit Party.

 

(e) Accountants’ Reports.  Promptly upon receipt thereof, each Credit Party shall deliver copies of all significant reports submitted by the Accountant in connection with each annual, interim or special audit or review of any type of the financial statements or related internal control systems of the Credit Parties and their Subsidiaries made by the Accountant, including any comment letter submitted by the Accountant to management in connection with its services.

 

(f) Management Reports.  Together with each delivery of financial statements of the Credit Parties and their Subsidiaries pursuant to Sections 8.01(a) and 8.01(b), the Credit Parties will deliver a management report (i) describing the operations and financial condition of the Credit Parties and their Subsidiaries for the month then ended and the portion of the current fiscal year then elapsed (or for the fiscal year then ended in the case of year end financials), (ii) setting forth in comparative form the corresponding figures for the corresponding periods of the previous fiscal year and the corresponding figures from the most recent projections for the current fiscal year delivered pursuant to subsection 8.01(g) discussing the reasons for any significant variations and (iii) a written report summarizing all material variances from budgets submitted by the Credit Parties pursuant to Section 8.01(g) and a discussion and analysis by management with respect to such variances, such discussion and analysis to be in such form and to provide such detail and substance as Purchaser shall reasonably require.  The information above shall be presented in reasonable detail and shall be certified by the chief financial officer of each Credit Party to the effect that such information fairly presents the results of operations and financial condition of the Credit Parties on a Consolidated Basis and Consolidating Basis as at the dates and for the periods indicated.

 

(g) Projections.  No earlier than sixty (60) days prior and no later than thirty (30) days prior to the end of each fiscal year (each, a “Specified Fiscal Year”), beginning with the fiscal year ending March 31, 2011, the Credit Parties shall prepare and deliver to Purchaser projections of the Credit Parties and their Subsidiaries for (i) each of the two fiscal years immediately succeeding such Specified Fiscal Year, on a quarter to quarter basis, and (ii) each of the fiscal years ending three years and four years, respectively, after the end of such Specified Fiscal Year, on a year by year basis, in each case, including a balance sheet as at the end of each relevant period and income statements and statements of cash flows for each relevant period and for the period commencing at the beginning of the fiscal year and ending on the last day of such relevant period.  Such projections shall be prepared in good faith on the basis of sound financial planning practice consistent with past budgets and financial statements and that such Authorized Officer has no reason to question the reasonableness of any material assumptions on which such projections were prepared.

(h) SEC Filings/Press Releases.  Furnish Purchaser with, promptly after the same are (i) filed, copies of all SEC Reports, (ii) sent, copies of all financial statements, management reports and reports related thereto which any Credit Party or Subsidiary sends generally to its shareholders or other equity holders, and (iii) made available, all press releases to the public concerning material developments in the business of any of the Credit Parties or any of their respective Subsidiaries.

 

(i) Material Occurrences.  Promptly notify Purchaser in writing upon the occurrence of (a) any Event of Default or Default; (b) any event, development or circumstance due to which any financial statements or other reports furnished to the Purchaser fail in any material respect to present fairly, in accordance with GAAP consistently applied, the financial condition or operating results of the Credit Parties as of the date of such statements; (c) any accumulated retirement plan funding deficiency which, if such deficiency continued for two plan years and was not corrected as provided in Section 4971 of the Code, could subject any Credit Party or Subsidiary to a Tax imposed by Section 4971 of the Code; (d) each and every default by any Credit Party or Subsidiary which permits the holders of any Indebtedness of any Credit Party or Subsidiary, the outstanding principal amount of which exceeds $50,000, to accelerate the maturity of such Indebtedness, including the names and addresses of the holders of such Indebtedness and the amount of such Indebtedness; and (e) any other development in the business or affairs of any Credit Party or Subsidiary which could reasonably be expected to have a Material Adverse Effect; in each case describing the nature thereof and the action the Credit Party or such Subsidiary proposes to take with respect thereto.  In addition, the Credit Parties shall notify Purchaser in writing promptly of any change in senior management (which, for purposes hereof, shall include any officer holding the title of vice president, or the functional equivalent thereof, and any officer holding a more senior title than vice president, or the functional equivalent thereof), and, in any event (i) if such change arises from a voluntary termination of employment, or as the result of death or disability of such officer, such notice shall be given no later than three (3) Business Days after any Credit Party shall have obtained knowledge (excluding the knowledge of such officer) of such event and (ii) if such change arises from an involuntary termination of employment of any of Harold K. Fletcher, Jeffrey C. O’Hara, Chris Allen, Dr. Ken Filardo, Joseph Macaluso, Jeff Feinstein or Jeff Johnson such notice shall be given no later than the date that is three (3) Business Days prior to the occurrence of such event, unless the Credit Parties determine, in the good faith exercise of their commercially reasonable judgment, that the delay in effectuating such termination due to the aforedescribed notice obligation would be reasonably likely to have a Material Adverse Effect, in which case the Credit Parties shall notify Purchaser in writing within one (1) Business Day after the occurrence of such involuntary termination.

(j) Litigation.  Promptly upon any officer of any Credit Party obtaining knowledge of (i) the institution of any action, suit, proceeding, governmental investigation or arbitration against or affecting any Credit Party or any Subsidiary or any property of any Credit Party or Subsidiary not previously disclosed by the Credit Parties to the Purchaser or (ii) any material development in any action, suit, proceeding, governmental investigation or arbitration at any time pending against or affecting any Credit Party or Subsidiary or any property or former property of any Credit Party or Subsidiary which, in each case, could reasonably be expected to have a Material Adverse Effect, the Credit Parties will promptly give notice thereof to the Purchaser and provide such other information as may be reasonably available to it to enable the Purchaser and its counsel to evaluate such matter.

 

(k) Subsidiaries.  Not less than fifteen (15) days prior to creating a Subsidiary or acquiring the Equity Interests in a Person, such that such Person will become a Subsidiary, the applicable Credit Party shall notify the Purchaser of such Credit Party’s or of such Credit Party’s Subsidiary’s intention to create such Subsidiary or acquire such Equity Interests, and following such notice such Subsidiary will not be created or acquired until such Credit Party has caused each Subsidiary to execute a joinder to this Agreement, and the other Transaction Documents and a Guaranty in form and substance satisfactory to the Purchaser.

 

(l) Notice of Corporate Changes.  The Credit Parties shall provide prompt written notice to the Purchaser of (i) all jurisdictions in which any Credit Party or any Subsidiary becomes qualified after the Closing Date to transact business, and (ii) any material change after the Closing Date in the authorized and issued Equity Interests of any Credit Party or any Subsidiary or any other material amendment to their applicable charter, by laws or other organizational documents, such notice, in each case, to identify the applicable jurisdictions, capital structures or amendments, as applicable.

 

(m) Notice of Adverse Events.  Furnish Purchaser with prompt written notice of (i) any lapse or other termination of any Consent issued to any Credit Party or any Subsidiary by any Governmental Authority or any other Person that is material to the operation of any Credit Party’s or Subsidiary’s business, (ii) any refusal by any Governmental Authority or any other Person to renew or extend any such Consent, (iii) copies of any periodic or special reports filed by any Credit Party or Subsidiary with any Governmental Authority or Person, if such reports indicate any material change, (iv) copies of any material notices and other material communications from any Governmental Authority or Person which specifically relate to any Credit Party or Subsidiary or the industry in which they operate, and (v) the occurrence of any development or event which is reasonably likely to cause any Credit Party or Subsidiary not to be in compliance with all federal, state and local laws relating to environmental protection and control and occupational safety and health.

(n) ERISA Notices and Requests.  Furnish Purchaser with immediate written notice in the event that (i) any Credit Party or any member of the Controlled Group knows or has reason to know that a Termination Event has occurred, together with a written statement describing such Termination Event and the action, if any, which such Credit Party or member of the Controlled Group has taken, is taking, or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, Department of Labor or PBGC with respect thereto, (ii) any Credit Party or any member of the Controlled Group knows or has reason to know that a material non-exempt prohibited transaction (as defined in Sections 406 of ERISA and 4975 of the Code) has occurred together with a written statement describing such transaction and the action which such Credit Party or member of the Controlled Group has taken, is taking or proposes to take with respect thereto, (iii) a funding waiver request has been filed with respect to any Plan together with all communications received by any Credit Party or any member of the Controlled Group with respect to such request, (iv) any increase in the benefits of any existing Plan or the establishment of any new Plan or the commencement of contributions to any Plan to which any Credit Party or any member of the Controlled Group was not previously contributing shall occur, (v) any Credit Party or any member of the Controlled Group shall receive from the PBGC a notice of intention to terminate a Plan or to have a trustee appointed to administer a Plan, together with copies of each such notice, (vi) any Credit Party or any member of the Controlled Group shall receive an unfavorable determination letter from the Internal Revenue Service regarding the qualification of a Plan under Section 401(a) of the Code, together with copies of each such letter; (vii) any Credit Party or any member of the Controlled Group shall receive a notice regarding the imposition of withdrawal liability, together with copies of each such notice; (viii) any Credit Party or any member of the Controlled Group shall fail to make a required installment or any other required payment under Section 412 of the Code on or before the due date for such installment or payment; (ix) any Credit Party or any member of the Controlled Group knows that (a) a Multiemployer Plan has been terminated, (b) the administrator or plan sponsor of a Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the PBGC has instituted or will institute proceedings under Section 4042 of ERISA to terminate a Multiemployer Plan.  Without limiting any of the foregoing, each Credit Party shall provide the Purchaser with copies of all of the final documentation related to any transactions whereby any Plan that is a deferred benefit plan is converted into a Plan that is a defined contribution plan at least ten (10) days prior to the effectiveness of such documents and/or the consummation of such transactions.

