EXHIBIT 10.7.7
Execution Copy
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LOAN AND SECURITY AGREEMENT
By and among
SLM HOLDINGS, INC.
as Borrower;
SALES LEAD MANAGEMENT INC.
as Guarantor;
and
AEGIS NY VENTURE FUND, LP,
as Lender.
Dated as of April 10, 2006
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LOAN AND SECURITY AGREEMENT
LOAN AND SECURITY AGREEMENT (this "Agreement"), dated as of April
10, 2006, by and among SLM HOLDINGS, INC., a Delaware corporation (the
"Borrower"); SALES LEAD MANAGEMENT INC., a Delaware corporation (the
"Guarantor"); and AEGIS NY VENTURE FUND, LP, a New York limited partnership
("Aegis", together with each of its direct and indirect successors and assigns,
the "Lender").
WITNESSETH:
WHEREAS, the Borrower wishes to obtain a certain term loan;
WHEREAS, the Lender has conditioned its entering this Agreement on
Guarantor entering into this agreement and performing its obligations hereunder;
WHEREAS, upon the terms and subject to the conditions set forth
herein, the Lender is willing to make a term loan to the Borrower in the
aggregate principal amount of $500,000;
NOW, THEREFORE, for due and valuable consideration, the receipt and
sufficiency of with is hereby acknowledged, the Borrower, the Guarantor and the
Lender hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 GENERAL DEFINITIONS. As used herein, the following terms
shall have the meanings herein specified (to be equally applicable to both the
singular and plural forms of the terms defined):
"ACCOUNTS" means, with respect to each Grantor, all of such
Grantor's accounts and accounts receivable (including, without limitation, all
rights to payment for goods sold or leased or for services rendered which are
not evidenced by an instrument or chattel paper), deposit accounts, health-care
insurance receivables, instruments, documents, contracts, securities, credits,
documents, letter of credit rights, electronic or tangible chattel paper, notes,
bills, drafts, acceptances, commercial tort claims, choses in action and causes
of action (whether arising in contract, tort or otherwise and whether or not
currently in litigation) and all other debts, obligations and liabilities in
whatever form owing to such Grantor, documents of title, warehouse receipts,
leases, investment accounts, deposit accounts, cash, money, contract rights,
dividends, distributions, judgments, covenants, licenses, warranties,
indemnities, partnership and joint venture interests and other rights, including
all rights to the payment of money.
"AFFILIATE" means, as to any Person, any other Person who directly
or indirectly controls, is under common control with, is controlled by or is a
director or officer of such Person. As used in this definition, "control"
(including its correlative meanings, "controlled by" and "under common control
with") means possession, directly or indirectly, of the power to direct or cause
the direction of management or policies (whether through ownership of voting
securities or
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partnership or other ownership interests, by contract or otherwise), provided
that, in any event, any Person who owns directly or indirectly ten percent (10%)
or more of the securities having ordinary voting power for the election of the
members of the board of directors or other governing body of a corporation or
ten percent (10%) or more of the partnership or other ownership interests of any
other Person (other than as a limited partner of such other Person) will be
deemed to control such corporation, partnership or other Person.
"AGREEMENT" means this Loan and Security Agreement, as amended,
supplemented or otherwise modified from time to time.
"ASSETS" means those tangible and intangible assets, properties and
rights that, as of the date hereof, are owned or controlled by Borrower, any of
its Subsidiaries or any of its affiliates, are used by Borrower or one or more
entities controlled by Borrower in the operation and conduct of the Borrower
Business.
"AUDITORS" means a nationally or regionally recognized firm of
independent public accountants selected by the Borrower, and reasonably
satisfactory to the Lender, as the auditor of the Borrower and its Subsidiaries.
"▇▇▇▇▇▇▇ GUARANTY" means the guaranty to be entered into on the date
hereof by ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇ for the benefit of the Lender, substantially in the
form satisfactory to Lender, as the same may be amended or modified from time to
time.
"BORROWER" has the meaning specified in the introductory paragraph.
"BORROWER ASSETS" means those tangible and intangible assets,
properties and rights that, as of the date hereof, are owned or controlled by
Borrower or any of its Subsidiaries or are used by Borrower or one of its
Subsidiaries in the operations of the Borrower Business.
"BORROWER BUSINESS" has the meaning specified in Section 6.1(y).
"BORROWER BUSINESS DESCRIPTION" has the meaning assigned such term
in section 6.1(b)(b).
"BORROWER INTELLECTUAL PROPERTY" shall have the meaning assigned
such term in section 6.l(y).
"BUSINESS DAY" means any day other than a Saturday, a Sunday or any
other day on which commercial banks in New York, New York are required or
permitted by law to close.
"BUSINESS PLAN" means a business plan of Borrower, consisting of
projected balance sheets, related cash flow statements and related profit and
loss statements, and availability forecasts, together with appropriate
supporting details and a statement of the underlying assumptions (including
specific identification of employees and identification of related capital
expenditure requirements), which covers a five year period and which is prepared
on a monthly basis for the first two years.
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"CAPITAL EXPENDITURES" means all expenditures made and liabilities
incurred, that are, in accordance with GAAP, treated as capital expenditures.
"CAPITALIZED LEASE OBLIGATIONS" means any obligation to pay rent or
other amounts under any lease of (or other arrangement conveying the right to
use) real or personal property, or a combination thereof, which, under GAAP, is
or will be required to be accounted for as a capital lease and, for the purpose
of this Agreement, the amount of such obligations at any time shall be the
capitalized amount thereof at such time determined in accordance with GAAP.
"CASH EQUIVALENTS" means (i) securities issued, guaranteed or
insured by the United States or any of its agencies with maturities of hot more
than one year from the date acquired; (ii) certificates of deposit with
maturities of not more than one year from the date acquired, issued by (A) the
Lender or its Affiliates; (B) any U.S. federal or state chartered commercial
bank of recognized standing which has capital and unimpaired surplus in excess
of $250,000,000; or (C) any bank or its holding company that has a short-term
commercial paper rating of at least A-l or the equivalent by Standard & Poor's
Ratings Services or at least P-l or the equivalent by ▇▇▇▇▇'▇ Investors Service,
Inc.; (iii) repurchase agreements and reverse repurchase agreements with terms
of not more than thirty days from the date acquired, for securities of the type
described in clause (i) above and entered into only with commercial banks having
the qualifications described in clause (ii) above or such other financial
institutions with a short-term commercial paper rating of at least A-l or the
equivalent by Standard & Poor's Ratings Services or at least P-l or the
equivalent by ▇▇▇▇▇'▇ Investors Service, Inc.; (iv) commercial paper, other than
commercial paper issued by the Borrower or the Borrower's Affiliates, issued by
any Person incorporated under the laws of the United States or any state thereof
and rated at least A-l or the equivalent thereof by Standard & Poor's Ratings
Services or at least P-l or the equivalent thereof by ▇▇▇▇▇'▇ Investors Service,
Inc., in each case with maturities of not more than one year from the date
acquired; (v) investments in money market funds registered under the Investment
Company Act of 1940, which have net assets of at least $250,000,000 and at least
eighty-five percent (85%) of whose assets consist of securities and other
obligations of the type described in clauses (i) through (iv) above; and (vi)
other instruments, commercial paper or investments acceptable to the Lender in
its sole discretion.
"CHANGE OF CONTROL" means, with respect to any Person, (a) the
transfer (in one transaction or a series of transactions) of all or
substantially all of the assets of such Person to any other Person or group (as
such term is used in Section 13(d)(3) of the Exchange Act); (b) the liquidation
or dissolution of such Person or the adoption of a plan by the equity holders of
such Person relating to the dissolution or liquidation of such Person (except
pursuant to a merger, consolidation, or amalgamation permitted hereunder); (c)
the acquisition by any Person or group (as such term is used in Section 13(d)(3)
of the Exchange Act), of beneficial ownership, directly or indirectly, of fifty
(50%) percent or more of the voting power of the total outstanding voting stock
of such Person; or (d) during any period individuals who at the beginning of
such period constituted the Board of Directors (together with any new directors
or similar manager whose nomination for election by the stockholders of such
Person, was approved by a vote of at least a majority of the directors or
similar managers then still in office who were either directors or similar
managers at the beginning of such period or whose election or nomination for
election
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was previously so approved) cease for any reason to constitute a majority of the
Board of Directors then still in office.
"CLOSING DATE" means the date of execution and delivery of this
Agreement by all parties hereto.
"CODE" has the meaning specified in Section 1.3.
"COLLATERAL" means, any and all tangible and intangible assets of
each Grantor, including, without limitation, all Accounts, Receivables,
Equipment, Property, Inventory, General Intangibles and Investment Property of
each Grantor and all other collateral specified in this Agreement and in the
Security Documents.
"▇▇▇▇▇ GUARANTY" means the guaranty to be entered into on the date
hereof by Mr. ▇▇▇▇▇ ▇▇▇▇▇ for the benefit of the Lender, substantially in a form
satisfactory to Lender, as the same may be amended or modified from time to
time.
"COLLATERAL ACCESS AGREEMENT (S)" means an agreement by and among
the Lender, the Borrower, and any lessor of premises to each Grantor, or any
other person to whom any Collateral (including Inventory, Equipment, bills of
lading or other documents of title) is consigned or who has custody, control or
possession of any Collateral or is otherwise the owner or operator of any
premises on which any of such Collateral is located, in a form satisfactory to
Lender, as amended, supplemented or otherwise modified from time to time.
"CONTROL AGREEMENT(S)" means a control agreement by and among the
Lender, each Grantor and the applicable securities intermediary with respect to
a Securities Account(s) and related Investment Property of such Grantor, in such
form as is reasonably satisfactory to the Lender, as amended, supplemented or
otherwise modified from time to time.
"DEFAULT" means any of the events specified in Section 9.1, whether
or not any of the requirements for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"DEFAULT INTEREST" has the meaning specified in Section 4.2.
"DEPOSIT ACCOUNT CONTROL AGREEMENT(S)" shall mean an agreement or
agreements by and among the Lender, each Grantor and any bank at which any
deposit account of a Grantor is at any time maintained, in form, scope and
substance satisfactory to Lender.
"DOLLARS" and the sign "$" means freely transferable lawful currency
of the United States.
"EBITDA" for any given period means, with respect to any Person, the
earnings of such Person for such period before interest expense, taxes,
depreciation and amortization expense.
"ENVIRONMENTAL LAWS" means any federal, state or local law, statute,
regulation requirement or ordinance, and any judicial or administrative order or
judgment thereunder,
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pertaining to health, safety or the environment, including, without limitation,
the following as to date or hereafter amended: The Comprehensive Environmental
Response, Compensation and Liability Act; the Resource Conservation and Recovery
Act; the Toxic Substances Control Act; the Federal Water Pollution Control Act
(also known as the Clean Water Act); the Clean Air Act; and the Hazardous
Materials Transportation Act; the Solid Waste Disposal Act; the Safe Drinking
Water Act; the Occupational Safety and Health Act; the Emergency Planning and
Community Right-To-Know Act; the Federal Insecticide, Fungicide and Rodenticide
Act; the National Environmental Policy Act; and the Rivers and Harbors
Appropriation Act.
"EQUIPMENT" means all now owned and hereafter acquired machinery,
equipment, furniture, fixtures, leasehold improvements, conveyors, tools,
materials, storage and handling equipment, hydraulic presses, cutting equipment,
computer equipment, data processing equipment, software (including embedded
software) and hardware, including central processing units, terminals, drives,
memory units, embedded computer programs and supporting information, printers,
keyboards, screens, peripherals and input or output devices, molds, dies,
stamps, and other equipment of every kind and nature and wherever situated now
or hereafter owned by a Person or in which a Person may have any interest as
lessee or otherwise (to the extent of such interest), together with all
additions and accessions thereto, all replacements and all accessories and parts
therefor, all manuals, blueprints, warranties and records in connection
therewith and all rights against suppliers, warrantors, manufacturers, and
sellers or others in connection therewith, together with all substitutes for any
of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974,
29 U.S.C. 1000 et seq., amendments thereto, successor statutes, and regulations
or guidelines promulgated thereunder.
"EVENT OF DEFAULT" means the occurrence of any of the events
specified in Section 9.1.
"FINANCIAL DATA" has the meaning specified in Section 6.1(i).
"FINANCIAL STATEMENTS" means, with respect to any Person the balance
sheets, profit and loss statements, statements of cash flow, and statements of
changes in intercompany accounts, if any, for the period specified, prepared in
accordance with GAAP on a consolidated basis and consistent with prior
practices.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time as set forth in the opinions
and pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board that are applicable to the circumstances as
of the date of determination, consistently applied.
"GENERAL INTANGIBLES" means, with respect to each Grantor, all of
such Grantor's patents and patent applications, trademarks and trademark
applications, service marks, trade names and the goodwill associated therewith,
technical knowledge and processes, blueprints, technical specifications,
copyrights, copyright applications, trade secrets, and all other general
intangibles, including, without limitation, customer lists, computer programs,
computer records
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and discs, computer data, software, intellectual property, tax refunds, tax
refund claims and all letters of credit, guarantees, claims, security interests
or other security held by or granted to a Grantor to secure payment due to such
Grantor, and all embodiments of any of the foregoing.
"GOVERNING DOCUMENTS" means, with respect to any Person, the
certificate of incorporation and bylaws or similar organizational documents of
such Person, as amended, supplemented or otherwise modified from time to time.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state
or other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions thereof or
pertaining thereto.
"GRANTOR" shall refer to herein to each of the Borrower and the
Subsidiary Guarantor.
"HAZARDOUS MATERIALS" means any pollutants, hazardous or toxic
materials, substances or wastes, including metals, petroleum and petroleum
products and derivatives; asbestos; radon; polychlorinated bi-phenyls;
urea-formaldehyde foam insulation; explosives; radioactive materials; laboratory
wastes and medical wastes; and any chemicals, materials or substances designated
or regulated as hazardous or as toxic substances, materials, or wastes, or in
any way otherwise regulated, under any Environmental Law.
"HEDGING AGREEMENT" means any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging agreement.
"INDEBTEDNESS" means, with respect to any Person, as of the date of
determination thereof (without duplication), (i) all obligations of such Person
for borrowed money of any kind or nature, including funded debt, and any Hedging
Agreements or arrangements therefor, regardless of whether the same is evidenced
by any note, debenture, bond or other instrument, (ii) all obligations of such
Person to pay the deferred purchase price of property or services which is
deferred for six months or more (other than trade accounts payable under normal
trade terms and which arise in the ordinary course of business), (iii) all
obligations of such Person to acquire, or for the acquisition or use of, any
fixed asset, including Capitalized Lease Obligations (other than, in any such
case, any portion thereof representing interest or deemed interest or payments
in respect of taxes, insurance, maintenance or service), (iv) all Indebtedness
of others secured by (or for which the holder of such Indebtedness has an
existing right to be secured by) a Lien on any asset of such Person whether or
not the Indebtedness is assumed by such Person, provided that for the purpose of
determining the amount of Indebtedness of the type described in this clause
(iv), if recourse with respect to such Indebtedness is limited to the assets of
such Person, then the amount of Indebtedness shall be limited to the fair market
value of such assets, (v) all guarantees of such Person of Indebtedness of
others and (vi) all obligations of such Person in respect of letters of credit,
bankers acceptances or similar instruments issued or accepted by banks or other
financial institutions for the account of such Person.
"INSOLVENCY EVENT" means, with respect to any Person, the occurrence
of any of the following: (i) such Person shall be adjudicated insolvent or
bankrupt or institutes proceedings
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to be adjudicated insolvent or bankrupt, or shall generally fail to pay or admit
in writing its inability to pay its debts as they become due, (ii) such Person
shall seek dissolution or reorganization or the appointment of a receiver,
trustee, custodian or liquidator for it or a substantial portion of its
property, assets or business or to effect a plan or other arrangement with its
creditors, (iii) such Person shall make a general assignment for the benefit of
its creditors, or consent to or acquiesce in the appointment of a receiver,
trustee, custodian or liquidator for a substantial portion of its property,
assets or business, (iv) such Person shall file a voluntary petition under any
bankruptcy, insolvency or similar law, (v) such Person shall take any corporate
or similar act in furtherance of any of the foregoing, or (vi) such Person, or a
substantial portion of its property, assets or business, shall become the
subject of an involuntary proceeding or petition for (A) its dissolution or
reorganization or (B) the appointment of a receiver, trustee, custodian or
liquidator, and (I) such proceeding is not dismissed or stayed within thirty
days or (II) such receiver, trustee, custodian or liquidator is appointed.
"INTELLECTUAL PROPERTY" means and includes patents, patent
applications and the right to file for patent applications (including but not
limited to continuations, continuations-in-part, divisionals and reissues),
trademarks, logos, service marks, trade names and service names (in each case
whether or not registered) and applications for and the right to file
applications for registration thereof, copyrights (whether or not registered)
and applications for and the right to file applications for registration
thereof, moral rights, mask works and mask work registrations and applications
for the right to file applications for registration thereof, trade secrets,
trade dress, publicity and privacy rights, and any other intellectual property
rights arising under the laws of the United States of America, any State
thereof, or any country or province.
"INTELLECTUAL PROPERTY SECURITY AGREEMENT" means the Intellectual
Property Security Agreement entered into by the Grantors in favor of the Lender,
in a form satisfactory to Lender, as amended, supplemented or otherwise modified
from time to time.
"INTEREST EXPENSE" means, for any period, all cash interest with
respect to Borrower's Indebtedness (including, without limitation, the interest
component of Capitalized Lease Obligations) accrued or capitalized during such
period (whether or not actually paid during such period) determined in
accordance with GAAP.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, any
amendments thereto, any successor statute and any regulations and guidelines
promulgated thereunder.
"INTERNAL REVENUE SERVICE" or "IRS" means the United States Internal
Revenue Service and any successor agency.
"INVENTORY" means, with respect to any Grantor, all present and
future goods of such Grantor intended for sale, lease or other disposition
including, without limitation, all raw materials, work in process, finished
goods and other inventory (including embedded software), goods in the possession
of outside processors or other third parties, goods held under a contract for
service, consigned goods (to the extent of the consignee's interest therein),
materials and supplies of any kind, nature or description which are or might be
used or consumed in business or used in connection with the manufacture,
packing, shipping, advertising, selling or finishing
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of any such goods, all documents of title or documents representing the same and
all records, files and writings with respect thereto.
"INVESTMENT" in any Person means, as of the date of determination
thereof, (i) any payment or contribution, or commitment to make a payment or
contribution, by a Person including, without limitation, property contributed or
committed to be contributed by such Person for or in connection with its
acquisition of any stock, bonds, notes, debentures, partnership or other
ownership interest or any other security of the Person in whom such Investment
is made or (ii) any loan, advance or other extension of credit by or guaranty of
or other surety obligation for any Indebtedness of the Person in whom the
Investment is made. In determining the aggregate amount of Investments
outstanding at any particular time, (i) a guaranty (or other surety obligation)
shall be valued at not less than the principal amount outstanding of the primary
obligation; (ii) returns of capital (but only by repurchase, redemption,
retirement, repayment, liquidating dividend or liquidating distribution) shall
be deducted; (iii) earnings, whether as dividends, interest or otherwise, shall
not be deducted; and (iv) decreases in the market value shall not be deducted
unless such decreases are computed in accordance with GAAP.
"INVESTMENT PROPERTY" means, with respect to a Grantor, all present
and future investment property of such Grantor, including without limitation,
all (i) securities, whether certificated or uncertificated, and including
stocks, bonds, debentures, notes, bills, certificates, warrants, options, rights
and shares, (ii) security entitlements, (iii) securities accounts, (iv)
commodity contracts, (v) commodity accounts and (vi) dividends and other
distributions in respect of any of the foregoing.
"KNOWLEDGE" means, with respect to any Person, the knowledge of any
Responsible Officer after due inquiry.
"LAW" means all applicable statutes, laws, treaties, ordinances,
rules, regulations, orders, writs, injunctions, decrees, judgments, and the
terms of any license or permit issued by any Governmental Authority.
"LENDER" has the meaning specified in the introductory paragraph
hereof.
"LENDER PAYMENT ACCOUNT" means the account of the Lender or any of
its Affiliates in the United States as the Lender may from time to time
designate in writing to the Borrower.
"LIABILITIES" of a Person as of the date of determination thereof
means the liabilities of such Person on such date as determined in accordance
with GAAP. Liabilities to Affiliates of such Person shall be treated as
Liabilities except where eliminated by consolidation in financial statements
prepared in accordance with GAAP or as otherwise provided herein.
"LIEN" means as applied to the property or assets (or the income or
profits therefrom) of any Person, in each case whether the same is consensual or
nonconsensual or arises by contract, operation of law, legal process or
otherwise: (a) any mortgage, lien, pledge, hypothecation, assignment, deposit
arrangement, preference priority or other security agreement of preferential
arrangement, attachment, charge, lease, conditional sale or other title
retention
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agreement, or other security interest or encumbrance of any kind; or (b) any
arrangement, express or implied, under which such property or assets are
transferred, sequestered or otherwise identified for the purpose of subjecting
or making available the same for the payment of debt or performance of any other
obligation in priority to the payment of the general, unsecured creditors of
such Person.
"LOAN DOCUMENTS" means this Agreement and all documents and
instruments to be delivered by the Borrower or any of its Affiliates under or in
connection with this Agreement, as each of the same may be amended, supplemented
or otherwise modified from time to time, including, without limitation, the
Note, the Intellectual Property Security Agreement, the ▇▇▇▇▇▇▇ Guaranty, the
▇▇▇▇▇ Guaranty, the Subsidiary Guaranty, the Collateral Access Agreement(s), the
Deposit Account Control Agreement(s), the Warrant Purchase Agreement and related
Warrants and any Control Agreements.
"LOAN" means the loan made by the Lender to the Borrower pursuant to
this Agreement on the Closing Date.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
business, operations, results of operations, assets, liabilities, prospects or
condition (financial or otherwise) of the Borrower and its Subsidiaries
considered as a whole, (ii) (A) the ability of any party to perform its
obligations under any of the Loan Documents or (B) the ability of the Lender to
enforce the Obligations or realize upon the Collateral or (iii) the value of the
Collateral or the amount that the Lender would be likely to receive (after
giving consideration to delays in payment and costs of enforcement) in the
liquidation of the Collateral.
"MATERIAL INDEBTEDNESS" means Indebtedness (excluding the Loan and
the Obligations arising out of the Loan Documents), or obligations in respect of
one or more Hedging Agreements, of the Borrower and any of its Subsidiaries in
an aggregate principal amount exceeding $10,000. For purposes of this
definition, the "principal amount" of the obligations of the Borrower and
Subsidiaries in respect of any Hedging Agreement at any time shall be the
maximum aggregate amount (giving effect to any netting agreements) that the
Borrower or any of its Subsidiaries would be required to pay if such Hedging
Agreement were terminated at such time.
"MATURITY DATE" means the second anniversary of the date hereof.
"NOTE" means a promissory note executed by the Borrower in favor of
the Lender, in a form satisfactory to Lender.
"OBLIGATIONS" means and includes all loans (including the Loan),
advances, debts, liabilities, obligations, covenants and duties owing by any
party to the Lender under the Loan documents of any kind or nature, present or
future, whether or not evidenced by any note, guaranty or other instrument,
which may arise under, out of, or in connection with, this Agreement, the Note,
the other Loan Documents or any other agreement executed in connection herewith
or therewith, whether or not for the payment of money, whether arising by reason
of an extension of credit, loan, guaranty, indemnification or in any other
manner, whether direct or indirect (including those acquired by assignment,
purchase, discount or otherwise), whether
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absolute or contingent, due or to become due, and however acquired. The term
includes, without limitation, all interest (including interest accruing on or
after an Insolvency Event, whether or not such interest constitutes an allowed
claim), charges, expenses, placement fees, reasonable attorneys' fees, and any
other sum properly chargeable to the Borrower, any Grantor or any guarantor
under this Agreement, the Note, the other Loan Documents or any other agreement
executed in connection herewith or therewith.
"PERMITTED LIENS" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced and be continuing (unless such enforcement, collection, levy or
foreclosure is being contested by the Borrower or any Grantor in good faith and
for which adequate reserves are being maintained in accordance with GAAP): (i)
Liens for taxes, assessments and other governmental charges or levies or the
claims or demands of landlords, carriers, warehousemen, mechanics, laborers,
materialmen and other like Persons arising by operation of law in the ordinary
course of business for sums which are not yet due and payable, (ii) deposits or
pledges (other than Liens on Receivables or Inventory of the Borrower) to secure
the payment of worker's compensation, unemployment insurance or other social
security benefits or obligations, public or statutory obligations, surety or
appeal bonds, bid or performance bonds, or other obligations of a like nature
incurred in the ordinary course of business or related to any proceedings to
which the Borrower or any Grantor is a party, (iii) pledges or deposits of money
securing bids, tenders, contracts (other than contracts for the payment of
money) or leases to which the Borrower or any Grantor is a party as lessee made
in the ordinary course of business, (iv) zoning restrictions, easements,
encroachments, licenses, restrictions or covenants on the use of any Property
which do not materially impair either the use of such Property in the operation
of the business of the Borrower or any grantor, as applicable, or the value of
such Property, (v) inchoate Liens arising under ERISA to secure current service
pension liabilities as they are incurred under the provisions of employee
benefit plans from time to time in effect, (vi) Liens for Capitalized Lease
Obligations in an amount aggregate amount not to exceed $10,000, and (vii)
rights of general application reserved to or vested in any Governmental
Authority to control or regulate any Property, or to use any Property in a
manner which does not materially impair the use of such Property for the
purposes for which it is held by the Borrower or any Grantor, as applicable.
