SUBORDINATION AND PRIORITIES AGREEMENT

BDC CAPITAL INC., A WHOLLY-OWNED SUBSIDIARY OF
BUSINESS DEVELOPMENT BANK OF CANADA

and

2314505 ONTARIO INC.

    and

APEX SYSTEMS INTEGRATORS INC.

and

ROYAL BANK OF CANADA

Dated as of the 4th day of June, 2012
Province of Ontario
 
 
 
 
 
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BETWEEN:
BDC CAPITAL INC., a wholly-owned subsidiary of
 
BUSINESS DEVELOPMENT BANK OF CANADA,

(hereinafter called “BDC”);

AND:                                          ROYAL BANK OF CANADA

(hereinafter called the “Bank”);

AND:
2314505 ONTARIO INC.

(hereinafter called the “Borrower”);

AND:
APEX SYSTEMS INTEGRATORS INC.

(hereinafter called the “Guarantor”);

WHO DECLARE AS FOLLOWS:

WHEREAS the Bank has granted or intends to grant to Borrower various credit
facilities not exceeding an aggregate amount of Two Million Seven Hundred Fifty
Thousand Dollars ($2,750,000.00) pursuant to a facilities letter dated June 4,
2012, a copy which is appended as Schedule “A” hereto (hereinafter collectively
called the “Bank Credit”, as it or they may have been and may in the future be
amended, modified, replaced or restated  from time to time) in guarantee of
which, inter alia, the Borrower and the Guarantor have granted or intend to
grant in favour of the Bank various security (collectively, the “Bank Security”)
(the “Bank Credit” and the “Bank Security” being hereinafter collectively called
the “Bank Debt”);

WHEREAS BDC submitted to the Borrower an offer of financing dated February 14,
2012 and as it may have been and may in the future be amended, modified,
replaced or restated from time to time (the “BDC Offer”), relating to, inter
alia, the granting of a subordinated loan in the amount of One Million Seven
Hundred Thousand Dollars ($1,700,000.00), the conditions for which are provided
in the BDC Offer as well as in a loan agreement dated the 4th day of June, 2012
(the “Loan Agreement”, as it may be amended, modified, replaced or restated from
time to time), copies of which are appended hereto as Schedule “B” in guarantee
of which, inter alia, the Borrower and Guarantor have granted or intend to grant
various security in favour of BDC (collectively the “BDC Security”) (the “BDC
Offer”, the “Loan Agreement” and the “BDC Security” being hereinafter
collectively called the “Subordinated Debt”);

WHEREAS the Lenders, as defined in Section 1.1.23 hereof, hereby wish to set
forth their respective rights and remedies in respect of the security granted by
the Borrower and the Guarantor to each of them;

NOW THEREFORE AND IN CONSIDERATION OF THE COVENANTS AND CONDITIONS HEREINAFTER
DESCRIBED, AND FOR GOOD AND VALUABLE CONSIDERATION, THE PARTIES HERETO AGREE AS
FOLLOWS:
 
 
 
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1. INTERPRETATION
 
1.1  
Definitions.

Except as otherwise provided herein or unless the context otherwise requires,
capitalized terms and expressions used in this Agreement and its preamble shall
have the meaning set forth below:

1.1.1  
“Additional Guarantors” means all of the Subsidiary Body Corporates and other
persons now or hereinafter owned or controlled directly or indirectly by the
Borrower;

1.1.2  
“Affiliate” means any Person which, directly or indirectly, controls or is
controlled by or is under common control of another.  For the purposes of this
definition, "control" (including with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of securities, or by contract or by any other means
whatsoever.  For greater certainty, the term "Affiliate" includes a Subsidiary
Body Corporate;

1.1.3  
“Agreement” and “Subordination Agreement” means this Subordination and
Priorities Agreement;

1.1.4  
“Bank Event of Default” means a Default, Event of Default or demand for payment
pursuant to any Loan Documents relating to the Bank Debt;

1.1.5  
“Bank Notice of Default” has the meaning ascribed thereto in Paragraph 3.1.3
herein;

1.1.6  
“Bank Security” means, individually or collectively, all Security granted or to
be granted by the Borrower and the Guarantor to the Bank to guarantee the
repayment of the Bank Debt;

1.1.7  
“BDC Event of Default” means a Default or Event of Default pursuant to any Loan
Documents relating to the Subordinated Debt;

1.1.8  
“BDC Notice of Intention” has the meaning ascribed thereto in Subsection 2.7
herein;

1.1.9  
“BDC Security” means, individually or collectively, all Security granted or to
be granted by the Borrower and the Guarantor to BDC to guarantee the repayment
and performance of the Subordinated Debt;

1.1.10  
“Borrower” means 2314505 Ontario Inc. as determined in accordance with the
relevant Bank Credit or the BDC Offer or Loan Agreement, and any legal entity
that may succeed same;

1.1.11  
“Borrower Group” means, collectively, the Borrower, the Guarantor and each of
the Borrower’s other Affiliates including, without limitation, each Additional
Guarantor;

1.1.12  
“Borrower Group Assets” means (a) all of the present and after acquired
undertaking, property and assets, real and personal, movable and immovable, of
whatsoever nature and kind and wheresoever situate of the Borrower, the
Guarantor and the Borrower’s other Affiliates and (b) the shares of any
Subsidiary Body Corporate owned by the Borrower, any Affiliate of the Borrower
and each Additional Guarantor;

1.1.13  
“Business Day(s)” means any day, except Saturday or Sunday, when the Bank is
open to do business in the Province of Ontario;

1.1.14  
“Cash Proceeds of Realization” means the aggregate of (i) all Proceeds of
Realization in the form of cash, and (ii) all cash proceeds of the sale or other
disposition of non-cash Proceeds of Realization, which are available to the
Lenders;

1.1.15  
“Default” means the occurrence of any of the defaults or events of default
specified in any Loan Document or in any Security entitling a Lender to Demand
or accelerate payment of any obligation, either immediately or after a cure
period or grace period, or failure of any member of the Borrower Group to pay
any amount which is payable to the Bank on demand within the time specified for
payment in a Demand made by the Bank;

1.1.16  
“Demand” means any notification by a Lender to any member of the Borrower Group
of a demand for payment under any Loan Documents or Security;

 
 
 
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1.1.17  
“Dollars” or “$” means lawful money of Canada;

1.1.18  
“Event of Default” means a Bank Event of Default or Default pursuant to any Loan
Document relating to the Bank Debt, or, as the case may be, a BDC Event of
Default or Default pursuant to any Loan Document  relating to the Subordinated
Debt;