 

(o) Environmental Reports.  Furnish Purchaser, concurrently with the delivery of the financial statements referred to in Sections 8.01(a) and 8.01(b) with a certificate signed by an Authorized Officer of each Credit Party stating that, to the best of such Authorized Officer’s knowledge, each Credit Party and Subsidiary is in compliance in all material respects with all Environmental Laws.  To the extent any Credit Party or Subsidiary is not in compliance with the foregoing laws, the certificate shall set forth with reasonable specificity all areas of non-compliance and the proposed action such Credit Party or Subsidiary will implement in order to achieve full compliance.

 

(p) Other Information.  With reasonable promptness, each Credit Party shall deliver such other information and data with respect to such Credit Party or any of its Subsidiaries as from time to time may be reasonably required by the Purchaser, including, without limitation and without the necessity of any request by the Purchaser, (a) copies of all environmental audits and reviews, (b) at least thirty (30) days prior thereto, notice of any Credit Party’s or such Subsidiary’s opening of any new office or place of business or any Credit Party’s or such Subsidiary’s closing of any existing office or place of business, and (c) promptly upon any Credit Party’s learning thereof, notice of any labor dispute to which any Credit Party or such Subsidiary may become a party, any strikes or walkouts relating to any of its plants or other facilities, and the expiration of any labor contract to which any Credit Party or such Subsidiary is a party or by which any Credit Party or such Subsidiary is bound.  Promptly upon request therefor by the Purchaser, the Credit Parties shall deliver such other business or financial data, reports, appraisals and projections as the Purchaser may reasonably request.

(q) Government Contract Audits.  Furnish Purchaser, promptly after any Credit Party’s receipt thereof, with (i) notice of any final decision of a contracting officer disallowing costs aggregating more than $250,000, which disallowed costs arise out of any audit of Government Contacts of any Credit Party, and (ii) copies of any material reports from auditors of Government Contracts.

 

(r) Government Contracts.  Furnish Purchaser, promptly after any Credit Party’s receipt thereof, with (i) a copy of any default, termination or other material notice with respect to any Government Contract, (ii) a copy of any notice of debarment or suspension from contracting with any Governmental Authority or (iii) a copy of any Government Contract entered into after the Closing Date.

 

(s) Additional Documents.  Execute and deliver to Purchaser, upon request, such documents and agreements as Purchaser may, from time to time, reasonably request to carry out the purposes, terms or conditions of this Agreement.

 

8.02. Preservation of Existence.  Each Credit Party shall, and shall cause each of its Subsidiaries to:

 

(a) conduct continuously and operate actively its business according to good business practices and maintain all of its properties useful or necessary in its business in good working order and condition (reasonable wear and tear excepted and except as may be disposed of in each case in accordance with the terms of this Agreement), including all licenses, patents, copyrights, design rights, tradenames, trade secrets and trademarks, in each case that are material to its business, and take all actions necessary to enforce and protect the validity of any intellectual property right;

 

(b) keep in full force and effect its existence and comply in all material respects with Applicable Laws governing the conduct of its business; and

 

(c) except as otherwise permitted herein, make all such reports and pay all such franchise and other taxes and license fees and do all such other acts and things as may be lawfully required to maintain its rights, licenses, leases, powers and franchises under the laws of the United States or any political subdivision thereof.

 

8.03. Payment of Obligations.  Each Credit Party shall, and shall cause each of its Subsidiaries to, pay and discharge as the same shall become due and payable, all their respective obligations and liabilities, including:

 

(a) all Tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless same are being Properly Contested;

(b) all lawful claims which any Credit Party or any of its Subsidiaries is obligated to pay, which are due and which, if unpaid, might by law become a Lien upon its property, unless the same are being Properly Contested; and

 

(c) pay, discharge or otherwise satisfy at or before maturity (subject, where applicable, to specified grace periods and, in the case of the trade payables, to normal payment practices) all its obligations and liabilities of whatever nature, except when the failure to do so could not reasonably be expected to have a Material Adverse Effect or when the amount or validity thereof is currently being Properly Contested.

 

8.04. Compliance with Laws.  Each Credit Party shall comply, and shall cause each of its Subsidiaries to comply, in all material respects with all Requirements of Law and with the directions of each Governmental Authority having jurisdiction over them or their respective business or property (including all applicable Environmental Laws), including any requirements to clean up, remove, or remediate Hazardous Materials at any location where necessary to protect human health or the environment.

 

8.05. Violations.  Each Credit Party shall promptly notify Purchaser in writing of any material violation of Applicable Law of any Governmental Authority, applicable to such Credit Party or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect.

 

8.06. Board Observer.  Each Credit Party shall give Purchaser notice of (in the same manner as notice is given to directors), and permit one person designated by Purchaser to attend as an observer, all meetings of its Board of Directors and all executive and other committee meetings of its Board of Directors (other than the audit committee) and shall provide to Purchaser the same information concerning the Credit Parties and their Subsidiaries, and access thereto, provided to members of the Credit Parties’ respective Board of Directors and such committees, as applicable.  The reasonable travel expenses incurred by any such designee of Purchaser in attending any board or committee meetings shall be reimbursed by the Credit Parties, to the extent consistent with the Credit Parties’ then existing policy of reimbursing directors generally for such expenses; provided, that the Credit Parties will not be required to permit such observer to (x) attend any portion of any meeting of its Board of Directors or any committee thereof, or (y) receive information provided to the members of its Board of Directors or any committee thereof, in each case, to the extent necessary to protect attorney-client privilege or in the event the Board of Directors of the Credit Parties reasonably determines that a conflict of interest may exist between Purchaser and the Credit Parties.

 

8.07. Inspection.  Each Credit Party will permit, and will cause each of its Subsidiaries to permit, representatives of the Purchaser to visit and inspect any of their respective properties, to examine their respective corporate, financial and operating records and make copies thereof or abstracts therefrom, and to discuss their respective affairs, finances and accounts with their respective directors, officers and, subject to the presence or participation of a representative of the Issuer in any such discussion, Accountants, all at such reasonable times during normal business hours and as often as may be reasonably requested, upon reasonable advance notice; provided, however, that no such inspection, examination or inquiry, the failure to conduct same, nor any knowledge of the Purchaser, including any knowledge obtained by the Purchaser in connection with any such inspection, investigation or inquiry, shall constitute a waiver of any rights the Purchaser may have under any representation, warranty, covenant, term or agreement under any of the Transaction Documents.

8.08. Payment of the Note.  The Issuer shall pay the principal of, interest on and other amounts due in respect of, the Note on the dates and in the manner provided in the Note and this Agreement.

 

8.09. Insurance.  Each Credit Party shall maintain or cause to be maintained, and shall cause its Subsidiaries to maintain or cause to be maintained, in good repair, working order and condition all material properties used in their respective businesses and will make or cause to be made, and shall cause its Subsidiaries to make or cause to be made, all appropriate repairs, renewals and replacements thereof.  Each Credit Party and its Subsidiaries will maintain or cause to be maintained with financially sound and reputable insurers that have a rating of “A” or better as established by Best’s Rating Guide (or an equivalent rating with such other publication of a similar nature as shall be in current use), the Life Insurance Policy and public liability and property damage insurance with respect to their respective businesses and properties against loss or damage of the kinds customarily carried or maintained by a company of established reputation engaged in similar businesses and in amounts acceptable to Purchaser and will deliver evidence thereof to Purchaser.  Without limiting the foregoing, each Credit Party and its Subsidiaries will establish on the Closing Date and maintain at all times thereafter (a) business interruption insurance in an amount satisfactory to the Purchaser, (b) products liability insurance coverage for the Credit Parties in amounts satisfactory to the Purchaser, and (c) subject to Section 8.17, the Life Insurance Policy.  All such insurance policies shall provide that they may not be canceled unless the insurance carrier gives at least 30 days prior written notice of such cancellation to Purchaser.