"PERSON" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
joint stock company, association, corporation, institution, entity, party or
government (including any division, agency or department thereof) or any other
legal entity, whether acting in an individual, fiduciary or other capacity, and,
as applicable, the successors, heirs and assigns of each.
"PROPERTY" means any real property owned, leased or controlled by
the Borrower or any of its Subsidiaries.
"QUALIFICATION" or "QUALIFIED" means, with respect to any report of
independent public accountants covering Financial Statements, a material
qualification to such report.
"RECEIVABLES" means all present and future Accounts, contracts,
contract rights, instruments (including promissory notes), chattel paper
(including tangible and electronic chattel paper), documents, tax refunds,
rights to receive tax refunds, bonds, certificates, insurance
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policies (including, without limitation, claims under health care insurance
policies), insurance proceeds, patents, patent applications, copyrights
(registered and unregistered), royalties, licenses, permits, franchise rights,
authorizations, customer and supplier lists, rights of indemnification,
contribution and subrogation, leases, computer tapes, programs, discs and
software, trade secrets, computer service contracts, trademarks (including any
goodwill associated with any trademark or the license of any trademark), trade
names, service marks, service names, domain names, logos, goodwill, deposits,
causes of action (including, without limitation, commercial tort claims), choses
in action, judgments, designs, blueprints, plans, know-how, all other general
intangibles, claims against third parties of every kind or nature, drafts,
acceptances, letters of credit, letter-of-credit rights, rights to receive
payments under letters of credit, book accounts, deposit and other accounts and
all money, balances, credits, deposits or other financial assets therein or
represented thereby, commercial tort claims, health care insurance receivables,
supporting obligations, credits and reserves and all forms of obligations
whatsoever owing, instruments, documents of title, leasehold rights in any
goods, and books, ledgers, files and records with respect to any collateral or
security, domain names, domain name registrations, software, together with all
supporting obligations and all right, title, security and guaranties with
respect to any of the foregoing, including any right of stoppage in transit.
"REQUIREMENT OF LAW" means, with respect to any Person, (i) the
Governing Documents, (ii) any law, treaty, rule, regulation, order or
determination of an arbitrator, court or other Governmental Authority or (iii)
any franchise, license, lease, permit, certificate, authorization,
qualification, easement, right of way, or other right or approval of a
Governmental Authority binding on such Person or any of its property.
"RESPONSIBLE OFFICER" means, with respect to any entity, the Chief
Executive Officer, Chief Operating Officer or the Chief Financial Officer of
such entity.
"SECURITIES ACCOUNT" has the meaning specified in Section 8-501 of
the Code.
"SECURITY DOCUMENTS" means this Agreement, the Deposit Account
Control Agreement(s), the Collateral access agreement(s), the Intellectual
Property Security Agreement, the Intellectual Property Security Agreement, any
Control Agreements and any other agreement delivered in connection herewith
which purports to ▇▇▇▇▇ ▇ ▇▇▇▇ in favor of the Lender to secure all or any of
the Obligations.
"SOLVENT" means, when used with respect to any Person, that as of
the date as to which such Person's solvency is to be measured:
(i) the fair salable value of the assets of the Person exceeds
and will, immediately following the making of the Loan, exceed the
amount that will be required to be paid on or in respect of the
existing debts and other liabilities (including contingent
liabilities) of the Person as they mature,
(ii) the assets of the Person do not and, immediately
following the making of the Loan, will not constitute unreasonably
small capital to carry out its business as conducted or as proposed
to be conducted, and
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(iii) the Person does not intent to, and does not believe that
the Person will, incur debts beyond its ability to pay such debts as
they mature (taking into account the timing and amounts of cash to
be received by the Person and the amounts to be payable or in
respect of obligations of the Person.
"SUBSIDIARY" means, as to any Person, a corporation or other entity
in which that Person directly or indirectly owns or controls the shares of stock
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other governing body, or to appoint the majority of
the managers of, such corporation or other entity.
"SUBSIDIARY GUARANTY" means the guaranty to be entered into on the
date hereof by the Subsidiary Guarantor, for the benefit of the Lender, in a
form satisfactory to Lender, as the same may be amended or modified from time to
time.
"SUBSIDIARY GUARANTOR" means, Sales Lead Management Inc., a Delaware
corporation and the sole Subsidiary of the Borrower.
"TANGIBLE NET WORTH" means at any date of determination, an amount
equal to (i) the total assets determined in accordance with GAAP, on a basis
consistent with the latest audited financial statements of the Company but
excluding such other assets as are properly classified as intangible assets
under GAAP, minus (ii) the total liabilities determined in accordance with GAAP,
on a basis consistent with the latest audited financial statements of the
Borrower.
"TAXES" means, for any Person, taxes, assessments or other
governmental charges or levies imposed upon that Person, its income, or any of
its properties, franchises or assets.
"WARRANT" means a warrant issued by the Borrower to the Lender, in a
form satisfactory to Lender.
"WARRANT PURCHASE AGREEMENT" means the Warrant Purchase Agreements
entered into in connection with this Agreement, between the Borrower and the
Lender, in a form satisfactory to Lender, as the same may be amended or
supplemented from time to time.
"WARRANT SHARES" shall have the meaning assigned such term in the
Warrant Agreement.
SECTION 1.2 ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
defined or specified herein, all accounting terms used in this Agreement shall
be construed in accordance with GAAP, applied on a basis consistent in all
material respects with the Financial Data delivered to the Lender on or before
the Closing Date. All accounting determinations for purposes of determining
compliance with Article VIII shall be made in accordance with GAAP as in effect
on the Closing Date and applied on a basis consistent in all material respects
with the Financial Data delivered to the Lender on or before the Closing Date.
The Financial Statements required to be delivered hereunder from and after the
Closing Date, and all financial records, shall be maintained in accordance with
GAAP.
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SECTION 1.3 OTHER TERMS; HEADINGS. Unless otherwise defined herein,
terms used herein that are defined in the Uniform Commercial Code, from time to
time in effect in the State of New York (the "Code"), shall have the meanings
given in the Code. An Event of Default that arises shall "continue" or be
"continuing" unless and until such Event of Default has been waived or cured
within any grace period specified therefor under Section 9.1. The headings and
the Table of Contents are for convenience only and shall not affect the meaning
or construction of any provision of this Agreement. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include", "includes" and "including" shall be deemed to
be followed by the phrase "without limitation". The word "will" shall be
construed to have the same meaning and effect as the word "shall". Unless the
context requires otherwise (i) any definition of or reference to any agreement,
instrument or other document herein or in any other Loan Document shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein
or in any other Loan Document), (ii) any reference herein to any Person shall be
construed to include such Person's successors and assigns, (iii) the words
"herein", "hereof" and "hereunder", and words of similar import, shall be
construed to refer to this Agreement in its entirety and not to any particular
provision hereof, (iv) 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 and (v) the words "asset" and "property" shall
be construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.
ARTICLE II
THE LOAN
SECTION 2.1 THE LOAN.
(a) From and after the Closing Date the Lender agrees, subject to
the terms and conditions of this Agreement, to make a Loan to the Borrower in
the aggregate principal amount of $500,000.00.
(b) Upon satisfaction of all applicable conditions precedent to
lending specified in Article V hereof, Lender will fund 100% of the proceeds of
the Loan into the Control Account (as such term is defined in the Deposit
Account Control Agreement), which funds shall be released from the Control
Account to an other Deposit Account (as such term is defined in the Deposit
Account Control Agreement) in accordance with the following provisions.
(i) at such time after the Closing Date as Borrower shall
deliver to Lender an Officer's Certificate executed by a Responsible
Officer certifying the (i) no Default or Event of Default has
occurred and is continuing and (ii) that Borrower shall have raised
a minimum of $50,000 from unrelated third parties in the form of
common equity or unsecured subordinated convertible debt with a
maturity of at least 2 years (or a combination thereof) with a
purchase or conversion price into common equity of at least $0.40
per share, along with
13
evidence of the foregoing reasonably satisfactory to Lender, Lender
will authorize the transfer of 40% of the proceeds of the Loan, plus
an amount equal $17,500.00, to be utilized to pay legal and due
diligence expenses related to the Loan and specified in Sections 4.5
and 5.1(c) hereof, from the Control Account to an other Deposit
Account;
(ii) at such time as Borrower shall deliver to Lender an
Officer's Certificate, executed by a Responsible Officer, certifying
that (i) no Default or Event of Default has occurred and is
continuing, (ii) that Borrower has raised an additional $125,000
(for a total of $175,000) from unrelated third parties in the form
of common equity or unsecured subordinated convertible debt with a
maturity of at least 2 years (or a combination thereof) with a
purchase or conversion price into common equity of at least $0.40
per share and (iii) that Borrower has received payments and provided
services for 1 full calendar month to at least 300 subscribers of
the Borrower's TBeV service (at an average cost of at least $300 per
subscriber per month), along with evidence reasonably satisfactory
to the Lender with respect to the foregoing, Lender will authorize
the transfer of an additional 40% of the proceeds of the Loan from
the Control Account to an other Deposit Account;
(iii) at such time as Borrower shall deliver to Lender an
Officer's Certificate, executed by a Responsible Officer, certifying
that (i) no Default or Event of Default has occurred and is
continuing, (ii) that Borrower raised an additional $125,000 (for a
total of $300,000) from unrelated third parties in the form of
common equity or unsecured convertible subordinated debt with a
maturity of at least 2 years (or a combination thereof) with a
purchase or conversion price into common equity of at least $0.40
per share and (iii) that Borrower has received payments and provided
services for 1 full calendar month to at least 400 subscribers of
the Borrower's TBeV service (at an average cost of at least $300 per
subscriber per month), along with evidence reasonably satisfactory
to Lender with respect to the foregoing, Lender will authorize the
release of the remaining funds on deposit in the Control Account to
an other Deposit Account; and
(iv) any amounts on deposit in the Primary Control Account on
the Maturity Date, shall be released to Lender and applied toward
the payment of the Obligations.
When used in this Agreement, reference to the requirement for an average
price per subscriber of $300 per month is meant to scale (so that as long as the
seat sales produce the same total revenue that $300 per month times the stated
number of seats for the applicable hurdle would produce, the hurdle is satisfied
(i.e., for the hurdle in clause (iii) of the immediately preceding sentence, the
Borrower can satisfy this hurdle with $120,000 in monthly revenue even if the
average sale per subscriber turns out to be less than $300)).
(c) The Loan shall be evidenced by the Note payable to the order of
the Lender and delivered to the Lender at the Closing.
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SECTION 2.2 ISSUANCE OF WARRANTS. On the Closing Date, in connection
with the Loan, the Borrower has authorized and effected the issuance, sale and
delivery to the Lender a Warrant issued to Lender, equal to six and one half
percent (6.50%) of the fully diluted portion of the issued and outstanding
shares of common stock of the Borrower, on a fully diluted basis, including,
without limitation, after giving effect to the issuance of the Warrant and the
related Warrant Shares, at a total exercise price of $390,000 (representing an
implied pre-money valuation of $6,000,000.
SECTION 2.3 NOTE AND PAYMENTS GENERALLY.
(a) Except as otherwise required by applicable Law, each payment by
the Borrower on account of Obligations hereunder shall be made to the Lender.
All payments to be made by the Borrower hereunder shall be made without setoff,
deduction or counterclaim and shall be made prior to 2:00 P.M. (New York, New
York time) on the due date thereof to the Lender (except as expressly otherwise
provided), at the Lender's Payment Account in immediately available funds.
(b) Whenever any payment to be made hereunder shall be stated to be
due on a day that is not a Business Day, the payment may be made on the next
succeeding Business Day and such extension of time shall be included in the
computation of the amount of interest due hereunder.
SECTION 2.4 LOAN PAYMENTS. Interest is due and payable in arrears on
the last Business Day of the current month of the date hereof, and thereafter on
each subsequent monthly anniversary, through and including the Maturity Date.
All outstanding principal and all accrued and unpaid interest on the Loan is due
and payable on the Maturity Date.
SECTION 2.5 APPLICATION OF PROCEEDS. (a) All proceeds of the Loan,
including any interest on the Loan received by the Borrower, shall be used
solely in accordance with this Agreement and to support the Borrower's principal
business operations in New York, other than for advertising, promotion, and
sales operations, which may be conducted outside of the State of New York. In no
event shall the Borrower (i) use any portion of the proceeds of the Loan in
violation of the preceding sentence or for the purpose of purchasing or carrying
any "margin stock" (as defined in Regulation U of the Federal Reserve Board) in
any manner which violates the provisions of Regulation T, U or X of the Federal
Reserve Board or for any other purpose in violation of any applicable statute or
regulation, or of the terms and conditions of this Agreement, or (ii) take, or
permit any Person acting on its behalf to take, any action which could
reasonably be expected to cause this Agreement or any document or instrument
delivered pursuant hereto to violate any regulation of the Federal Reserve
Board.
(b) Without limiting the foregoing, the proceeds of the Loan shall
be used solely to fund research and development costs for enhancing software and
web-enabled systems, expansion of sales force and costs of additional associated
administrative personnel, and payment of suppliers for goods and services
ordered after the Closing Date.
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(c) The proceeds of the Loan shall not be used to repay any existing
debt or payables owed to Borrower's, or any of Borrower's Subsidiary's,
respective stockholders, employees, Subsidiaries or Affiliates.
SECTION 2.6 TERM. The term of this Agreement shall be for a period
from the Closing Date to but not including the Maturity Date, unless sooner
terminated in accordance with the terms of this Agreement. Notwithstanding the
foregoing, the Borrower shall have no right to terminate this Agreement at any
time that any principal of or interest on any of the Loan is outstanding, except
upon prepayment of all Obligations and the satisfaction of all other conditions
set forth in the Loan Documents with respect thereto.
SECTION 2.7 PERMITTED PREPAYMENT. Notwithstanding anything in this
Agreement to the contrary, the Borrower may voluntarily prepay all or any
portion of the Loan from time to time, as set out below:
(a) Lenders must receive the Borrower's written or telephonic
prepayment notice by 10:00 a.m. on the third Business Day before the prepayment
date, specifying the amount to be prepaid and the prepayment date; and
(b) all accrued and unpaid interest on the Loan must be paid in full
on the prepayment date.
SECTION 2.8 MANDATORY PREPAYMENT. Notwithstanding anything in this
Agreement to the contrary, the Borrower and its Subsidiaries shall apply 100% of
the proceeds of any borrowings or equity sales to prepay the outstanding
principal balance of the Loan; PROVIDED, HOWEVER, that Borrower may first use up
to $150,000 of the proceeds of borrowings or equity sales to repay the existing
$300,000 loan it has outstanding on the date hereof to [ ] (and net income,
if any computed on a quarterly basis, may also be used to repay such $300,000
loan) prior to prepaying Lender. In addition, Borrower may also use up to an
additional $150,000 of the proceeds of borrowings or equity sales to fund its
operations, so long as it is meeting or exceeding its monthly projections as
indicated in a budget provided to, and approved by, Lender pursuant to the terms
of this Agreement.
ARTICLE III
SECURITY
(a) GENERAL. To secure the prompt and complete payment and
performance when due (whether at stated maturity, by acceleration or otherwise)
of all of the Obligations, each Grantor hereby grants to the Lender, a Lien on
and security interest in, all of its right, title and interest in, to and under
all of its assets, wherever located, whether now owned or hereafter acquired,
including, without limitation, all of the Accounts, General Intangibles,
Receivables, Equipment, Property, Inventory and Investment Property of each
Grantor, wherever located, whether now owned or hereafter acquired, and all
additions and accessions thereto and substitutions and replacements therefor and
improvements thereon, and all proceeds (whether in
16
the form of cash or other property) and products thereof including, without
limitation, all proceeds of insurance covering the same.
This Agreement shall constitute a security agreement for purposes of the Code.
SECTION 3.2 FURTHER SECURITY. Each Grantor also grants to the
Lender, as further security for all of the Obligations, a security interest in
all of its right, title and interest in and to all property of such Grantor in
the possession of or deposited with or in the custody of the Lender or any
Affiliate of the Lender or any representative, agent or correspondent of the
Lender and in all present and future deposit accounts as that term is defined in
the Code. For purposes of this Agreement, any property in which the Lender or
any such Affiliate has any security or title retention interest shall be deemed
to be in the custody of the Lender or of such Affiliate.
SECTION 3.3 RECOURSE TO SECURITY. Recourse to security shall not be
required for any Obligation hereunder and the Borrower hereby waives any
requirement that the Lender exhaust any right or take any action against any of
the Collateral before proceeding to enforce the Obligations against the
Borrower.
SECTION 3.4 SPECIAL PROVISIONS RELATING TO INVENTORY.
(a) ALL INVENTORY. The security interest in the Inventory granted to
the Lender hereunder shall continue through all steps of manufacture and sale
and attach without further act to raw materials, work in process, finished
goods, returned goods, documents of title and warehouse receipts, and to
proceeds resulting from the sale or other disposition of such Inventory. Until
all of the Obligations have been satisfied, the Lender's security interest in
such Inventory and in all proceeds thereof shall continue in full force and
effect and the Lender shall have, in its sole and absolute discretion at any
time if a Default has occurred and is continuing or the Lender in good faith
believes that fraud has occurred with respect to the entering into this
Agreement by Borrower, the right to take physical possession of such Inventory
and to maintain it on the premises of the Borrower, in a public warehouse, or at
such other place as the Lender may deem appropriate. Each Grantor represents and
warrants that none of the Inventory or other Collateral constitutes farm
products or the proceeds thereof.
(b) NO LIENS. Each Grantor represents and warrants that all of its
Inventory is, and will be, owned by it free and clear of all Liens, other than
Permitted Liens and Liens in favor of the Lender.
(c) FURTHER ASSURANCES. Each Grantor will perform any and all steps
that the Lender may reasonably request to perfect the Lender's security
interests in Borrower's Inventory including, without limitation, placing and
maintaining signs, executing and filing financing or continuation statements in
form and substance reasonably satisfactory to the Lender, maintaining stock
records and conducting lien searches. In each case, each Grantor shall take such
action as promptly as possible after requested by the Lender but in any event
within ten Business Days after any such request is made except that Borrower
shall take such action immediately upon the Lender's request following the
occurrence of a Default. Each Grantor shall produce, use, store and maintain the
Inventory in accordance with applicable standards of any insurance and in
conformity with applicable laws (including the requirements of the Federal Fair
Labor Standards
17
Act of 1938, as amended and all rules, regulations and orders related thereto).
Each Grantor assumes all responsibility and liability arising from or relating
to the production, use, sale or other disposition of the Inventory. If so
requested by the Lender in good faith, each Grantor (as promptly as possible
after requested by the Lender but in any event within ten (10) Business Days
after any such request is made) will deliver (i) to the Lender warehouse
receipts covering any of such Grantor's Inventory located in warehouses showing
the Lender as the beneficiary thereof and (ii) to the warehouseman such
agreements relating to the release of warehouse Inventory as the Lender may
reasonably request. If so requested by the Lender, each Grantor shall also
submit to the Lender a copy of the annual physical Inventory of such Grantor as
observed and tested by its public accountants in accordance with generally
accepted auditing standards and GAAP. If so requested by the Lender, each
Grantor shall execute and deliver to the Lender a confirmatory written
instrument, in form and substance reasonably satisfactory to the Lender, listing
its entire Inventory, but any failure to execute or deliver the same shall not
limit or otherwise affect the Lender's security interest in and to such
Inventory. Upon request by the Lender, each Grantor shall deliver a monthly
report of its Inventory, based upon its perpetual inventory, which shall
describe such Inventory by category, item (in reasonable detail) and location
and report the then appraised value (at the lower of cost or market) of such
Inventory and its location. Upon the Lender's request after the occurrence of a
Default, the Borrower shall, at its expense deliver or cause to be delivered to
Lender written appraisals as to the Inventory in form, scope and methodology
acceptable to the Lender and by an appraiser acceptable to Lender, addressed to
Lender and upon which the Lender is expressly permitted to rely. Each Grantor
shall produce, use, store and maintain the Inventory in accordance with
applicable standards of any insurance and in conformity with applicable laws
(including the requirements of the Federal Fair Labor Standards Act of 1938, as
amended and all rules, regulations and orders related thereto). Each Grantor
assumes all responsibility and liability arising from or relating to the
production, use, sale or other disposition of the Inventory. Except for in the
ordinary course of business, each Grantor shall not sell Inventory to any
customer on approval or any other basis which entitles the customer to return or
may obligate such Grantor to repurchase such Inventory. Except for in the
ordinary course of business, each Grantor shall not, without prior written
notice to the Lender, acquire or accept any Inventory on consignment or
approval.
(d) INVENTORY RECORDS. Each Grantor shall maintain full, accurate
and complete records of its Inventory.
SECTION 3.5 SPECIAL PROVISIONS RELATING TO RECEIVABLES.
(a) RECORDS, COLLECTIONS, ETC. Each Grantor shall report all
customer credits, all returns and recoveries of merchandise and of all claims
asserted with respect to merchandise, in each case with an aggregate value in
excess of $10,000 to the Lender. Such report shall include a general description
of each such return, repossession or recovery of merchandise and a description
of such merchandise. Each Grantor shall not settle or adjust any such dispute or
claim, or grant any discount (except ordinary trade discounts), credit or
allowance or accept any return of merchandise in connection with any such
dispute or claim, except in the ordinary course of its business, without the
Lender's consent. Upon the occurrence and during the continuance of a Default,
the Lender may (i) settle or adjust disputes or claims directly with account
debtors for amounts and upon terms which it considers advisable and (ii) notify
account
18
debtors on Receivables that such Receivables have been assigned to the Lender,
and that payments in respect thereof shall be made directly to the Lender.
(b) RECEIVABLES COVENANTS. Each Grantor shall notify the Lender
promptly of any material delay in such Grantor's performance of any of its
obligations to any account debtor or the assertion of any material claims,
offsets, defenses or counterclaims by any account debtor or any material
disputes with account debtors or any settlement, adjustment or compromise
thereof, all material adverse information relating to the financial condition of
any account debtor and any event or circumstance that, to such Grantor's
knowledge, could be reasonably expected to result in a Default or a Material
Adverse Effect. With respect to each Account of each Grantor: (i) the amounts
shown on any invoice delivered to Lender or schedule thereof delivered to the
Lender shall be true and complete in all material respects, (ii) none of the
transactions giving rise thereto will materially violate any applicable foreign,
Federal, State or local laws or regulations, and (iii) all documentation
relating thereto will be legally sufficient under such laws and regulations and
all such documentation will be legally enforceable in accordance with its terms.
If the Lender, in its discretion, determines that a Default is reasonably
expected to occur or upon the occurrence of a Default, the Lender shall have the
right at any time or times, in the Lender's name or in the name of a nominee of
Lender, to verify the validity, amount or any other matter relating to any
Account or other Collateral, by mail, telephone, facsimile transmission or
otherwise.
SECTION 3.6 SPECIAL PROVISIONS RELATING TO EQUIPMENT AND PROPERTY.
(a) LOCATION. Each item of Equipment of each Grantor, now owned or
hereafter acquired, will be kept at the location therefor shown on Schedule 3.6
and may not be moved without the prior written consent of the Lender, except to
the extent necessary to have any Equipment repaired or maintained in the
ordinary course of business. Each Grantor shall at all times hereafter keep
correct and accurate records itemizing and describing the location, kind, type,
age and condition of its Equipment, its cost therefor and accumulated
depreciation thereof, and retirements, sales, or other dispositions thereof, all
of which records shall be available during usual business hours, to any of the
officers, employees or agents of the Lender.
(b) REPAIR. Each Grantor shall keep all of its Equipment in a
satisfactory state of repair and satisfactory operating condition in accordance
with industry standards, ordinary wear and tear excepted, and will, consistent
with the exercise of its reasonable business judgment, make all repairs and
replacements when and where necessary and practical and in a manner sufficient
to continue the operation of its business as heretofore conducted. Each Grantor
will use or cause its Equipment to be used in accordance in all material
respects with law and the manufacturer's instructions.
(c) DISPOSAL. Where any Grantor is permitted to dispose of any of
its Equipment under this Agreement or by any consent thereto hereafter given by
the Lender, such Grantor shall do so at arm's length, in good faith and by
obtaining the maximum amount of recovery practicable therefor and without
impairing the operating integrity or value of its remaining Equipment.