1.1.19  
“GAAP” means the generally accepted accounting principles in force in Canada, as
accepted or established by the Canadian Institute of Chartered Accountants, as
they may be modified from time to time, but applied in a consistent manner;

1.1.20  
“Government Authority” means Canada, the province mentioned in Subsection 14.5
herein, and any other regional, municipal, local or other subdivision of that
province, any other governmental organization of such jurisdiction, including
any agency, commission, office, department, ministry, organization or other
person carrying on executive, legislative, judicial, regulatory or
administrative functions arising out of or related thereto;

1.1.21  
“Guarantor” means Apex Systems Integrators Inc. and any legal entity that may
succeed same;

1.1.22  
“Intellectual Property” means all the intangible assets, present and future, of
the Borrower, including but without limiting the generality of the foregoing,
all its rights in any trademarks, registered or not, copyrights, including
software, domain names, source codes, designs and manuals, industrial designs,
inventions, patents and ongoing applications for patents, commercial secrets,
know-how, integrated circuit topography, any confidential information, licence
from third parties, end-user licence and any other intellectual property rights
(registered or not), their improvements and modifications as well as any right
in any application relating to their protection, in Canada or elsewhere, of one
or some of these Intellectual Property rights;

1.1.23  
“Lenders” means, collectively, the Bank and BDC and “Lender” refers to either of
them;

1.1.24  
“Life Insurance Policy” means the life insurance policy that is subject to the
BDC Security, whether or not held by the Borrower or the Guarantor, and
described in Schedule “C” attached hereto;

1.1.25  
“Loan Documents” mean any letter of intent, loan offer, loan agreement or other
agreement relating to the loans and security in connection with the Bank Debt
or, as the case may be, the Subordinated Debt, as amended from time to time;

1.1.26  
“Proceeds of Realization” or any part thereof means all proceeds (including
money, choses in action, securities, assets and other property) derived from any
sale or disposition of, or other enforcement or realization proceedings with
respect to any of the Borrower Group Assets  (a) after any demand, (b) upon any
dissolution, liquidation, winding-up, reorganization (including any proposal
under the Bankruptcy and Insolvency Act (Canada) and any reorganization under
the Companies' Creditors Arrangement Act (Canada)), bankruptcy, insolvency or
receivership of any member of the  Borrower Group or any other arrangement or
marshalling of the Borrower Group Assets that is similar thereto, (c) upon the
enforcement of, or any action taken with respect to, any of the Security, (d) as
insurance or expropriation proceeds or any other payment representing indemnity
or compensation for loss of, or damage to Borrower Group Assets or any part of
them or representing indemnity or compensation for loss of, damage to or
interruption in the business, operation or enjoyment of the Borrower’s business
or any proceeds thereof (including money, choses in action, securities, assets
and other property), or (e) as a result of the exercise of any right of set-off
or other similar right or remedy, in each case net of all costs, charges and
expenses or liabilities incurred in connection with such sale, disposition,
enforcement or realization, including legal fees and all proper costs, charges,
expenses and liabilities of any Receiver;

1.1.27  
“Purchase Money Obligation” means any indebtedness of the Borrower or the
Guarantor assumed or incurred to provide funds to pay all or part of the
purchase price of tangible personal property or assets, including interest,
costs and other amounts incurred in connection with such indebtedness, provided
that the incurring of such indebtedness does not give rise to a default under
either the Bank Security or the BDC Security, and provided the Bank has provided
BDC with its prior written consent to the incurring by the Borrower or the
Guarantor, as applicable, of same;

1.1.28  
“Purchase Money Security” means any Security given, reserved, created, assumed
or arising by operation of law, whether or not in favour of the transferor, to
provide or secure, or to provide any member of the Borrower Group (including,
without limitation, the Guarantor) with funds to pay the whole or any part of,
the consideration for the acquisition of tangible personal property; provided
that such Security is restricted to such personal property or asset acquired and
secures an amount not in excess of the purchase price thereof;

1.1.29  
“Receiver” means a receiver, a manager, receiver and manager, or agent or other
person having similar parties or authority appointed by the Bank or BDC or
another creditor, whether by way of a private or court appointment in respect of
any member of  the Borrower Group (including, without limitation, the Guarantor)
or any of the Borrower Group Assets;

1.1.30  
“Security” means, individually or collectively, all the deeds, documents and
agreements, including any amendment, substitution or replacement thereof,
relating or useful to complete and confirm the hypothecs, charges, mortgages,
security interest or other movable or immovable security granted to the Bank,
or, as the case may be, to BDC, in accordance with the laws of any Governmental
Authority having jurisdiction over the properties and rights of the Borrower and
the Guarantor subject to such security;

1.1.31  
“Software Escrow Agreement” means the software escrow agreement made as of June
_____, 2012 between the Guarantor, the Lenders and Lincoln-Parry Associates Inc.
in respect of the escrow of certain Intellectual Property of the Guarantor for
the benefit of the Lenders;

1.1.32  
“Standstill Period” means the period(s) described in Section 6 hereof;

1.1.33  
“Subsidiary Body Corporate” shall have the meaning ascribed thereto in
subsection 1(2) of the Business Corporations Act (Ontario).

1.2  
Titles.  The titles have been inserted in the present Subordination Agreement
for convenience of reference only and shall not in any manner affect its
interpretation. The section numbers refer to the sections of this Agreement.

1.3  
Preamble.   The preamble hereinabove forms an integral part of this Agreement.

1.4  
Paramountcy.  If there is a conflict or inconsistency between the provisions of
this Agreement and the provisions of any other agreement which is referred to
herein or delivered pursuant hereto, as between the Lenders, the provisions of
this Agreement will prevail, provided that nothing in this Agreement is intended
to or will impair, as between any member of the Borrower Group and either of the
Lenders, the obligations of any member of the Borrower Group to pay the Bank
Debt or the Subordinated Debt, as applicable, when due.  For greater certainty,
as between each Lender and any member of the Borrower Group (including, without
limitation, the Guarantor), the applicable Loan Documents shall prevail.

 
 
 
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1.5  
No Rights Conferred on Borrower Group.  Nothing in this Agreement will be
construed as conferring any rights upon any member of the Borrower Group or any
third party.  The terms and conditions hereof are and will be for the sole and
exclusive benefit of the Lenders.  Each member of the Borrower Group, by its
execution of this Agreement, hereby agrees to be bound by, and will act in
accordance with, the terms, provisions and intent of this Agreement; however,
such Borrower Group member will not take any right, benefit or advantage in it
being a party to this Agreement, and this Agreement may be amended, modified,
supplemented or restated without notice to, or the consent of, any member of the
Borrower Group and provided further that in the event that any amendment,
modification, supplement or restatement materially increases the obligations of
the Borrower Group, the Lenders shall use best efforts to give notice thereof to
the Borrower Group but the Lenders shall not be liable for any inadvertent or
accidental omission to give any such notice.  Each member of the Borrower Group
(including, without limitation, the Guarantor) hereby consents to each Lender
providing the other Lender with such information, financial or otherwise,
regarding any member of the Borrower Group, the Bank Debt or the Subordinated
Debt, as applicable, and the Security as may be deemed advisable by the Lenders
from time to time.