 

8.10. Books and Records.  Each Credit Party shall keep, and shall cause each of its Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of such Credit Party and each of its Subsidiaries in accordance with GAAP consistently applied to the Credit Parties and their Subsidiaries taken as a whole.

 

8.11. Use of Proceeds.

 

(a) The Credit Parties shall use the proceeds of the sale of the Securities hereunder only as follows:  (i) for the payment of fees and expenses in connection with the transactions contemplated hereunder and in the other Transaction Documents, (ii) for the repayment in full of the Prior Debt and (iii) for general corporate purposes.

 

(b) No proceeds of the Note will be used to purchase or carry any Margin Stock or to extend credit for the purpose of purchasing or carrying any Margin Stock.  Neither the sale of any Securities or nor the use of the proceeds thereof will violate or be inconsistent with the provisions of Regulation T, U, or X of the Board of Governors of the Federal Reserve System.

8.12. Standards of Financial Statements.  The Credit Parties shall cause all financial statements referred to in Sections 8.01(a), (b), (c) and (h), as to which GAAP is applicable, to fairly present the information presented (subject, in the case of interim financial statements, to normal year-end audit adjustments and the absence of footnotes) and to be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein (except as concurred in by such reporting accountants or officer, as the case may be, and disclosed therein).

 

8.13. Reservation of Equity Interests.  The Issuer shall at all times reserve and keep available out of its authorized Equity Interests, solely for the purpose of issuance and delivery upon exercise of the Warrant and the Employee Options, the number of Equity Interests issuable in accordance with the terms of the Warrant and the Employee Options (the “Exercisable Interests”).  The Exercisable Interests, when issued or delivered in accordance with the Warrant or the Employee Options, as the case may be, shall be duly and validly issued and fully paid and non-assessable.  The Issuer shall issue such Equity Interests in accordance with the provisions of the Warrants or the Employee Options, as the case may be, and shall otherwise comply, in each case, with the terms thereof.

 

8.14. Additional Real Property.  If any Credit Party acquires at any time or times hereafter any fee simple interest in real property, then within ninety (90) days of the acquisition thereof such Credit Party shall execute and deliver to Purchaser, as additional security and Collateral for the obligations, deeds of trust, security deeds, mortgages or other collateral assignments reasonably satisfactory in form and substance to Purchaser and its counsel (herein collectively referred to as “New Mortgages”) covering such real property.  The New Mortgages shall be duly recorded (at the Credit Parties’ expense) in each office where such recording is required to constitute a valid lien on the real property covered thereby.  In respect of any New Mortgage, Credit Parties shall deliver to Purchaser, at Credit Parties’ expense, mortgagee title insurance policies issued by a title insurance company reasonably satisfactory to Purchaser, which policies shall be in form and substance reasonably satisfactory to Purchaser and shall insure a valid lien in favor of Purchaser on the property covered thereby, subject only to Permitted Liens and those other exceptions reasonably acceptable to Purchaser and its counsel.  Credit Parties shall also deliver to Purchaser such other usual and customary documents, including ALTA surveys of the real property described in the New Mortgages, as Purchaser and its counsel may reasonably request relating to the real property subject to the New Mortgages.

 

8.15. Cash Management Systems. 

 

(a) Each Credit Party shall, concurrently with the opening of any new deposit, securities, commodity or similar account after the Closing Date, as applicable, enter into, and cause each depository, securities intermediary or commodities intermediary to enter into, Control Agreements with respect to each deposit, securities, commodity or similar account maintained by such Person after the Closing Date.  Without limiting the foregoing, Issuer shall, within sixty (60) days following the Closing Date (i) permanently close all of its and its Subsidiaries existing deposit, securities, commodity and similar accounts (including, without limitation, such accounts set forth in Schedule 3.10 to the Security Agreement), (ii) open one or more new deposit account(s) at a financial institution reasonably acceptable to Purchaser and (iii) enter into, and cause such financial institution to enter into, Control Agreement(s) with respect to such new deposit account(s).  Only after the occurrence and during the continuation of an Event of Default, the Purchaser shall be entitled to deliver a notice to any financial institution that is party to a Control Agreement of its exercise of control over any deposit, securities, commodity or other account subject to such Control Agreement.  Each Credit Party shall provide the Purchaser with electronic access at all times to each of its and its Subsidiaries’ depositary, securities intermediary or commodities intermediary accounts so that the Purchaser may monitor the activity in such accounts.

(b) Section 8.15(a) shall not apply to (i) any payroll account so long as such payroll account is a zero balance account, or (ii) withholding Tax, employee benefits and similar fiduciary accounts.

 

8.16. Landlord Waivers.  Each Credit Party shall use commercially reasonable efforts to promptly obtain a collateral lease assignment, landlord agreement or bailee or mortgagee waivers, as applicable, from the lessor of each leased property, bailee in possession of any Collateral or, mortgagee of any owned property with respect to each location where Collateral is stored or located, which agreement shall be reasonably satisfactory in form and substance to the Purchaser.  Without limiting the foregoing, Issuer shall, within twenty (20) days following the Closing Date, obtain a duly notarized copy of the Landlord Consent and Waiver executed and delivered by 210 Garibaldi Avenue Group at the Closing.

 

8.17. Life Insurance Policy.

 

(a) Issuer shall, within sixty (60) days following the Closing Date, obtain the O’Hara Life Insurance Policy, in accordance with the terms, conditions and requirements of Section 8.09 hereof, and deliver to Purchaser evidence thereof.

 

(b) Issuer shall, within sixty (60) days following the Closing Date, obtain and deliver to Purchaser evidence of the Fletcher Life Insurance Policy.

Until the payment in full of all principal of and interest on the Note and all other amounts due to the Purchaser under this Agreement and the other Transaction Documents, including all fees, expenses and amounts due at such time in respect of indemnity obligations under Article 7, each Credit Party covenants and agrees with the Purchaser as set forth in this Article 9, provided, however, that following payment in full of all such amounts, for so long as the Warrant is outstanding, each Credit Party hereby covenants and agrees with the Purchaser only as set forth in Section 9.09:

 

9.01. Fundamental Changes; Consolidations, Mergers and Acquisitions

 

(a) .  No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, directly or indirectly: (a) enter into any merger, consolidation or other reorganization with or into any other Person or acquire all or a substantial portion of the assets or Equity Interests of any Person or permit any other Person to consolidate with or merge with it except for Permitted Acquisitions, and (b) sell, lease, transfer or otherwise dispose of any of its properties or other assets, except (i) dispositions of inventory in the Ordinary Course of Business Permitted Dispositions and (ii) sales of assets provided the following conditions are met: (x) the market value of the assets with respect to all such sales does not exceed $250,000 in the aggregate; (b) the Net Proceeds received is at least equal to the fair market value of such assets;  and (c) no Default or Event of Default then exists or shall result from any such sale.

9.02. Creation of Liens.  No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, directly or indirectly, create or suffer to exist any Lien or transfer upon or against any of its property or assets now owned or hereafter acquired, except Permitted Liens.

 

9.03. Guarantees.  No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, directly or indirectly become liable upon the obligations or liabilities of any Person by assumption, endorsement or guaranty thereof or otherwise (other than to Purchaser) except (a) guarantees made in the Ordinary Course of Business up to an aggregate amount of $50,000, and (b) the endorsement of checks in the Ordinary Course of Business.

 

9.04. Investments.  No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, directly or indirectly make any Investments, except:

 

(a) investments in Cash and Cash Equivalents;

 

(b) investments existing on the Closing Date as set forth on Schedule 9.04 hereto;

 

(c) investments in wholly-owned Subsidiaries of such Credit Party created or acquired after the Closing Date, to the extent permitted hereunder;

 

(d) loans permitted by Section 9.05;

 

(e) investments by the Credit Parties and their respective Subsidiaries in Capital Expenditures permitted to be made pursuant to Section 9.15(c).

 

9.05. Loans.  No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, directly or indirectly make or have outstanding advances, loans or extensions of credit to any Person, including any Subsidiary or Affiliate, except for (a) the extension of commercial trade credit in connection with the sale of inventory in the Ordinary Course of Business and (b) loans to its employees or subcontractors in the Ordinary Course of Business not to exceed, in the aggregate, $100,000 at any time outstanding.