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(d) EQUIPMENT AND PROPERTY COVENANTS. With respect to the Equipment
and Property: (i) upon the occurrence of a Default at any time or times as the
Lender may request, deliver or cause to be delivered to Lender written
appraisals as to such Equipment and/or such Property in form, scope and
methodology reasonably acceptable to the Lender and by an appraiser reasonably
acceptable to the Lender, addressed to the Lender and upon which the Lender is
expressly permitted to rely; (ii) the Equipment is and shall be used in the
applicable Grantor's business and not for personal, family, household or farming
use; and (iii) the applicable Grantor assumes all responsibility and liability
arising from the use of the Equipment and Property.
SECTION 3.7 CONTINUATION OF LIENS, ETC. Each Grantor shall
defend the Collateral against all claims and demands of all Persons at any time
claiming any interest therein, other than claims relating to Liens permitted by
the Loan Documents. Each Grantor agrees to comply with the requirements of all
state and federal laws to grant to the Lender valid and perfected first priority
security interests in the Collateral and shall, upon request of the Lender,
obtain, execute and deliver, any and all documents that the Lender shall
reasonably be required under applicable to perfect and maintain a first priority
security interest in the Collateral, including, without limitation, obtaining
executing and delivering one or more deposit account control agreements or
control agreements from any depository bank or securities intermediary in
possession of any of the Grantors' deposit accounts or Investment Property. The
Lender is hereby authorized by each Grantor to sign such Grantor's name on any
document or instrument as may be necessary or desirable to establish and
maintain the Liens covering the Collateral and the priority and continued
perfection thereof or to file any financing or continuation statements or
similar documents or instruments covering the Collateral whether or not such
Grantor's signature appears thereon. Each Grantor agrees, from time to time, at
the Lender's reasonable request, to file notices of Liens, financing statements,
similar documents or instruments, and amendments, renewals and continuations
thereof, and cooperate with the Lender's representatives, in connection with the
continued perfection (and the priority status thereof) and protection of the
Collateral and the Lender's Liens thereon. Each Grantor agrees that the Lender
may file a carbon, photographic or other reproduction of this Agreement (or any
financing statement related hereto) as a financing statement.
SECTION 3.8 POWER OF ATTORNEY. In addition to all of the powers
granted to the Lender hereunder, each Grantor hereby irrevocably designates and
appoints the Lender (and all persons designated by the Lender) as such Grantor's
true and lawful attorney-in-fact, and authorizes the Lender (and its designees),
in its or the Lender's name, to:
(a) at any time after the occurrence of a Default and such Grantor
fails to promptly do so following the written request of Lender, (i) demand
payment on the Receivables or other Collateral of each Grantor, (ii) enforce
payment of the Receivables of each Grantor by legal proceedings or otherwise,
(iii) exercise all of rights and remedies of each Grantor to collect any
Receivable or other Collateral, (iv) sell or assign any Receivable or other
Collateral of each Grantor upon such terms, for such amount and at such time or
times as the Lender deems advisable, (v) settle, adjust, compromise, extend or
renew any of the Receivables of each Grantor, (vi) discharge and release any of
the Receivables of each Grantor, (vii) prepare, file and sign the name of each
Grantor on any proof of claim in bankruptcy or other similar document against an
account debtor or other obligor in respect of any of the Receivables or other
Collateral
20
of each Grantor, (viii) notify the post office authorities to change the address
for delivery of remittances from account debtors or other obligors in respect of
Receivables or other proceeds of Collateral to an address designated by the
Lender, and open and dispose of all mail addressed to each Grantor and handle
and store all mail relating to the Collateral; and (ix) make any payment or take
any action necessary or desirable to protect or preserve any of the Collateral;
and (x) do all acts and things which are necessary, in the Lender's
determination, to fulfill each Grantor's obligations under this Agreement and
the other Loan Documents; and
(b) at any time after the occurrence of a Default (i) take control
in any manner of any item of payment in respect of each Grantor's Receivables or
constituting the Collateral or otherwise received in or for deposit in any
depositary account of any Grantor or otherwise received by the Lender, (ii) have
access to any lockbox or postal box into which remittances from account debtors
or other obligors in respect of each Grantor's Receivables or other proceeds of
the Collateral are sent or received, (iii) endorse each Grantor's name upon any
items of payment in respect of each Grantor's Receivables or constituting
Collateral or otherwise received by the Lender and deposit the same in the
Lender's account for application to the Obligations, (iv) endorse each Grantor's
name upon any chattel paper, document, instrument, invoice, or similar document
or agreement relating to any Receivable or any goods pertaining thereto or any
other Collateral, including any warehouse or other receipts, or bills of lading
and other negotiable or nonnegotiable documents, and deposit the same in the
Lender's account for application to the Obligations, (v) sign each Grantor's
name on any verification of each Grantor's Receivables and notices thereof to
account debtors or any secondary obligors or other obligors in respect thereof.
Each Grantor hereby releases the Lender and its officers, employees
and designees from any liabilities arising from any act or acts under this power
of attorney and in furtherance thereof, whether of omission or commission,
except as a result of the Lender's or any of its officer's, employee's or
designee's own gross negligence or willful misconduct as determined pursuant to
a final non-appealable order of a court of competent jurisdiction. The Lender's
authority hereunder shall include, without limitation, the authority to execute
and give receipt for any certificate of ownership or any document, to transfer
title to any item of Collateral and to take any other actions arising from or
incident to the powers granted to the Lender under this Agreement. This power of
attorney is coupled with an interest and is irrevocable until the Obligations
are repaid in full.
SECTION 3.9 PERFECTION OF SECURITY INTERESTS.
(a) Each Grantor irrevocably and unconditionally authorizes the
Lender (or its agent) to file at any time and from time to time such financing
statements and similar instruments with respect to the Collateral naming the
Lender or its designee as the secured party and the Grantor as debtor, as the
Lender may require, and including any other information with respect to the
Grantor or otherwise required by part 5 of Article 9 of the Uniform Commercial
Code of such jurisdiction as the Lender may determine, together with any
amendment and continuations with respect thereto, which authorization shall
apply to all financing statements and similar instruments filed on, prior to or
after the date hereof. Each Grantor hereby ratifies and approves all financing
statements naming the Lender or its designee as secured party and each Grantor
as debtor with respect to the Collateral (and any amendments with respect to
such financing
21
statements and similar instruments) filed by or on behalf of the Lender prior to
the date hereof and ratifies and confirms the authorization of the Lender to
file such financing statements and similar instruments (and amendments, if any).
Each Grantor hereby authorizes the Lender to adopt on behalf of each Grantor any
symbol required for authenticating any electronic filing. In no event prior to
the payment in full of the Obligations shall any Grantor at any time file, or
permit or cause to be filed, any correction statement or termination statement
with respect to any financing statement or similar instrument (or amendment or
continuation with respect thereto) naming the Lender or its designee as secured
party and the Grantor as debtor, without the prior written consent of the
Lender.
(b) Each Grantor represents and warrants to the Lender that
neither such Grantor nor any Subsidiary of such Grantor, has any chattel paper
(whether tangible or electronic) or instruments as of the date hereof. Each
Grantor covenants to the Lender that in the event that any Grantor or any
Subsidiary of any Grantor shall be entitled to or shall receive any chattel
paper or instrument after the date hereof, such Grantor or Subsidiary shall
promptly notify the Lender thereof in writing. Promptly upon the receipt thereof
by a Grantor, such Grantor shall deliver, or cause to be delivered to the
Lender, all tangible chattel paper and instruments that such Grantor may at any
time acquire, accompanied by such instruments of transfer or assignment duly
executed in blank as the Lender may from time to time specify, in each case
except as the Lender may otherwise agree. At the Lender's option, each Grantor
shall, or the Lender may at any time on behalf of each Grantor, cause the
original of any such instrument or chattel paper to be conspicuously marked in a
form and manner acceptable to the Lender with the following legend referring to
chattel paper or instruments as applicable: "This [chattel paper] [instrument]
is subject to the security interest of Aegis NY Venture Fund, LP, as Lender, and
any sale, transfer, assignment or encumbrance of this [chattel paper]
[instrument] violates the rights of such secured party."
(c) In the event that any Grantor shall at any time hold or acquire
an interest in any electronic chattel paper or any "transferable record" (as
such term is defined in Section 201 of the Federal Electronic Signatures in
Global and National Commerce Act or in Section 16 of the Uniform Electronic
Transactions Act as in effect in any relevant jurisdiction), such Grantor shall
promptly notify the Lender thereof in writing. Promptly upon the Lender's
request, such Grantor shall take, or cause to be taken, such actions as the
Lender may reasonably request to give the Lender control of such electronic
chattel paper under Section 9-105 of the UCC and control of such transferable
record under Section 201 of the Federal Electronic Signatures in Global and
National Commerce Act or, as the case may be, Section 16 of the Uniform
Electronic Transactions Act, as in effect in such jurisdiction.
(d) Each Grantor represents and warrants to Lender that neither such
Grantor nor any Subsidiary of such Grantor has any deposit accounts as of the
date hereof, except as set forth on Schedule 3.9(d) hereof. Each Grantor
represents, warrants and covenants with Lender, that neither such Grantor nor
any Subsidiary of such Grantor, shall, directly or indirectly, after the date
hereof open, establish or maintain any deposit account unless each of the
following conditions is satisfied: (i) the Lender shall have received not less
than one (1) Business Days prior written notice of the intention of such Grantor
or Subsidiary to open or establish such account which notice shall specify in
reasonable detail and specificity reasonably acceptable to the Lender the name
of the account, the owner of the account, the name and address of the bank
22
or other financial institution at which such account is to be opened or
established, the individual at such bank or other financial institution with
whom such Grantor or Subsidiary is dealing and the purpose of the account and
(ii) on or before the opening of such deposit account, such Grantor or
Subsidiary shall as the Lender may specify either (A) deliver to the Lender a
Deposit Account Control Agreement with respect to such deposit account of the
Grantor or Subsidiary duly authorized, executed and delivered by such Grantor or
Subsidiary and the bank at which such deposit account is opened and maintained
or (B) arrange for the Lender to become the customer of the bank with respect to
such deposit account of the Grantor or Subsidiary on terms and conditions
acceptable to the Lender. The terms of this subsection (d) shall not apply to
deposit accounts specifically and exclusively used for payroll, payroll taxes
and other employee wage and benefit payments to or for the benefit of the
Grantor's employees.
(e) Each Grantor represents and warrants to Lender that, except for
the equity interests set forth on SCHEDULE 3.9(e) hereof, no Grantor nor any
Subsidiary of any Grantor owns or holds, directly or indirectly, beneficially or
as record owner or both, any Investment Property, as of the date hereof, or has
any investment account, securities account, commodity account or other similar
account with any bank or other financial institution or other securities
intermediary or commodity intermediary as of the date hereof. Each Grantor
covenants to the Lender that:
(i) In the event that such Grantor or any Subsidiary of such
Grantor shall be entitled to or shall at any time after the date
hereof hold or acquire any certificated securities, such Grantor
shall, or shall cause such Subsidiary to, promptly endorse, assign
and deliver the same to the Lender, accompanied by such instruments
of transfer or assignment duly executed in blank as the Lender may
from time to time specify, which instruments of transfer or
assignment shall not be executed by the Lender unless a Default
exists. If any securities, now or hereafter acquired by any Grantor
or any Subsidiary of any Grantor are uncertificated and are issued
to such Grantor or any Subsidiary of such Grantor or its nominee
directly by the issuer thereof, then such Grantor shall, or shall
cause such Subsidiary to, immediately notify the Lender thereof and
shall, during the existence of a Default, at the Lender's option,
either (A) cause the issuer to agree to comply with instructions
from the Lender as to such securities, without further consent of
the applicable Grantor, Subsidiary or such nominee, or (B) arrange
for the Lender to become the registered owner of the securities; and
(ii) No Grantor shall, nor shall any Grantor permit any of its
Subsidiaries to, directly or indirectly, after the date hereof open,
establish or maintain any investment account, securities account,
commodity account or any other similar account (other than a deposit
account) with any securities intermediary or commodity intermediary
unless each of the following conditions is satisfied: (A) the Lender
shall have received not less than one (1) Business Day prior written
notice of the intention of such Grantor or Subsidiary to open or
establish such account which notice shall specify in reasonable
detail and specificity reasonably acceptable to the Lender the name
of the account, the owner of the account, the name and address of
the securities intermediary or commodity intermediary at which such
account is to be opened or established, the individual at such
intermediary with whom the applicable Grantor or Subsidiary is
23
dealing and the purpose of the account and (B) on or before the
opening of such investment account, securities account or other
similar account with a securities intermediary or commodity
intermediary, the applicable grantor or Subsidiary shall as the
Lender may specify either (1) execute and deliver, and cause to be
executed and delivered to the Lender, a Control Agreement with
respect thereto duly authorized, executed and delivered by the
Borrower or any Subsidiary and such securities intermediary or
commodity intermediary or (2) arrange for the Lender to become the
entitlement holder with respect to such investment property on terms
and conditions acceptable to the Lender.
(f) Each Grantor represents and warrants to the Lender that neither
such Grantor nor any Subsidiary of such Grantor is the beneficiary or otherwise
entitled to any right to payment under any letter of credit, banker's acceptance
or similar instrument as of the date hereof. Each Grantor covenants with the
Lender that in the event that such Grantor or any Subsidiary of such Grantor
shall be entitled to or shall receive any right to payment under any letter of
credit, banker's acceptance or any similar instrument, whether as beneficiary
thereof or otherwise after the date hereof, such Grantor shall, and shall cause
such Subsidiary to, promptly notify the Lender thereof in writing. Such Grantor
shall, and shall cause each Subsidiary to, immediately, as the Lender may
specify, either (i) deliver, or cause to be delivered to the Lender, with
respect to any such letter of credit, banker's acceptance or similar instrument,
the written agreement of the issuer and any other nominated person obligated to
make any payment in respect thereof (including any confirming or negotiating
bank), in form and substance satisfactory to the Lender, consenting to the
assignment of the proceeds of the letter of credit to the Lender by such Grantor
or the applicable Subsidiary during the existence of a Default and agreeing to
make all payments thereon during the existence of a Default directly to the
Lender or as the Lender may otherwise direct, or (ii) cause the Lender to
become, at the Grantor's and any Subsidiary's expense during the existence of a
Default or and upon the occurrence and continuation of a Default, the transferee
beneficiary of the letter of credit, banker's acceptance or similar instrument
(as the case may be).
(g) Each Grantor represents and warrants to the Lender that neither
such Grantor nor any Subsidiary of such Grantor is the plaintiff in any pending
commercial tort claims as of the date hereof. Each Grantor covenants with the
Lender that in the event that such Grantor or any Subsidiary of such Grantor
shall at any time after the date hereof become the plaintiff in any pending
commercial tort claims, such Grantor shall, and shall cause such Subsidiary to,
promptly notify the Lender thereof in writing, which notice shall (i) set forth
in reasonable detail the basis for and nature of such commercial tort claim and
(ii) include the express grant by the applicable Grantor and/or any Subsidiary
to the Lender of a security interest in such commercial tort claim (and the
proceeds thereof). In the event that such notice does not include such grant of
a security interest, the sending thereof by a Grantor or any Subsidiary to the
Lender shall be deemed to constitute such grant to the Lender. Upon the sending
of such notice, any commercial tort claim described therein shall constitute
part of the Collateral and shall be deemed included therein. Without limiting
the authorization of the Lender provided in Section 3.9(a) hereof or otherwise
arising by the execution by the Grantors and any Subsidiary of this Agreement,
the Lender is hereby irrevocably authorized from time to time and at any time to
file such financing statements and similar instruments naming the Lender or its
designee as secured party and the Grantors as debtor, or any amendments to any
financing statements, covering any such
24
commercial tort claim as Collateral. In addition, each Grantor or any Subsidiary
shall promptly upon the Lender's request, execute and deliver, or cause to be
executed and delivered, to the Lender such other agreements, documents and
instruments as the Lender may require in connection with such commercial tort
claim.
(h) Each Grantor shall, and shall cause each of its Subsidiaries to,
take any other actions reasonably requested by the Lender from time to time to
cause the attachment, perfection and first priority of, and the ability of the
Lender to enforce, the security interest of the Lender in any and all of the
Collateral, including, without limitation, (i) executing, delivering and, where
appropriate, filing financing statements and similar instruments and amendments
relating thereto under the Code or other applicable law, to the extent, if any,
that the Grantor's signature thereon is required therefor, (ii) causing the
Lender's name to be noted as secured party on any certificate of title for a
titled good if such notation is a condition to attachment, perfection or
priority of, or ability of the Lender to enforce, the security interest of the
Lender in such Collateral, (iii) complying with any provision of any statute,
regulation or treaty of the United States as to any Collateral if compliance
with such provision is a condition to attachment, perfection or priority of, or
ability of the Lender to enforce, the security interest of the Lender in such
Collateral, (iv) obtaining the consents and approvals of any Governmental
Authority or third party, including, without limitation, any consent of any
licensor, lessor or other person obligated on Collateral, and taking all actions
required by any earlier versions of the Code or by other law, as applicable in
any relevant jurisdiction.
SECTION 3.10 RIGHT TO CURE. If a Grantor has failed to take any of
the actions specified below, then the Lender may, at its option and upon written
notice to the Borrower, (a) cure any default by a Grantor under any agreement
with a third party that materially affects the Collateral, its value or the
ability of the Lender to collect, sell or otherwise dispose of the Collateral or
the rights and remedies of the Lender therein or the ability of any Grantor to
perform its obligations hereunder or under the other Loan Documents, (b) pay or
bond on appeal any judgment entered against any Grantor, (c) discharge taxes,
liens, security interests or other encumbrances at any time levied on or
existing with respect to the Collateral and (d) pay any amount, incur any
expense or perform any act which, in the Lender's good faith judgment, is
necessary or appropriate to preserve, protect, insure or maintain the Collateral
and the rights of the Lender with respect thereto. The Lender may add any
amounts so expended to the Obligations, such amounts to be repayable by the
Borrower on demand. The Lender shall be under no obligation to effect such cure,
payment or bonding and shall not, by doing so, be deemed to have assumed any
obligation or liability of ant Grantor. Any payment made or other action taken
by the Lender under this Section shall be without prejudice to any right to
assert an Event of Default hereunder and to proceed accordingly.
ARTICLE IV
INTEREST, FEES AND EXPENSES
SECTION 4.1 INTEREST. Interest shall accrue on the Loan from the
Closing Date, through and including the date the Loan and all interest thereof
is paid in full, subject to the default provisions set forth below, as follows:
25
(i) ten and one half percent (10.50%) per annum from the
Closing Date through, but not including, the third monthly
anniversary of the Closing Date; and
(ii) thereafter, increasing by three quarters of one percent
(0.75%) per annum, during and for each subsequent three month
period.
SECTION 4.2 INTEREST AFTER EVENT OF DEFAULT. From the date of
occurrence of any Event of Default until the earlier of the date upon which (i)
all Obligations shall have been paid and satisfied in full or (ii) such Event of
Default shall have been cured or waived, interest on the Loan shall accrue at a
rate per annum equal to the rate that would be otherwise applicable thereto
under Section 4.1 plus an additional seven percent (7%) ("Default Interest").
SECTION 4.3 CALCULATIONS. All calculations of interest and fees
hereunder shall be made by the Lender on the basis of the actual number of days
elapsed in the period for which such interest or fees are payable. Each
determination by the Lender of an interest rate, fee or other payment hereunder
shall be conclusive and binding for all purposes, absent manifest error.
SECTION 4.4 TAXES.
(a) Any and all payments by the Borrower hereunder or under the Note
shall be made free and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or withholdings and
penalties, interest and all other liabilities with respect thereto ("Taxes"),
excluding in the case of the Lender, taxes imposed on its net income (including,
without limitation, any taxes imposed on branch profits) and franchise taxes
imposed on the Lender by any applicable jurisdiction. If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under any Loan to or for the benefit of the Lender, (A) the sum
payable shall be increased as shall be necessary so that after making all
required deductions of Taxes (including deductions of Taxes applicable to
additional sums payable under this Section 4.4) the Lender receives an amount
equal to the sum it would have received had no such deductions been made, (B)
the Borrower shall make such deductions and (C) the Borrower shall pay the full
amount so deducted to the relevant taxation authority or other authority in
accordance with applicable law.
(b) In addition, the Borrower agrees to pay any present or future
stamp, documentary, excise, privilege, intangible or similar taxes or levies
("Other Taxes") that arise at any time or from time to time (i) from any payment
made under any and all Loan Documents, or (ii) from the execution or delivery by
the Borrower or any Grantor of, or from the filing or recording or maintenance
of, or otherwise with respect to the exercise by the Lender of its rights under,
any and all Loan Documents.
(c) The Borrower agrees to indemnify and hold harmless the Lender
and its officers, directors affiliates and agents for the full amount of (i)
Taxes imposed on or with respect to amounts payable hereunder and (ii) Other
Taxes; PROVIDED, HOWEVER, that in no event shall the Borrower be required to
indemnify the Lender for any taxes imposed on the Lender's net income or for any
franchise taxes imposed on the Lender by any applicable jurisdiction.
26
(d) Within thirty days after the date of any payment of Taxes or
Other Taxes, the Borrower will, upon request, furnish to the Lender the original
or a certified copy of a receipt evidencing payment thereof.
(e) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 4.4 shall survive the indefeasible payment in full of the
Obligations.
Section 4.5 FEES. At Closing, if not previously paid, the Borrower
shall pay the Lender a closing fee of $5,000 (the "Closing Fee") to compensate
the Lender for expenses incurred associated with underwriting and closing of the
Loan.
ARTICLE V
CONDITIONS OF LENDING
SECTION 5.1 CONDITIONS PRECEDENT TO THE LOAN. The obligation of the
Lender to fund the Loan is subject to the satisfaction of the following
conditions:
(a) the Lender shall have received the following, each dated as of
the date of the funding of the Loan or as of an earlier date acceptable to the
Lender, in form and substance satisfactory to the Lender and its counsel:
(i) the Note evidencing the Loan, duly executed by the
Borrower;
(ii) the Warrant Purchase Agreement and Warrants specified in
Section 2.3(a);
(iii) the Intellectual Property Security Agreement, duly
executed by the Borrower;
(iv) the Deposit Account Control Agreement, duly executed by
all parties thereto;
(v) the ▇▇▇▇▇ Guaranty, duly executed by Mr. ▇▇▇▇▇ ▇▇▇▇▇;
(vi) the ▇▇▇▇▇▇▇ Guaranty, duly executed by ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇;
(vii) the Subsidiary Guaranty, duly executed and delivered;
(viii) a solvency certificate, with respect to the Subsidiary
Guarantor, duly executed by an applicable Responsible Officer of the
Subsidiary Guarantor, in form, scope and substance satisfactory to
Lender and its counsel;
(ix) an audited consolidated balance sheet as of December 31,
2005, and an statement of operations and cash flows for the year
ended December 31, 2005, in each case, certified has having been
prepared in accordance with GAAP, along with an Officer's
Certificate of a Responsible Officer of Borrower
27
certifying that since December 31, 2005, no material and adverse
change in the business, assets, operations or financial condition of
the Borrower's and its subsidiaries' businesses shall have occurred;
(x) an opinion of counsel for the Borrower, in form, scope and
substance satisfactory to Lender and its counsel, covering such
matters incident to the transactions contemplated by this Agreement
as the Lender and its counsel may reasonably require, including,
without limitation, that the Lender has a first priority perfected
security interest in all the Collateral;
(xi) copies of certificates of insurance that evidence all
policies of insurance required by this Agreement and the other Loan
Documents, together with loss payee endorsements for all such
policies naming the Lender as lender loss payee and an additional
insured;
(xii) a copy of the budget and projections of the Borrower and
its Subsidiaries for the fiscal years of 2006 and 2007 along with
monthly cash reports for January and February 2006, accompanied by a
certificate executed by the Chief Operating Officer of the Borrower
certifying to the Lender that such budget, projections and cash
reports have been prepared in good faith based upon the assumptions
contained therein and all information available at the time of
preparation thereof and, as of the date of such certificate, such
Chief Operating Officer is not aware that of any information
contained in such budget, projections or cash reports is false or
misleading in any material respect or of any omission of information
which causes such budget, projections or cash reports to be false or
misleading in any material respect;
(xiii) copies of the Governing Documents of the Borrower and
its Subsidiaries and a copy of the resolutions of the Board of
Directors (or similar evidence of authorization) of the Borrower and
its Subsidiaries authorizing the execution, delivery and performance
of this Agreement, the other Loan Documents to which the Borrower
and/or its Subsidiaries is or is to be a party, as applicable, and
the transactions contemplated hereby and thereby, attached to which
is a certificate of the Secretary of the Corporation certifying (A)
that such copies of the Governing Documents and resolutions (or
similar evidence of authorization) are true, complete and accurate
copies thereof, have not been amended or modified since the date of
such certificate and are in full force and effect and (B) the
incumbency, names and true signatures of the officers of each such
entity authorized to sign the Loan Documents to which it is a party;
(xiv) with respect to the Borrower and its Subsidiaries, a
good standing certificate from the Secretary of State of (A) its
state of incorporation or formation and (B) each state in which it
is qualified as a foreign entity, each dated within ten days of the
Closing Date;
(xv) a Collateral Access Agreement for each parcel of Property
specified on Schedule 5.1(a)(xv), duly executed by the lessor of
such Property;
28
(xvi) non-compete and confidentiality agreements from the
Responsible Officers of the Borrower covering, at a minimum, the
period from the closing Date through and including the second
anniversary thereof, in form, scope and substance satisfactory to
Lender and its counsel;
(xvii) a certification as to Borrower's non-foreign status
which complies with the provisions of Section 1445(b)(2) of the
Internal Revenue Code, signed by the Borrower;
(xviii) An Officer's Certificate certified by the Chief
Operating Officer of the Borrower certifying that after giving
effect to the execution and delivery of the Loan Documents, no
Default shall exist under the Loan Documents; and
(xix) such other agreements, instruments, documents and
evidence as the Lender and its counsel in good ▇▇▇▇▇ ▇▇▇▇▇ necessary
in its reasonable discretion in connection with the transactions
contemplated hereby.