1.6  
Accounting Terms.  Each accounting term used in this Agreement has the meaning
generally ascribed to it by GAAP unless another definition is given herein, and
any reference to an item of a balance sheet or income statement must be
construed according to its presentation in the appropriate statement established
in accordance with GAAP as modified from time to time by any accounting norms
adopted by the Canadian Institute of Chartered Accountants.

1.7  
Singular Plural.   In this Agreement, words importing the singular number also
include the plural and vice versa, and person (or persons) includes an
individual, firm, company, corporation, government, governmental body or agency,
unincorporated association or partnership. Information that is provided in the
schedules hereto shall be consistent with the definitions, terms and conditions
of this Agreement.

1.8  
Consent.  Each of the Lenders hereby consents to the:

1.8.1  
indebtedness and obligations provided for in the Bank Credit and the BDC Offer
and the Loan Agreement;

1.8.2  
creation and issuance by the Borrower to the Bank of the Bank Security and to
BDC of the BDC Security; and

1.8.3  
existence of the Bank Debt and the Subordinated Debt generally.

2. SUBORDINATION AND
POSTPONEMENT                                                                                     
 
2.1  
The Subordinated Debt and the BDC Security herein are hereby fully subordinated
to the prior repayment in full of the Bank Debt, and the Bank Security will have
priority to the full extent of the Bank Debt over the BDC Security and the
Subordinated Debt in all respects and at all times, save and except that:

2.1.1  
The BDC Security shall rank in priority to the Bank Security in all respects
on  the Life Insurance Policy in the event that the Bank Security affects the
Life Insurance Policy.

2.2  
BDC agrees with the Bank that, at any time, the Borrower may make and the Bank
may accept any payment or prepayment in respect of the Bank Debt; or any part
thereof, whether or not any Default has occurred, all in accordance with the
Bank Loan Documents.  Nothing herein contained will prevent, limit or restrict
the Bank in any manner from exercising all or any of its rights or remedies
otherwise permitted under the terms of the Bank Security in connection with the
Bank Debt.

2.3  
For greater certainty, the subordination herein provided shall apply to any
guarantee granted now or hereafter by any Subsidiary Body Corporate, any
Affiliate of the Borrower or any Additional Guarantor to the Lenders.

2.4  
Unless otherwise acknowledged in writing by BDC, the subordination herein
provided does not affect the rights of BDC in any suretyship granted in its
favour by any person, related or not to the Borrower, other than the suretyship
granted by a Subsidiary Body Corporate, any Affiliate or any Additional
Guarantors, nor the rights of BDC in any Security held in connection with such
suretyship.

2.5  
Subject to the foregoing provisions, the subordinations and postponements herein
provided shall remain in force for as long as the Borrower has not repaid its
indebtedness in full to either of the Bank and BDC, and neither Lender has
cancelled the Bank Credit or the BDC Offer and Loan Agreement, as the case may
be, and shall apply in all events and circumstances regardless of:

2.5.1  
any priority otherwise given by law to the BDC Security in connection with the
Borrower Group Assets (except for the BDC Security on the Life Insurance Policy
as more particularly described herein);

2.5.2  
the respective dates of execution and registration attachment or perfection of
the BDC Security as well as the Bank Security;

2.5.3  
the date or dates of any advances made or that will be made to the Borrower by
the Bank or BDC;

2.5.4  
the date or dates of any Event of Default;

2.5.5  
any other cause of priority by any principle of law or any statute, including
the Personal Property Security Act, between the Bank and BDC.

2.6  
Subject to the provisions of this Agreement, including without limitation, all
provisions relating to the restrictions imposed on BDC during a Standstill
Period, the subordination and postponement herein:

2.6.1  
shall not prevent BDC from obtaining the principal, interest, additional
interest, bonus, fee, cost and expense payments in accordance with the terms and
conditions of the Loan Agreement;

2.6.2  
shall not prevent BDC from exercising its right under any suretyship held by it
with respect to the Subordinated Debt, other than a suretyship by a Subsidiary
Body Corporate of the Borrower (other than the Guarantor), Affiliate of the
Borrower or any Additional Guarantors;

2.6.3  
shall not prevent BDC from exercising its right under any Security on the Life
Insurance Policy;

2.6.4  
shall be effective only with respect to the Subordinated Debt, excluding any
Purchase Money Obligation incurred by any member of the Borrower Group to BDC,
as well as any Purchase Money Security granted to BDC in connection thereto;

2.6.5  
shall not prevent BDC from filing a proof of claim with any trustee in
bankruptcy in the case of any (i) bankruptcy or assignment of property by any
member of the Borrower Group, or (ii) filing by any member of the Borrower Group
of a notice of intention or  a proposal pursuant to the Bankruptcy and
Insolvency Act or filing of an arrangement under the Companies’ Creditors
Arrangement Act (R.S.C., c. C-36);

2.6.6  
shall not prevent BDC from invoking an Event of Default with respect to the
Subordinated Debt nor to exercise its rights and remedies in such circumstances,
whether by judicial means or otherwise. On the other hand, the realization of
the BDC Security remains subject to the subordination provided by the present
Agreement as long as it remains in force.

2.7  
Notwithstanding anything to the contrary contained herein, if a BDC Event of
Default pursuant to the Subordinated Debt occurs and BDC wishes to call its
loan, initiate enforcement proceedings in view of obtaining repayment of same or
realizing upon the BDC Security, including without limitation upon the filing of
a proof of claim as more particularly described in section 2.6.5. above where a
standstill period has not already been triggered, BDC must give a written notice
to the Bank informing the Bank of its intention to do so (the “BDC Notice of
Intention”). If the Bank does not notify BDC in writing that it avails itself of
the provisions regarding the implementation of a Standstill Period within a
period of ten (10) Business Days from the receipt of the BDC Notice of
Intention, BDC may then realize upon the BDC Security and take any measures
deemed useful or necessary to protect its rights with respect to the Borrower as
if this Agreement had not been executed.