 

9.06. Restricted Payments.  No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, directly or indirectly declare, pay or make any Restricted Payments, except (i) as set forth on Schedule 9.06 and (ii) that at any time following the end of the second Loan Year, Issuer (x) may purchase shares of Common Stock for cash (“Permitted Share Repurchase”) and (y) so long as no Default or Event of Default has occurred and is then continuing, may prepay all or any portion of the Subordinated Debt in cash (“Permitted Debt Prepayment”); provided, however, that no such Permitted Payment shall be made unless (A) Issuer shall prepay the principal amount of the Note in accordance with the terms of Section 10.02 hereof in an amount equal to the amount of such Permitted Payment, (B) Cash on Hand shall exceed $1,000,000, determined on a pro forma Consolidated Basis after giving effect to such Permitted Payment and such prepayment of the principal amount of the Note, (C) Net Operating Cash Flow, determined for the most recent month for which financial statements have been delivered on a pro forma Consolidated Basis after giving effect to such Permitted Payment and such prepayment of the principal amount of the Note shall be greater than zero, and (D) the Credit Parties shall (x) be in compliance with the covenants set forth in Section 9.15 on a pro forma Consolidated Basis after giving effect to such Permitted Payment and prepayment of the principal amount of the Note, recomputed for the most recent month for which financial statements have been delivered, and (y) believe in good faith that they shall thereafter continue to be in compliance with Section 9.15.

9.07. Indebtedness.  No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, directly or indirectly create, incur, assume or suffer to exist any Indebtedness except:

 

(a) trade debt incurred in the Ordinary Course of Business,

 

(b) the Indebtedness created under this Agreement;

 

(c) Indebtedness for Capital Expenditures permitted under Section 9.15(d), including Purchase Money Indebtedness and indebtedness incurred under Capital Lease Obligations, in each case incurred in connection with such Capital Expenditures, in an aggregate amount not to exceed $250,000 at any one time outstanding for all Credit Parties and their respective Subsidiaries;

 

(d) Indebtedness disclosed on Schedule 9.07;

 

(e) Indebtedness under any Interest Rate Hedge or any Other Hedging Agreement reasonably acceptable to Purchaser; and

 

(f) guaranty obligations permitted pursuant to Section 9.03 hereof.

 

9.08. Nature of Business.  No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, substantially change the nature of the business in which it is presently engaged, or except as specifically permitted hereby purchase or invest, directly or indirectly, in any assets or property other than in the Ordinary Course of Business and where such assets or property are useful in, necessary for and are to be used in its business as presently conducted.

 

9.09. Transactions with Affiliates; ITI and Tel Holdings.

 

(a)           No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, directly or indirectly, purchase, acquire or lease any property from, or sell, transfer or lease any property to, or otherwise enter into any transaction or deal with, any Affiliate, except (i) for transactions in the Ordinary Course of Business, entered into on an arm’s-length basis on fair and reasonable terms no less favorable than terms which would have been obtainable from a Person other than an Affiliate; (ii) for the payment of customary and reasonable directors’ fees to directors who are not employees of the Credit Parties or any Affiliate of the Credit Parties as well as the payment of their reasonable out-of-pocket expenses incurred in performing their directorial or committee duties and the payment of indemnities owing to them as directors; and (iii) as set forth on Schedule 9.09.

(b)           Notwithstanding any provision in this Agreement or any other Transaction Document to the contrary, no Credit Party shall, and no Credit Party shall permit or cause any of its Subsidiaries, Affiliates, officers, directors or employees to, directly or indirectly, purchase, acquire or lease any property from, or sell, transfer or lease any property to, or otherwise enter into any transaction or deal or conduct any business with, ITI or Tel Holdings except as may be reasonably necessary to effect the dissolution and liquidation of ITI or Tel Holdings, provided that no Credit Party nor any of its Subsidiaries, Affiliates, officers, directors or employees makes any Investment or otherwise expends any funds in connection therewith (other than ordinary and reasonable out-of-pocket expenses that may be incurred in connection with the dissolution of ITI and Tel Holdings).  Neither ITI nor Tel Holdings shall engage in any business or otherwise conduct any activities.

 

9.10. Leases.  No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to,  directly or indirectly enter as lessee into any lease arrangement for real or personal property (unless capitalized and permitted under Section 9.07(c) hereof) if after giving effect thereto, aggregate annual rental payments for all leased property, whether real or personal, would exceed $300,000 in any one fiscal year in the aggregate for all Credit Parties and their respective Subsidiaries.

 

9.11. Subsidiaries; Partnerships; Joint Ventures.  No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, form any Subsidiary (other than a Subsidiary, the formation of which shall have been consented to in advance in writing by the Purchaser), or enter into any partnership, joint venture or similar arrangement.

 

9.12. Fiscal Year and Accounting Changes.  No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, directly or indirectly maintain a fiscal year other than a year ending on March 31, or make any change (i) in accounting treatment and reporting practices except as required by GAAP or (ii) in Tax reporting treatment except as required or permitted by Applicable Law.

 

9.13. Amendment of Organizational Documents.  No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, amend, modify or waive any material term or material provision of its Organizational Documents unless required by Applicable Law.

 

9.14. Limitation on Modifications of Indebtedness; Modifications of Certain Other Agreements; Etc.  No Credit Party shall, and no Credit Party shall permit any of its Subsidiaries to, (i) amend or modify, or permit the amendment or modification of, any provision of the Indebtedness described in Section 9.07 hereto or of any agreement (including any purchase agreement, indenture, loan agreement or security agreement) relating thereto other than any amendments or modifications to such Indebtedness which do not in any way adversely affect the interests of the Purchaser and are otherwise permitted under Section 9.07, (ii) make (or give any notice in respect thereof) any voluntary or optional payment or prepayment on or redemption or acquisition for value of, or any prepayment or redemption as a result of any asset sale, change of control or similar event of, any Indebtedness which is contractually subordinated to the Note, or (iii) amend or modify, or permit the amendment or modification of any Equity Document, except for amendments or modifications which are not in any way adverse in any material respect to the interests of the Purchaser.

9.15. Financial Covenants.

 

(a) Total Leverage Ratio.  The Credit Parties shall maintain, and shall cause their respective Subsidiaries to maintain, a Total Leverage Ratio, as of and for (i) the four consecutive fiscal quarters ending September 30, 2011, of not greater than 1.50:1.00, (ii) the four consecutive fiscal quarters ending December 31, 2011, of not greater than 1.25:1.00, and (iii) each period of four consecutive fiscal quarters ending after December 31, 2011, of not greater than 1.00:1.00.

 

(b) Debt Service Coverage Ratio.  The Credit Parties shall maintain, and shall cause their respective Subsidiaries to maintain, a Debt Service Coverage Ratio, as of and for (i) the fiscal quarter ending December 31, 2010, of not less than 1.10:1.00, (ii) the two consecutive fiscal quarters ending March 31, 2011, of not less than 1.40:1.00, (iii) the three consecutive fiscal quarters ending June 30, 2011, of not less than 1.65:1.00, (iv) the four consecutive fiscal quarters ending September 30, 2011, of not less than 2.00:1.00, and (v) each period of four consecutive fiscal quarters ending after September 30, 2011, of not less than 2.50:1.00.

 

(c) Fixed Charge Coverage.  The Credit Parties shall maintain, and shall cause each of their respective Subsidiaries to maintain, a Fixed Charge Coverage Ratio, as of and for (i) the fiscal quarter ending December 31, 2010, of not less than 1.00:1.00, (ii) the two consecutive fiscal quarters ending March 31, 2011, of not less than 1.25:1.00, (iii) the three consecutive fiscal quarters ending June 30, 2011, of not less than 1.50:1.00, (iv) the four consecutive fiscal quarters ending September 30, 2011, of not less than 1.75:1.00, and (v) each period of four consecutive fiscal quarters ending after September 30, 2011, of not less than 2.25:1.00.

 

(d) Capital Expenditures.  The Credit Parties shall not, and shall cause their respective Subsidiaries not to, contract for, purchase or make any expenditure or commitments for Capital Expenditures in any fiscal year in an aggregate amount in excess of $250,000 unless the Credit Parties are in compliance on a pro forma basis, after giving effect to such Capital Expenditures, with the other covenants set forth in this Section 9.15, recomputed for the most recent month for which financial statements have been delivered.

 

(e) Minimum EBITDA.  The Credit Parties shall not permit EBITDA, measured as of the last day of (i) the fiscal quarter ending December 31, 2010, to be less than $200,000 for such fiscal quarter, (ii) the two consecutive fiscal quarters ending March 31, 2011, to be less than $500,000 for such two consecutive fiscal quarters, (iii) the three consecutive fiscal quarters ending June 30, 2011, to be less than $900,000 for such three consecutive fiscal quarters, and (iv) each period of four consecutive fiscal quarters ending after June 30, 2011, to be less than $1,250,000 for each such period.

 

Compliance with the covenants in this Section 9.15 shall be determined on a Consolidated Basis in accordance with GAAP consistently applied, unless explicitly stated otherwise.