(b) There shall be no pending or, to the knowledge of the Borrower
threatened litigation, proceeding, inquiry or other action (i) seeking an
injunction or other restraining order, damages or other relief with respect to
the transactions contemplated by this Agreement or the other Loan Documents or
(ii) which affects or could affect the business, prospects, operations, assets,
liabilities or condition (financial or otherwise) of the Borrower, or any other
litigation, proceeding, inquiry or other action that could not reasonably be
expected to have a Material Adverse Effect.
(c) The Borrower shall have paid, or shall have authorized the
Lender to deduct from the proceeds of the Loan, the Closing Fee, and an amount
to reimburse Lender for all reasonable fees and expenses of the Lender incurred
in connection with the negotiation, preparation, execution and delivery of the
Loan Documents (including, without limitation, reasonable fees and expenses of
counsel to the Lender in connection therewith), in an amount not to exceed $
12,500 in the aggregate.
(d) Except for filings required to perfect the Liens of the Lender,
all of which shall have been completed prior to or contemporaneously with, the
Closing, no consent or authorization of, filing with or other act by or in
respect of any Governmental Authority or any other Person is required in
connection with the execution, delivery, performance, validity or enforceability
of this Agreement, the Note or the other Loan Documents or the consummation of
the transactions contemplated hereby or thereby or the continuing.
(e) The Borrower is a "qualified business" pursuant to New York
CAPCO Law.
29
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.1 REPRESENTATIONS AND WARRANTIES OF THE BORROWER; RELIANCE
BY LENDER. The Borrower represents and warrants to the Lender as of the Closing
Date as follows:
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Borrower and
each of its Subsidiaries (i) is duly organized, validly existing and in good
standing under the laws of the state of its organization, (ii) has the power and
authority to own its properties and assets and to transact the businesses in
which it presently is, or currently proposes to be, engaged and (iii) is duly
qualified, authorized to do business and in good standing in each jurisdiction
where it presently is, or currently proposes to be, engaged in business, except
to the extent that the failure to so qualify or be in good standing could not
reasonably be expected to have a Material Adverse Effect. Schedule 6.1(a)
specifies the jurisdiction in which the Borrower is organized and all
jurisdictions in which the Borrower is qualified to do business as a foreign
corporation as of the Closing Date. Except as set forth on schedule 6.1(a), the
Borrower has no Subsidiaries.
(b) LOCATIONS OF OFFICES, RECORDS AND COLLATERAL. The address of the
principal place of business and chief executive office of the Borrower and each
of its Subsidiaries is, and the books and records of the Borrower and each of
its Subsidiaries and all of its respective chattel paper and records of its
respective Receivables are maintained exclusively in its possession, at its
address specified in Schedule 6.1(b), in New York. There is currently no
location at which the Borrower or any of its subsidiaries maintains any
Collateral other than the locations specified for it in Schedule 6.1(b).
Schedule 6.1(b) specifies all Property of the Borrower and its Subsidiaries, and
indicates whether each location specified therein is leased or owned, and
whether any Collateral is in the possession or control of any Person other than
the Borrower or one of its Subsidiaries.
(c) AUTHORITY. Each of the Borrower and the Grantors has the
requisite power and authority to execute, deliver and perform its obligations
under each of the Loan Documents to which it is a party. All action necessary
for the execution, delivery and performance by the Borrower and its Subsidiaries
of the Loan Documents (including the consent of equity holders where required)
has been taken.
(d) ENFORCEABILITY. This Agreement is and, when executed and
delivered, each other Loan Document, will be, the legal, valid and binding
obligation of the Borrower and each of its Subsidiaries, as applicable,
enforceable in accordance with its terms, except as enforceability may be
limited by (i) bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (ii) general principles of equity.
(e) NO CONFLICT. The execution, delivery and performance by the
Borrower and each of its Subsidiaries of each Loan Document to which it is a
party does not and will not contravene (i) any of the Governing Documents of the
Borrower or its Subsidiaries, as applicable, (ii) any Requirement of Law or
(iii) any Material Contract and will not result in the imposition of any Liens
upon any of the properties of the Borrower or any of its Subsidiaries, except in
favor of the Lender.
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(f) CONSENTS AND FILINGS. No consent, authorization or approval of,
or filing with or other act by, any equity holder of the Borrower, any
Governmental Authority or any other Person is required in connection with the
execution, delivery, performance, validity or enforceability of this Agreement
or any other Loan Document, the consummation of the transactions contemplated
hereby or thereby or the continuing operations of the Borrower following such
consummation, except (i) those that have been obtained or made and are specified
on Schedule 6.1(f) hereto and (ii) the filing of financing and termination
statements under the Code.
(g) OWNERSHIP; CAPITALIZATION. The authorized capital stock of the
Borrower consists of 100,000,000 shares of common stock, par value .0001 per
share, 30,781,050 of which are issued and outstanding as of the date hereof.
Except as set forth on Schedule 6.1(g), there are outstanding no securities
convertible into, exchangeable for, or carrying the right to acquire, equity
securities of the Borrower or any of its subsidiaries, or subscriptions,
warrants, options, rights or other arrangements or commitments obligating the
Borrower or any of its Subsidiaries to issue or dispose of any of its equity
securities or any ownership interest therein. The capital stock of the Borrower
is owned by the Persons and in the amounts specified in Schedule 6.1(g).
Schedule 6.1(g) sets forth the exact correct legal name of (i) the Borrower and
each of its Subsidiaries, as specified in the public record of the jurisdiction
of its organization and (ii) the Persons that own the capital stock therein.
Except with respect to the Loan Documents, neither the Borrower nor any of its
Subsidiaries is a party to, or obligated under, any registration rights, warrant
purchase or other similar or comparable type of agreement.
(h) SOLVENCY. Immediately before, and immediately after, giving
effect to the transactions contemplated by the Loan Documents, the Borrower and
the Subsidiary Guarantor are Solvent as of the Closing Date.
(i) FINANCIAL DATA. The Borrower has delivered to the Lender an
audited balance sheet of the Borrower and its Subsidiaries as of December 31,
2005(the "Balance Sheet"), and audited statements of income and cash flows for
the fiscal years ended December 31, 2005 and December 31, 2004, respectively
(such financial statements together with the notes to such financial statements,
collectively, the "Financial Statements"). The Financial Statements have been
prepared in conformity with GAAP and, on that basis, fairly present in all
material respects the financial condition and results of operations of the
Borrower and its Subsidiaries as of the respective dates thereof and for the
respective periods indicated. Except as specified on the Balance Sheet (or on
Schedule 6.1(j)), neither the Borrower nor any of its Subsidiaries has any
liabilities, contingent or otherwise, of any type or nature.
(j) ABSENCE OF CERTAIN CHANGES. Except as set forth in Schedule
6.1(j), or permitted or contemplated by this Agreement, since the date of the
Balance Sheet, neither the Borrower nor any of its Subsidiaries has (a) suffered
any damage, destruction or casualty loss to its physical properties which are
material and adverse to the Borrower and its Subsidiaries; (b) incurred or
discharged any obligation or liability, contingent or otherwise, except in the
ordinary course of business; (c) suffered any material adverse change in the
business, operations, affairs, prospects or financial condition of the Borrower,
its Subsidiaries, the Borrower Business or the Borrower Assets; or (d) increased
the rate or terms of compensation payable or to become payable by the Borrower
or any of its Subsidiaries to its directors, officers or key employees or
31
increased the rate or terms of any bonus, pension or other employee benefit plan
covering any of its directors, officers or key employees.
(k) INDEBTEDNESS; LIENS. Other than as set forth in the Balance
Sheet or on Schedule 6.1(k), each of the Borrower and its Subsidiaries owns all
of its respective assets free and clear of all Liens, and neither the Borrower
nor any of its Subsidiaries has any Indebtedness, has granted any Liens on any
of its respective assets, owns any material assets or engages in any business.
(l) NO JOINT VENTURES OR PARTNERSHIPS. The Borrower is not engaged
in any joint venture or partnership with any other Person.
(m) CORPORATE AND TRADE NAME; ORGANIZATIONAL IDENTIFICATION NUMBER.
Except as set forth on Schedule 6.1(m), during the past five years, neither the
Borrower nor any of its Subsidiaries has been known by or used any other
corporate, trade or fictitious name except for its name as set forth on the
signature page of this Agreement. The exact legal name of the Borrower and each
of its Subsidiaries is as set forth on the signature page of this Agreement.
(n) NO ACTUAL OR PENDING MATERIAL MODIFICATION OF BUSINESS. There
exists no actual or, to the best of the Borrower's knowledge, threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship of the Borrower or any of its Subsidiaries with any
customer or group of customers which individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect.
(o) NO BROKER'S OR FINDER'S FEES. No broker or finder brought about
the obtaining, making or closing of the Loan or financial accommodations
afforded hereunder or in connection herewith by the Lender, the Lender or any of
its respective Affiliates. No broker's or finder's fees or commissions will be
payable by the Borrower to any Person in connection with the transactions
contemplated by this Agreement.
(p) INVESTMENT COMPANY. The Borrower is not an "investment company,"
or an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended. Neither the making of any Loan nor the consummation of the
other transactions contemplated by this Agreement or the other Loan Documents
will violate any provision of such Act or any rule, regulation or order of the
Securities and Exchange Commission thereunder.
(q) FEDERAL RESERVE REGULATIONS; USE OF PROCEEDS. No part of the
proceeds of the Loan will be used, whether directly or indirectly, and whether
immediately, incidentally or ultimately, for any purpose which entails a
violation of the provisions of Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System of the United States. The proceeds of
the Loan will be used only for the purposes contemplated hereunder.
(r) TAXES AND TAX RETURNS.
(i) The Borrower and each of its Subsidiaries has properly
completed and timely filed all income tax returns it is required to
file. The information filed within such tax returns is complete and
accurate in all material respects. All
32
deductions taken in such income tax returns are appropriate and in
accordance with applicable laws and regulations, except deductions
that may have been disallowed but are being challenged in good faith
and for which adequate reserves have been established in accordance
with GAAP.
(ii) All taxes, assessments, fees and other governmental
charges for periods beginning prior to the date hereof have been
timely paid (or, if not yet due, adequate reserves therefor have
been established) and the Borrower and its Subsidiaries have no
liability for taxes in excess of the amounts so paid or reserves so
established.
(iii) No deficiencies for taxes have been claimed, proposed or
assessed by any taxing or other Governmental Authority against the
Borrower or any of its Subsidiaries and no tax Liens have been filed
with respect thereto. There are no pending or threatened audits,
investigations or claims for or relating to any liability of the
Borrower or any of its Subsidiaries for taxes and there are no
matters under discussion with any Governmental Authority which could
result in an additional liability for taxes. The federal income tax
returns of the Borrower and its Subsidiaries have never been audited
by the Internal Revenue Service. No extension of a statute of
limitations relating to taxes, assessments, fees or other
governmental charges is in effect with respect to the Borrower or
any of its Subsidiaries.
(iv) Neither the Borrower nor any of its Subsidiaries is a
party to, or has any obligation under, any written tax sharing
agreement or agreement regarding payments in lieu of taxes. The
Borrower is not a "foreign person" within the meaning of Section
1445(b)(2) of the Internal Revenue Code, and the Borrower will
furnish the Lender at the Closing with an affidavit to that effect,
in form, scope and substance reasonably satisfactory to the Lender.
(s) NO JUDGMENTS OR LITIGATION. Except as specified in Schedule
6.1(s), no judgments, orders, writs or decrees are outstanding against the
Borrower or any of its Subsidiaries, nor is there now pending or, to the
knowledge of the Borrower after due inquiry, threatened litigation, contested
claim, investigation, arbitration, or governmental proceeding by or against the
Borrower or any of its Subsidiaries.
(t) TITLE TO PROPERTY. Each of the Borrower and each of its
Subsidiaries has (i) good and marketable fee simple title to or valid leasehold
interests in all of its respective Property and (ii) good and marketable title
to all of its respective other property, in each case free and clear of Liens.
(u) INVESTMENTS. The Borrower has not committed to make any
Investment.
(v) NO DEFAULTS. On the Closing Date, after giving effect to the
transactions contemplated hereby, neither the Borrower nor any of its
Subsidiaries is in default under any term of any Material Contract.
33
(w) RIGHTS IN COLLATERAL; PRIORITY OF LIENS. All of the Collateral
of the Borrower and its Subsidiaries is owned or leased by each such entity free
and clear of any and all Liens in favor of third parties, other than Liens in
favor of the Lender and Permitted Liens. Upon the occurrence of the filings
specified in Schedule 6.1(w), the Liens granted by the Borrower and its
Subsidiaries to the Lender pursuant to the Loan Documents will constitute valid,
enforceable and perfected first priority Liens on the Collateral.
(x) ERISA. The Borrower and each of its Subsidiaries is in
compliance with ERISA. Neither the Borrower nor any of its Subsidiaries has any
"employee benefit plan," as defined in ERISA. Neither the Borrower nor any of
its Subsidiaries, is or was at any time, obligated to contribute to any employee
pension benefit plan that is or was a "multi-employer plan," as defined in
ERISA.
(y) INTELLECTUAL PROPERTY. Schedule 6.1(y) sets forth a list, as of
the date hereof, of all Intellectual Property used to conduct the business and
operations of the Borrower and its Subsidiaries, as it is now being conducted
and as it is proposed to be conducted following the date hereof (as currently
conducted and as contemplated to be conducted, the "BORROWER BUSINESS"). The
Borrower or one of its Subsidiaries owns, possesses, has the exclusive right to
make, use, sell and license, has the right to bring actions for the infringement
of, and where necessary, has made timely and proper application for protection
of, all Intellectual Properties that are used in the Borrower Business or that
comprise a portion of the Borrower Assets (the "BORROWER INTELLECTUAL
PROPERTY"). Neither the Borrower nor any of its Subsidiaries has granted any
third party any outstanding licenses or other rights to any of the Borrower
Intellectual Property, and neither the Borrower nor any of its Subsidiaries is
liable, or has made any contract or arrangement whereby it may become liable, to
any person for any royalty or other compensation for the use of any Borrower
Intellectual Property. Neither the Borrower nor any of its Subsidiaries, has
received notice of any claim that any Borrower Intellectual Property infringes
any Intellectual Property right of any third party and there is no basis for
such claim. No claim or litigation is pending, or, to the best of Borrower's
knowledge, threatened, against the Borrower or any of its Subsidiaries that
contests the rights of the Borrower and its Subsidiaries in, to and under the
Borrower Intellectual Property. All employees and consultants of the Borrower
and its Subsidiaries and any other third parties who have been involved in
product development for the Borrower Business, have executed invention
assignment agreements and all employees and consultants who have access to
confidential or trade secret information concerning the technology or products
of the Borrower Business have executed nondisclosure agreements.
(z) COMPLETENESS OF BORROWER ASSETS. The Borrower Assets, as listed
on Schedule 6.1(z), constitute in every material respect, all of the assets that
have been used in the operation of the Borrower Business, and that are
sufficient to continue to operate the Borrower Business in the manner in which
it has been conducted by the Borrower prior to the date hereof and as it is
proposed to be conducted following the date hereof.
(aa) COMPLIANCE WITH LAWS. Borrower and each of its Subsidiaries are
in compliance with all applicable laws, rules, regulations and orders of
federal, state, local and foreign governments (including but not limited to all
export control laws and regulations of the United States of America or any
governmental, authority or agency of the United States
34
government, the Securities Act of 1933, as amended, and the rules and
regulations thereunder and the Securities Exchange Act of 1934, and the rules
and regulations thereunder.
(bb) THE BROKER'S E-VANTAGE SYSTEM. Borrower's e- Vantage software
system has all of the functionality described in the schedule attached hereto as
Schedule 6.1(bb) (the "Borrower Business Description").
(cc) COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as set forth on
Schedule 6.1(z), (i) neither the Borrower nor any of its Subsidiaries, is the
subject of any judicial or administrative proceeding or investigation relating
to the violation of any Environmental Law or asserting potential liability
arising from the release or disposal by any Person of any Hazardous Materials,
(ii) neither the Borrower nor any of its Subsidiaries has filed with or received
from any Governmental Authority or other Person any notice, order, stipulation
or directive under any Environmental Law, nor is the Borrower aware of any
pending discussions within any Governmental Authority, concerning the treatment,
storage, disposal, spill or release or threatened release of any Hazardous
Materials at, on, beneath or adjacent to property owned or leased by the
Borrower or any of its Subsidiaries, or of the release or threatened release at
any other location of any Hazardous Material generated, used, stored, treated,
transported or released by or on behalf of the Borrower or any of its
Subsidiaries, (iii) the Borrower and its Subsidiaries have disposed of all of
their respective waste in accordance with all applicable laws and have not
improperly stored or disposed of any waste at, on, beneath or adjacent to any of
its respective property and none of its respective property contains any waste
fill, (iv) neither the Borrower nor any of its Subsidiaries has any contingent
liability for any release of any Hazardous Materials, and there has been no
spill or release of any Hazardous Materials at any of the Properties in
violation of Environmental Laws, (v) all Properties have at all times been free,
of Hazardous Materials and underground storage tanks and (vi) none of the
Properties have ever been used as a waste disposal site, whether registered or
unregistered.
(dd) LICENSES AND PERMITS. Each of the Borrower and each of its
Subsidiaries has obtained and holds in full force and effect all franchises,
licenses, leases, permits, certificates, authorizations, qualifications,
easements, rights of way and other rights and approvals which are necessary or
advisable for the operation of its respective business as presently conducted
and as proposed to be conducted.
(ee) GOVERNMENT REGULATION. The Borrower is not subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act or any other Requirement of Law that
limits its ability to incur Indebtedness or to consummate the transactions
contemplated by this Agreement and the other Loan Documents.
(ff) MATERIAL CONTRACTS. Set forth on Schedule 6.1(cc) is a complete
and accurate list of all Material Contracts of the Borrower and its
Subsidiaries, showing as of the date hereof, the parties thereto and the subject
matter and term thereof. Each such contract has been duly authorized, executed
and delivered by the Borrower or one of its Subsidiaries and, to the Borrower's
knowledge, each other party thereto. Except as specified in Schedule 6.1(cc),
each Material Contract of the Borrower and its Subsidiaries is in full force and
effect and is binding upon and enforceable against the Borrower or one of its
Subsidiaries, as applicable, and, to the
35
Borrower's knowledge, all parties thereto in accordance with its terms, and
there exists no default under any such contract of the Borrower by any party
thereto.
(gg) QUALIFIED BUSINESS. The Borrower is a "qualified business"
pursuant to the New York CAPCO Law and all facts and materials provided to the
Lender and submitted to the Insurance Department of the State of New York on
March ____, 2006, as specified in Schedule 6.1(dd) hereof, are true and correct
in all respects regarding the current and intended business of the Borrower and
its Subsidiaries. In addition:
(i) The Borrower's primary business is and will continue to
remain in manufacturing, processing (including electronic processing
of credit card and check transactions) and/or assembling products;
(ii) The Borrower does not and will not incur more than 20% of
its expenses and does not receive more than 20% of its income from:
(A) retail sales;
(B) real estate development;
(C) the business of financial services including
insurance, banking or lending, but excluding electronic
processing of credit card and check transactions; or
(D) the provision of professional services provided by
accountants, attorneys or physicians.
(iii) The Borrower was not formed or organized, directly or
indirectly, by the Lender or an Affiliate of Lender.
(iv) The Borrower agrees to maintain its headquarters and
principal place of business operations within the State of New York
and in the New Windsor Empire Zone for at least two years after the
Closing Date. The Borrower agrees to use the Loan proceeds primarily
to support its business operations within the State of New York,
including at all times while the Loan is outstanding, keeping at
least 80% of its employees employed in the State of New York.
(v) The Borrower's Empire Zone certificate is valid and it
remains in full force and effect.
(hh) BUSINESS PLAN. The Business Plan, budget, projections and
monthly cash statements, delivered by the Borrower to the Lender pursuant to
Section 5.1(a)(xii) hereof, were prepared in good faith on the basis of
assumptions which were fair in the context of the conditions existing at the
time of delivery thereof, and, with respect to the projections contained
therein, represented, at the time of delivery, the Borrower's best estimate of
its future financial performance.
36
(ii) AFFILIATE TRANSACTIONS. Except as specified in Schedule 6.1(ff)
hereto, neither the Borrower nor any of its Affiliates is a party to or bound by
any agreement or arrangement (whether oral or written) to which any Affiliate of
the Borrower or any of its Subsidiaries is a party.
(jj) BANK ACCOUNTS. All of the deposit accounts, investment accounts
or other accounts in the name of or used by the Borrower or any of its
Subsidiaries maintained at any bank or other financial institution as of the
date hereof are set forth in Schedule 6.1(jj).
(kk) NO MATERIAL MISSTATEMENTS. The written and oral information
provided by the Borrower or any of its Subsidiaries to the Lender in connection
with the Loan Documents, including, without limitation, the documents and
information delivered pursuant thereto, or in connection therewith, and the
Borrower Business Description, do not contain any material misstatement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(ll) PATRIOT ACT AND RELATED MATTERS. Neither the making of the Loan
nor the entering into of any of the Loan Documents nor the use of the proceeds
of the Loan violates the Trading with the Enemy Act, as amended, or any of the
foreign assets control regulations of the United States Treasury Department (31
CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive
order relating thereto. In addition, Borrower, warrants, represents and
covenants to Lender that, as of the date hereof, neither Borrower nor any of its
Affiliates or Subsidiaries is or will be an entity or person (i) that is listed
in the Annex to, or is otherwise subject to the provisions of, Executive Order
13,224 Blocking Property and Prohibiting Transaction With Persons Who Commit,
Threaten to Commit, or Support Terrorism, 66 Fed. Re. 49,079 (September 24,
2001) ("EO13224"), (ii) whose name appears on the United States Treasury
Department's Office of Foreign Assets Control ("OFAC") most current list of
"Specifically Designated Nationals and Blocked Persons" (which list may be
published from time to time in various mediums including, but not limited to,
the OFAC website, http:▇▇▇.▇▇▇▇▇.▇▇▇/▇▇▇▇/▇▇▇▇▇▇.▇▇▇), (iii) who commits,
threatens to commit or supports "terrorism", as that term is defined in EO
13224, or (iv) who is otherwise affiliated with any entity or person listed in
subparts (i)-(iv) above (any and all parties or persons described in subparts
(i)-(iv) above are herein referred to as a "Prohibited Person"). Borrower
covenants and agrees that neither Borrower nor any of Borrower's Affiliates or
Subsidiaries, will (i) conduct any business, nor engage in any transaction or
dealing, with any Prohibited Person, including, but not limited to, the making
or receiving of any contribution of funds, goods, or services, to or for the
benefit of a Prohibited Person, or (ii) 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 EO13224. Borrower
further covenant and agree to deliver to Lender any such certification or other
evidence as may be requested by Lender in its sole discretion, confirming that
(i) neither Borrower nor any of its Subsidiaries or Affiliates is a Prohibited
Person and (ii) neither Borrower nor any of its Subsidiaries or Affiliates has
engaged in any business, transaction or dealings with a Prohibited Person,
including, but not limited to, the making or receiving of any contribution of
funds, goods, or services, to or for the benefit of a Prohibited Person.
37
(mm) PRIOR SALE OF SECURITIES. All prior sales of securities and
notes by the Borrower, its Subsidiaries and each of their respective
representatives have been in accordance with applicable securities laws and no
purchaser of the Borrower's securities or notes has any recision right or other
contract, arrangement or understanding with respect to those securities and
notes.
All representations and warranties made by the Borrower and its
Subsidiaries in this Agreement and in each other Loan Document to which it is a
party shall survive the execution and delivery hereof and thereof and the
closing of the transactions contemplated hereby and thereby. The Borrower
acknowledges and confirms that the Lenders are relying on such representations
and warranties without independent inquiry in entering into this Agreement.