 

 
 
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2.8  
For greater certainty, the priority of repayment and distribution of Cash
Proceeds of Realization set out in Section 9 shall continue in force.  In
addition, and for greater certainty, a BDC Notice of Intention shall constitute
an immediate Event of Default entitling the Bank, in its discretion, to
implement a One Hundred and Eighty Day (180) Standstill Period, provided it so
advises BDC within the time period set out in section 2.7.

3. CONSENT TO PAYMENTS
 
3.1  
Until such time as the Bank Debt is fully repaid as to principal, interest,
fees, costs and expenses by any member of the Borrower Group and the Bank Credit
has been cancelled and before the coming into force of a Standstill Period, BDC:

3.1.1  
may receive principal (including any cash sweep payment), interest, additional
interest, bonus, fee, cost and expense payments in connection with the
Subordinated Debt, in accordance with the terms and conditions of the Loan
Agreement, to the extent where, at the date of such payments, the Borrower is
not in Default under the terms of the Bank Debt and/or does not become in
Default by reason of these payments;

3.1.2  
may not receive any prepayment of principal, account management fee, or bonus
payments or any other form of prepayment in connection with the Subordinated
Debt, without the prior written consent of the Bank;

3.1.3  
may keep any payment received from any member of the Borrower Group before
receipt of a written notice announcing an Event of Default relating to the Bank
Debt (the “Bank Notice of Default”), except for cases provided in subsection 3.2
below.

3.2  
It is agreed that any payment in connection with the Subordinated Debt made to
BDC while any member of the Borrower Group is in Default pursuant to the
provisions of the Bank Debt and after a Bank Notice of Default has been duly
delivered to BDC by the Bank or, as the case may be, within thirty (30) days
prior to such notice if such payment is the cause or materially contributes to
the cause of the Event of Default of any member of the Borrower Group with
respect to the Bank Debt, will be deemed to have been received by BDC acting as
mandatary and in trust for the Bank and shall be remitted to the Bank by BDC as
soon as possible. It is further agreed that in the case of an Event of Default
giving rise to a Standstill Period of ninety (90) days, BDC shall remit all
payments of principal (including cash sweep payments, if any), and bonus
payments received but will, however, be entitled to keep the interest,
additional interest, account management fees, and/or fee, cost and expense
payments and stay such payments during the Standstill Period;

3.3  
In the case of an Event of Default giving rise to a Standstill Period of one
hundred and eighty (180) days, BDC shall remit to the Bank all payments
received, including, without limitation, principal, interest, additional
interest, cash sweep payments, royalty, bonus, account management fees and cost
and expense payments and stay such payments during the Standstill Period.

3.4  
If the Event of Default invoked by the Bank under the Bank Debt is cured to the
satisfaction of the Bank and the Bank has provided written notice to each of the
Borrower and BDC, the Borrower shall resume its payments relating to the
Subordinated Debt and BDC may then receive principal (including cash sweep
payments), interest, additional interest, royalty, bonus, fee and accessory
payments in connection with the Subordinated Debt, as well as all of the arrears
related to such amounts (excluding, for greater certainty any accelerated
amounts), including the interest on the unpaid interest to the extent that such
repayment does not put any member of the Borrower Group in default under the
terms of the Bank Debt both pre and post payment. BDC may also demand payment of
any such amount required to maintain the same yield as initially anticipated in
connection with the Subordinated Debt, provided that the extent of such payment
does not put any member of the Borrower Group in default under the terms of the
Bank Debt both pre and post payment.

3.5  
The Bank shall advise BDC as soon as any member of the Borrower Group has
remedied the Event of Default invoked by the Bank in order that the payments due
to BDC may resume without further delay.

4. SECURITY HELD BY THE LENDERS
 
4.1  
Each Lender declares and represents that no Security, other than those mentioned
in Schedule “C” annexed hereto, guarantees the obligations of each member of the
Borrower Group pursuant to the Bank Debt and the Subordinated Debt.

4.2  
Unless otherwise acknowledged in writing by BDC, the rights and remedies of the
Bank pursuant to any suretyship held with respect to the Bank Debt, and the
rights and remedies of BDC pursuant to any suretyship held in relation to the
Subordinated Debt, other than a suretyship held by a Subsidiary Body Corporate
of the Borrower (other than the Guarantor), Affiliate of the Borrower or any
Additional Guarantor are not subject to the present Agreement.

4.3  
Each of BDC and the Bank shall permit the other Lender and their employees,
agents and contractors, access at all reasonable times to any property and
assets of any member of the Borrower Group upon which it has a prior charge or
security interest in accordance with the terms hereof and to permit such other
Lender to remove such property and assets from the premises of any member of the
Borrower Group at all reasonable times without interference, provided that such
other Lender shall promptly repair any damage caused to the premises by the
removal of any such property or assets.

4.4  
Each of the Borrower and the Guarantor hereby confirms to and agrees with BDC
and the Bank that so long as any of the indebtedness of the Borrower Group to
BDC and the Bank remains outstanding, they shall stand possessed of their assets
so charged for BDC and for the Bank in accordance with their respective
interests and priorities as herein set out.

4.5  
BDC and the Bank agree that in an Event of Default while the Bank Credit, or any
portion thereof, remains outstanding, the Bank shall have the sole right to
request the release of the Intellectual Property escrowed under the Software
Escrow Agreement and to otherwise deal with such Intellectual Property provided
that all Cash Proceeds of Realization arising therefrom or relating thereto
shall be applied and distributed in accordance with this Agreement.  The Bank
acknowledges and agrees that upon payment of all amounts due with respect to the
Bank Debt and cancellation of the Bank Credit, BDC shall, thereafter, have the
sole right to the Intellectual Property escrowed pursuant to the Software Escrow
Agreement.

 
 
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5. MODIFICATIONS TO THE CONDITIONS OF THE BANK DEBT
 
5.1  
Subject to the terms of Section 5.2 hereof, the Bank will be entitled to modify
the terms and conditions of the Bank Credit set forth in Schedule A annexed
hereto without authorization from BDC, but shall notify BDC in writing of each
modification (provided, however, the Bank shall not be liable for any
inadvertent failure or accidental omission to provide such notice to BDC).
However, these modifications shall not allow the Bank to demand the enforcement
of a Standstill Period in case of a Bank Event of Default resulting solely from
such modifications, if the modification had not been previously authorized by
BDC in writing or prior to the expiration of a period of six (6) months
following the effective date of such modifications.

