Exhibit 10.1


 


ACCOUNTS RECEIVABLE PURCHASE AGREEMENT


 


THIS ACCOUNTS RECEIVABLE PURCHASE AGREEMENT (this “Agreement”)
is made on this 23rd day of July, 2009, by and between REPUBLIC CAPITAL ACCESS,
LLC, a Delaware limited liability company having its principal place of
business at 1818 Library Street, Reston, Virginia 20190 (“Buyer”),  and American Defense Systems, Inc., a Delaware
Corporation having its principal place of business at 230 Duffy Ave.,
Hicksville, NY 11801 (“Seller”).


 


WHEREAS, Buyer and RCA have performed, or have caused to be
performed, all necessary due diligence and have determined that Seller is an
Eligible Contractor; and


 


WHEREAS, Seller desires to sell certain Receivables that it
now owns and from time to time hereafter will own to Buyer, and Buyer is
willing, on the terms and subject to the conditions contained in this
Agreement, to purchase such Receivables from Seller at such time; and


 


WHEREAS, Buyer is a bona fide financing institution within
the meaning of the Assignment of Claims Act and the Federal Acquisition
Regulations.


 


NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained herein, the parties hereto agree as follows:


 


SECTION 1


DEFINITIONS


 


1.1           Definitions. Certain terms
used in this Agreement are defined in this Section 1.1.  These
terms, and the additional terms defined above, shall have the meanings assigned
wherever the terms appear in this Agreement. These meanings are also applicable
to the singular and plural forms of the terms defined.


 


“Acceptance Date” shall have the meaning set forth in Section 2.2
hereof.


 


“Account Balance” shall mean, on any given day, the gross amount
of all the Purchased Receivables or any portion thereof unpaid on that day.


 


“Account Debtor” shall have the same meaning set forth in the
UCC and shall include any person liable on any Purchased Receivable, including,
without limitation, the Government and any guarantor of such Purchased
Receivable.


 


“Accrual Period” shall mean, with respect to any Residual Payment
Date, the period from, and including, the immediately preceding Residual
Payment Date through, but excluding, such Residual Payment Date; provided,
however, that the initial Accrual Period shall commence on the date
hereof.


 


“Applicable Law” shall mean all provisions of laws, statutes,
rules, regulations, codes, ordinances, judgments, writs, decrees and orders of
any 


 

















 


Governmental
Authority or arbitrator applicable to the Person in question, including
judgments, writs, decrees and orders of all courts and arbitrators in
Proceedings in which the Person in question is a party.


 


“Anticipated Collection Date” shall mean, with respect to any
Purchased Receivable, the date which Buyer estimates in good faith to be the
date that all Collections related to such Eligible Receivable will be directly
deposited to the Segregated Account by the Account Debtor.


 


“Assignment of Claims Act” shall mean the United States
Assignment of Claims Act of 1940, 31 U.S.C. § 3727, 41 U.S.C. § 15, as amended.


 


“Availability Period” shall mean the
period from and including the date hereof to December 31, 2009, provided,
however, that if the term of this Agreement is extended in accordance
with Section 10.10 hereof, the Availability Period will be extended
as determined by Buyer in its sole discretion.


 


“Bankruptcy Code” shall mean Title 11 of the United States Code
(11 U.S.C. §§ 101 et  seq.).


 


“Business Day” shall mean any day that is not a Saturday, a
Sunday or other day on which commercial banking institutions in the City of New
York are authorized or obligated by Applicable Law to close.


 


“Buyer Indemnified Liabilities” shall have the meaning set forth
in Section 10.3.1 hereof.


 


“CBH” shall mean Cherry, Bekaert & Holland, L.L.P., or
such other Person that KBC approves in writing in its sole discretion that
performs the obligations of Cherry, Bekaert & Holland, L.L.P. under
the Collateral Review Agreement.


 


“Collateral Review Agreement” shall mean the Letter of
Arrangement dated as of December 31, 2008 between CBH and the Buyer.


 


“Collections” shall mean all amounts received with respect to
the Purchased Receivables, including scheduled payments (whether received in
whole or in part; whether related to a current, future or prior due date; or
whether paid voluntarily by an Account Debtor or received in connection with
the realization of the amounts due under any Purchased Receivable or upon the
sale or disposition of any property acquired in respect thereof), all partial
payments, all full prepayments and all recoveries.