9.16. Compliance with ERISA.  No Credit Party shall, nor shall any Credit Party permit any of its Subsidiaries, to (x) maintain, or permit any member of the Controlled Group to maintain, or (y) become obligated to contribute, or permit any member of the Controlled Group to become obligated to contribute, to any Plan, other than those Plans disclosed on Schedule 5.22, (ii) engage, or permit any member of the Controlled Group to engage, in any non-exempt “prohibited transaction”, as that term is defined in section 406 of ERISA and Section 4975 of the Code; (iii) incur, or permit any member of the Controlled Group to incur, any “accumulated funding deficiency”, as that term is defined in Section 302 of ERISA or Section 412 of the Code, (iv) terminate, or permit any member of the Controlled Group to terminate, any Plan where such event could result in any liability of any Credit Party or any member of the Controlled Group or the imposition of a lien on the property of any Credit Party or any member of the Controlled Group pursuant to Section 4068 of ERISA, (v) assume, or permit any member of the Controlled Group to assume, any obligation to contribute to any Multiemployer Plan not disclosed on Schedule 5.22, (vi) incur, or permit any member of the Controlled Group to incur, any withdrawal liability to any Multiemployer Plan; (vii) fail promptly to notify Purchaser of the occurrence of any Termination Event, (viii) fail to comply, or permit a member of the Controlled Group to fail to comply, with the requirements of ERISA or the Code or other Applicable Laws in respect of any Plan , (ix) fail to meet, or permit any member of the Controlled Group to fail to meet, all minimum funding requirements under ERISA or the Code or postpone or delay or allow any member of the Controlled Group to postpone or delay any funding requirement with respect of any Plan.

 

9.17. Prepayment of Indebtedness.  No Credit Party shall, nor shall any Credit Party permit any of its Subsidiaries to, at any time, directly or indirectly, prepay any Indebtedness (other than to Purchaser), or repurchase, redeem, retire or otherwise acquire any Indebtedness (other than to Purchaser), except as expressly permitted by and in accordance with Section 9.06.

 

9.18. Anti-Terrorism Laws.  No Credit Party shall, nor shall any Credit Party permit any Affiliate or agent to: (a) conduct any business or engage in any transaction or dealing with any Blocked Person, including the making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, (b) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order No. 13224 and (c) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in the Executive Order No. 13224, the USA Patriot Act or any other Anti-Terrorism Law.  Each Credit Party shall deliver to Purchaser any certification or other evidence reasonably requested from time to time by Purchaser, in its sole discretion, confirming such Credit Party’s compliance with this Section.

 

9.19. Trading with the Enemy Act.  No Credit Party shall nor shall any Credit Party permit any of its Subsidiaries to engage in any business or activity in violation of the Trading with the Enemy Act.

9.20. Additional Negative Pledges.  No Credit Party shall, nor shall any Credit Party permit any of its Subsidiaries, to create or otherwise cause or suffer to exist or become effective, directly or indirectly, (i) any prohibition or restriction (including any agreement to provide equal and ratable security to any other Person) on the creation or existence of any Lien upon the assets of any Credit Party or any of its Subsidiaries, other than Permitted Liens or (ii) any contractual obligation which may restrict or inhibit Purchaser’s rights or ability to sell or otherwise dispose of the Collateral or any part thereof after the occurrence of an Event of Default.

10.01. Optional Prepayment.  The Issuer may prepay the outstanding principal amount (together with accrued Interest) on the Note as follows:

 

(a)  The Issuer may, at its option, at any time upon notice given to Purchaser as provided in Section 10.01(b), prepay, by wire transfer of immediately available funds, all or any portion of the principal amount of the Note, together with Interest accrued and unpaid on the principal amount of the Note so prepaid through the date fixed for such prepayment, provided that (i) any such prepayment shall be applied in the inverse order of the maturity of the principal amount of the Note, (ii) Issuer shall pay to Purchaser an additional amount equal to (A) 3% of the outstanding principal amount being prepaid if such prepayment is made during the first Loan Year, and (B) 2% of the outstanding principal amount then being prepaid if such prepayment is being made during the second Loan Year, and (iii) Issuer shall pay Purchaser all (A) Interest, including default interest, if any, (B) reasonable out-of-pocket costs and expenses (including reasonable fees, charges and disbursements of counsel), if any, associated with such prepayment, and (C) all other costs, expenses and indemnities then payable under this Agreement; provided, however, that each payment of less than the full outstanding balance of the principal amount of the Note shall be in an aggregate amount of not less than $25,000 or integral multiples of $25,000 in excess thereof.  Any optional prepayment under this Section 10.01 shall be applied first to all costs, expenses and indemnities payable under this Agreement, then to payment of default interest, if any, then to accrued but unpaid Interest, if any, and thereafter to the premium and principal amount.

 

(a) The Issuer shall give written notice of prepayment of the Note pursuant to this Section 10.01 not less than 5 nor more than 30 Business Days prior to the date fixed for such prepayment.  Such notice of prepayment pursuant to this Section 10.01 shall be given in the manner specified in Section 12.02 of this Agreement and shall specify the principal amount of the Note to be prepaid.  Upon notice of prepayment pursuant to this Section 10.01 being given by the Issuer, the Issuer covenants and agrees that it will prepay, on the date therein fixed for prepayment, the principal amount so called for prepayment, together will all other amounts required under Section 10.01(a), all in the manner provided under Section 10.01(a).

 

10.02. Scheduled Payments; Mandatory Prepayments.

 

(a) The principal amount of the Note together with accrued and unpaid Interest shall be paid by wire transfer of immediately available funds in installments on the dates and in the respective amounts shown on Schedule 10.02, or, if any such date shall not be a Business Day, on the immediately preceding Business Day occurring prior to such date.

(b) Change of Control; O’Hara Life Insurance Realization Event.  Upon the occurrence of a Change of Control or within five (5) Business Days of an O’Hara Life Insurance Realization Event, the Issuer shall, in each case at the election of the Purchaser, prepay by wire transfer of immediately available funds the entire outstanding principal amount of the Note in accordance with the redemption prices (the “Mandatory Redemption Prices”) set forth below (expressed as a percentage of the outstanding principal amount being prepaid), together with (x) Interest, including default interest, if any, accrued and unpaid on the outstanding principal amount of the Note so prepaid through the date of such prepayment, (y) all reasonable out-of-pocket costs and expenses (including reasonable fees, charges and disbursements of counsel), if any, associated with such prepayment, and (z) all other costs, expenses and indemnities then payable under this Agreement (such amounts, collectively the “Mandatory Redemption Payment”).  If a Change of Control or O’Hara Life Insurance Realization Event shall occur during any Loan Year set forth below, the Mandatory Redemption Price shall be determined based upon the percentage indicated below for such Loan Year multiplied by the principal amount which is being prepaid.  At the election of the Purchaser, all or any portion of the Mandatory Redemption Payment may be paid in the form of Marketable Securities in lieu of cash, subject to Section 6.04 hereof and to the extent available and to the extent not restricted by any SBIC Regulations.  In the event Purchaser makes the election contemplated by the immediately preceding sentence, the Issuer shall issue to Purchaser that number of shares having an aggregate Current Market Price as of such issuance date equal to that portion of the Mandatory Redemption Payment subject to such election.

(c) Fletcher Life Insurance Realization Event. Within five (5) Business Days of a Fletcher Life Insurance Realization Event, the Issuer shall, at the election of the Purchaser, apply 100% of the proceeds received by each Credit Party in respect of the Fletcher Life Insurance Realization Event to prepay the Note and any other obligations then owing hereunder.  Any such prepayment shall be applied in the same order as set forth in Section 11.03 below.

 

(d) Recovery Event.  Within five (5) Business Days of any Credit Party’s receipt of proceeds in excess of $325,000 from any Recovery Event, unless a Reinvestment Notice shall have been timely delivered to Purchaser in respect thereof, the Issuer shall, at the election of the Purchaser, apply 100% of the proceeds received by the Credit Parties in respect of such Recovery Event to prepay the Note and any other obligations then owing hereunder; provided that, notwithstanding the foregoing, (x) the aggregate proceeds in respect of Recovery Events that may be excluded from the foregoing prepayment requirements pursuant to a Reinvestment Notice shall not exceed $500,000 in any fiscal year of the Issuer, and (y) on each Reinvestment Prepayment Date, an amount equal to the Reinvestment Prepayment Amount with respect to the relevant Reinvestment Event shall be applied towards the prepayment of the Note.  Any prepayment under this Section 10.02(d) shall be applied in the same order as set forth in Section 11.03 below.

(e) Notice.  The Issuer shall give written notice to the Purchaser of any mandatory prepayment pursuant to Section 10.02(b) by reason of a Change of Control at least ten (10) Business Days prior to the date of such prepayment.  Such notice shall be given in the manner specified in Section 12.02 of this Agreement.