5.2  
However, at all times, BDC’s authorization will be required in the following
cases:

5.2.1  
if the Bank wishes amend the margining formula applicable to accounts receivable
financing under the Bank Credit, as established on the date hereof;

5.2.2  
at all times, if the Bank wishes to increase the available credit offered to the
Borrower under the Bank Credit provided however that the Bank may (i) increase
the limit of available amounts provided for in the Bank Credit to no more than
one hundred and fifteen percent (115%) of the amount already authorized; or (ii)
decrease the limit of available amounts provided for in the Bank Credit by no
more that fifteen percent (15%) of the amount already authorized; where the
authorized limit under the Bank Credit currently consists as of the date hereof
of a Two Hundred Thousand Dollars ($200,000.00) operating line, a Two Million
Five Hundred Thousand Dollars ($2,500,000.00) term loan and a Fifty Thousand
Dollar ($50,000.00) Visa facility;

5.2.3  
the financing of the acquisition of new equipment in excess of seventy-five
percent (75%) of the value of such equipment.

5.3  
Where BDC authorization is required pursuant to this section of this Agreement,
BDC shall not unreasonably withhold its authorization in the case of any request
made by the Bank with respect to the foregoing modifications.

5.4  
If an authorization required hereunder is not granted in writing by BDC within a
period of fifteen (15) Business Days from the written request of the Bank, this
authorization is deemed to have been refused and any Bank Event of Default
resulting solely from such modifications, if they had not been previously
authorized by BDC in writing shall not allow the Bank to demand the enforcement
of a Standstill Period prior to the expiration of a period of six (6) months
following the effective date of such modification.  Notwithstanding, the
forgoing and for greater certainty, if an authorization required hereunder is
not granted in writing by BDC, but the Bank determines to implement the
modifications in connection with which it was required to seek authorization,
there shall be no prohibition on the Bank instituting a Standstill Period, upon
a breach by the Borrower of the terms and conditions of the Bank Credit as they
existed prior to implementation of such modifications, provided however that
such modifications did not contribute in any way to the Borrower’s breach of
such terms and conditions.

5.5  
In the case of an authorized increase of the credit limit, any new Security that
may be required by the Bank shall be subject to this Agreement; provided,
however, the Bank agrees that it shall not request or require any pledge upon
any of the securities in the capital of the Borrower or the Guarantor (including
any successor thereof, whether by amalgamation or otherwise).

6. STANDSTILL PERIOD
 
6.1  
If an Event of Default occurs with respect to the Bank Debt, the Bank may
subject to the terms and conditions of this Agreement, but without any
obligation to do so, notify BDC of the occurrence of such Event of Default and
impose a Standstill Period on BDC with respect to the exercise of its rights
regarding the Subordinated Debt.

6.2  
In order for the Bank to exercise its right to impose a Standstill Period, the
Bank shall nonetheless give a written notice to BDC advising of the Event of
Default of the Borrower under the Bank Debt and indicating the nature of the
Default(s). Upon receipt of the Bank Notice of Default, BDC shall stay all
proceedings engaged in view of realizing upon the BDC Security or, as the case
may be, not initiate any proceedings against the Borrower and/or the Guarantor
in order to call its loan or realize upon the BDC Security, unless the Bank has
itself initiated such proceedings with respect to the Bank Credit and/or the
Bank Security, and a period of ten (10) days has elapsed from the date the Bank
initiated such proceedings, such stay or non-initiation of proceedings being
limited to the Standstill Period and this, for the period(s) of time referred to
below in Sections 6.3 and 6.4.

6.3  
If the Event of Default is limited to only non performance on the part of the
Borrower and/or the Guarantor or any other member of the Borrower Group, as
applicable, relating to the various financial ratios and such other covenants
set forth in Section 1 of Schedule “D” annexed hereto, subject to the
modifications that may be made pursuant to the provisions of Section 5, the
Standstill Period will be limited to ninety (90) days from the date of receipt
of the Bank Notice of Default, during which period BDC:

6.3.1  
may not receive principal payments (including cash sweep payments) or bonus
payments in connection with the Subordinated Debt;

6.3.2  
will only be allowed to receive the interest, additional interest, account
management fee and cost and expense payments;

6.3.3  
may not prohibit the Borrower or the Bank from using the assets subject to the
BDC Security, provided such use is not beyond that which is commercially
reasonable;

6.4  
If the Event of Default involves a Default set forth in Section 2 of Schedule
“D” annexed hereto, the Standstill Period will be limited to one hundred and
eighty (180) days from the date of receipt of the Bank Notice of Default, period
during which BDC:

6.4.1  
will stay all the payments due by the Borrower in principal (including cash
sweep payments), interest, additional interest, royalties, bonus, fees,
accessories or any other form of payment for the said period; and,

6.4.2  
may not prohibit the Borrower or the Bank from using the assets subject to the
BDC Security; provided such use is not beyond that which is commercially
reasonable;

6.5  
During any consecutive twelve (12) month period, the Bank may not request more
than 2 (two) Standstill Periods for a period of time exceeding One Hundred and
Eighty (180) days if the Event of Default is related to a failure to meet the
financial ratios and other covenants set forth in Section 1 of Schedule “D”
annexed hereto, or one hundred and eighty (180) days for any other Event of
Default. Moreover, whatever the nature of the Event of Default, the total
cumulative number of days of Standstill Periods during any consecutive twelve
(12) month period may not exceed one hundred and eighty (180) days and any one
day of a Standstill Period of ninety (90) days shall reduce the time allocated
to a Standstill Period of one hundred eighty (180) days by one day accordingly
as applicable.

6.6  
The Standstill Period will terminate at the expiration of the term fixed for
such Standstill Period. If the Borrower or any member of the Borrower Group has
not remedied the Event(s) of Default invoked by the Bank before the expiration
of the Standstill Period, BDC may then start realizing upon its own Security and
take any useful or necessary measures to protect its rights with respect to the
Borrower, including the disposition of the Borrower Group Assets subject to the
BDC Security.

6.7  
In the event of the delivery of a BDC Notice of Intention, the Bank may, but
without any obligation to do so, remedy the Default of the Borrower relating to
the Subordinated Debt, in which case, any payment made by the Bank will be
considered as an advance of funds under the Bank Credit.