 


“Compliance Certificate” shall mean a certificate, in a form
provided by Seller to Buyer, which contains the certification of an officer of
Seller that, among other things, the representations and warranties set forth
in this Agreement are true and correct as of the date such certificate is
delivered.


 


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“Confirmation List” shall mean a list, made either in writing or
via email, delivered to Seller on the Acceptance Date that shall set forth (i) each
Eligible Receivable Buyer agrees to purchase pursuant to any related Offer
Notice and (ii) the Initial Purchase Price that shall be paid to Seller
with respect to each such Eligible Receivable.


 


“Contract Disputes Act” shall mean the Contract Disputes Act of
1978, 41 U.S.C. §§ 601-613, as amended.


 


“Contractor Review Agreement” shall mean that certain Letter
Agreement  dated as of January 9, 2009
between the Underwriter and RCA.


 


“DCAA” shall mean the Defense Contract Audit Agency of the
United States Department of Defense.


 


“Deemed Collections” shall mean all
reductions, adjustments, discounts, credits, allowances, rebates, refunds,
returns, disputes, counterclaims, offsets, defenses, rights of recoupment,
rights of return, warranty claims or short payments, asserted by or on behalf
of any Account Debtor with respect to any Purchased Receivable.


 


“Direct Costs” shall have the meaning ascribed to such term in
48 C.F.R. Section 2.101 and shall include all allocable and allowable
costs in accordance with FAR Part 31.


 


“Discount Factor” shall have the meaning set forth in Section 3.5
hereof.


 


“Discount Factor Rate” shall have the meaning set forth in Section 3.5
hereof.


 


“Eligible Contractor” means a Person
that (a) is a U.S. resident or Person organized under the laws of any
state of the United States, (b) is not an affiliate of RCA or Buyer, (c) is
a party to a contract with an Account Debtor pursuant to which it is entitled
to receive payments from such Account Debtor, (d) has been deemed to be “responsible”
in accordance with the FAR and to have been determined by the Account Debtor to
be satisfactory after reviewing the United States Government Contractor
Performance Assessment Reporting System, (e) has not been notified of the
reduction or suspension of contract payments upon a finding of fraud, or of the
investigation of fraud, pursuant to FAR 32.006, (f) does not have a
billing rate error of more than two percent (2%) with respect to billings to
the Government within the last twelve (12) months prior to the purchase of any
receivable generated by such Contractor by RCA, (g) has not experienced
any set-off or withholding of funds under any contract with the Account Debtor
as a result of a failure to pay its employees in accordance with any federal
wage and hour statutes, including, but not limited to, the Service Contract
Act, 41 U.S.C. § 351 et  seq., or the Contract Work Hours and
Safety Standards Act, 40 U.S.C. § 3701 et  seq., nor has it been
notified of an investigation of the foregoing matters, (h) has not
experienced any set-off or withholding of funds under any contract with the 


 


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Account Debtor as a result of its Indebtedness to the Account Debtor,
including any monies owed for overpayment by the Account Debtor, nor has it been
notified of an investigation of such matter, (i) has been reviewed and
approved pursuant to the Contractor Review Agreement at least annually, and (j) satisfies
all of the representations and warranties it makes under this Agreement.


 