11.01. Events of Default.  An “Event of Default” shall occur if:

 

(a) any Credit Party shall default in the payment of the principal amount of the Note or any installment thereof, when and as the same shall become due and payable, whether at maturity or at a date fixed for payment or prepayment or by acceleration or otherwise, and such default shall continue for a period of two (2) days after the due date for the payment thereof; or

 

(b) any Credit Party shall default in the payment of any installment of Interest or any other amount due under this Agreement or the Note (other than as set forth in clause (a) of this Section 11.01) according to its terms, when and as the same shall become due and payable and such default shall continue for a period of two (2) days after the due date for the payment thereof; or

 

(c) any Credit Party or any of its Subsidiaries shall default in the due observance or performance of any covenant to be observed or performed pursuant to Sections 8.01, 8.02, 8.03, 8.08 (subject to clause (b) of this Section 11.01), or Article 9 of this Agreement; or

 

(d) any Credit Party or any of its Subsidiaries shall default in the due observance or performance of any other covenant, condition or agreement on the part of such Credit Party or such Subsidiary to be observed or performed pursuant to the terms hereof or any of the Transaction Documents (other than those referred to in clauses (a), (b) or (c) of this Section 11.01), and such default shall continue for fifteen (15) days after the earliest of (A) if any Credit Party has knowledge of such default, the date such Credit Party is required pursuant to the Transaction Documents or otherwise to give notice thereof to the Purchaser (whether or not such notice is actually given) or (B) the date of written notice thereof, specifying such default, shall have been given to the Credit Parties by the Purchaser; or

 

(e) any representation, warranty or certification made by or on behalf of any Credit Party or any of its Subsidiaries in this Agreement, the Note, the Transaction Documents or in any certificate or other document delivered pursuant hereto or thereto shall have been incorrect in any material respect (without duplication of any materiality qualification therein) when made; or

(f) (x) any event or condition shall occur that results in (A) the acceleration of the maturity of any Indebtedness of any Credit Party or of any of their Subsidiaries, or (B) a default of any Indebtedness of any Credit Party or any of its Subsidiaries that continues beyond any applicable period of cure, in either case in an amount in excess of $100,000 for any Credit Party or its Subsidiaries or $200,000 for all Credit Parties and their respective Subsidiaries; or

 

(g) any uninsured damage to or loss, theft or destruction of any assets of any Credit Party or any of its Subsidiaries shall occur that is in excess of $325,000 in the aggregate for all Credit Parties and Subsidiaries; or

 

(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (A) relief in respect of any Credit Party or any of its Subsidiaries, or of a substantial part of any of their respective property or assets, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal or state bankruptcy, insolvency, receivership or similar law, (B) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Credit Party or any of its Subsidiaries, or for a substantial part of any of their respective property or assets, or (C) the winding up or liquidation of any Credit Party or any of its Subsidiaries; and such proceeding or petition shall continue undismissed for sixty (60) days, or an order or decree approving or ordering any of the foregoing shall be entered; or

 

(i) any Credit Party or any of its Subsidiaries shall (A) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal or state bankruptcy, insolvency, receivership or similar Applicable Law, (B) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in paragraph (h) of this Section 11.01, (C) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official, for a substantial part of its property or assets, (D) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (E) make a general assignment for the benefit of creditors, (F) become unable, admit in writing its inability or fail generally to pay its debts as they become due, or (G) take any action for the purpose of effecting any of the foregoing; or

 

(j) one or more judgments for the payment of money in an aggregate amount in excess of $200,000 shall be rendered against one or more of the Credit Parties or their respective Subsidiaries (in either case, except to the extent covered by insurance as to which the insurance company has acknowledged coverage) and the same shall remain undischarged for a period of thirty (30) days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of any Credit Party or any of its Subsidiaries to enforce any such judgment; or

 

(k) any Credit Party or any of its Subsidiaries shall commence legal action challenging the validity and binding effect of any provision of any of the Transaction Documents or any of the Transaction Documents shall for any reason (except to the extent permitted by its express terms) cease to be effective or, if in the case of the Transaction Documents intended to provide a Lien in favor of the Purchaser, fail to create a valid and perfected first priority Lien (except for Permitted Liens that by operation of law would take priority) on, or security interest in, any of the Collateral purported to be covered; or

(l) unless otherwise waived or consented to by the Purchaser in writing, the subordination provisions relating to the Subordinated Debt or any other Indebtedness subordinated to the Indebtedness pursuant to the Note and the Agreement in excess of $100,000 in the aggregate for all subordinated debt (collectively, the “Subordination Provisions”) shall fail to be enforceable by the Purchaser in accordance with the terms thereof, or the monetary obligations pursuant to the Note and this Agreement shall fail to constitute “Senior Debt” (or similar term) referring to such obligations; or any Credit Party shall, directly or indirectly, disavow or contest in any manner (i) the effectiveness, validity or enforceability of any of the Subordination Provisions, (ii) that the Subordination Provisions exist for the benefit of the Purchaser or (iii) that all payments of principal of or premium and interest on the such subordinated Indebtedness, or realized from the liquidation of any property of any Credit Party or Subsidiary, shall be subject to any of such Subordination Provisions; or

 

(m)  Harold K. Fletcher or Jeffrey C. O’Hara (or any replacement appointed in accordance with this Section 11.01(m)) shall cease to have the title and perform the functions of Chairman and Chief Executive Officer, and President and Chief Operating Officer, respectively, of Issuer at any time and Issuer shall fail to appoint a replacement for such office and functions reasonably acceptable to Purchaser, within ninety (90) days after such vacancy; or

 

(n) (i) with respect to any Government Contract, receipt of a written termination for default issued by the applicable Governmental Authority and such default is not waived or cured within the applicable grace period; or (ii) any Credit Party or any Subsidiary shall have (A) received a written notice of debarment or suspension from contracting with any Governmental Authority or (B) been debarred or suspended from contracting with any Governmental Authority; or (iii)  receipt of a written termination for default of a Government Contract issued by the applicable Governmental Authority based on a finding of fraud, criminal activity, deception or willful misconduct; or

 

(o) (i) any Credit Party shall be debarred or suspended from any contracting with a Governmental Authority; (ii) any notice of debarment or notice of suspension shall have been issued to any Credit Party; or (iii) any notice of termination for default or the actual termination for default of any Material Contract shall have been issued to or received by any Credit Party; or

 

(p) a Litigation set forth on Schedule 5.05 shall be resolved adversely to any Credit Party and such adverse resolution could reasonably be expected to have a Material Adverse Effect.

 

11.02. Acceleration and Remedies.  If an Event of Default occurs under Section 11.01(h) or (i), then the outstanding principal of and all accrued Interest on the Note shall automatically become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived.  If any other Event of Default occurs and is continuing, Purchaser may, by written notice to the Credit Parties, declare the principal of and accrued Interest on the Note to be immediately due and payable.  Upon any such declaration, such principal and Interest shall become immediately due and payable.  The Purchaser may rescind an acceleration and its consequences if all existing Events of Default have been cured or waived, except nonpayment of principal or Interest that has become due solely because of the acceleration, and if the rescission would not conflict with any judgment or decree.  Any notice or rescission shall be given in the manner specified in Section 12.02 hereof.  Upon the occurrence of an Event of Default, Purchaser shall have the right to exercise any and all rights and remedies provided for herein, under the Security Documents, under the Uniform Commercial Code and at law or equity generally, including the right to foreclose the security interests granted under the Security Documents and to realize upon any collateral by any available judicial procedure and/or to take possession of and sell any or all of the collateral with or without judicial process.

11.03. Application of Proceeds.  Notwithstanding any other provisions of this Agreement to the contrary, after the occurrence and during the continuance of an Event of Default, all amounts collected or received by the Purchaser on account of the Note or any other amounts outstanding under any of the Transaction Documents or in respect of the Collateral may, at Purchaser’s discretion be paid over or delivered as follows:

 

(a) FIRST, to the payment of all reasonable out-of-pocket costs and expenses (including reasonable attorneys’ fees) of the Purchaser in connection with enforcing its rights and the rights of the Purchaser under this Agreement and the other Transaction Documents;

 

(b) SECOND, to the payment of any fees owed to the Purchaser;

 

(c) THIRD, to the payment of all accrued fees and Interest which has not been included in the principal amount, in respect of the Note, this Agreement or the other Transaction Documents;

 

(d) FOURTH, to the payment of the principal amount of the Note;

 

(e) FIFTH, to all other obligations which shall have become due and payable under the Transaction Documents or otherwise and not repaid pursuant to clauses “FIRST” through “FOURTH” above; and

 

(f) SIXTH, the balance, if any, to whoever may be lawfully entitled to receive such surplus.

 

In carrying out the foregoing, amounts received shall be applied in the numerical order provided until exhausted prior to application to the next succeeding category.

12.01. Survival of Representations and Warranties.  All of the representations and warranties made herein shall survive the execution and delivery of this Agreement and any investigation by or on behalf of the Purchaser, acceptance of the Securities and payment therefor.