 
 
 
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7. RIGHTS OF BDC DURING ANY SUBSEQUENT STANDSTILL PERIOD
 
7.1  
If, after having taken advantage for the first time of one or more Standstill
Periods of a maximum cumulative duration of ninety (90) days or one hundred and
eighty (180) days, as the case may be, the Bank had to once again avail itself
of its rights to require a new Standstill Period (i.e. after the expiration of a
twelve (12) month period since the delivery of the Bank Notice of Default having
required the enforcement of a first Standstill Period) by reason of a new Event
of Default, the Bank acknowledges that BDC may require any member of the
Borrower Group, as applicable, to consent to the following requirements, without
such request constituting an Event of Default pursuant to the Bank Credit, and
each member of the Borrower Group undertakes to do all the necessary acts in
order for these conditions to be fulfilled within a delay of thirty (30) days of
such demand from BDC, to that effect:

7.1.1  
to have its own appointed representative to attend, as an observer, to all
meetings of the board of directors of any member of the Borrower Group, during
which meetings such observer shall be entitled to participate in discussions but
not be entitled to vote;

7.1.2  
to hold a meeting of the board of directors each month, at a place and date
acceptable to BDC;

7.1.3  
to have its own appointed representative to attend, as an observer, to all
general or special shareholders’ meetings of any member of the Borrower Group,
during which meetings such observer shall be entitled to participate in
discussions but not be entitled to vote;

7.1.4  
to receive a copy of any notice of meeting to directors’ or shareholders’
meetings, as the case may be, at least five (5) days in advance, as well as all
the relevant documentation delivered to the directors and/or shareholders of any
member of the Borrower Group;

7.1.5  
to receive a copy of the minutes of the directors’ and shareholders’ meetings,
within five (5) business days of such meeting, even if the observer appointed by
BDC was not present at the meeting;

7.1.6  
to require the resignation of a director of any member of the Borrower Group and
its replacement by a person appointed by BDC, as the case may be;

7.1.7  
to request an increase in the interest rate payable on the advances made
according to the Loan Agreement, by way of an increase of the spread between
BDC’s prime rate(s) and the actual interest rate(s) payable by any member of the
Borrower Group in accordance with the Loan Agreement provided that such increase
will not result in a Bank Event of Default as a result of such increase;

7.1.8  
to request a reasonable increase in the monthly account management fees payable
by any member of the Borrower Group;

7.1.9  
to obtain from the shareholders of any member of the Borrower Group such further
Security as may be required and all in accordance with this Agreement.

8. AMENDMENT OF BDC LOAN AGREEMENT AND BDC LOAN DOCUMENTS
 
8.1  
Subject to Section 7, without the prior written consent of the Bank, BDC agrees
that it will not be entitled to:  (i) cause to be more onerous or add any
financial covenants of the Borrower or add any additional Events of Default (as
defined in the Loan Agreement) to the Loan Agreement (including for greater
certainty, the Offer Letter) (copies of which are annexed hereto as Schedule
“B”); (ii) shorten any scheduled repayment date or shorten the final maturity
date of any of the Subordinated Debt (other than pursuant to the making of a
demand); or (iii) increase any interest rate applicable to the Subordinated Debt
(provided for greater certainty, that this shall not restrict any increase in
any interest rate applicable only following the occurrence of any Event of
Default under the Loan Documents as in effect on the day hereof, and provided
further, that any such increased interest arising following occurrence of an
Event of Default shall accrue until all of the Bank Debt shall have been
indefeasibly satisfied in full and all commitments to make advances under the
Bank Credit have been terminated).  BDC further agrees that it shall not request
or require any pledge upon any of the securities in the capital of the Borrower
or the Guarantor (including any successor thereof, whether by amalgamation or
otherwise).

9. APPLICATION OF CASH PROCEEDS OF REALIZATION
 
9.1  
All Cash Proceeds of Realization, other than Cash Proceeds of Realization
directly or indirectly derived from or relating to the Life Insurance Policy or
subject to payment of any claims or liens ranking in priority to the Bank Debt
and Bank Security, will be applied and distributed, and the Security will be
deemed to have the relative priorities which would result in such Cash Proceeds
of Realization being applied and distributed, as follows:

9.1.1  
firstly, to the payment of all reasonable costs and expenses incurred by the
Bank in the exercise of all or any of the powers granted to it under the Bank
Credit and in payment of all of the remuneration of any Receiver and all
reasonable costs incurred by such Receiver in the exercise of all or any powers
granted to it under the Bank Credit;

9.1.2  
secondly, to the payment or prepayment in full of the Bank Debt (including
holding such Cash Proceeds of Realization as cash collateral to be applied
against the Bank Debt which have not then matured) in such manner as the Bank
may see fit;

9.1.3  
thirdly, to the payment of all reasonable costs and expenses incurred by BDC in
the exercise of all or any of the powers granted to it under the BDC Offer, the
Loan Agreement or the BDC Security and in payment of all of the remuneration of
any Receiver and all reasonable costs incurred by such Receiver in the exercise
of all or any powers granted to it under BDC Security provided that BDC is
permitted to exercise such powers and to appoint a Receiver pursuant to this
Agreement;

9.1.4  
fourthly, to the payment or prepayment in full of the Subordinated Debt
(including holding such Cash Proceeds of Realization as cash collateral to be
applied against Subordinated Debt which have not then matured); and

9.1.5  
the balance, if any, in accordance with applicable law.

9.2  
All Cash Proceeds of Realization directly or indirectly derived from or relating
to any and all Life Insurance Policy will be applied and distributed, and the
Security will be deemed to have the relative priorities which would result in
such Cash Proceeds of Realization being applied and distributed, as follows:

9.2.1  
firstly, to the payment of all reasonable costs and expenses incurred by BDC in
the exercise of all or any of the powers granted to it under the BDC Security
and in payment of all of the remuneration of any Receiver and all reasonable
costs incurred by such Receiver in the exercise of all or any powers granted to
it under the BDC Security;

9.2.2  
secondly, to the payment or prepayment in full of the Subordinated Debt
(including holding such Cash Proceeds of Realization as cash collateral to be
applied against Subordinated Debt which have not then matured);

9.2.3  
the balance, if any, in accordance with applicable law.

9.3  
Each Lender acknowledges that the foregoing method of application of Cash
Proceeds of Realization may be subject to the claims, if any, of prior secured
creditors of the Borrower; however, this acknowledgement is not intended to, and
shall not, constitute a subordination by either Lender in favour of any other
creditor of the Borrower.  For the purposes of this Agreement, the Bank Debt
will not be considered to have been paid in full unless the Bank has received
payment in cash of the full amount of all Bank Debt and the Subordinated Debt
will not be considered to have been paid in full unless BDC has received payment
in cash of the full amount of all Subordinated Debt.

 
 
 
8

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10. DURATION
 
10.1  
The present Agreement shall remain in force until the first of the following
dates:

10.1.1  
the date of cancellation of the Agreement following the written consent of the
Lenders;

10.1.2  
the date on which any and all amounts due with respect to the Bank Debt will
have been completely repaid and the Bank Credit has been cancelled to the entire
satisfaction of the Bank and no further obligation remains with the Bank to
advance funds to the Borrower;

10.1.3  
the date on which any and all amounts due with respect to the Subordinated Debt
will have been completely repaid and the Bank Credit has been cancelled to the
entire satisfaction of BDC.