“Eligible Receivable” A bona fide
receivable arising from an invoice that has been sent to and approved for
payment by an Account Debtor (to the extent required by Buyer) pursuant to a
contract between an Account Debtor, as obligor, and Seller, and all Related
Security thereof: (a) that is either (i) a “Service Contract” (as
defined in FAR 37.101) between Seller and the Account Debtor, provided, however,
that an Eligible Receivable shall not be deemed to arise from a construction
contract, or (ii) a contract between Seller and the Account Debtor for the
delivery of products, provided that the delivery of such products can be
verified by Buyer; (b) that has been purchased by the Buyer from the
Seller in accordance with this Agreement; (c) that has been executed by an
authorized officer of the Seller who has verified that adequate funds are
available and no appropriations approval is required for the Seller to enter
into the contract; (d) that satisfies all of the criteria of any due
diligence review conducted by Buyer, RCA, CBH or the Underwriter; (e) that
is denominated and payable only in U.S. dollars by electronic funds transfer
and only in the United States and no later than the later of (i) sixty
(60) days from the Account Debtor’s receipt of the invoice and (ii) sixty
(60) days after the Account Debtor has accepted the supplies delivered or the
services performed to which the invoice relates; (f) that has been validly
assigned to Buyer pursuant to the Assignment of Claims Act, and all payments
with respect thereto have been validly directed to be made directly to the
Segregated Account; (g) with respect to which, immediately following the
transfer of such Eligible Receivable to Buyer as contemplated by this
Agreement, the Borrower shall have good title to such Eligible Receivable, free
and clear of any Liens; (h) the sale and assignment of which by Seller to
Buyer does not contravene or conflict with any applicable laws or contractual
obligation or other restriction, limitation or encumbrance, and do not require
any consent that has not been obtained; (i) the contracts, documents,
instruments and other items with respect to which (i) contain customary
and enforceable provisions such that the rights and remedies of the holder
thereof are adequate for the practical realization against any related
collateral or purchased assets of the benefits of the security or ownership
thereof and (ii) do not contain any confidentiality (or any other)
provisions that would restrict the ability of Buyer to exercise its
powers,  rights and remedies under this
Agreement; (j) as to which the right to receive payments thereunder is an “account”
or a “payment intangible”, within the meaning of the UCC; (k) which arises
under contracts, documents, instruments and other items that (i) have been
duly authorized, are in full force and effect and constitute the legal, valid
and binding obligations of the related Account Debtor and Seller, enforceable
against such Account Debtor and Seller in accordance with their terms (except
as may be limited by bankruptcy, insolvency, reorganization, moratorium or
other laws affecting creditors’ rights generally and the effects of general
principles of equity) and (ii) are not subject to any dispute, claim,
defense, offset or counterclaim; (l) as to which no portion of the Related
Security has been 


 


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released (in whole or in
part) from any Lien or security interest therein granted by the related Account
Debtor to the Seller; (m) which, together with the contracts, documents,
instruments and other items related thereto, do not contravene in any material
respect any Applicable Laws; (n) which arises under contracts, documents,
instruments and other items, none of the parties to which have done or failed
to do anything that would or might permit any other party thereto (other than
the Borrower in exercising its rights or remedies thereunder) to terminate any
such contracts, documents, instruments and other items or to suspend or reduce
any payments or obligations due or to become due thereunder at any time after
it becomes an Eligible Receivable; and (o) which at no point in time has
failed to meet each of the criteria to constitute an Eligible Receivable set
forth in subsections (a) through (m) above. Notwithstanding anything
in this definition to the contrary, the first three (3) invoices or the
last invoice with respect to any contract shall not be deemed an “Eligible
Receivable” unless (i) any such receivable is submitted and validated
through a web-based system such as “Wide Area Workflow” (WAWF) or (ii) KBC,
in its sole discretion, is satisfied with the verbal confirmation that KBC has
received from an appropriate government official that any such receivable is
proper and will be submitted for payment.


 


“Enrollment Fee” shall have the meaning set forth in Section 3.1
hereof.


 


“Environmental Law” shall mean all
requirements of applicable law and any permit, approval, authorization,
license, concession or permission from any governmental authority imposing
liability or standards of conduct for or relating to the regulation and
protection of human health, safety, the environment and natural resources,
including the United States Comprehensive Environmental Response, Compensation,
and Liability Act (42 U.S.C. §§ 9601 et  seq.), the Solid Waste
Disposal Act (42 U.S.C. §§ 6901 et  seq.), the Hazardous Materials
Transportation Act (49 U.S.C. §§ 5101 et  seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. §§ 136 et  seq.),
the Toxic Substances Control Act (15 U.S.C. §§ 2601 et  seq.), the
Clean Air Act (42 U.S.C. §§ 7401 et  seq.), the Federal Water
Pollution Control Act (33 U.S.C. §§ 1251 et  seq.), the
Occupational Safety and Health Act (29 U.S.C. §§ 651 et  seq.),
the Safe Drinking Water Act (42 U.S.C. §§ 300(f) et  seq.),
all regulations promulgated under any of the foregoing, all analogous
requirements of law and any environmental transfer of ownership notification or
approval statutes, including the Industrial Site Recovery Act (N.J. Stat. Ann.
§§ 13:1K-6 et  seq.).