12.02. Notices.  All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be by registered or certified first class mail, return receipt requested, facsimile (with receipt confirmed), electronic transmission (i.e., e-mail), courier service or personal delivery:

All such notices and communications shall be deemed to be effective: (i) in the case of hand-delivery, when delivered; (ii) in the case of a facsimile transmission, when sent to the applicable party’s facsimile machine’s telephone number, if the party sending such notice or communication receives confirmation of the delivery thereof from its own facsimile machine; (iii) in the case of electronic transmission, when actually received; (iv) in the case of mail, five (5) Business Days after being deposited in the mail, postage prepaid; or (v) if given by any other means (including by overnight courier), when actually received.

12.03. Successors and Assigns. 

 

(a) This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties hereto.  Subject to applicable securities laws, and subject to the prior written consent of the Issuer (such consent not to be unreasonably withheld, conditioned or delayed), the Purchaser may assign any of its rights under any of the Transaction Documents, in whole or in part, to any Person, and any such purported assignment without such consent shall be void and of no effect; provided, however, that no such consent will be required (i) with respect to any transfer or assignment to any partner, member or Affiliate of the Purchaser, or (ii) upon or following the occurrence of any Default or Event of Default.  No Credit Party may assign any of their respective rights, or delegate any of its obligations, under this Agreement or any of the other Transaction Documents without the prior written consent of the Purchaser, and any such purported assignment by any Credit Party without the written consent of the Purchaser shall be void and of no effect.  Except as provided in Article 7, no Person other than the parties hereto and to the other Transaction Documents and their successors and permitted assigns is intended to be a beneficiary of any of such Transaction Documents.

 

(b) Notwithstanding any other provision of this Agreement or any other Transaction Document to the contrary, the Purchaser may at any time create a security interest in all or any portion of its rights under this Agreement, the Note or any other Transaction Document, and the Collateral.

 

12.04. Amendment and Waiver. 

 

(a) No failure or delay on the part of any of the parties hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy.  The remedies provided for in this Agreement are cumulative and are not exclusive of any remedies that may be available to the parties hereto at law, in equity or otherwise.

 

(b) Any Modification of this Agreement, the Note or the Security Documents, shall be effective as to the parties hereto (i) only if it is made or given in writing and signed by each Credit Party and the Purchaser, and (ii) only in the specific instance and for the specific purpose for which made or given.  No amendment, supplement or modification of or to any provision of this Agreement or any of the other Transaction Documents, or any waiver of any such provision or consent to any departure by any party from the terms of any such provision may be made orally.  Except where notice is specifically required by this Agreement, no notice to or demand on any party hereto in any case shall entitle such party to any other or further notice or demand in similar or other circumstances.

 

(c) Any Modification of the Warrant shall be effective as to Issuer and Purchaser (i) only if it is made or given in writing and signed by Issuer and Purchaser and the, and (ii) only in the specific instance and for the specific purpose for which made or given.

12.05. Confidentiality.

 

(a) Purchaser agrees to maintain the confidentiality of the Information (as defined below) in accordance with its customary procedures for handling confidential information, except that Information may be disclosed by Purchaser: (i) to its Affiliates and to its and its Affiliates’ respective partners, equity holders, directors, officers, employees, agents, advisors and other representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential in the same manner as provided herein); (ii) to the extent requested by any regulatory authority or self-regulatory authority purporting to have jurisdiction over it (including, without limitation, pursuant to the Small Business Investment Act of 1958, as amended, any other SBIC Regulations, or the Securities and Exchange Act of 1934, as amended, and rules and regulations promulgated thereunder); (iii) to the extent required by Applicable Law or by any subpoena or similar legal process (provided that (A) if Information is to be disclosed pursuant to this clause (iii), Purchaser will, to the extent practicable, promptly notify Issuer thereof and cooperate with Issuer, to the extent legally permissible, if Issuer should seek to obtain an order or other reliable assurance that confidential treatment will be accorded to designated portions of the Information, and (B) Purchaser shall be entitled to reimbursement from Issuer for all expenses incurred by it or any of its Affiliates, including the fees and expenses of counsel, in connection with any action taken pursuant to the proviso to this clause (iii)); (iv) to any other party hereto; (v) in connection with the exercise of any remedies hereunder or under any other Transaction Document or any action or proceeding relating to this Agreement or any other Transaction Document or the enforcement of rights hereunder or thereunder; (vi) subject to an agreement containing provisions substantially the same as those of this Section, to any assignee or transferee of, or any prospective assignee or transferee of, any of its rights or obligations under this Agreement; (vii) with the consent of the applicable Credit Party; or (viii) to the extent such Information (A) becomes publicly available other than as a result of a breach of this Section or (B) is disclosed to any Purchaser or any of their respective Affiliates by a third party not apparently acting at the direction of any Credit Party; provided such Person does not have knowledge, after reasonable inquiry, that such third party is prohibited from disclosing such information or has wrongfully obtained it.

 

(b) For purposes of this Section, “Information” means all information received from the Credit Parties or any of their respective Subsidiaries relating to such Person or any of their respective Subsidiaries or any of their respective businesses, other than any such information that is available to any Purchaser on a nonconfidential basis prior to disclosure by such Person.

 

12.06. Signatures; Counterparts.  Facsimile or electronic transmissions of any executed original document and/or retransmission of any executed facsimile or electronic transmission shall be deemed to be the same as the delivery of an executed original.  At the request of any party hereto, the other parties hereto shall confirm facsimile or electronic transmissions by executing duplicate original documents and delivering the same to the requesting party or parties.  This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

12.07. Headings.  The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

12.08. GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED IN ACCORDANCE WITH, AND ENFORCED UNDER, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS OR INSTRUMENTS ENTERED INTO AND PERFORMED ENTIRELY WITHIN SUCH STATE.

 

12.09. JURISDICTION; JURY TRIAL WAIVER.

 

(a) EACH PARTY HERETO HEREBY IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE SECURITIES OR ANY AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY SHALL BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, IN EACH CASE LOCATED IN THE COUNTY OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HERETO HEREBY EXPRESSLY SUBMITS TO THE PERSONAL JURISDICTION AND VENUE OF SUCH COURTS FOR THE PURPOSES THEREOF AND EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE AND ANY CLAIM THAT SUCH COURTS ARE AN INCONVENIENT FORUM.  EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS ADDRESS SET FORTH IN SECTION 12.02, SUCH SERVICE TO BECOME EFFECTIVE 10 DAYS AFTER SUCH MAILING.  NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY HERETO OR THE HOLDER OF THE NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY OTHER PARTY HERETO IN ANY OTHER JURISDICTION IN THE EVENT THAT A STATE OR FEDERAL COURT LOCATED IN THE COUNTY OF NEW YORK DECLINES JURISDICTION.

 

(b) EACH PARTY HERETO AND EACH OF ITS SUBSIDIARIES, HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE SECURITIES OR ANY OF THE OTHER TRANSACTION DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.  EACH PARTY HERETO AND EACH OF ITS SUBSIDIARIES (I) CERTIFIES THAT NEITHER THE OTHER PARTY HERETO NOR ITS REPRESENTATIVES OR ATTORNEYS HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (II) ACKNOWLEDGES THAT EACH PARTY HERETO HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, AND THE OTHER TRANSACTION DOCUMENTS TO WHICH IT IS PARTY BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.

 

12.10. Severability.  If any one or more of the provisions contained in this Agreement, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, unless the provisions held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions of this Agreement.  The parties hereto further agree to replace such invalid, illegal or unenforceable provisions of this Agreement with valid, legal and enforceable provisions that will achieve, to the extent possible, the economic, business and other purposes of such invalid, illegal or unenforceable provisions.

12.11. Entire Agreement.  This Agreement, together with the exhibits and schedules hereto and the other Transaction Documents, is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein.  There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein or therein.  This Agreement, together with the exhibits and schedules hereto, and the other Transaction Documents supersede all prior agreements and understandings between the parties with respect to such subject matter.

 

12.12. Certain Expenses.  The Credit Parties will pay all reasonable expenses of the Purchaser (including fees, charges and disbursements of counsel) in connection with (i) any amendment, supplement, modification or waiver of or to any provision of this Agreement or any of the other Transaction Documents or any documents relating thereto (including a response to a request by any Credit Party for the Purchaser’s consent to any action otherwise prohibited hereunder or thereunder), or consent to any departure from, the terms of any provision of this Agreement or such other documents, (ii) all efforts made to enforce payment of the Note, (iii) instituting, maintaining, preserving, enforcing and foreclosing on Purchaser’s security interest in or Lien on any of the Collateral, or maintaining, preserving or enforcing any of Purchaser’s or the Purchaser’s rights hereunder and under all related agreements, documents and instruments, whether through judicial proceedings or otherwise, (iv) defending or prosecuting any actions or proceedings arising out of or relating to the Purchaser’s transactions with any Credit Party (provided, however, that any expenses paid under this clause (iv) shall be refunded to the Credit Parties to the extent that it is finally judicially determined that the subject matter in question under such action or proceeding resulted primarily from (A) the willful misconduct or gross negligence of Purchaser or (B) the breach by Purchaser of any representation, warranty, covenant or other agreement contained in this Agreement or any other Transaction Document), or (v) any advice given to the Purchaser with respect to its rights and obligations under this Agreement and all related agreements, documents and instruments.  Such payment will be made by the Credit Parties against receipt of reasonably detailed invoices therefor.