ARTICLE VII
COVENANTS OF THE BORROWER
SECTION 7.1 AFFIRMATIVE COVENANTS. The Borrower covenants and agrees
that, until payment and satisfaction of all Obligations in full, except as
consented to in writing by the Lender:
(a) CORPORATE EXISTENCE. The Borrower shall, and shall cause each of
its Subsidiaries to, (i) maintain its existence, (ii) maintain in full force and
effect all material licenses, bonds, franchises, leases, trademarks,
qualifications and authorizations to do business, and all material patents,
contracts and other rights necessary or advisable to the profitable conduct of
its businesses, and (iii) continue in the same lines of business as presently
conducted by it.
(b) MAINTENANCE OF PROPERTY. The Borrower shall maintain all of its
Equipment and Property in accordance with Section 3.6.
(c) AFFILIATE TRANSACTIONS. The Borrower shall, and shall cause each
of its Subsidiaries to, not to conduct transactions with any of its Affiliates,
unless such transaction shall be on a basis no less favorable to the Borrower or
its Subsidiary than would apply in a transaction with a non-Affiliate and which
are approved by the board of directors (or similar governing body) of the
Borrower or Subsidiary. Borrower and its Subsidiaries will not make any payments
or distributions to employees, stockholders or Affiliates while the Loan is
outstanding other than salaries set forth in the Business Plan and
reimbursements of reasonable business expenses incurred in the ordinary course
after funding of the Loan, in each case without the Lender's prior written
consent.
(d) TAXES. The Borrower shall, and shall cause each of its
Subsidiaries to, pay, when due, (i) all tax assessments, and other governmental
charges and levies imposed against it or any of its property and (ii) all lawful
claims that, if unpaid, might by law become a Lien upon its property; provided,
however, that, unless such tax assessment, charge, levy or claim has become a
Lien on any of the property of the Borrower or any of is Subsidiaries, it need
not be paid if it is being contested in good faith, by appropriate proceedings
diligently conducted
38
and an adequate reserve or other appropriate provision shall have been
established therefor as required in accordance with GAAP.
(e) REQUIREMENTS OF LAW. The Borrower shall, and shall cause each of
its Subsidiaries to, comply in all material respects with all Requirements of
Law applicable to it, including, without limitation, all applicable federal,
state, local or foreign laws and regulations, including, without limitation,
those relating to environmental and employee matters (including the collection,
payment and deposit of employees' income, unemployment, Social Security and
Medicare hospital insurance taxes) and with respect to pension liabilities
(f) INSURANCE. Borrower (including its Subsidiaries) shall, at all
times, maintain with financially sound and reputable insurers insurance with
respect to the Collateral against loss or damage and all other insurance of the
kinds and in the amounts customarily insured against or carried by corporations
of established reputation engaged in the same or similar businesses and
similarly situated. Such policies of insurance shall be reasonably satisfactory
to the Lender as to form, amount and insurer. The Borrower shall furnish
certificates, policies or endorsements to the Lender as the Lender shall request
as proof of such insurance, and, if the Borrower fails to do so, the Lender is
authorized, but not required, to obtain such insurance at the expense of the
Borrower. All policies shall provide for at least thirty (30) days prior written
notice to the Lender of any cancellation or reduction of coverage and that the
Lender may act as attorney for the Borrower in obtaining, and at any time a
Default exists, adjusting, settling, amending and canceling such insurance. The
Borrower shall cause the Lender to be named as a loss payee and an additional
insured (but without any liability for the Borrower premiums) under such
insurance policies and the Borrower shall obtain non-contributory lender's loss
payable endorsements to all insurance policies in form and substance
satisfactory to the Lender. Such Lender's loss payable endorsements shall
specify that the proceeds of such insurance shall be payable to the Lender as
its interests may appear and further specify that the Lender shall be paid
regardless of any act or omission by the Borrower or any of its Affiliates. In
the event of a loss that results in a Material Adverse Effect, at its option,
the Lender may apply any insurance proceeds received by the Lender at any time
to the cost of repairs or replacement of Collateral and/or to payment of the
Obligations, whether or not then due, in any order and in such manner as the
Lender may reasonably determine or hold such proceeds as cash collateral for the
Obligations. In all other circumstances, the Borrower shall determine whether
the insurance proceeds shall be applied to the cost of repairs or replacement of
Collateral or to payment of the Obligations.
(g) BOOKS AND RECORDS; INSPECTIONS. The Borrower shall, and shall
cause each of its Subsidiaries to, (i) maintain books and records (including
computer records and programs) of account pertaining to the assets, liabilities
and financial transactions of the Borrower and its Subsidiaries in such detail,
form and scope as is consistent with good business practice and (ii) provide the
Lender and its agents and representatives with access to the premises of the
Borrower and its Subsidiaries at any time and from time to time, during normal
business hours and upon reasonable notice under the circumstances, but in all
events upon at least one (1) Business Day notice, and at any time after the
occurrence and during the continuance of a Default, for the purposes of (A)
inspecting and verifying the Collateral, (B) inspecting and copying (at the
Borrower's expense) any and all records pertaining thereto, and (C) discussing
the affairs, finances and business of the Borrower and its Subsidiaries with any
officer or director
39
thereof or with the auditors of the Borrower, all of whom are hereby authorized
to disclose to the Lender all financial statements, work papers, and other
information relating to such affairs, finances or business. After the occurrence
and during the continuance of a Default, the Borrower shall reimburse the Lender
for the reasonable travel and related expenses of the Lender's employees or, at
the Lender's option, of such outside accountants or examiners as may be retained
by the Lender. If the Lender's own employees are used, the Borrower shall also
pay such reasonable per diem allowance as Lender shall request per day, or, if
outside examiners or accountants are used, the Borrower shall also pay the
Lender the direct out-of-pocket expenses as the Lender may be obligated to pay
as fees therefor. The Borrower hereby authorize the Lender to communicate
directly with the Auditors to disclose to the Lender any and all financial
information regarding the Borrower including, without limitation, matters
relating to any audit and copies of any letters, memoranda or other
correspondence related to the business, financial condition or other affairs of
the Borrower.
(h) QUALIFIED BUSINESS. The Borrower shall continue to maintain its
status of a "Qualified Business" pursuant to the New York CAPCO law and shall
continue to maintain its headquarters and principal place of business in New
York.
(i) NOTIFICATION REQUIREMENTS. The Borrower shall timely give the
Lender the following notices and other documents:
(i) NOTICE OF DEFAULTS. Promptly, and in any event within five
Business Days after becoming aware of the occurrence of a Default or
Event of Default, a certificate of a Responsible Officer specifying
the nature thereof and the Borrower's proposed response thereto,
each in reasonable detail.
(ii) PROCEEDINGS OR CHANGES. Promptly, and in any event within
five Business Days after the Borrower becomes aware of (A) any
proceeding (other than those disclosed in this Agreement and the
Schedules to this Agreement) including, without limitation, any
proceeding the subject of which is based in whole or in part on a
commercial tort claim being instituted or threatened to be
instituted by or against the Borrower or any of its Subsidiaries in
any federal, state, local or foreign court or before any commission
or other regulatory body (federal, state, local or foreign)
involving a sum, together with the sum involved in all other similar
proceedings, in excess of $10,000 in the aggregate, (B) any order,
judgment or decree involving a sum, together with the sum of all
other orders, judgments or decrees, in excess of $10,000 in the
aggregate being entered against the Borrower or any of its
Subsidiaries or any of its property or assets, (C) any material
notice or correspondence issued to the Borrower or Subsidiary
thereof by a Governmental Authority warning, threatening or advising
of the commencement of any investigation involving the Borrower or
Subsidiary or any of its property or assets, (D) any change,
development or event which has or could reasonably be expected to
have a Material Adverse Effect, (E) the cessation of the business
relationship with any customer of the Borrower whose purchases have
accounted for more than 10% of the sales of the Borrower in any year
since the year ending December 31, 2003, (F) a change in the
location of any Collateral from the locations specified in Schedule
6.1(b) except for changes as otherwise
40
permitted herein or (G) a proposed or actual change of the name,
identity, corporate structure or jurisdiction of organization or
formation of the Borrower or any of its Subsidiaries, a written
statement describing such proceeding, order, judgment, decree,
change, development or event and any action being taken by the
Borrower with respect thereto.
(iii) MATERIAL CONTRACTS. Promptly, and in any event within
ten Business Days after any Material Contract is terminated or
amended in any material respect, or any new Material Contract is
entered into, a written statement describing such event, with copies
of amendments or new contracts, and an explanation of any actions
being taken with respect thereto.
(iv) ENVIRONMENTAL MATTERS. Promptly, and in any event within
ten Business Days after receipt by the Borrower thereof, copies of
each (A) written notice that any violation of any Environmental Law
may have been committed or is about to be committed by the Borrower
or any of its Subsidiaries, (B) written notice that any
administrative or judicial complaint or order has been filed or is
about to be filed against the Borrower or any of its Subsidiaries
alleging violations of any Environmental Law or requiring the
Borrower or any of its Subsidiaries to take any action in connection
with the release of toxic or Hazardous Materials into the
environment, or (C) written notice from a Governmental Authority or
other Person alleging that the Borrower or any of its Subsidiaries
may be liable or responsible for costs associated with a response to
or cleanup of a release of a Hazardous Material into the environment
or any damages caused thereby.
(j) CASUALTY LOSS. The Borrower shall, and shall cause each of its
Subsidiaries to, (i) provide written notice to the Lender, within ten Business
Days, of any material damage to, the destruction of or any other material loss
to any asset or property owned or used by the Borrower or any of its
Subsidiaries other than any such asset or property with a net book value
(individually or in the aggregate) less than $10,000, or any condemnation,
confiscation or other taking, in whole or in part, or any event that otherwise
diminishes so as to render impracticable or unreasonable the use of such asset
or property owned or used by the Borrower or any of its Subsidiaries together
with a statement of the amount of the damage, destruction, loss or diminution in
value (a "Casualty Loss") and (ii) diligently file and prosecute its claim for
any award or payment in connection with a Casualty Loss.
(k) QUALIFY TO TRANSACT BUSINESS. The Borrower shall, and shall
cause each of its Subsidiaries to, qualify to transact business as a foreign
corporation in each jurisdiction where the nature or extent of its business or
the ownership of its property requires it to be so qualified or authorized and
where failure to qualify or be authorized could reasonably be expected to have a
Material Adverse Effect.
(1) FINANCIAL REPORTING. The Borrower shall deliver to the Lender
the following:
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(i) ANNUAL FINANCIAL STATEMENTS. As soon as available, but not
later than 60 days after the end of each fiscal year, (A) the
Borrower's annual certified Financial Statements; and (B) the
Auditors' opinion without Qualification and a statement from the
Auditors indicating that the Auditors have not obtained knowledge of
the existence of any Default or Event of Default during their audit.
(ii) BUDGET AND PROJECTIONS. Not later than thirty days before
the end of each fiscal year of the Borrower, the Borrower shall
prepare and deliver to Lender a detailed business plan and budget
for the coming fiscal year, which Lender will be given an
opportunity to review and approve before it is so delivered to
Lender in final form, and projections of the Borrower for the
three-year period commencing with the following fiscal year, in each
case, as certified by the Chief Financial Officer of the Borrower.
Borrower will not approve and finalize an annual budget without the
prior approval of Lender.
(iii) QUARTERLY FINANCIAL STATEMENTS. As soon as available,
but not later than thirty days after the end of each quarter,
commencing with the quarter in which the Closing Date occurs, (A)
the Borrower's interim Financial Statements as at the end of such
quarter, for the most recently ended fiscal quarter and for the
fiscal year to date and (B) a certification by the Borrower's Chief
Financial Officer that such Financial Statements have been prepared
in accordance with GAAP and are fairly stated in all material
respects (subject to normal year-end audit adjustments).
(iv) MONTHLY PROFIT AND LOSS REPORT. Within five (5) Business
Days after the end of each month, the Borrower's monthly profit and
loss statement as at the end of such month.
(v) MONTHLY FINANCIAL REVIEW AND CASH REPORT. Together with
the aforementioned monthly profit and loss statements, an update of
the current year's annual projection from the Business Plan (and any
more recent budgets prepared pursuant to clause (ii) above). On a
monthly basis, a report from the Chief Financial Officer of the
Borrower that provides an explanation for any areas of
underperformance or overperformance against the budget for the month
in question, and the reasons for the changes to the budget for any
future months. In addition, a monthly cash report will be delivered
to Lender showing expected expenditures of cash for the month (in
detail by payee), as well as expected changes in Borrower's
consolidated cash balances and current liabilities for the month, in
each case with a comparison of actual performance versus forecast
for the prior month.
(vi) SHAREHOLDER AND SEC REPORTS. As soon as available, but
not later than five Business Days after the same are sent or filed,
as the case may be, copies of all financial statements and reports
that the Borrower sends to any of its shareholders or files with the
Securities and Exchange Commission, if applicable, or any other
Governmental Authority.
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(vii) OTHER FINANCIAL INFORMATION. Within ten (10) Business
Days after the request by the Lender therefor, such additional
financial statements, budgets, forecasts, projections and other
related data and information as to the Collateral and the business,
prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of the Borrower and its
Subsidiaries as the Lender may from time to time reasonably request,
including, without limitation, reports on employment taxes, sales
and use tax collections, and sales and use tax accruals.
(m) PAYMENT OF LIABILITIES. The Borrower shall, and shall cause each
of its Subsidiaries to, pay and discharge, in the ordinary course of business,
all obligations and liabilities (including, without limitation, tax liabilities
and other governmental charges), except where the same may be contested in good
faith by appropriate proceedings and for which adequate reserves with respect
thereto have been established in accordance with GAAP.
(n) ENVIRONMENTAL MATTERS. The Borrower shall, and shall cause each
of its Subsidiaries to, conduct its business so as to comply in all material
respects with all applicable Environmental Laws including, without limitation,
compliance in all material respects with the terms and conditions of all permits
and governmental authorizations.
(o) INTELLECTUAL PROPERTY. The Borrower shall, and shall cause each
of its Subsidiaries to, preserve and keep in full force and effect all of its
registrations and other matters relating to the Borrower Intellectual Property.
(p) BOARD OBSERVER RIGHTS. Until the later of payment and
satisfaction of all Obligations in full or exercise of the Warrant by the
Lender, the Lender shall be entitled to board observer rights, the Lender shall
receive notice of all shareholder meetings and notice of proposed business
transactions of the Borrower outside the ordinary course.
SECTION 7.2 NEGATIVE COVENANTS. The Borrower covenants and agrees
that, until payment and satisfaction of all Obligations in full, except with the
prior written approval of Lender, the Borrower will not, and will not permit any
of its Subsidiaries to, directly or indirectly, at any time:
(a) INDEBTEDNESS. Incur, assume or suffer to exist any Indebtedness
other than:
(i) Indebtedness under the Loan Documents;
(ii) Indebtedness outstanding on the date hereof;
(iii) Indebtedness incurred to finance the payment in full of
the Obligations; PROVIDED, THAT, the Obligations are paid in full
within one (1) Business Day after the funding of such Indebtedness;
and
(iv) Indebtedness (including Capitalized Lease Obligations)
for Equipment incurred after the date of this Agreement in the
ordinary course of business in an aggregate amount not to exceed
$10,000.
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(b) CORPORATE CHANGES, ETC. Merge or consolidate with any Person or
amend, alter or modify its Governing Documents or its legal name, change its
state of formation, mailing address, chief executive office or principal places
of business, structure, status or existence, or liquidate or dissolve itself (or
suffer any liquidation or dissolution) or issue any capital stock or other
equity interests.
(c) CHANGE IN NATURE OF BUSINESS. Make any material change in the
lines of its business as carried on at the date hereof or enter into any new
line of business, except reasonable extensions of the current business.
(d) SALES, ETC. OF ASSETS. In any fiscal year, sell, dispose of or
transfer, to any Person any of its assets (other than sales of its Inventory or
Equipment in the ordinary course of business), or grant any option or other
right to purchase or otherwise acquire any of its assets, with an aggregate
value, as to the Borrower and its Subsidiaries taken together, in excess of
$10,000. With respect to any disposition of assets or other properties permitted
pursuant to this Section, Lender agrees, upon reasonable prior written notice,
to release its Lien on such assets or other properties in order to permit the
Borrower to effect such disposition and shall execute and deliver to the
Borrower, at the Borrower's expense, appropriate UCC-3 termination statements
and other releases as reasonably requested by the Borrower.
(e) USE OF PROCEEDS. The Borrower may use the proceeds of the Loan
only for the purposes specified in Section 2.5 hereof.
(f) CANCELLATION OF DEBT. Cancel any liability or Indebtedness owed
to it by any Person except for consideration in the ordinary course of business.
(g) LOANS TO OTHER PERSONS. Make loans or advance any credit to any
employee, Affiliate or other Person.
(h) LIENS, ETC. Incur, assume or suffer to exist any Lien on or with
respect to any Borrower Assets, other than:
(i) Liens created hereunder and by the Security Documents; and
(ii) Permitted Liens.
(i) DIVIDENDS, STOCK REDEMPTIONS, STOCK ISSUANCES, EXCHANGE,
DISTRIBUTIONS, ETC. Issue any shares of its capital stock or other equity
interests, or securities convertible into, exchangeable for, or carrying the
right to acquire, equity securities, or issue or enter into subscriptions,
warrants, options, rights or other arrangements or commitments obligating the
Borrower or any of its Subsidiaries to issue or dispose of any of its equity
securities or any ownership interest therein, amend any of the terms of any of
the foregoing outstanding on the date hereof, pay any dividends or distributions
on, purchase, redeem or retire any shares of any class of its capital stock or
other equity interests or any warrants, options or rights to purchase any such
capital stock or other equity interests, whether now or hereafter outstanding
("Stock"), or make any payment on account of or set apart assets for a sinking
or other analogous fund for, the purchase, redemption, defeasance, retirement or
other acquisition of its Stock, or make any
44
other distribution in respect thereof, either directly or indirectly, whether in
cash or property or in obligations of the Borrower or any of its Subsidiaries.
(j) EMPLOYEES. Make any payment or distributions, or provided any
benefits or other compensation to, any employee or Affiliate (other than
payments of salary, in the amounts and of the type provided to the Lender in
writing in the Business Plan prior to the Closing Date, which includes deferral
of salary of the principals) and reimbursements of reasonable business expenses
incurred in the ordinary course of business.
(k) INVESTMENTS. Make or hold any Investment in any Person (whether
in cash, securities or other property of any kind) except each of the Borrower
and its Subsidiaries may (i) make Investments in cash and Cash Equivalents so
long as the Lender has a perfected, first priority Lien on such cash and Cash
Equivalents pursuant to a Control Agreement or a Deposit Account Control
Agreement and (ii) establish and maintain Securities Accounts in compliance with
Section 3.9(e).
(l) FISCAL YEAR. Change its fiscal year from a year ending December
31.
(m) ACCOUNTING CHANGES. Make or permit any material change in
accounting policies or reporting practices, except as required by GAAP.
(n) BANK ACCOUNTS. Open, maintain or otherwise have any checking,
savings or other accounts at any bank or other financial institution, or any
other account where money is or may be deposited or maintained with any other
Person, other than (i) accounts used exclusively for payroll, payroll taxes and
other employee wage and benefit payments to or for the benefit of its workers
and (ii) accounts with respect to which the Borrower has complied with the
provisions of Section 3.9(d).
(o) ACQUISITION OF STOCK OR ASSETS. Except for acquisitions of
Equipment and Inventory in the ordinary course of business as permitted by the
terms of this Agreement, acquire or commit or agree to acquire any stock,
securities or assets of any other Person.
(p) NEW COLLATERAL LOCATIONS. Maintain any collateral at any
locations that are not specified in Schedule 6.1(b), except for any new location
of the Borrower within the State of New York provided the Borrower (i) gives the
Lender thirty (30) days prior written notice of the intended opening of any such
new location and (ii) executes and delivers, or causes to be executed and
delivered, to the Lender such agreements, documents, and instruments as the
Lender may deem necessary or desirable to protect its security interests in the
Collateral at such location.
ARTICLE VIII
FINANCIAL COVENANTS
The Borrower covenants and agrees that, until payment and
satisfaction of all Obligations in full, except as consented to in writing by
the Lender:
45
SECTION 8.1 MINIMUM EBITDA. While the Obligations remain
outstanding, and tested on the last day of each fiscal quarter beginning June
31, 2006, with respect to each fiscal quarter, the Borrower's EBITDA, calculated
in accordance with GAAP based on accounting policies currently in effect (net of
any Capital Expenditures made during such period, if any), must equal or exceed
the amount specified in the associated column below:
(i) April 1, 2006, to June 31, 2006 ($ 200,000)
(ii) July 1, 2006, to September 30, 2006 $ 0
(iii) October 1, 2006, to December 31, 2006 $ 175,000
(iv) January 1, 2007, to March 31, 2007 $ 300,000
(v) April 1, 2007, to June 31, 2007 $ 600,000
(vi) July 1, 2007, to September 30, 2007 $ 1,000,000
(vii) October 1, 2007, to December 31, 2007 $ 1,000,000
(vii) January 1, 2007, to Maturity Date $ 1,000,000
SECTION 8.2 MINIMUM NET WORTH AND UNENCUMBERED ASSETS. While the
Obligations remain outstanding, Borrower shall have and maintain
(a) a minimum net worth that does not fall below negative
$1,300,000.00; and
(b) unencumbered assets with a book value of not less than 50% of
the principal amount outstanding under the Loan at the time of
measurement.
SECTION 8.3 MINIMUM SALES REVENUE. While the Obligations remain
outstanding, and tested on the last day of each fiscal quarter beginning June
31, 2006, with respect to each fiscal quarter, Borrower shall have sales
revenue, calculated in accordance with GAAP based on revenue recognition
policies currently in effect (net of any sales taxes collected or to be
collected with regard to such sales and net of a reasonable allowance for
projected returns, if any), equal to or exceeding the amount specified in the
associated column below:
(i) April 1, 2006, to June 31, 2006 $ 150,000
(ii) July 1, 2006, to September 30, 2006 $ 300,000
(iii) October 1, 2006, to December 31, 2006 $ 450,000
(iv) January 1, 2007, to March 31, 2007 $ 800,000
46
(v) April 1, 2007, to June 31, 2007 $ 1,200,000
(vi) July 1, 2007, to September 30, 2007 $ 1,500,000
(vii) October 1, 2007, to December 31, 2007 $ 1,500,000
(vii) January 1, 2007, to the Maturity Date $ 1,500,000
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.1 EVENTS OF DEFAULT. The occurrence of any of the
following events shall constitute an "Event of Default":
(a) the Borrower shall fail to pay any principal, interest, fees,
expenses or other Obligations when due and payable, whether at stated maturity,
by acceleration, or otherwise, and such failure shall continue for five (2)
Business Days after written notice to the Borrower; or
(b) the Borrower breaches any of the set forth in Section 7.2 or
Article VIII; or
(c) (i) the Borrower shall fail to perform any of the covenants
contained in Section 7.1 of this Agreement and such failure shall continue for
fifteen (15) days, provided, that, such fifteen (15) day period shall not apply
in the case of: (A) any failure to observe any such covenant which is not
capable of being cured at all or within such fifteen (15) day period or (B) an
intentional breach by the Borrower of any such covenant; or (ii) the Borrower or
any other party to any Loan Document fails to perform any other material terms,
covenants, conditions or provisions contained in this Agreement or any of the
other Loan Documents and such failure shall continue for fifteen (15) days; or
(d) the Borrower shall dissolve, wind up or otherwise cease to
conduct its business; or
(e) the Borrower shall become the subject of an Insolvency Event; or
(f) (i) the Borrower or any of its Subsidiaries shall fail to make
any payment (whether of principal, interest or otherwise and regardless of
amount) in respect of any of its Indebtedness when due (whether at scheduled
maturity or by required prepayment, acceleration, demand or otherwise), which
default continues for more than the applicable cure period, or (ii) any event or
condition occurs that results in any Indebtedness of the Borrower or any of its
subsidiaries becoming due other than in connection with a voluntary prepayment
by the Borrower or one of its Subsidiaries in accordance with this Agreement; or
47
(g) any representation or warranty made by the Borrower under or in
connection with any Loan Document or amendment or waiver thereof, or in any
Financial Statement, report, document or certificate delivered in connection
therewith, shall prove to have been incorrect in any material respect when made;
or
(h) any judgment or order for the payment of money which, when taken
together with all other judgments and orders rendered against the Borrower and
its Subsidiaries, exceeds $10,000 in the aggregate, shall be rendered against
the Borrower or any of its Subsidiaries and shall not be stayed, vacated, bonded
or discharged within thirty days; or
(i) (i) the indictment by any Governmental Authority, or as the
Lender may reasonably and in good faith determine, the threatened indictment by
any Governmental Authority, of the Borrower or any affiliate of the Borrower of
which the Borrower or the Lender receives notice, in either case, as to which
there is a reasonable possibility of an adverse determination, in the good faith
determination of the Lender (after a consultation with the Borrower), under any
criminal statute, or (ii) the commencement or threatened commencement of
criminal or civil proceedings against the Borrower or any Affiliate of the
Borrower pursuant to which statute or proceedings the penalties or remedies
sought or available include forfeiture of (A) any of the Collateral having an
aggregate value in excess of $10,000 or (B) any other property of the Borrower
or any of its Subsidiaries which is necessary or material to the conduct of its
business; or
(j) a Change of Control shall occur; or
(k) any material covenant, agreement or obligation of the Borrower
contained in or evidenced by any of the Loan Documents shall cease to be
enforceable, or shall be determined to be unenforceable, in accordance with its
terms; the Borrower or any of its Subsidiaries shall deny or disaffirm its
obligations under any of the Loan Documents or any Liens granted in connection
therewith or shall otherwise challenge any of its obligations under any of the
Loan Documents; or
(l) the Lender shall cease to have a perfected first priority
security interest in all of the Collateral, or Borrower or any Affiliate of
Borrower shall so claim; or
(m) the occurrence of any event or condition that has a Material
Adverse Effect.