 


“ERISA” shall mean the United States
Employee Retirement Income Security Act of 1974, as codified at 29 U.S.C. §
1001 et  seq. and the rules and regulations promulgated
thereunder.


 


“Event
of Default” shall have the meaning set forth in Section 9.1
hereof.


 


“Face Amount” shall mean, with respect to a Purchased
Receivable, the face amount of such Purchased Receivable as of the date Buyer
shall have delivered the Initial Purchase Price to Seller related to such
Purchased Receivable.


 


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“FAR” means the United States Federal
Acquisition Regulations, 48 C.F.R. Parts 1-53, as may be amended from time to
time.


 


“GAAP” means generally accepted accounting principles in the
United States of America in effect from time to time consistently applied
(except for accounting changes in response to releases of the Financial
Accounting Standards Board, or other authoritative pronouncements).


 


“Government” means the United States Federal Government or any
agency or instrumentality thereof.


 


“Government Contract” means any prime contract, purchase order,
task order, delivery order, teaming agreement, joint venture agreement,
strategic alliance agreement, basic ordering agreement, pricing agreement,
letter contract or other similar arrangement of any kind that are currently
active in performance between Seller, as an Eligible Contractor, and the
Government, which shall result in Eligible Receivables owed to Seller which may
be purchased by Buyer in accordance with this Agreement. A task, purchase or
delivery order under a Government Contract shall not constitute a separate
Government Contract, for purposes of this definition, but shall be part of the
Government Contract to which it relates.


 


“Government Contract Bid” shall mean quotations, bids and
proposals for awards of new Government Contracts  made
by Seller for which no award has been announced and for which Seller believes
there is a reasonable prospect that such an award to Seller may yet be made.


 


“Governmental Authority” shall mean any federal, state,
municipal, local or other governmental or regulatory department, commission,
board, bureau, agency, instrumentality, court or tribunal, in each case whether
of the United States of America, any political subdivision thereof or any
foreign jurisdiction.


 


“Indebtedness” shall mean, with
respect to any Person, without duplication, any of the following, whether or
not matured:  (a) all indebtedness
for borrowed money, (b) all other obligations evidenced by notes, bonds,
debentures or similar instruments, (c) all reimbursement and all other
obligations with respect to (i) letters of credit, bank guarantees or
bankers’ acceptances or (ii) surety, customs, reclamation or performance
bonds (in each case not related to judgments or litigation), (d) all
obligations to pay the deferred purchase price of property or services, (e) all
obligations created or arising under any conditional sale or other title
retention agreement, regardless of whether the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property, (f) all matured obligations under
any swap, cap, collar, forward purchase or similar hedging agreements or
arrangements dealing with interest rates, currency exchange rates or commodity
prices, either generally or under specific contingencies, (g) all
obligations of such Person under all leases which are capitalized in accordance
with GAAP and any financing leases involving substantially the same economic
effect, (h) any obligation, 


 


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contingent or otherwise, of
such Person directly or indirectly guaranteeing, or indemnifying any Person against
losses in respect of, any Indebtedness of any other Person, (i) all
Indebtedness referred to above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property or other assets (including accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness and (j) all other obligations
that would be recorded on a person’s balance sheet as a liability in accordance
with GAAP.


 


“Indirect Costs” shall have the
meaning ascribed to such term in 48 C.F.R. Section 2.101 and in FAR Part 31.


 


“Initial Purchase Price” shall have the meaning set forth in Section 2.3.1
hereof.


 


“Initial Purchase Price Rate” shall have the meaning set forth
in Section 2.3.1 hereof.


 


“KBC” shall mean KBC Bank, N.V., a banking institution organized
under the laws of the Kingdom of Belgium, acting through its New York Branch.


 


“Lien” shall mean any lien, security
interest or other charge, encumbrance, or other type of preferential
arrangement having the practical effect of a lien or security interest, of or
on any assets or properties of any Person in favor of any other Person,
including a conditional sale or title retention agreement.


 


“Material Adverse Effect” shall mean a circumstance or condition
affecting the business, assets, operations, properties, condition (financial or
otherwise), or prospects of Seller and/or the Purchased Receivables that could
materially adversely affect (a) the business, assets, operations,
properties, condition (financial or otherwise) or prospects of Seller, (b) the
ability of Seller to perform any of its obligations under this Agreement, (c) the
rights and remedies of Buyer under this Agreement, (d) the value,
existence or ownership of the Purchased Receivables or (e) the
collectability of the Purchased Receivables.