 

12.13. Publicity.  Except as may be required by Applicable Law, none of the parties hereto shall issue a publicity release or announcement or otherwise make any public disclosure concerning this Agreement or the transactions contemplated hereby, without prior approval by the other parties hereto.  If any announcement is required by law to be made by any party hereto, prior to making such announcement such party will deliver a draft of such announcement to the other parties and shall give the other parties an opportunity to comment thereon.  Notwithstanding the foregoing, the Purchaser or any Affiliate of the Purchaser may (i) disclose a general description of transactions arising under the Transaction Documents for advertising, marketing or other similar purposes, and (ii) use any Credit Party’s name, logo or other indicia germane to such party in connection with such advertising, marketing or other similar purposes, and, in each case, may post such information on its website but, in each case, only after the Credit Parties have publicly disclosed the matter as may be required under Applicable Law.

12.14. Further Assurances.  Each of the parties shall execute such documents and perform such further acts (including obtaining any consents, exemptions, authorizations, or other actions by, or giving any notices to, or making any filings with, any Governmental Authority or any other Person) as may be reasonably required or desirable to carry out or to perform the provisions of this Agreement, including, subject to Section 12.03(a) hereof, any post-closing assignment(s) by the Purchaser of a portion of the Securities to a Person not currently a party hereto.

 

12.15. No Strict Construction.  The parties hereto have participated jointly in the negotiation and drafting of this Agreement and the other Transaction Documents.  In the event an ambiguity or question of intent or interpretation arises under any provision of this Agreement or any Transaction Document, this Agreement or such other Transaction Document shall be construed as if drafted jointly by the parties thereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement or any other Transaction Document.  No knowledge of, or investigation, including due diligence investigation, conducted by, or on behalf of, the Purchaser shall limit, modify or affect the representations set forth in Article 5 of this Agreement or the right of the Purchaser to rely thereon.

 

12.16. Joint and Several Liability.  All amounts funded by the Purchaser hereunder shall be deemed to be jointly funded to, or at the direction of, and received by, or at the direction of, the Credit Parties.  Each Credit Party jointly and severally agrees to pay, and shall be jointly and severally liable under this Agreement for, all obligations to the Purchaser regardless of the manner or amount in which proceeds are used, allocated, shared, or disbursed by or among the Credit Parties themselves.  Each Credit Party shall be liable for all amounts due to the Purchaser under this Agreement and the Note, regardless of which Credit Party actually receives such funds.

 

12.17. Transfer of the Note. 

 

(a) The term “Purchaser” as used herein shall include any transferee of the Note whose name has been recorded by the Issuer in the Note Register.  Each transferee of the Note acknowledges that the Note has not been registered under the Securities Act, and may be transferred only pursuant to an effective registration under the Securities Act or pursuant to an applicable exemption from the registration requirements of the Securities Act, and otherwise in accordance with Section 12.03(a) hereof.

 

(b) The Issuer shall maintain a register (the “Note Register”) in its principal offices for the purpose of registering the Note has and any transfer or partial transfer thereof, which register shall reflect and identify, at all times, the ownership of record of any interest in the Note has or any interest therein.  Upon the issuance of the Note, the Issuer shall record the name and address of the initial purchaser of the Note in the Note Register as the first Purchaser.  Upon surrender for registration of transfer or exchange of the Note at the principal offices of the Issuer, the Issuer shall, at its expense, execute and deliver one or more new Notes of like tenor and of denominations of at least $500,000 (except as may be necessary to reflect any principal amount not evenly divisible by $500,000) of a like aggregate principal amount, registered in the name of the Purchaser or a transferee or transferees.  Every Note surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by written instrument of transfer duly executed by the Purchaser of such Note or the Purchaser’s attorney duly authorized in writing.

(c) On receipt by the Issuer of an affidavit of an authorized representative of the Purchaser stating the circumstances of the loss, theft, destruction or mutilation of the Note (and in the case of any such mutilation, on surrender and cancellation of such Note), the Issuer, at its expense, will promptly execute and deliver, in lieu thereof, a new Note of like tenor.  If required by the Issuer, the Purchaser must provide indemnity sufficient in the reasonable judgment of the Issuer to protect the Issuer from any loss which they may suffer if a lost, stolen or destroyed Note is replaced.

13.01. Taxes.

 

(a) Any and all payments by or on account of any obligation of each Credit Party hereunder or under any other Transaction Document shall be made free and clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes, provided that if any Credit Party shall be required by Applicable Law to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions for Indemnified Taxes or Other Taxes (including deductions applicable to additional sums payable under this Section) Purchaser receives an amount equal to the sum it would have received had no such deductions for Indemnified Taxes or Other Taxes been made, (ii) such Credit Party shall make such deductions and (iii) such Credit Party shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with Applicable Law.

 

(b) Without limiting the provisions of paragraph (a) above, each Credit Party shall timely pay any (i) Other Taxes to the relevant Governmental Authority in accordance with Applicable Law and (ii) costs relating to the preparation and filing of any Tax Returns relating thereto.

 

(c) Each Credit Party shall jointly and severally indemnify the Purchaser, within thirty (30) days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Purchaser and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to such Credit Party, signed by an authorized person on behalf of Purchaser, shall be presumptive evidence of the matters set forth therein, absent manifest error.

(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by a Credit Party to a Governmental Authority, such Credit Party shall deliver to Purchaser the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Purchaser.

 

(e) A Foreign Purchaser that is entitled to an exemption from or reduction of withholding Tax under the law of the United States, or any treaty to which such jurisdiction is a party, with respect to payments by a Credit Party under this Agreement or under any other Transaction Document shall deliver to such Credit Party, at the time or times reasonably requested by Issuer two original Internal Revenue Service Form W-8 (e.g., W-8 BEN, W-8 ECI), as appropriate, or any successor or other form prescribed by the Internal Revenue Service, and related documentation certifying that such Foreign Purchaser is exempt from or entitled to a reduced rate of United States federal withholding tax on payments pursuant to this Agreement or any other Transaction Document.  In addition, the Purchaser, if requested by Issuer or the Purchaser, shall deliver such other documentation prescribed by Applicable Law or reasonably requested by Issuer or the Purchaser as will enable Issuer to determine whether or not the Purchaser is subject to backup withholding or information reporting requirements; provided, that the Issuer or the Purchaser, as applicable, agrees to maintain the confidentiality of any non-public information provided by the Purchaser in accordance with its customary procedures for handling confidential information and to not disclose such information except as required by Applicable Law, and provided, further, that should the Purchaser become subject to Indemnified Taxes because of its failure to deliver a form required hereunder, the Credit Parties shall take such steps as the Purchaser shall reasonably request to reasonably assist (consistent with its preexisting internal policies applied on a nondiscriminatory basis and legal and regulatory restrictions) the Purchaser to recover such Indemnified Taxes.

 

(f) The agreements in this Section shall survive the termination of this Agreement and payment of the Note and all other amounts payable hereunder, under the Note or under any other Transaction Document.

 

(g) No Purchaser shall be obligated to contest a Tax indemnified by a Credit Party under the Transaction Documents that is asserted in the name of the Purchaser nor will the Credit Parties be permitted to contest such a Tax, unless (i) in the judgment of the Purchaser, there is a reasonable basis for such contest and the contest and its resolution does not materially disadvantage the Purchaser, and (ii) the Credit Parties bear the expense of such contest.

 

(h) In the event that a Purchaser is entitled, on the effective date of any assignment and acceptance under this Agreement, to the benefits of a payment pursuant to subsection (a), (b) or (c) of this Section 13.01, the assignee of the Purchaser shall be entitled, without duplication, to the benefits of such payments (in addition to any future benefits of payment that may arise with respect to such assignee) that would have been available to the Purchaser had the Purchaser not entered into such assignment and acceptance with such assignee.

 

13.02. Certificates of Purchaser.  To the extent Purchaser claims reimbursement or compensation pursuant to this Article 13, Purchaser shall deliver to Issuer a certificate, signed by an authorized person on behalf of Purchaser, setting forth in reasonable detail the amount payable to the Purchaser hereunder and such certificate shall be presumptive evidence of the matters set forth therein, absent manifest error.

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