SECTION 9.2 ACCELERATION, TERMINATION AND CASH COLLATERALIZATION.
Upon the occurrence and during the continuance of an Event of Default, the
Lender may, without prejudice to the rights of the Lender to enforce its claims
against the Borrower or any Grantor, declare all Obligations immediately due and
payable (except with respect to any Event of Default specified in Section
9.1(d), in which case all Obligations shall automatically become immediately due
and payable) without presentment, demand, protest or any other action or
obligation of the Lender.
48
SECTION 9.3 OTHER REMEDIES.
(a) Upon the occurrence and during the continuance of an Event of
Default, the Lender shall have all rights and remedies with respect to the
Obligations and the Collateral under applicable law and the Loan Documents, and
the Lender may do any or all of the following:
(i) remove for copying where they are located all documents,
instruments, files and records (including the copying of any
computer records) relating to the Borrower's or any Grantor
Receivables or use (at the expense of the Borrower) such supplies or
space of each Grantor at such Grantor's places of business and
necessary to administer, enforce and collect such Receivables and
any supporting obligations as provided under applicable law and the
Loan Documents;
(ii) accelerate (if permitted by the terms of such Receivable)
or extend the time of payment, compromise, issue credits or bring
suit on the any Grantor's Receivable (in the name of the applicable
Grantor or the Lender) and otherwise administer and collect such
Receivables;
(iii) sell, assign and deliver the Receivables of any Grantor
with or without advertisement, at public or private sale, for cash,
on credit or otherwise, subject to applicable law;
(iv) foreclose the security interests created pursuant to the
Loan Documents by any available procedure, or take possession of any
or all of the Collateral, without judicial process and enter any
premises where any Collateral may be located for the purpose of
taking possession of or removing the same;
(v) require the Borrower, at the Borrower's expense, to
assemble and make available to the Lender any part or all of the
Collateral at the premises of the Borrower at any time designated by
the Lender;
(vi) collect, foreclose, receive, appropriate, setoff and
realize upon any and all Collateral;
(vii) remove any or all of the Collateral from any premises on
or in which the same may be located for the purpose of effecting the
sale, foreclosure or other disposition thereof or for any other
purpose;
(viii) sell, lease, transfer, assign, deliver or otherwise
dispose of any and all Collateral (including entering into contracts
with respect thereto, public or private sales at any exchange,
broker's board, at any office of the Lender or elsewhere) at such
prices or terms as the Lender may deem reasonable, for cash, upon
credit or for future delivery, with the Lender having the right to
purchase the whole or any part of the Collateral at any such public
sale; or
(ix) terminate this Agreement.
49
If any of the Collateral is sold or leased by the Lender upon credit terms or
for future delivery, the Obligations shall not be reduced as a result thereof
until payment therefor is finally collected by the Lender. In the event the
Lender institutes an action to recover any Collateral or seeks recovery of any
Collateral by way of prejudgment remedy, each Grantor waives the posting of any
bond which might otherwise be required.
(b) The Lender may bid or become a purchaser at any sale, free from
any right of redemption, which right is expressly waived by each Grantor. If
notice of intended disposition of any Collateral is required by law, it is
agreed that ten Business Days' notice shall constitute reasonable notification.
Each Grantor will assemble the Collateral in its possession and make it
available at the premises of the Borrower, and will make available to the Lender
the premises and facilities of the Borrower for the purpose of the Lender's
taking possession of or removing the Collateral or putting the Collateral in
saleable form. The Lender may sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any exchange, broker's board or at
any of the Lender's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Lender may deem commercially
reasonable. The Lender shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Lender may adjourn any
public or private sale from tune to time by announcement at the time and place
fixed therefor, and such sale may, upon additional notice in accordance with
this Section 9.3(b) and applicable law, be made at the time and place to which
it was so adjourned. Each Grantor hereby grant the Lender a license to enter and
occupy any of such Grantor's leased or owned premises and facilities, without
charge, to the extent necessary to exercise any of such rights or remedies of
the Lender.
(c) The Lender may, at any time or from time to time that a Default
or Event of Default has occurred and is continuing, enforce the rights of each
Grantor against any account debtor or secondary obligor or other obligor in
respect of any of the Accounts or other Receivables. Without limiting the
generality of the foregoing, the Lender may at such time or times (i) notify any
or all account debtors, secondary obligors or other obligors in respect thereof
that the Receivables have been assigned to the Lender and that the Lender has a
security interest therein and the Lender may direct any or all accounts debtors,
secondary obligors and other obligors to make payment of Receivables directly to
the Lender, extend the time of payment of, compromise, settle or adjust for
cash, credit, return of merchandise or otherwise, and upon any terms or
conditions, any and all Receivables or other obligations included in the
Collateral and thereby discharge or release the account debtor or any secondary
obligors or other obligors in respect thereof without affecting any of the
Obligations, demand, collect or enforce payment of any Receivables or such other
obligations, but without any duty to do so, and the Lender shall not be liable
for its failure to collect or enforce the payment thereof nor for the negligence
of its agents or attorneys with respect thereto and take whatever other action
the Lender may deem necessary or desirable for the protection of its interests.
SECTION 9.4 LICENSE FOR USE OF SOFTWARE AND OTHER INTELLECTUAL
PROPERTY. Upon the occurrence or during the continuance of a Default or Event of
Default, Each Grantor hereby grant to the Lender an irrevocable, non-exclusive
license or other right to use or sublicense, without charge or royalty, all
computer software programs, data bases, processes, trademarks, tradenames,
copyrights, labels, trade secrets, service marks, copyrights, copyrightable
material, advertising materials and other rights, assets and materials of such
50
Grantor, whether now owned or hereafter acquired, including in such license
reasonable access to all media in which any of the foregoing may be stored or
recorded and to all computer programs used for the compilation or printout
thereof.
SECTION 9.5 NO MARSHALING; DEFICIENCIES; REMEDIES CUMULATIVE. The
Lender shall have no obligation to marshal any Collateral or to seek recourse
against or satisfaction of any of the Obligations from one source before seeking
recourse against or satisfaction from another source. The net cash proceeds
resulting from the Lender's exercise of any of the foregoing rights to liquidate
Collateral, including any and all collections (after deducting all of the
Lender's expenses related thereto), shall be applied by the Lender to such of
the Obligations and in such order as the Lender shall elect in its sole and
absolute discretion, whether due or to become due and in accordance with
applicable law. The Borrower shall remain liable to the Lender for any
deficiency with interest at the highest rate applicable to Loan hereunder and
the Lender in turn agrees to remit to the Borrower or its successor or assign,
any surplus resulting therefrom. All of the Lender's remedies under the Loan
Documents shall be cumulative, may be exercised simultaneously against any
Collateral and each Grantor or in such order and with respect to such Collateral
or any Grantor as the Lender may deem desirable, and are not intended to be
exhaustive.
SECTION 9.6 WAIVERS. Except as may be otherwise specifically
provided herein or in any other Loan Document, each Grantor hereby waive any
right to a judicial or other hearing with respect to any action or prejudgment
remedy or proceeding by the Lender to take possession, exercise control over, or
dispose of any item of Collateral in any instance (regardless of where the same
may be located) where such action is permitted under the terms of this Agreement
or any other Loan Document or by applicable law or of the time, place or terms
of sale in connection with the exercise of the Lender's rights hereunder and
also waives any bonds, security or sureties required by any statute, rule or
other law as an incident to any taking of possession by the Lender of any
Collateral. Each Grantor also waive any damages (direct, consequential or
otherwise) occasioned by the enforcement of the Lender's rights under this
Agreement or any other Loan Document including the lawful taking of possession
of any Collateral or the giving of notice to any account debtor or the
collection of any Receivable of such Grantor to the extent authorized to do so
by the Loan Documents. Each Grantor also consent that upon the occurrence and
during the continuance of a Default or an Event of Default, the Lender may
peaceably enter upon any premises owned by or leased to it without obligations
to pay rent or for use and occupancy, through self-help, without judicial
process and without having first obtained an order of any court. These waivers
and all other waivers provided for in this Agreement and the other Loan
Documents have been negotiated by the parties, and each Grantor acknowledges
that it has been represented by counsel of its own choice, have consulted such
counsel with respect to its rights hereunder and have freely and voluntarily
entered into this Agreement and the other Loan Documents as the result of
arm's-length negotiations.
SECTION 9.7 FURTHER RIGHTS OF THE LENDER.
(a) FURTHER ASSURANCES. Each Grantor shall do all things and shall
execute and deliver all documents and instruments reasonably requested by the
Lender to protect or perfect any Lien (and the priority thereof) of the Lender
on the Collateral including, without limitation, financing statements under the
Code. The Lender is authorized to describe the
51
Collateral covered by any financing statement filed by it under the Code as "all
assets" or "all personal property" of the Borrower.
(b) INSURANCE; ETC. In the event that any Grantor shall fail to
purchase or maintain insurance (where applicable), or to pay any tax,
assessment, governmental charge or levy, except as the same may be otherwise
permitted hereunder or which is being contested in good faith by appropriate
proceedings and for which adequate reserves have been established in accordance
with GAAP, or in the event that any Lien prohibited hereby shall not be paid in
full or discharged, or in the event that the Borrower or any Grantor shall fail
to perform or comply with any other covenant, promise or obligation to the
Lender hereunder or under any other Loan Document, the Lender may (but shall not
be required to) perform, pay, satisfy, discharge or bond the same for the
account of the Borrower or any Grantor, and all amounts so paid by the Lender
shall be treated as an additional Loan to the Borrower and shall constitute part
of the Obligations.
(c) COMMERCIALLY REASONABLE STANDARDS. To the extent that applicable
law imposes duties on the Lender to exercise remedies in a commercially
reasonable manner (which duties cannot be waived under such law), each Grantor
acknowledge and agree that it is not commercially unreasonable for the Lender
(i) to fail to incur expenses reasonably deemed significant by the Lender to
prepare Collateral for disposition or otherwise to complete raw material or work
in process into finished goods or other finished products for disposition, (ii)
to fail to obtain third party consents for access to Collateral to be disposed
of, or to obtain or, if not required by other law, to fail to obtain consents of
any Governmental Authority or other third party for the collection or
disposition of Collateral to be collected or disposed of, (iii) to fail to
exercise collection remedies against account debtors or other persons obligated
on Collateral or to remove liens or encumbrances on or any adverse claims
against Collateral, (iv) to exercise collection remedies against account debtors
and other persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (v) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (vi) to contact other
persons, whether or not in the same business as the Borrower, for expressions of
interest in acquiring all or any portion of the Collateral, (vii) to hire one or
more professional auctioneers to assist in the disposition of Collateral,
whether or not the collateral is of a specialized nature, (viii) to dispose of
Collateral by utilizing Internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capability of
doing so, or that match buyers and sellers of assets, (ix) to dispose of assets
in wholesale rather than retail markets, (x) to disclaim disposition warranties,
(xi) to purchase insurance or credit enhancements to insure the Lender against
risks of loss, collection or disposition of Collateral or to provide to the
Lender a guaranteed return from the collection or disposition of Collateral, or
(xii) to the extent deemed appropriate by the Lender, to obtain the services of
other brokers, investment bankers, consultants and other professionals to assist
the Lender in the collection or disposition of any of the Collateral. Each
Grantor acknowledges that the purpose of this Section is to provide
non-exhaustive indications of what actions or omissions would not be
commercially unreasonable in the Lender's exercise of remedies against the
Collateral and that other actions or omissions by the Lender shall not be deemed
commercially unreasonable solely on account of not being indicated in this
Section. Without limitation of the foregoing, nothing contained in this Section
shall be construed to grant any rights to the Borrower or any Grantor or to
impose any duties on the Lender that would not have been granted or imposed by
this Agreement or by applicable law in the absence of this
52
Section. All references to the term "good faith" used herein when applicable to
the Lender shall mean, notwithstanding anything to the contrary contained herein
or in the Code, honesty in fact in the conduct or transaction concerned. The
Borrower and each Grantor shall have the burden of proving any lack of good
faith on the part of the Lender alleged by the Borrower or any Grantor at any
time.
SECTION 9.8 INTEREST AFTER EVENT OF DEFAULT. The Borrower agrees and
acknowledges that the additional interest and fees that may be charged under
Section 4.2: (a) are an inducement to the Lender to make the Loan hereunder and
that the Lender would not consummate the transactions contemplated by this
Agreement without the inclusion of such provisions; (b) are fair and reasonable
estimates of the Lender's costs of administering the Loan upon an Event of
Default; and (c) are intended to estimate the Lender's increased risks upon an
Event of Default.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 NOTICES. Except as otherwise provided herein, all
notices and other communications hereunder shall be in writing and sent by
certified or registered mail, return receipt requested, by overnight delivery
service, with all charges prepaid, by hand delivery, or by telecopier followed
by a hard copy sent by regular mail, if to the Lender, then to
Aegis NY Venture Fund, LP
c/o Aegis NY Venture Fund Management Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
With a copy to:
Nimkoff ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇)▇▇▇-▇▇▇▇
and if to the Borrower or any Subsidiary of the Borrower, then to
SLM Holdings, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
53
With a copy to:
▇▇▇▇▇▇▇ Savage LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇)▇▇▇-▇▇▇▇
or, in each case, to such other address as the Borrower, the Lender may specify
to the other parties in the manner required hereunder. All such notices and
correspondence shall be deemed given (i) if sent by certified or registered
mail, three Business Days after being postmarked, (ii) if sent by overnight
delivery service or by hand delivery, when received at the above stated
addresses or when delivery is refused and (iii) if sent by telecopier
transmission, when such transmission is confirmed.
SECTION 10.2 DELAYS; PARTIAL EXERCISE OF REMEDIES. No delay or
omission of the Lender to exercise any right or remedy hereunder shall impair
any such right or operate as a waiver thereof. No single or partial exercise by
the Lender of any right or remedy shall preclude any other or further exercise
thereof, or preclude any other right or remedy.
SECTION 10.3 RIGHT OF SETOFF. In addition to, and not in limitation
of, all rights of offset that the Lender or any of its Affiliates may have under
applicable law, and whether or not the Lender has made any demand or the
Obligations have matured, the Lender and its Affiliates shall have the right to
set off and apply any and all deposits (general or special, time or demand,
provisional or final, or any other type) at any time held and any other
Indebtedness at any time owing by the Lender or any of its Affiliates to or for
the credit or the account of the Borrower or the Borrower's Affiliate against
any and all of the Obligations. In the event that the Lender exercises any of
its rights under this Section 10.3, the Lender shall provide notice to the
Borrower of such exercise, provided that the failure to give such notice shall
not affect the validity of the exercise of such rights.
SECTION 10.4 INDEMNIFICATION; REIMBURSEMENT OF EXPENSES OF
COLLECTION.
(a) The Borrower and its Subsidiaries hereby agree that, whether or
not any of the transactions contemplated by this Agreement or the other Loan
Documents are consummated, the Borrower and its Subsidiaries will indemnify,
defend and hold harmless (on an after-tax basis) the Lender, and its successors
and assigns and their respective directors, officers, agents, employees,
advisors, shareholders, attorneys and Affiliates (each, an "Indemnified Party")
from and against any and all losses, claims, damages, liabilities, deficiencies,
obligations, fines, penalties, actions (whether threatened or existing),
judgments, suits (whether threatened or existing) or expenses (including,
without limitation, reasonable fees and disbursements of counsel and experts)
imposed on, asserted against or incurred by any of them (collectively, "Claims")
(except, in the case of each Indemnified Party, to the extent that any Claim is
determined in a final and non-appealable judgment by a court of competent
jurisdiction to have directly resulted solely from such Indemnified Party's
gross negligence or willful misconduct) arising out of or by reason of (i) any
litigation, investigation, claim or proceeding related to (A) this Agreement,
any other Loan Document or the transactions contemplated hereby or thereby, (B)
any actual or proposed use by the Borrower or its
54
Subsidiaries of the proceeds of the Loan or (C) the Lender's entering into this
Agreement, the other Loan Documents or any other agreements and documents
relating hereto, including, without limitation, amounts paid in settlement,
court costs and the fees and disbursements of counsel incurred in connection
with any such litigation, investigation, claim or proceeding, (ii) any remedial
or other action taken or required to be taken by the Borrower or its
Subsidiaries in connection with compliance by the Borrower its Subsidiaries, or
any of its properties, with any federal, state or local Environmental Laws,
(iii) any pending, threatened or actual action, claim, proceeding or suit by any
shareholder or director of the Borrower, and Affiliate of Borrower or any actual
or purported violation of the Borrower's Governing Documents, Grantor's
Governing Documents or any other agreement or instrument to which the Borrower
or Grantor is a party or by which any of its respective properties are bound,
and (iv) any act or omission performed or omitted in a manner reasonably
believed by such Indemnified Party to be consistent with this Agreement, the
other Loan Documents or any other document or instrument now or hereafter
executed and delivered in connection herewith. In addition, the Borrower and the
Grantor shall, upon demand, pay to the Lender all costs and expenses incurred by
the Lender (including the reasonable fees and disbursements of counsel) in
connection with the preparation, execution, delivery, administration,
modification and amendment of the Loan Documents, and pay to the Lender all
costs and expenses (including the reasonable fees and disbursements of counsel)
paid or incurred by the Lender in (A) enforcing or defending its rights under or
in respect of this Agreement, the other Loan Documents or any other document or
instrument now or hereafter executed and delivered in connection herewith, (B)
collecting the Obligations or otherwise administering this Agreement and (C)
foreclosing or otherwise realizing upon the Collateral or any part thereof. If
and to the extent that the obligations of the Borrower and its Subsidiaries
hereunder are unenforceable for any reason, the Borrower and its Subsidiaries
hereby agree to make the maximum contribution to the payment and satisfaction of
such obligations that is permissible under applicable law.
(b) The Borrower's and its Subsidiaries' obligations under Section
4.4 and this Section 10.4 shall survive any termination of this Agreement and
the other Loan Documents and the payment in full of the Obligations, and are in
addition to, and not in substitution of, any of the other Obligations.
SECTION 10.5 AMENDMENTS, WAIVERS AND CONSENTS. No amendment or
waiver of any provision of this Agreement or any other Loan Document, or consent
to any departure by the Borrower or any other party thereto therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Borrower and the Lender, and then such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 10.6 NONLIABILITY OF LENDER. The relationship among each of
the Borrower, and the Lender shall be solely that of Borrower and Lender. The
Lender shall not have any fiduciary responsibilities to the Borrower. The Lender
does not undertake any responsibility to the Borrower to review or inform the
Borrower of any matter in connection with any phase of the Borrower's business
or operations.
SECTION 10.7 COUNTERPARTS; TELECOPIED SIGNATURES. This Agreement and
any waiver or amendment hereto may be executed in counterparts and by the
parties hereto in
55
separate counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument. This Agreement and each of the other Loan Documents may be executed
and delivered by telecopier or other facsimile transmission all with the same
force and effect as if the same was a fully executed and delivered original
manual counterpart.
SECTION 10.8 SEVERABILITY. In case any provision in or obligation
under this Agreement, any Note or any other Loan Document shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.
SECTION 10.9 MAXIMUM RATE. Notwithstanding anything to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the parties
hereto hereby agree that all agreements between them under this Agreement and
the other Loan Documents, whether now existing or hereafter arising and whether
written or oral, are expressly limited so that in no contingency or event
whatsoever shall the amount paid, or agreed to be paid, to the Lender for the
use, forbearance, or detention of the money loaned to the Borrower and evidenced
hereby or thereby or for the performance or payment of any covenant or
obligation contained herein or therein, exceed the maximum non-usurious interest
rate, if any, that at any time or from time to time may be contracted for,
taken, reserved, charged or received on the Obligations, under the laws of the
State of New York (or the laws of any other jurisdiction whose laws may be
mandatorily applicable notwithstanding other provisions of this Agreement and
the other Loan Documents), or under applicable federal laws which may presently
or hereafter be in effect, in any case after taking into account, to the extent
permitted by applicable law, any and all relevant payments or charges under this
Agreement and the other Loan Documents executed in connection herewith, and any
available exemptions, exceptions and exclusions (the "Highest Lawful Rate"). If
due to any circumstance whatsoever, fulfillment of any provision of this
Agreement or any of the other Loan Documents at the time performance of such
provision shall be due shall exceed the Highest Lawful Rate, then,
automatically, the obligation to be fulfilled shall be modified or reduced to
the extent necessary to limit such interest to the Highest Lawful Rate, and if
from any such circumstance the Lender should ever receive anything of value
deemed interest by applicable law which would exceed the Highest Lawful Rate,
such excessive interest shall be applied to the reduction of the principal
amount then outstanding hereunder or on account of any other then outstanding
Obligations and not to the payment of interest, or if such excessive interest
exceeds the principal unpaid balance then outstanding hereunder and such other
then outstanding Obligations, such excess shall be refunded to the Borrower. All
sums paid or agreed to be paid to the Lenders for the use, forbearance, or
detention of the Obligations and other Indebtedness of the Borrower to the
Lenders shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of such Indebtedness,
until payment in full thereof, so that the actual rate of interest on account of
all such Indebtedness does not exceed the Highest Lawful Rate throughout the
entire term of such Indebtedness. The terms and provisions of this Section shall
control every other provision of this Agreement, the other Loan Documents and
all other agreements among the parties hereto.
SECTION 10.10 ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS. This
Agreement and the other Loan Documents constitute the entire agreement among the
parties, supersede any
56
prior written and verbal agreements among them, and shall bind and benefit the
parties and their respective successors and permitted assigns.
SECTION 10.11 LIMITATION OF LIABILITY. NEITHER THE LENDER NOR ANY
AFFILIATE OF THE LENDER SHALL HAVE ANY LIABILITY TO THE BORROWER OR ANY GRANTOR
(WHETHER SOUNDING IN TORT, CONTRACT, OR OTHERWISE) FOR LOSSES SUFFERED BY SUCH
PERSON IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THE
TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED BY THIS AGREEMENT OR ANY LOAN
DOCUMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH,
UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER
BINDING ON THE LENDER THAT THE LOSSES WERE THE RESULT OF ACTS OR OMISSIONS
CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE LENDER. THE BORROWER
AND EACH GRANTOR HEREBY WAIVES ALL FUTURE CLAIMS AGAINST THE LENDER FOR SPECIAL,
INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES.
SECTION 10.12 GOVERNING LAW. THE VALIDITY, INTERPRETATION AND
ENFORCEMENT OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ANY DISPUTE
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE
GOVERNED BY THE INTERNAL LAWS AND DECISIONS OF THE STATE OF NEW YORK (WITHOUT
REGARD TO CONFLICT OF LAW PRINCIPLES).
SECTION 10.13 SUBMISSION TO JURISDICTION. ALL DISPUTES BETWEEN OR
AMONG BORROWER, ANY GRANTOR AND THE LENDER, WHETHER SOUNDING IN CONTRACT, TORT,
EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED
IN NEW YORK COUNTY, NEW YORK AND THE COURTS TO WHICH AN APPEAL THEREFROM MAY BE
TAKEN; PROVIDED, HOWEVER, THAT THE LENDER SHALL HAVE THE RIGHT, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE BORROWER OR ANY GRANTOR OR
ITS RESPECTIVE PROPERTY IN (A) ANY COURTS OF COMPETENT JURISDICTION AND VENUE
AND (B) ANY LOCATION SELECTED BY THE LENDER TO ENABLE THE LENDER TO REALIZE ON
SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
LENDER. THE BORROWER AND EACH GRANTOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO
THE LOCATION OF THE COURT IN WHICH THE LENDER HAS COMMENCED A PROCEEDING,
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
FORUM NON CONVENIENS.
SECTION 10.14 JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVES
TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO (I)
THIS AGREEMENT; (II) ANY OTHER LOAN DOCUMENT OR OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN OR AMONG A BORROWER AND THE LENDER; OR (III) ANY
CONDUCT,
57
ACTS OR OMISSIONS OF THE BORROWER, THE LENDER OR ANY OF THEIR RESPECTIVE
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR OTHER AFFILIATES, IN EACH
CASE WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
58
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their proper and duly authorized officers as of the date first
set forth above.