 


“Offer Notice” shall mean a notice, made either in writing or
via email, delivered to Buyer by Seller through which Seller shall offer to
sell Eligible Receivables for an amount greater than or equal to ten thousand
dollars ($10,000).


 


“PAF Rate” shall have the meaning set forth in Section 3.3
hereof.


 


“Person” shall mean any individual,
corporation, partnership, limited liability company, limited liability
partnership, joint venture, association, joint stock company, trust (including
any beneficiary thereof), unincorporated organization or government or any
agency or political subdivision thereof.


 


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“Plan” shall mean an employee benefit
plan within the meaning of Section 3(3) of ERISA which is subject to
Title IV of ERISA and maintained or contributed to by Seller, or any other plan
covered by Title IV of ERISA that covers the employees of Seller.


 


“Proceeding” shall mean any action,
suit, proceeding or litigation in equity or at law, or any other judicial or
administrative proceeding or investigation.


 


“Program Access Fees” shall have the meaning set forth in Section 3.3
hereof.


 


“Program Continuance Fee” shall have the meaning set forth in Section 3.4
hereof.


 


“Purchased Receivables” shall mean all Eligible Receivables
arising out of any invoice and other agreements identified on or delivered with
any Receivables Invoice delivered by Seller to Buyer which Buyer elects to
purchase pursuant to Section 2.2 hereof.


 


“RCA” shall mean RCA Funding, LLC.


 


“Receivables” shall mean (i) all of Seller’s receivables
listed on any Receivables Invoice and all rights to, but not the obligations under,
such contracts and any and all rights and security arising thereunder, (ii) all
monies due or to become due with respect to the foregoing and (iii) all
books and records related to any of the foregoing.


 


“Receivables Invoice” shall have the meaning set forth in Section 2.1
hereof.


 


“Related Security” shall mean, with respect to any Eligible
Receivable or other receivable, all of the Seller’s right, title, interest and
remedies in, to and under any and all contracts, documents, instruments and
other items related thereto, and all proceeds of the foregoing, including,
without limitation, (i) the right of the Seller to receive all scheduled
and unscheduled payments of all amounts payable in connection with such
Eligible Receivable or other receivable, (ii) the right, if any, of the
Seller to cause the repurchase of the Seller’s interest in such Eligible
Receivable or other receivable  and to
receive the purchase price, (iii) the right to enforce the Seller’s rights
and remedies under any purchase and sale, transfer or other applicable
assignment agreement, if any, with respect thereto, (iv) all Liens or
security interests and property subject thereto from time to time purporting to
secure any of the foregoing rights or interests, and the right to all collections
in respect thereof, if any, (v) all guarantees, casualty and other
insurance policies (including, without limitation, the right to receive all
returned premiums related thereto) and other agreements or arrangements of
whatever character from time to time supporting or securing or otherwise
related to such Eligible Receivable or other receivable and the related
contracts, documents, instruments and other items related thereto, (vi) all
Collections and all accounts to 


 


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which
Collections in respect of such Eligible Receivable or other receivable are
deposited (including the Segregated Account), (vii) all other information,
documents, instruments, servicing files, records and computer-readable media,
personal property, contract rights, servicing rights, escrow funds, and general
intangibles of whatsoever kind evidencing, comprising or relating to the
ownership or transfer of such Eligible Receivable or other receivable or the
servicing thereof and all other documents or instruments delivered to the
Seller with respect thereto and (viii) all proceeds of the foregoing.


 


“Residual Calculation Date” shall mean the [second] Business Day
immediately following the date that any Collections are collected with respect
to any Purchased Receivable; provided that the amount of such
Collections exceed the sum of the Initial Purchase Price of such Purchased
Receivable, plus the Discount Factor related to such Purchased
Receivable, plus any accrued Program Access Fees owed during the
applicable Accrual Period.


 


“Residual Payment Date” shall mean the Business Day immediately
following the Residual Calculation Date.


 


“Residual Purchase Price” shall have the meaning set forth in Section 2.3.2
hereof.


 


“Sale and Contribution Agreement”
shall mean that certain Sale and Contribution Agreement dated as of January 20,
2009, by and between RCA, as purchaser, and Buyer, as seller.