11. DOCUMENTATION
 
11.1  
Each Lender shall, upon request of the other Lender and no later than fifteen
(15) days of such request, sign any deed, agreement or other document, and shall
do any act deemed useful or necessary in order to give effect to the Agreement
hereof, including, as the case may be, assigning the priority of rank with
respect to their respective Security.

12. DEFAULT AND NOTICE OF DEFAULT
 
12.1  
BDC and the Bank agree to act reasonably when exercising their respective rights
and remedies under the terms of the Subordinated Debt and the Bank Debt.

12.2  
BDC and the Bank also agree to provide each other with copies of any letter or
any notice transmitted in writing by one or the other to the Borrower and/or the
Guarantor relating to any Event of Default under the terms of the Subordinated
Debt or the Bank Debt, as the case may be but any failure to provide such notice
shall not invalidate the agreements made herein.

13. NOTICE
 
13.1  
All notices or requests provided for in this Agreement shall be transmitted in
writing to the party to which it is sent or given. Any notice or request is
validly transmitted by its delivery to its recipient, either: personally (in
which case, the delivery shall be accepted); or by registered and prepaid mail;
or by facsimile, telex, cable or telegram; or served to the addresses
hereinafter mentioned:

For BDC:

BDC Capital Inc., a wholly-owned subsidiary of Business Development Bank of
Canada
148 Fullarton Street, Suite 1000
London, Ontario  N6A 5P3

To the attention of Jeff Hill
Facsimile No.:    519.645.5989

For the Bank:

Royal Bank of Canada
30 Duke Street West, 8th Floor
Kitchener, Ontario  N2H 3W5

To the attention of Account Manager – Apex Systems Integrators Inc.
Facsimile No.:  519.575.2248

For the Borrower and the Guarantor:

3170 Harvester Road
Burlington, ON  L7N 3W8

Facsimile No.:                                 ____________________

Any notice given or any request made as provided for hereinabove is deemed to
have been received upon its delivery, if personally delivered, or at the time of
its service, if served, or on the third (3rd) Business Day following its
mailing, if sent by mail, or on the Business Day following its transmittal, if
transmitted by fax, telex, cable or telegram, as the case may be. However, if
the mail service is interrupted by a strike, a slowdown, an act of God or any
other cause, the party sending the notice or the request shall use one of the
services that is not interrupted or shall deliver such notice or request in a
manner that such notice or request is received as soon as possible. Each party
may advise the other parties of any change of address in the manner hereinabove
mentioned for the purposes of this Agreement.

14. MISCELLANEOUS
 
14.1  
Amalgamation of Borrower and Guarantor.  The Lenders acknowledge that they have
each been advised that the Borrower and the Guarantor intend to amalgamate
following the execution of this Agreement.  Upon amalgamation, the amalgamated
company will be subject to and liable in respect of the Bank Debt and the
Subordinated Debt and the provisions of this Agreement shall thereafter continue
to apply, mutatis mutandis.

14.2  
Monies deposited by the Borrower with Bank.  With the exception of monies
deposited in any accounts designated as trust accounts by the Borrower for the
benefit of BDC, BDC shall not be entitled, notwithstanding anything to the
contrary in this Agreement, to make a claim against any monies which are
deposited in or disbursed from any account of the Borrower maintained with the
Bank, except for monies deposited therein after the time the Bank has received
written notice from BDC of a default under the BDC Offer or the Loan Agreement.

 
 
 
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14.3  
Successors and Assigns.  The terms and conditions herein shall apply and enure
to the benefit of the successors and assigns of BDC and the Bank. Any assignee
of the rights of the Bank according to the Bank Debt shall benefit from the
rights of the Bank in accordance with the terms hereof and any assignee of the
rights of BDC pursuant to the Subordinated Debt shall assume in writing the
obligations of BDC described herein and BDC agrees to obtain such assumption
from such assignee.

14.4  
Continuing Agreement.  This Agreement shall constitute a continuing agreement,
even though at times the Borrower (as applicable) may not be indebted to a
Lender under the applicable Loan Documents and each Lender may continue, without
notice to the other Lender, to lend money, extend credit and make other
financial accommodations to or for the account of the Borrower and/or the
Guarantor (as applicable) on the faith hereof.

14.5  
Waivers and Amendments.  None of the terms or provisions of this Agreement may
be waived, amended, supplemented or otherwise modified except by a written
instrument executed by the Lenders.  In the event that any amendment, supplement
or modification would materially increase the obligations of the Borrower Group
under this Agreement, the Lenders will use best efforts to notify the Borrower
Group of such amendment, supplement or modification (provided, however, neither
of the Lenders shall have any liability for any inadvertent failure or
accidental omission to so notify the Borrower Group).  No Lender will by any act
or delay, be deemed to have waived any right or remedy hereunder or to have
acquiesced in any default or in any breach of any of the terms and conditions
hereof.  No failure to exercise, nor any delay in exercising, on the part of any
Lender, any right, power or privilege hereunder shall operate as a waiver
thereof.  No single or partial exercise of any right, power or privilege
hereunder will preclude any other or further exercise thereof or the exercise of
any other right, power or privilege.  A waiver by any Lender of any right or
remedy hereunder on any one occasion will not be construed as a bar to any right
or remedy which such Lender would otherwise have on any future occasion.

14.6  
Governing Laws.  The provisions hereof shall be governed by and construed in
accordance with the laws of the Province of Ontario and the federal laws of
Canada applicable therein.

14.7  
The Agreement hereof may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed to be an original, and all
of which taken together shall constitute one and the same agreement. Execution
of this Agreement may be made by each party by signing a copy of the Agreement
and sending such signature by facsimile or otherwise.

[signature pages follow]
 
 
 
 
10

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement in the
following manner:

BDC this 4th day of June, 2012.

BDC CAPITAL INC., a wholly-owned subsidiary of
BUSINESS DEVELOPMENT BANK OF CANADA

Per:                                                                        
Name:
Title:

Per:                                                                        
Name:
Title:
I/We have authority to bind the Bank.

The Bank this 4th day of June, 2012.

ROYAL BANK OF CANADA

Per:/s/ Carolyn Galbraith
Name: Carolyn Galbraith
Title: Manager, Subordinate Financing

Per: /s/ Jeff Hill
Name: Jeff Hill
Title: Managing Director, Subordinate Financing
I/We have authority to bind the Bank.