BORROWER AND GRANTOR:
SLM HOLDINGS, INC.,
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: CEO
GRANTOR:
SALES LEAD MANAGEMENT INC.,
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: CEO
LENDER:
AEGIS NY VENTURE FUND, LP
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chairman
6.1(k) LIENS
Five Point Capital has a lien covering hardware for $40,000 and a lien
covering Convex Boxes for $15,000.
6.1(m) NONE
6.1(s) NONE
6.1(w) TWO UCC-1 IN THE STATE OF DELAWARE FOR SALES LEAD MANAGEMENT, INC. AND
SLM HOLDINGS, INC.
6.1(y) INTELLECTUAL PROPERTY USED TO CONDUCT BUSINESS
The Company has two trademarks granted - "TBEV" and "The Broker's
Advantage"
The Company has a trademark pending in "The SLM Dialer"
6.1(Z) ENVIRONMENTAL VIOLATIONS
None
6.1(bb) DESCRIPTION OF E-VANTAGE SYSTEM
The first suite of products offered by SLM Holdings is our proprietary
web-based "Broker's e-Vantage" sales lead management system, which we license on
a monthly per-user basis. SLM offers web based software tools that allow
securities brokers, with the simple click of a mouse, to organize their sales
prospect's information significantly better than the manual, labor-intensive
system that is typically used in the securities brokerage industry. There are
four essential components to the System;
1. A web based "all you can eat" database of Leads that brokers can custom
select using their own specific prospecting criteria and then seamlessly upload
those files to the system
2. Users can then retrieve and call those prospects via an auto-dial button on
their computer screen that connects to either via VoIP or traditional telephone
line. Case studies show the Auto Dialer to double or triple the typical amount
of calls generated by each user daily.
3. A comprehensive "PRM" (Prospect Relationship Management) suite of tools to
intelligently allow reps to manage their qualified databases.
4. A State of the Art permission based email campaign program custom generated
by SLM a the clients direction to afford critical first impression flash and
HTML email campaigns and follow up campaigns. All work includes the firm's
custom colors, logo and copy and often digital pictures of the reps themselves.
All campaigns are pre-approved by a firms compliance department and are
generated in conjunction with NASD accepted guidelines.
5. Ancillary to our Broker's e-Vantage system, SLM is authorized to re-sell
Teleblock(R) services to allow our customers to comply with federal "Do not
call" prohibitions. The service can be sold as a stand alone or integrated into
the Brokers e-Vantage System.
6.1(ff) THE COMPANY HAS MATERIAL CONTRACTS WITH THE FOLLOWING TBEV CUSTOMERS:
▇▇▇▇ ▇▇▇▇▇ Financial
Great Eastern
Kent Financial
▇.▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Newbridge Securities
National Securities
Starlight Securities
I-Trade Direct
Ehrenkrantz King ▇▇▇▇▇▇▇▇, Inc.
V Finance
THE COMPANY HAS A HOSTING AGREEMENT WITH GLOBIX, INC.
6.1(gg) MATERIALS PROVIDED TO INSURANCE REGULATORS PROVIDED DIRECTLY TO LENDER
6.1 AFFILIATETRANSACTIONS
The Company has certain debt outstanding to ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇
6.1(jj) BANK ACCOUNTS
Citibank, NA 705 84670
EXHIBIT A
Certificated # Stockholder Names Shares
----------------------------------------------------------------------------
1492 ▇▇▇▇▇ ▇▇▇▇▇▇▇ 5,000,000 x
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 5,000,000 x
1535 ▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ ▇▇▇▇▇ TTEES 5,000,000 x
1500 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 1,712,500 x
1505 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 1,285,000 1,265,000
1493 ▇▇▇▇ ▇▇▇▇ 1,075,000 x
1497 ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 1,000,000 x
1524 ▇▇▇▇▇▇▇ ▇▇▇▇▇ 1,000,000 x
1494 ▇▇▇▇▇▇ ▇▇▇▇▇▇ 675,000 x
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 662,500 x
1514 RMH VENTURES LLC 625,000 x
1507 ▇▇▇▇▇ ▇. ▇▇▇▇ 625,000 x
1499 CHILDRESS MANAGEMENT SERVICES, INC. ESOP 537,500 x
1512 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ TTEE FBO 500,000 x
1527 ▇▇▇▇ ▇▇▇▇▇▇▇ 437,500 x
▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ 425,000 x
1508 ▇▇▇▇▇ ▇▇▇▇▇ 300,000 325,000
1532 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 275,000 x
1510 ▇▇▇▇▇ ▇▇▇▇▇▇ 250,000 x
1516 ▇▇▇▇▇▇▇ ▇▇▇ 250,000 x
1498 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 200,000 X
1531 CHILDRESS ENGINEERING SERVICES, INC. 137,500 X
1496 ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. 137,500 X
1495 ▇▇▇ ▇▇▇▇▇▇▇ 137,500 x
1529 ▇▇▇▇▇ ▇▇▇▇▇ 125,000 x
1501 ▇▇▇▇▇ ▇▇▇▇▇▇ & UNTION PENSION TTEE FBO 125,000 x
1530 ▇▇▇▇▇ ▇▇▇▇▇ 125,000 x
1517 ▇▇▇▇ ▇▇▇▇▇▇ 125,000 x
1513 RICHIE SEITCHER 125,000 x
1519 ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ TTEE FBO 125,000 x
1528 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 100,000 x
1533 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 75,000 x
1525 ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ TTEE FBO 62,500 x
1526 ▇▇▇▇▇ ▇▇▇▇▇▇ 62,500 x
1518 ▇▇▇▇▇▇ ▇▇▇▇▇▇ TTEE FBO 62,500 x
1503 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 62,500 x
1502 P.C. ▇▇▇▇▇▇, INC. 25,000 x
1506 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 25,000 x
1511 MTRAIN ASSOCIATES LLC 10,000 x
-----------
28,482,500
-----------
1476 CEDE & CO - ▇▇▇▇▇▇ 480,000 Cert. Needs to b
1476 CEDE & CO - ?? 320 Cert. Needs to b
1476 CEDE & CO - (LAST QTR - HALTER???) 71,001 Cert. Needs to b
1188 HALTER FINANCIAL GROUP, INC. 274,004
1065 ▇▇▇▇▇ ▇▇▇▇▇▇ 192,080
1021 AMANA REFRIGERATION, INC. 154,090
1178 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 111,275
1477 ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 50,000
1269 ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 10,000
1456 ▇▇▇▇ ▇▇▇▇▇▇ 9,100
1113 CRYSTAL TIPS ICE SYSTEMS 7,425
1479 FIRST CO 7,275
1053 BEVERAGE AIR 5,615
1261 MASTER-BILT 3,990
1305 PAMECO CORP. 3,960
1334 RELIABLE METAL PRODUCTS 3,915
1417 TRUE FOOD SERVICE EQUIPMENT, INC. 2,580
1195 HOBART CORP. 2,510
1212 ▇.▇. ▇▇▇▇▇▇▇ COMPANY, INC. 2,415
1432 ▇▇▇▇ TUBE ICE, LLC 1,960
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ICE DISTRIBUTING, INC. 1,890
1238 KY/▇▇▇▇▇▇▇ 1,665
1348 RYERSON ▇▇▇▇ 1,665
▇▇▇▇ ▇▇▇▇▇ ENGINEERING 1,615
1257 MARKET FORGE INDUSTRIES, INC. 1,560
1277 MITSUBISHI ELECTRONICS AMERICA, INC. 1,320
1418 TRUE MANUFACTURING 1,220
1169 FS ALLOYS 1,200
1024 AMERICAN FREIGHTWAY, INC. 1,140
1109 CRES-COR 1,140
1011 ADVANCE TABCO-PM 1,095
1204 IMI ▇▇▇▇▇▇▇▇▇, INC. 1,090
1146 FAST FOOD EQUIPMENT 980
1185 GRINDMASTER CORPORATION 940
1239 ▇▇▇▇▇ PANEL SYSTEMS 880
1027 ▇▇▇▇▇▇▇▇ COMPANY 760
1396 TEXAS RESTAURANT ASSOC. 740
1236 ▇▇▇▇▇▇ COMPANY 735
1457 NATIONAL FINANCIAL SERVICES LLC 725
1046 BARSCO 685
1247 LEER LIMITED PARTNERSHIP 670
1438 WASHINGTON SPECIALITY METALS 640
1209 INTERNATIONAL PATTERNS, INC. 585
1246 LEASECO 555
1131 ECLIPSE TELECOMMUNICATIONS, INC. 545
1197 HOSHIZAKI S. CENTRAL DISTRIBUTION CTR, INC. 535
1081 CENTRAL FREIGHT LINES, INC. 530
1339 ROADRUNNER FREIGHT SYSTEMS, INC. 520
1095 COMPONENT HARDWARE GROUP 510
1199 HP ENTERPRISES 510
1056 BOOTH, INC. 505
1336 ▇▇▇▇▇▇▇▇▇▇ FIRE EQUIPMENT CO. 495
1350 SCOTTSMAN REFRIGERATIONS SUPPLIES, INC. 490
1370 ▇▇▇▇▇▇ & ASSOCIATES PC 470
1291 NORTHWEST REFRIGERATION 440
1297 OLD DOMINION WOOD PRODUCTS, INC. 440
1425 UNIVEX CORP. 380
1405 THERMO-KOOL 375
1228 ▇▇▇▇▇▇▇ OF CHICAGO 370
1471 ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ASSOCIATES, INC. 370
1006 ABC ABRASIVES 345
1162 ▇▇▇▇▇▇▇, INC. 345
1356 ▇▇▇▇ INDUSTRIES 345
1294 OFFICE DEPOT 330
1130 EAST TEXAS SERVICE CO., INC. 325
1150 FEDERAL INDUSTRIES 325
1391 ▇▇▇▇▇▇ MADE CONCEPTS 320
1372 STAR MANUFACTURING 305
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ PC 300
1275 MISSOURI EQUIPMENT CO. 295
1116 DE ▇▇ ▇▇▇▇▇ & ASSOCIATES, P.C. 290
1483 HATCO CORPORATION 285
1074 CARLISLE FOODSERVICE PRODUCTS 280
1233 KOLPAK REFRIGERATION 280
1281 MTS SEATING 280
1083 CHICAGO METALLIC PRODUCTS, INC. 275
1268 ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP 275
1093 COMMERCIAL KITCHEN SERVICES 265
1340 ROBOT COUPE USA, INC. 265
1424 UNITED REFRIGERATION, INC. 265
1032 ARCVISION, INC. 260
1168 ▇▇▇-▇▇▇▇▇▇ MOVING & STORAGE 260
1214 JADE RANGE 255
1482 HATCO 250
1369 STANDARD SUPPLY & DISTRIBUTING, INC. 250
1411 TRANSOM STAFFING SERVICES, INC. 250
1486 OVERNITE TRANSPORTATION 245
1365 SOUTHWESTERN ▇▇▇▇ WIRELESS 245
1035 ARNEG 240
1126 DYNAMIC SERVICE CONTRACT 240
1208 INTERNATIONAL MAILING SY 235
1308 ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ 235
1441 ▇▇▇▇▇ MANUFACTURING, CO. 230
1273 MILE HIGH EQUIPMENT CO. 225
1050 BERKEL, INC. 220
1315 PLYMOLD SEATING 220
1282 MTS SEATING 215
1108 CRESCO, INC. 210
1210 ISI COMMERCIAL REFRIGERATION, INC. 210
1058 BRENTWOOD 205
1225 KASON ▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇-▇▇ FOOD SERVICE SYSTEMS 195
1385 T & S BRASS AND BRONZE WORKS, INC. 195
1047 ▇▇▇▇▇▇▇ BRO 190
1101 CONSOLIDATED FREIGHTWAYS 190
1313 PITCO FRIALATOR, INC. 190
1446 WORLD TABLEWARE, INC. 190
1292 NSF INTERNATIONAL 180
1413 TRESKO 180
1147 FAST FOOD EQUIPMENT, INC. 175
1219 ▇▇▇ ▇▇▇▇▇▇ 175
1316 PLYMOLD SEATING 170
1104 ▇▇▇▇▇▇▇▇▇ ▇▇. ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ EQUIPMENT, INC. 165
1242 LANE & ▇▇▇▇▇▇▇ DISTRIBUTORS, INC. 165
1270 MIDWEST EQUIPMENT 165
1037 ATLAS METAL INDUSTRIES, INC. 160
1122 DISTRIBUTORS, INC. 155
1157 ▇▇▇▇▇▇▇ CORP. 155
1429 VARESOURCES 155
1129 EAGLE CHAIR, INC. 150
1386 TABLE CLOTH CO. 150
1412 TRAULSEN 150
1278 MOFFAT, INC. 145
1034 ARKANSAS LAMP 140
1072 CAL-MIL PLASTIC PRODUCTS, INC. 140
1180 GEVERS HEATING 140
1310 PEERLESS PROFESSIONAL CO. 140
1488 POLAR ▇▇▇▇ CO 140
1433 VOLLRATH CO., LLC 140
1092 COMFORT SUPPLY, INC. 135
1325 QUIPCO 135
1489 SOUTHWEST SECURITIES 135
1090 COLUMBUS COATED FABRICS 130
1243 ▇▇▇▇▇▇ 130
1408 ▇▇▇▇ ▇▇▇▇▇▇ 130
1117 DEALERS ELECTRICAL SUPPLY 125
1211 ISLAND POLY-FOODHANDLER 125
1295 OFFICE DEPOT, INC. 125
1423 UNITED PARCEL SERVICE 125
1442 ▇▇▇▇▇▇, INC. 125
1103 CONSTRUCTION DATA CORP. 120
1345 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 120
1422 UNITED HEALTHCARE 120
1041 B & B SERVICE ENGINEERS 110
1087 COLDMASTERS TEMPERATURE CONTROL, INC. 110
1088 ▇▇▇▇ ▇▇▇▇▇▇▇ 110
1327 ▇.▇. ▇▇▇▇ ▇▇. ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇-▇▇▇▇▇, INC. 110
1140 ESQUIRE DEPOSITION SERVICES - HOUSTON 105
1145 FALCON PRODUCTS, INC. 105
1229 KELMAX EQUIPMENT CO. 105
1258 MARKO INTERNATIONAL 105
1352 SERVICE 1 INC. 105
1399 TEXICAN SPECIALITY PRODUC 105
1450 YELLOW FREIGHT 105
1167 FRYMASTER 100
1342 ▇▇▇▇▇▇▇ TRUCK RENTAL/LEASING 100
1397 TEXAS SHEET METAL 100
1443 WICHITA SOUTHEAST KANSAS TRANSIT, INC. 100
1020 ALTO-SHAAM, INC. 95
1064 ▇▇▇▇-O-MATIC CORPORATION 95
1124 DIVERSIFIED METAL PRODUCTS, INC. 95
1249 LMI/TRUCKLOAD 95
1255 ▇▇▇▇ GLASS CONCEPTS 95
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ EQUIP. D. 95
1112 CROWN PACKAGING CORP. 90
1314 PITNEYWORKS 90
1360 SOUTHEST STAINLESS 90
1028 ▇▇▇▇▇▇▇ INTERNATIONAL 85
1097 COMPUTEROCITY 85
1100 CONSOLIDATED COMMERCIAL CONTROLS ▇▇
▇▇▇▇ ▇ ▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇ ▇▇▇▇▇ ENTERPRISES, INC. 85
1355 SESSION FIXTURE CO. 85
1001 A & E MOTOR FREIGHT, INC. 80
1029 APEX SUPPLY CO. 80
1054 BI-STATE REFRIGERATION 80
1067 C & K MANUFACTURING, L.L.C. 80
1098 ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ STOVE CO. 80
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, INC. 80
1231 ▇▇▇▇▇ ▇▇▇▇▇ 80
1326 R.C. DISTRIBUTING 80
1341 ▇▇▇▇▇▇▇ LEASING CORP. 80
1354 SERVICEMAN SUPPLIES 80
1144 ▇ ▇ ▇▇▇▇▇ GROUP 75
1217 ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 75
1395 TELETRAC, INC. 75
1415 TRI COUNTY SALES 75
1018 ALFA INTERNATIONAL CORP. 70
1059 ▇▇▇▇▇ ▇▇▇▇ 70
1099 CONCENTRA MEDICAL CENTERS 70
1121 DISPLAYRITE 70
1123 DITTO & ▇▇▇▇▇▇▇ INC. 70
1160 ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, INC. 70
1173 GAR 70
1481 GARMENTS TO GO, INC 70
1205 INTEDGE 70
1403 THE HOME DEPOT CRC 70
1448 XEROX CORP. 70
1051 ▇▇▇▇▇▇ INTERNATIONAL CORP 65
1076 ▇▇▇▇▇▇▇-▇▇▇▇ ▇▇. ▇▇
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇▇ CONSTRUCTION 65
1222 ▇▇▇▇▇▇▇▇▇ SUPPLY 65
1252 LUCENT TECHNOLOGIES PRODUCT FINANCE 65
1349 SAMSUNG AIR CONDITIONING 65
1390 ▇▇▇▇▇▇ DESIGN GROUP 65
1451 YELLOW FREIGHT SYSTEM, INC. 65
1003 ▇.▇. ▇▇▇▇▇▇▇ 60
1025 AMERICAN METALCRAFT 60
1118 ▇▇▇▇▇▇ ▇▇▇▇▇▇ SALES 60
1138 EPCO/UNITED SERVICE EQUIPMENT CO. 60
1190 ▇▇▇▇▇▇▇▇ TRUCK SERVICE 60
1009 ACE MART 55
1069 C ▇▇▇▇▇▇ MANUFACTURING 55
1114 CSRS PROPERTIES 55
1134 ▇▇▇▇▇▇▇ CORPORATION 55
1215 JANITROL AIR CONDITIONING & HEATING 55
1296 OLD DOMINION FREIGHT LINE, INC. 55
1338 RJF INTERNATIONAL ▇▇▇▇. ▇▇
▇▇▇▇ ▇▇▇▇▇ ARMY BRANDS 55
1416 TRINITY WASTE SERVICES 55
1023 AMERICAN DISTRIBUTORS, INC. 50
1102 CONSOLIDATED TRUCK & CASTER 50
1139 EQUIPMENT DEPOT 50
1149 FEDERAL EXPRESS 50
1177 GCS SERVICE, INC. - ▇▇. ▇▇▇▇▇ ▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ INDUSTRIES INT'L, INC. 50
1251 LUCENT TECHNOLOGIES 50
1274 MIROIL 50
1343 ROMAR SUPPLY 50
1358 SNEEZEGUARD SOLUTIONS, INC. 50
1371 STAPLES 50
1375 SUNBELT INDUSTRIAL TRUCKS 50
1383 T&S BRASS 50
1388 TABLECRAFT PRODUCTS CO-PM 50
1392 ▇▇▇▇▇▇ PRECISION PRODUCTS 50
1426 UPDATE INTERNATIONAL 50
1447 WSKT 50
1005 AAA ▇▇▇▇▇▇ TRANSPORT 45
1075 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 45
1096 COMPUTER PARADIGM GROUP LLC 45
1111 ▇▇▇▇▇▇ SALES CO., INC. 45
1259 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 45
1289 NEXTEL 45
1367 SPILL-STOP MFG. LLC 45
1048 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 40
1057 BRASS ▇▇▇▇▇ 40
1082 CHICAGO FAUCETS 40
1091 COMARK INSTRUMENTS, INC. 40
1110 CRISMAR 40
1136 ENCORE 40
1203 ICS 40
1206 INTERMEDIA COMMUNICATIONS 40
1207 INTERMEDIA COMMUNICATIONS 40
1232 KOLDAIRE SUPPLY CO., INC. 40
1264 ▇▇▇▇▇▇▇▇ METAL COMPANY 40
1328 ▇▇▇▇▇▇▇ MANUFACTURING, INC. 40
1329 ▇▇▇▇▇▇-DELUX 40
1401 THE DRAWING BOARD 40
1143 EXPO DESIGN CENTER 35
1158 ▇▇▇▇▇▇▇▇ TRUCK EQUIPMENT COMPANY 35
1216 JAYHAWK SALES 35
1363 SOUTHWESTERN ▇▇▇▇ 35
1378 SUPREMETAL 35
1384 T & S ▇▇▇▇▇ ▇▇
▇▇▇▇ ▇▇▇▇▇▇ PRESS, INC. 30
1012 ADVANTA LEASING SERVICES 30
1036 ASPEN AIR, INC. 30
1040 AUTOQUOTES 30
1052 BEST VALUE TEXTILE 30
1062 BUILDERS'ASSOCIATION 30
1148 FEDA 30
1154 FLAME GARD 30
1159 FOODSERVICE EQUIPMENT DISTRIBUTORS ASSOC 30
1186 GTE 30
1201 ▇▇▇▇▇▇ HEATING & AIR 30
1227 KG BOOTH CO. 30
1248 LE-JO ENTERPRISES, INC. 30
▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇, INC. 30
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, INC. 30
1373 STOVE PARTS SUPPLY CO., INC. 30
1407 ▇▇▇▇▇▇ REPRORAPHICS 30
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ 30
1491 ▇▇▇▇▇▇▇ MOTOR LINES, INC 30
1004 ▇.▇. ▇▇▇▇▇▇▇ & CO. 25
1039 AUSTIN REFRIGERATION SERVICES, INC. 25
1066 C & H DISTRIBUTORS, INC. 25
1077 ▇▇▇▇▇▇ & SONS FREIGHTWAYS, INC. 25
1079 CENTRAL CASTER & WHEELS 25
1105 CORPORATE EXPRESS COURIERS 25
1125 DYNAMIC INTERNATIONAL LTD. 25
1137 ENGLAND ▇▇▇▇▇▇ & ASSOCIATES 25
1156 FLO-PAC CORP 25
1161 FORKLIFTS SALES AND SERVICE, INC. 25
1480 FOXX EQUIPMENT COMPANY 25
1245 LEASE CORPORATION OF AMERICA 25
1279 MOMENTUM TEXTILES, INC. 25
1283 MUNDIAL, INC. 25
1485 ONEIDA SILVERSMITHS 25
1303 P GREEN ENTERPRISES, INC. 25
1319 PRINCE CASTLE, INC. 25
1320 PRONTO DELIVERY 25
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ CUTLERY, INC. 25
1351 SERVER PRODUCTS, INC. 25
1364 SOUTHWESTERN ▇▇▇▇ TELEPHONE 25
1387 TABLECRAFT PRODUCTS CO. 25
1400 THE DALLAS MORNING NEWS 25
1437 ▇▇▇▇▇▇ ELECTRIC COMPANY 25
1445 ▇▇▇▇▇▇▇ & CO. OF ARLINGTON 25
1014 AG VAN & TRUCK EQUIPMENT, INC. 20
1019 ALL SIZE PALLET SUPPLY 20
1044 ▇▇▇▇▇▇▇ SALES COMPANY 20
1142 EXCEL METAL PRODUCTS, INC. 20
1193 ▇▇▇▇▇▇▇▇▇ OIL CO. 20
1237 KROWNE 20
1276 MISSOURI RESTAURANT ASSOCIATION 20
1323 QUALITY KITCHEN FAB 20
1389 ▇▇▇▇ LINENS 20
1022 AMERENUE 15
1033 ARGOS FOOD EQUIPMENT, INC. 15
1038 ▇▇▇▇▇ COMPANY, INC 15
1049 BENNINGTON FURNITURE 15
1060 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ COMPANY 15
1061 BUDGET BOX CO. 15
1063 BULLET FREIGHT SYSTEMS, INC. 15
1070 ▇.▇. ▇▇▇▇▇▇▇▇ COMPANY 15
1071 CABLE & WIRELESS, INC. 15
1078 CASE PARTS 15
1084 CIRCLE PRODUCTS 15
1086 CLASSICO SEATING 15
1094 COMMERCIAL TOOL & ▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇ ▇▇▇▇▇ REPORTERS ASSOCIATED 15
1120 DETECTO SCALE CO. 15
1128 E C C I & ASSOCIATES 15
1132 EDEL & ▇▇▇▇▇ HARDWARE 15
1165 FRANKLIN MACHINE PRODUCTS 15
1171 G T E ENTERPRISES, INC - PP 15
1183 GRAYARC 15
1189 ▇▇▇▇ & PRICE CORP. 15
1200 HUB GROUP 15
1221 ▇▇▇▇▇▇▇ ▇▇▇▇ CORP. 15
1244 LAVI INDUSTRIES 15
1254 M & R EXPRESS 15
1262 MATS, INC. 15
1266 METRO ONE COURIER, INC. 15
1484 MR BAR-B-Q, INC 15
1285 NATIONAL CONVEYOR CORP. 15
1332 READ PRODUCTS, INC. 15
1344 RUBACHEM SYSTEMS, INC. 15
1353 SERVICE IDEAS 15
1357 SHELL OIL 15
1374 SUNBEAM PRODUCTS, INC. 15
1379 SURETY FOODS, INC. 15
1393 TDS / TIRE DISTRIBUTION SYSTEMS, INC. 15
1430 VIKING OFFICE PRODUCTS 15
1431 VITRO SEATING PRODUCTS 15
1434 ▇ ▇ ▇▇▇▇▇▇▇▇, INC. 15
1002 A T & T 10
1010 ADT SECURITY SERVICES 10
1030 APPLIANCE PARTS DEPOT, INC. 10
1042 B.A.R. SERVICES 10
1043 BAKERS PRIDE 10
1045 BANNER BEVERAGE SYSTEMS 10
1068 C D & ▇ ▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ENGINEERING & SUPPLY CO. 10
1089 COLUMBIA DAILY TRIBUNE 10
1107 CRAFTS BY ▇▇▇▇▇▇ 10
1115 DANSON PRINTING 10
1478 DELCO ▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇ ▇▇▇▇▇▇ & ASSOCIATES, INC. 10
1152 FIRE SAFETY, INC. 10
1155 ▇▇▇▇▇▇▇▇-▇▇▇▇▇ EXPRESS 10
1164 FRANCOTYP-POSTALIA 10
1170 FURNITURE IMPORTS, INC. 10
1175 ▇▇▇▇▇▇▇ PAPER 10
1176 GCS SERVICE, INC. 10
1184 GREYHOUND PACKAGE EXPRESS 10
1202 ▇-▇▇ ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇ ▇ & R EXPRESS 10
1224 ▇▇▇▇▇▇▇▇▇▇ PARTS 10
1230 ▇▇▇▇▇▇▇ & SONS 10
1234 ▇▇▇▇▇ GLASS 10
1240 LACLEDE GAS 10
1241 LANCASTER COLONY COMM. PRODS. 10
1250 LODGE CAST IRON 10
1256 MANNA FREIGHT SYSTEMS, INC. 10
1263 MCI 10
1265 MEDIQUICK CONVENIENCE CLINIC 10
1271 MIDWEST REFRIGERATION 10
1272 MIDWEST WASTE 10
1286 NEBS 10
1287 NEMCO 10
1304 PAGENET SOUTH 10
1309 PEERLESS 10
1312 ▇▇▇▇▇▇▇▇'▇ COMMERCIAL PARTS & SERVICE 10
1321 PRONTO PRODUCTS CO. 10
1322 PUREMARK INTERNATIONAL LTD. 10
1331 RAVIOLIS 10
1333 REGAL PLASTICS 10
1335 REPRO SUPPLY 10
1359 SOUTHBEND 10
1368 ST. LOUIS POST DISPATCH 10
1377 SUPERIOR PRODUCTS MFG. CO. 10
1380 ▇▇ ▇▇▇▇ TELEPHONE 10
1381 ▇▇ ▇▇▇▇ WIRELESS 10
1394 TEKNOR APEX CO. 10
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ MACHINERY 10
1402 THE ELECTROMOTIVE CORP. 10
1404 THE STERIL-SIL CO. 10
1406 ▇▇▇▇▇▇ REPROGRAPHICS, INC. 10
1409 TOWN FOOD SERVICE EQUIPMENT 10
1410 TRAEX 10
1435 ▇▇▇▇▇▇▇ REFRIGERATION 10
1439 WASTE MANAGEMENT 10
1444 ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 10
1449 YAMATO CORP. 10
1008 ACCESS COURIER, INC. 5
1013 AERO MANUFACTURING CO., INC. 5
1015 AIRBORNE EXPRESS 5
1026 AMOCO OIL 5
1031 ARAMARK UNIFORM 5
1055 BOBRICK WASHROOM EQUIPMENT 5
1073 ▇▇▇▇▇▇▇▇ ▇
▇▇▇▇ ▇▇▇▇ RESIDENT COMMERCIAL 5
1127 E & D PLASTICS 5
1133 EDGECRAFT CORPORATION 5
1135 ▇▇▇▇▇▇▇'▇ TRUE VALUE HARDWARE 5
1141 ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ & ASSOCIATES, INC. 5
1181 GLOBE FOOD 5
1182 ▇▇▇▇▇▇ TRUCK LINES CO., INC. 5
1194 HIRLI 5
1196 ▇▇▇▇▇▇▇▇▇ ▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ SERVICE 5
1218 JIFFY LUBE/AFMS 5
1220 JIM'S BIKE AND KEY 5
1235 KORMEYER-FIREPROTECTION L.L.C. 5
1253 M & L TRUCKING 5
1260 ▇▇▇▇▇▇ OFFICE ▇▇▇▇▇▇▇ ▇▇. ▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ WELDING SUPPLY 5
1298 OLDE ▇▇▇▇▇▇▇▇ 5
1311 PELOUZE FOOD SERVICE 5
1324 QUALITY PRINTING 5
1337 ▇▇▇▇▇▇'▇ 5
1376 SUPERIOR MFG. GROUP 5
1414 TRESKO 5
1419 TXU ELECTRIC 5
1420 UNIFIRST CORP. 5
1427 US INTERNET 5
1428 USF ▇▇▇▇▇ 5
1436 ▇▇▇▇▇ & ▇▇▇▇▇▇▇ 5
-----------
1,454,800
-----------
29,937,300
===========
ISSUED/OUTSTANDING 04/04/06 29,937,300
ADDITIONAL SHARES TO BE ADDED OR SUBTRACTED
1508 ▇▇▇▇▇ ▇▇▇▇▇ 25,000 Interest
1499 CHILDRESS MANAGEMENT SERVICES, INC. 200,000 $50k & Consultir
▇▇▇▇▇ ▇. ▇▇▇▇▇ 125,000
▇.▇. ▇▇▇▇▇▇▇▇▇ 12,500
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ 125,000
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇ - INTEREST 12,500
RMH VENTURES 62,500
RMH VENTURES - INTEREST 6,250
▇▇▇ ▇▇▇▇▇▇▇ 125,000
▇▇▇ ▇▇▇▇▇▇▇ - INTEREST 12,500
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 62,500
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ - INTEREST 6,250
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 62,500
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ - INTEREST 6,250
-----------
Total Changes to Stock 843,750
-----------
Total Shares 30,781,050
===========
Total Common Stock 3,078.11
Per Quickbooks 3,076.11
-----------
Difference 1.99
CERTIFICATE OF INSURANCE
[LOGO] This certifies that [X] ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
[ ] STATE FARM GENERAL INSURANCE COMPANY, Bloomington, Illinois
[ ] STATE FARM FIRE AND CASUALTY COMPANY, Scarborough, Ontario
[ ] STATE FARM FLORIDA INSURANCE COMPANY, Winter Haven, Florida
[ ] STATE FARM LLOYDS, Dallas, Texas
insures the following policyholder for the coverages indicated below:
Policyholder Sales Lead Management Inc
Address of policyholder ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇-▇▇▇▇
Location of operations same
Description of operations Software
The Policies listed below have been issued to the policyholder for the policy
periods shown. The insurance described in these policies is subject to all the
terms, exclusions, and conditions of those policies. The limits of liability
shown may have been reduced by any paid claims.