 


“Segregated  Account”
shall mean that segregated bank account, located at KBC, specified by Buyer to
Seller, in which any and all Collections shall be deposited.


 


“Seller Obligations” shall mean all advances, financial
accommodations, liabilities, obligations, covenants and duties owing, arising,
due or payable by Seller to Buyer of any kind or nature, present or future,
arising under or in connection with this Agreement or under any other document,
instrument or agreement, whether or not evidenced by any note, guarantee or
other instrument, whether arising on account or by overdraft, whether direct or
indirect (including those acquired by assignment) absolute or contingent,
primary or secondary, due or to become due, now owing or hereafter arising and
however acquired, including, without limitation, all Initial Purchase Prices,
Program Access Fees, interest, Deemed Collections, fees, expenses, professional
fees and attorneys’ fees and any other sums chargeable to Seller hereunder or
otherwise.


 


“Solvent” means, with respect any Person, that as of any day,
both (a) (i) the sum of such Person’s debts (including contingent and
unliquidated liabilities) does not exceed the present fair saleable value of
such Person’s present assets (both at fair value and fair saleable value); (ii) such
Person’s capital is not unreasonably small in relation to its business as
contemplated on such day; and (iii) such Person has not incurred and does
not intend to incur, and believes that it 


 


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will
not incur, debts including current obligations beyond its ability to pay such
debts as they become due (whether at maturity or otherwise); and (b) such
Person is  “solvent” within the meaning
given that term and similar terms under Applicable Laws relating to fraudulent
transfers and conveyances.  For purposes
of this definition, the amount of any contingent liability at any time shall be
computed as the amount that, in light of all of the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability (irrespective of whether such contingent
liabilities meet the criteria for accrual under Statement of Financial
Accounting Standard No. 5)


 


“Termination Fee” shall have the meaning set forth in Section 3.2
hereof.


 


“Truth in Negotiations Act” shall mean the Truth in Negotiations
Act of 1962, 10 U.S.C. § 2306(a), 41 U.S.C. § 254(b), as amended.


 


“UCC” shall mean the Uniform
Commercial Code as in effect from time to time in the State of New York, provided,
however, that, in the event that, by reason of mandatory provisions of
law, any of the attachment, perfection or priority of the Purchased Receivables
under this Agreement is governed by the Uniform Commercial Code as in effect in
a jurisdiction other than the State of New York, the term “UCC” shall mean the
Uniform Commercial Code as in effect in such other jurisdiction for purposes of
the provisions of this Agreement relating to such attachment, perfection or
priority and for purposes of definitions related to such provisions.


 


“Underwriter” shall mean Credit Risk Management LLC.


 


“Unpurchased Receivable” shall mean any Receivable that is not a
Purchased Receivable.


 


“USA Patriot Act” shall mean the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act (Title II of Pub. L. 107-56 (signed into law October 26,
2001)).


 


SECTION 2


PURCHASE AND SALE OF RECEIVABLES


 


2.1           Delivery of
Invoices; Validation of Receivables.  During the Availability Period, and
simultaneously with the delivery of the same to any Account Debtor, Seller
shall deliver to Buyer and KBC any and all invoices prepared relating to
Receivables arising under contracts with an Account Debtor for which Seller has
assigned the rights to receive payments therefrom to Buyer or Buyer’s designee
(each, a “Receivables Invoice”). Upon receipt of any Receivables
Invoices, Buyer shall perform, or shall cause another Person to perform, any
and all due diligence necessary to determine which Receivables set forth in the
Receivables Invoices are Eligible Receivables.


 


2.2           Offer and
Acceptance of Receivables.  At
any time during the Availability Period, provided that there does not then
exist any Event of Default or any event that, 


 