The Borrower this 4th day of June, 2012.

2314505 ONTARIO INC.

Per: /s/ Nicholas R. Toms
Name:
Title:

Per:                                                                        
Name:
Title:    Authorized Signing Officer
I/We have authority to bind the Corporation.

The Guarantor this 4th day of June, 2012.

APEX SYSTEMS INTEGRATORS INC.

Per:/s/ Karen Dalicandro
Name:
Title:

Per:                                                                        
Name:
Title:    Authorized Signing Officer
I/We have authority to bind the Corporation.
 
 
 
 
11

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SCHEDULE “A”

Letter Agreement of Bank dated June 4, 2012
 
 
 
 
12

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SCHEDULE “B”

Offer Letter and Loan Agreement of BDC

Dated February 14, 2012 and June 4, 2012, respectively

 
13

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SCHEDULE “C”

1.           LIST OF LIFE INSURANCE POLICIES IN FAVOUR OF BDC

Life Insurance Policy No. l issued by l on the life of Donald Dalicandro in the
amount of $1,700,000.

2.
LIST OF THE BANK SECURITY

The Bank declares that as of the date of these presents, the Bank Security held
is the following:

1.  
General Security Agreement from the Borrower;

 
2.  
Guarantee and Postponement of Claim in the amount of $2,750,000 from the
Guarantor;

 
3.  
General Security Agreement from the Guarantor;

 
4.  
Guarantee and Subordination of DecisionPoint Systems, Inc.;

 
5.  
Security Agreement from DecisionPoint Systems, Inc.;

 
6.  
Assignment of Insurance from the Borrower and the Guarantor;

 
7.  
Postponement and Assignment of Claim of DecisionPoint Systems, Inc.;

 
8.  
Postponement and Assignment of Claim of Karen Dalicandro (with side letter);

 
9.  
Postponement and Assignment of Claim of Don Dalicandro (with side letter);

 
10.  
Postponement and Assignment of Claim of 2293046 Ontario Inc. (with side letter);

 
11.  
Software Escrow Agreement signed by the Guarantor.

3.
LIST OF THE BDC SECURITY

BDC declares that at the date of these presents, the Security held is the
following:

1.  
General Security Agreement from the Borrower.

 
2.  
Corporate Guarantee of the Guarantor.

 
3.  
General Security Agreement of the Guarantor.

 
4.  
Conditional Guarantee of DecisionPoint Systems, Inc.

 
5.  
Assignment of the life insurance policy on the life of Donald Dalicandro in the
amount of $1,700,000.

 
6.  
Postponement of vendor earn-out due to Karen Dalicandro and 2293046 Ontario Inc.

 
7.  
Postponement of bonus due to Donald Dalicandro.

 
8.  
Escrow of source code for software owned and developed by the Guarantor.

 
 
 
14

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SCHEDULE “D”

CONDITIONS PRECEDENT FOR A STANDSTILL PERIOD
1.          NINETY (90) DAY STANDSTILL PERIOD

The Bank may avail itself of a ninety (90) day Standstill Period in the case of
the following Events of Default:

(a)  
if the Borrower’s Fixed Charge Coverage, calculated on a rolling four quarters
basis, is less than 1.25:1;

(b)  
if the Borrower’s ratio of Funded Debt to EBITDA, calculated on a rolling four
quarters basis, is greater than 2.25:1;

(c)  
if the Borrower makes any Corporate Distributions.

2.
ONE HUNDRED AND EIGHTY (180) DAY STANDSTILL PERIOD

The Bank may avail itself of a one hundred and eighty (180) day Standstill
Period in the case of the following Events of Default:
 
(a)           the interest is not paid when due pursuant to the Bank Loan
Documents;

 
(b)
the principal repayments are not made;

(d)  
the Borrower exceeds its authorized line of credit by more than fifteen
percent (15%);

(e)  
BDC delivers a BDC Notice of Intention to each of the Borrower and the Bank.

For the purposes hereof, the following expressions mean:

 
(a)
“Capital Expenditures” means, for any fiscal period, any amounts accrued or paid
in respect of any purchase or other acquisition for value of capital assets and,
for greater certainty, excludes amounts expended in respect of the normal repair
and maintenance of capital assets utilized in the ordinary course of business;

 
(b)
“Corporate Distributions” means any payment to any shareholder, director or
officer of the Borrower, or to any associate or holder of subordinated debt of
the Borrower, or to any shareholder, director or officer of any associate or
holder of subordinated debt of the Borrower, including, without limitation,
bonuses, dividends, interest, salaries or repayment of debt or making of loans
to any such person, but excluding salaries to officers or other employees in the
ordinary course of business;

 
(c)
“EBITDA” means, for any fiscal period, net income from continuing operations
(excluding extraordinary gains or losses) plus, to the extent deducted in
determining net income, Interest Expense and income taxes accrued during, and
depreciation, depletion and amortization expenses deducted for, the period;

 
(d)
“Earn-Out Payments” means all payments that may be due to Karen Dalicandro and
2293046 Ontario Inc. as vendors after the initial drawdown of Facility #2 in
respect of the whole or any part of the “2013 EBITDA Basic Earn-Out Amount” as
defined in Purchase Agreement including all payments of principal and interest
in respect of the “Convertible Note” (as defined in the Purchase Agreement) that
may be issued in part payment of the 2013 EBITDA Basic Earn-Out Amount;

 
(e)
“Fixed Charge Coverage” means for any fiscal period, EBITDA less the sum of cash
taxes, unfunded Capital Expenditures, Interest Expense, scheduled Earn-Out
Payments and scheduled payments in respect of Funded Debt;

 
(f)
“Fixed Charges” means, for any fiscal period, the total of Interest Expense,
scheduled principal payments in respect of Funded Debt, payments under operating
leases and Corporate Distributions;

 
(g)
“Funded Debt” means, at any time for the fiscal period then ended, all
obligations for borrowed money which bears interest or to which interest is
imputed plus, without duplication, all obligations for the deferred payment of
the purchase of property, all capital lease obligations and all indebtedness
secured by purchase money security interests, but excluding Postponed Debt;

 
(h)
“Interest Expense” means, for any fiscal period, the aggregate cost of advances
of credit outstanding during that period including, without limitation, interest
charges, capitalized interest, the interest component of capital leases, fees
payable in respect of letters of credit and letters of guarantee and discounts
incurred and fees payable in respect of bankers’ acceptances;

 
(i)
“Postponed Debt” means indebtedness that is fully postponed and subordinated,
both as to principal and interest, on terms satisfactory to the Bank, to the
obligations owing to the Bank hereunder;

 
 
 
 
15