------------------------------------------------------------------------------------------------------------------------------
POLICY PERIOD LIMITS OF LIABILITY
POLICY NUMBER TYPE OF INSURANCE EFFECTIVE DATE EXPIRATION DATE (AT BEGINNING OF POLICY PERIOD)
------------------------------------------------------------------------------------------------------------------------------
92-GA-1471-7 Comprehensive 09/18/2005 09/18/2006 BODILY INJURY AND
Business Liability PROPERTY DAMAGE
------------------------------------------------------------------------------------------
This insurance includes: [ ] Products - Completed Operations Each Occurrence $ 1,000,000
[ ] Contractual Liability
[ ] Personal Injury
[ ] Advertising Injury General Aggregate $ 2,000,000
[ ]
[ ] Products - Completed $ 2,000,000
[ ] Operations Aggregate
------------------------------------------------------------------------------------------------------------------------------
POLICY PERIOD BODILY INJURY AND PROPERTY DAMAGE
92-GA-1470-5 EXCESS LIABILITY EFFECTIVE DATE EXPIRATION DATE (Combined Single Limit)
--------------------------------
[X] Umbrella 09/18/2005 09/18/2006 Each Occurrence $ 2,000,000
[ ] Other Aggregate $ 4,000,000
------------------------------------------------------------------------------------------------------------------------------
Workers' Compensation POLICY PERIOD Part I - Workers Compensation -
and Employers Liability EFFECTIVE DATE EXPIRATION DATE Statutory
--------------------------------
Workers' Compensation Part II - Employers Liability
and Employers Liability Each Accident $
Disease - Each Employee $
Disease - Policy Limit $
------------------------------------------------------------------------------------------------------------------------------
POLICY PERIOD LIMITS OF LIABILITY
POLICY NUMBER TYPE OF INSURANCE EFFECTIVE DATE EXPIRATION DATE (AT BEGINNING OF POLICY PERIOD)
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
THE CERTIFICATE OF INSURANCE IS NOT A CONTRACT OF INSURANCE AND NEITHER
AFFIRMATIVELY NOR NEGATIVELY AMENDS, EXTENDS OR ALTERS THE COVERAGE APPROVED BY
ANY POLICY DESCRIBED HEREIN.
NAME AND ADDRESS OF CERTIFICATE HOLDER
Loss Payee and Additional Insured If any of the described policies are
canceled before their expiration date.
State Farm will try to mail a written
Ageis New York State Venture Fund notice to the certificate holder 15
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇ days before cancellation. If however,
▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇ we fail to mail such notice, no
obligation or liability will be imposed
on State Farm or its agents or
representatives.
/s/ ▇▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇
---------------------------------------
Signature of Authorized Representative
Agent 04/11/2006
---------------------------------------
Title Date
▇▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇
---------------------------------------
Agent Name
Telephone Number (▇▇▇) ▇▇▇-▇▇▇▇________
---------------------------------------
Agent's Code Stamp
Agent Code
AFO Code ▇▇▇▇▇ 32-1921
AFO NASSAU COUNTY 17-F552
SCHEDULES TO LOAN AND SECURITY AGREEMENT
3.6 LOCATION OF EQUIPMENT
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
3.9(c) LIST OF ANY ENTITY OWNED BY COMPANY
Sales Lead Management Inc.
3.9(d) BANK NAME AND ACCOUNT NUMBER
Citibank, NA 705 84670
3.9(e) EQUITY INTERESTS
None
5.1(a) (xv) PROPERTY SUBJECT TO COLLATERAL ACCESS AGREEMENT
Commencing May 15th, ▇▇▇-▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
6.1(a) LIST OF SUBSIDIARIES
Sales Lead Management Inc.
State of Incorporation and Qualification to do business
Incorporated in Delaware Qualified to do business in Delaware and
New York
6.l(b) ADDRESS
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
LIST OF ALL PROPERTY OWNED
ASSET LOCATION MODEL SERIAL
Monitor Corporate DELL 2005FPW 15" Flat Panel MX-0N2363-48323-455-2481
PC Corporate OptiPlex 170L CN-0Y2393-70821-42I-97FX
Copier Corporate Panasonic Workio DP-3010 FCG39J00438
Copier Corporate PC980 TVH73159
Monitor Corporate DELL M990 19"CRT MX-04512R-47801-08U-B15Z
Printer Corporate Epson Photo 825 EMTE185781
Printer Corporate HP OfficeJet 6110Xi MY3A6H71K5
Printer Corporate HP PhotoSmart 8150 MY49J2M067
Printer Corporate HP PhotoSmart 8150 MY49G2N2TV
Printer Corporate HP PhotoSmart 8150 MY4A42M1YJ
Printer Corporate Tally T6215 C21L106192
Printer Corporate Tally T6215 E21G202871
Server Corporate IBM X-Series 346 (Model#8840-11U) KP-BYG84
Server Corporate IBM X-Series 346 (Model #8840-11U) KP-KHC34
Server Corporate IBM X-Series 346 (Model #8840-11U) KP-KHB87
Server Corporate IBM X-Series 346 (Model #8840-11U) KP-PZR08
Server Corporate IBM X-Series 346 (Model #8840-11U) KP-PZP68
Switch Corporate Cisco Catalyst 3550 48-Port (EMI) CAT0841K004
Docking Station Corporate DELL Docking Station CN-02U442-48643-451-0515
Docking Station Corporate DELL Docking Station CN-02U442-48643-44D-6218
Docking ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇-▇▇▇▇ 35-47985-4BC-0919
Docking ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇-▇▇▇▇▇▇-▇▇▇▇▇-▇▇▇-▇▇▇▇
Docking ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇-▇▇▇▇▇▇-▇▇▇▇▇-▇▇▇-▇▇▇▇
Docking ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇-▇▇▇▇▇▇-▇▇▇▇▇-▇▇▇-▇▇▇▇
Laptop Corporate Dell Inspiron 5100 CN-09U806-12961-37J-3237
Laptop Corporate Dell Inspiron 5100 CN-09U808-12961-39A-3691
Laptop Corporate Dell Inspiron 8600 6VX5051
Laptop Corporate Dell Inspiron 8600 2GPGR51
Laptop Corporate Dell Inspiron 8600 5R3LL61
Laptop Corporate Dell Inspiron 8600 GQ3LL61
Laptop Corporate Dell Inspiron 8600 2FFRM51
Laptop Corporate Dell Inspiron 8600 JR3LL61
Laptop Corporate Sony Vaio PCG-FXA48 2834763-03704537
Laptop Corporate Sony Vaio PCG-GRX520 2836293-04001123
Monitor Corporate DELL 19" CRT MX-0X3758-47605-8RB-PPA
Monitor Corporate DELL 2005FPW 15" Flat Panel MX-0N2363-48323-455-65AL
Monitor Corporate DELL 2005FPW 15" Flat Panel MX-0N2363-48323-455-24LL
Monitor Corporate Planar PE-171BK 17" Flat Planel AE450H29637
Monitor Corporate ViewSonic PT775 JT72400217
Mouse Corporate MS Optical Mouse 3287611-3
Mouse Corporate MS Optical Mouse 6459004-4
Mouse Corporate MS Optical Mouse 3980125-4
Mouse Corporate MS Optical Mouse 1403857-20246
PC Corporate OptiPlex170L CN-0Y2393-70821 -42I-97FH
PC Corporate OptiPlex170L CN-0Y2393-70821-42I-99X0
PC Corporate OptiPlex170L CN-0Y2393-70821-42I-97FS
PC Corporate OptiPlex 370L 53S5R51
Switch Corporate GigaFast EZ-1600-S 16-Port R837000426
Backup Tapes Corporate Sony AIT 50/130 GB Backup Tapes N/A
Backup Tapes Corporate Travan 20/40 GB Backup Tapes N/A
Equipment Rack Corporate Panduit Free Standing Equipment Rack N/A
Firewall/VPN Corporate Cisco PIX515E-R-DMZ-BUN 88808454256
KVM Switch Corporate OmniView Pro2 8-Port KVM Switch 3043440327
Monitor Corporate DELL 2005FPW 15" Flat Panel MX-0N2363-48323-455-3GCL
Monitor Corporate Dell E151 FPP 15" Flat Panel CN-06R644-47804-373-LES5
Patch Panel Corporate Avaya 2917 CAT5 Modular Patch Panel N/A
Patch Panel Corporate Lucent 1100CAT5 Modular Patch Panel N/A
Patch Panel Corporate Ortronics Patch Panel (OR-808004818) N/A
Patch Panel Corporate Ortronics Patch Panel (OR-808004818) N/A
PBX Corporate AlphaScan 511 Monitor (VM Workstation) S4600144SC00640
PBX Corporate Avaya Definity PBX Cabinet# 1 01DR03903724
PBX Corporate Avaya Definity PBX Cabinet# 2 N/A
PBX Corporate Avaya Intuity Voicemail Workstation 84302901A0
PBX Corporate Lucent MAX900 PBX Terminal 15919501301
PC Corporate OptiPlex 170L CN-0Y2393-70821-42I-99VQ
Printer Corporate HPLaserJet 1000 CNBJ415934
SMC 8-Port Router/Firewall
Router Corporate (SMC7008ABR) T131001516
Server Corporate PowerEdge 400SC BWQYH31
Server Corporate PowerEdge 600SC CRS6T21
Server Corporate PowerEdge 600SC BRS6T21
Server Corporate PowerEdge 600SC DKPYV31
Server Cabinet Corporate HH Complete Enclosures #HH-G1 N/A
Switch Corporate Linksys 24-Port(EF4124) RD80047002836
Switch 16 Port Corporate SMC-EZ6516TX T13320015
Tape Backup Corporate Sony AIT Autoloader (Model# LIB-D81) 02492705
UPS Corporate Belkin UPS 800VA DX034213070W0
UPS Corporate Liebert UPS (GXT-2000 RT120) 0431500073AF071
UPS Corporate Liebert UPS (GXT-2000 RT120) 0431500075AF071
Laptop Corporate Dell Inspiron 5100 CN-09U807-12961-42H-4965
Laptop Corporate Dell Inspiron 8600 J9TJR41
Monitor ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇" ▇▇▇ ▇▇-▇▇▇▇▇▇-▇▇▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ Corporate DELL 2005FPW 15" Flat Panel MX-0N2363-48323-455-24TL
Monitor Corporate DELL 2005FPW 15" Flat Panel MX-0N2363-48323-455-13ZL
Monitor Corporate DELL 2005FPW 15" Flat Panel ▇▇-▇▇▇▇▇▇-▇▇▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ 15" Flat Panel MX-0N2363-48323-455-5DCL
Monitor Corporate DELL 2005FPW 15" Flat Panel MX-0N2363-48323-455-23ZL
Monitor Corporate DELL 2005FPW 15" Flat Panel MX-0N2363-48323-455-24QL
Monitor Corporate Princeton 15" CRT KNAX2607040
Mouse Corporate MS Optical Mouse 5612815-4
PC Corporate Dimension 2400 CN-0C3152-70821-43C-5B8K
PC Corporate OptiPlex 170L CN-0Y2393-70821-42I-99VM
PC Corporate OptiPlex 170L CN-0Y2393-70821-42I-99VP
PC Corporate OptiPlex 170L CN-0Y2393-70821-42I-99VX
PC Corporate OptiPlex 170L CN-0Y2393-70821-42I-99VT
PC Corporate OptiPlex 170L CN-0Y2393-70821-42I-99VV
PC Corporate OptiPlex 170L CN-0Y2393-70821-42I-97F9
PDA Corporate Dell AXIM X3i N/A
Printer Corporate Canon BJC-4200 EFP40215
Printer Corporate HP 6P USBB219060
Printer Corporate OfficeJet 4110 MY350B12BD
RAID Array Globix NY IBM EXP300-1RU 68-26101
Server Globix NY Dell Poweredge 1750 9Q5W541
Server Globix NY IBM Netfinity x330 1S867411X78LA278
Server Globix NY IBM Netfinity x330 1S867411X78LA292
Server Globix NY IBM Netfinity x342 8669-4RX 78-Z7325
Server Globix NY IBM Netfinity x360 8686-1RX 78-ZXB55
Switch/Router Globix NY Cabletron SSR-2000 325401340011050E
Tape Backup Globix NY HP SureStor DAT 20 N/A
NEC PC Telephony Adapter CTA-U
CTI Adapters Corporate (Qty 23)
NEC PC Telephony Adapter CTA-R
CTI Adapters Corporate (Qty 5)
CTI Adapters Corporate Konexx DWInt (Nortel) (Qty 12)
CTI Adapters Corporate Konexx DWIatt (Avaya) (Qty 7)
A/B Switches Corporate DataProbe Analog A/B Phone Switches (Qty 7)
Phones Corporate Lucent 8405D+ Digital Phone (Qty 24)
Modems Corporate TrendNet USB Modem TFM-5600 (Qty 7)
IP-PBX Gateway Corporate Intel Netstructure Digital IP-PBX Gateway (Qty 6)
IP-PBX Gateway Corporate Intel Netstructure Analog IP-PBX Gateway (Qty 1)
Sound Cards Corporate Sound Blaster 16 Sound Card (Qty 8)
Headsets Corporate Plantronics USB Headset (Qty 20)
Headsets Corporate Plantronics Analog Headset (Qty 2)
Headsets Corporate Plantronics CS-50 Headset (Qty 6)
Headsets Corporate Plantronics Audio-60 Headset (Qty 11)
Headsets Corporate Plantronics M300 Bluetooth Headset (Qty 3)
Headset Adapters Corporate Plantronics USB DA-60 Adapter (Qty 8)
Headset Adapters Corporate Belkin Bluetooth USB Adapter (Qty 2)
Headset Amps Corporate Plantronics M12 Headset Amp (Qty 5)
Headset Amps Corporate GN Netcom Headset Amp (Qty 9)
6.1(f) CONSENTS
None
6.1(g) Attached as Exhibit A hereto is a complete list of the Borrower's
shareholders. The Borrower's correct name is SLM Holdings, Inc. The subsidiary's
name is Sales Lead Management, Inc. All of the capital stock of Sales Lead
Management, Inc. is owned by SLM Holdings, Inc.
The Company has 6,950,000 options, 2,965,000 warrants and convertible debt
convertible into 1,804,094 shares of common stock.
6.1(j) Any Liabilities not reflected on December 31, 2005 Balance Sheet
SLM HOLDINGS, Inc. 3:10 PM
ACCOUNTS PAYABLE AND LIABILITIES INCURRED SINCE 1/1/06 04/05/2006
AS OF APRIL 5, 2006
CURRENT 1 - 30 31 - 60 61 - 90 > 90 TOTAL
--------- --------- -------- --------- --------- ------------
AMERICAN EXPRESS 0.00 8,173.48 0.00 9,837.56 0.00 30,049.60
AMERICAN FURNITURE RENTALS INC. 0.00 0.00 320.30 0.00 0.00 320.30
AMERICAN LIST COUNSEL INC 7,551.78 5,260.48 1,173.85 0.00 0.00 13,986.11
CABLE - 07801-319019-05-2 0.00 169.92 0.00 0.00 0.00 169.92
CATALYST TELECOM 0.00 892.00 0.00 0.00 0.00 892.00
CIT TECHNOLOGY FIN SERV, INC 0.00 255.62 0.00 0.00 0.00 255.62
CMS COMMUNICATIONS, INC. 0.00 0.00 0.00 507.28 0.00 507.28
▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ 0.00 112.18 0.00 0.00 0.00 112.18
GLOBIX 0.00 2,585.93 0.00 0.00 0.00 2,585.93
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇-▇, LLC 0.00 7,905.29 710.63 0.00 0.00 8,615.92
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 0.00 0.00 0.00 1,500.00 12,000.00 13,500.00
INFO USA 0.00 0.00 300.00 0.00 2,238.84 2,538.84
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 111.75 0.00 0.00 0.00 0.00 111.75
KEYSPAN ENERGY DELIVERY 0.00 157.22 0.00 0.00 0.00 157.22
LIGHTPATH 0.00 831.27 0.00 0.00 0.00 831.27
LIPA 0.00 39.22 0.00 0.00 0.00 39.22
▇▇▇▇▇ & COMPANY 1,500.00 3,540.00 1,500.00 0.00 17,356.12 23,896.12
▇▇▇▇▇▇▇ MAVROVITAS 69.00 0.00 0.00 0.00 0.00 69.00
NASDAQ INSURANCE AGENCY 0.00 338.49 0.00 0.00 0.00 338.49
OXFORD HEALTH INSURANCE PLANS 4,412.02 0.00 0.00 0.00 0.00 4,412.02
▇▇▇▇▇ ▇▇▇▇▇ 0.00 793.31 0.00 0.00 0.00 793.31
PITNEY ▇▇▇▇▇ 0.00 130.04 0.00 0.00 0.00 130.04
POLAND SPRING 0.00 206.61 0.00 0.00 0.00 206.61
RUSKIN, MOSCOU & FALTISCHEK PC 0.00 0.00 0.00 0.00 19,945.82 19,945.82
SECURITIES TRANSFER CORPORATION 0.00 0.00 0.00 0.00 180.00 180.00
SLOMIN'S 0.00 574.98 0.00 0.00 0.00 574.98
UNISHIPPERS 0.00 123.84 0.00 0.00 0.00 123.84
USA COMPUTER LINK 449.78 0.00 0.00 0.00 0.00 449.78
VERIZON WIRELESS 649.15 0.00 0.00 0.00 0.00 649.15
--------- --------- -------- --------- --------- ----------
TOTAL 14,743.48 32,089.88 4,004.78 11,844.84 51,720.78 114,403.76
========= ========= ======== ========= ========= ==========
DEFERRED COMPENSATION - EXECUTIVE 134,156.26
DEFERRED COMPENSATION - EMPLOYEES 26,376.41
EQUIPMENT LOAN PAYABLE 60,475.32
EQUIPMENT LOAN PAYABLE - 2 15,355.64
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 125,000.00
▇▇▇▇▇ ▇▇▇▇▇ 100,000.00
▇▇▇▇▇ ▇▇▇▇ 25,000.00
CONVERTIBLE NOTES
▇▇▇▇▇▇ ▇▇▇▇▇▇ 300,000.00
CHILDRESS MANAGEMENT 185,000.00
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 100,000.00
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 50,000.00
CHILDRESS MANAGEMENT 50,000.00
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ 10,000.00
------------
TOTAL 1,181,363.63
============
TOTAL ALL LIABITIES 1,295,767.39
============