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with
notice, lapse of time or otherwise, would constitute an Event of Default,
Seller may deliver to Buyer an Offer Notice; provided, however,
that Seller shall not deliver more than three (3) Offer Notices to Buyer
in any calendar week. Within two (2) Business
Days of Buyer’s receipt of an Offer Notice (the “Acceptance Date”),
Buyer shall (i) deliver to Seller a Confirmation List and (ii) and
pay to Seller by wire transfer an amount equal to the Initial Purchase Price of
each Eligible Receivable set forth on such Confirmation List, it being hereby
agreed to and accepted that the satisfaction of items (i) and (ii) above
shall evidence Buyer’s acceptance to purchase the Eligible Receivables set
forth on the Confirmation List. Notwithstanding the foregoing, Buyer shall have
no obligation to purchase all or any portion of Eligible Receivables set forth
in any Offer Notice or to give a Confirmation List. Upon Buyer’s acceptance of
any Eligible Receivable as set forth in this Section 2.2, such
Eligible Receivable shall become a “Purchased Receivable”; provided,
however, that it shall be a condition to the payment of each Initial
Purchase Price that: (i) all of the conditions, representations,
warranties and covenants set forth herein be true and correct on and as of the
Acceptance Date as though made at and as of each such date, and (ii) no
Event of Default, or any event or condition that with notice, lapse of time or
otherwise would constitute an Event of Default, shall have occurred and be
continuing, or would result from the payment of such Initial Purchase Price.


 


2.3           Purchase Price of Receivables.


 


2.3.1        Initial Purchase Price.  As set forth in Section 2.2
hereof, Buyer shall pay to Seller an amount equal to ninety  percent
(90%) (the “Initial Purchase Price Rate”)
of the Face Amount of each Eligible Receivable set forth in any Confirmation
List (each, an “Initial Purchase Price”). The Initial Purchase Price
Rate shall remain in effect throughout the term of this Agreement.


 


2.3.2        Residual Purchase Price.  Provided that there does not then exist an Event
of Default or any event or condition that, with notice, lapse of time or
otherwise, would constitute an Event of Default, Buyer shall pay to Seller by
wire transfer on the Residual Payment Date, the amount, if any, which Buyer
owes to Seller on such Residual Payment Date, according to the accounting
prepared by Buyer as of such Residual Calculation Date (the “Residual
Purchase Price”). For each individual Purchased Receivable, the Residual
Purchase Price shall be an amount equal to: (A) the total amount of
Collections related to such Purchased Receivable as of the Residual Calculation
Date; minus (B) the sum of (i) the Initial Purchase Price paid
for such Purchased Receivable, plus (ii) the Discount Factor owed
with respect to such Purchased Receivable, plus (iii) the total as
of the Residual Calculation Date of (a) any and all accrued and unpaid
Program Access Fees multiplied by a fraction, the numerator of which is equal
to the total amount of Collections collected in such applicable Accrual Period
and the denominator of which is the average daily Account Balance during such
applicable Accrual Period, (b) Deemed Collections related to such
Purchased Receivable, and (c) any other amounts due, including
professional fees and expenses, as set forth in Section 10.2 hereof
for which oral or written demand has been made by Buyer to Seller as of the
Residual Calculation Date to the extent Buyer has agreed to accept payment
thereof by deduction from the Residual Purchase Price.


 


11
















 


2.4           Effectiveness
of the Sale to Buyer.  Effective
upon Buyer’s payment of the Initial Purchase Price, and for and in
consideration therefore and in consideration of the covenants of this
Agreement, Seller hereby absolutely sells, transfers and assigns to Buyer, all
of Seller’s right, title and interest in and to each Purchased Receivable and
any Related Security and all monies due or which may become due on or with
respect to such Purchased Receivable and any Related Security. Buyer shall be
the absolute owner of each Purchased Receivable and any Related Security. Buyer
shall have, with respect to any goods related to the Purchased Receivable and
any Related Security, all the rights and remedies of an unpaid seller under the
UCC and other applicable laws, including the rights of replevin, claim and
delivery, reclamation and stoppage in transit.


 


2.5           Unpurchased
Receivables.  In the
event that any collections deposited into the Segregated Account relate to an
Unpurchased Receivable, Buyer shall remit, or shall cause RCA or KBC to remit,
all such collections to Seller within the two (2) Business Days
immediately following such collection, provided that the Seller has submitted
the proper banking information and invoice documentation required by the Buyer.


 


2.6           True Sales.


 


2.6.1        Each of Buyer
and Seller intend the transactions hereunder to constitute true sales of
Purchased Receivables by Seller to Buyer providing Buyer with the full benefits
of ownership thereof, and no party hereto intends the transactions contemplated
hereunder to be, or for any purpose to be characterized as, a loan from or
through Buyer to Seller.


 


2.6.2        In the event,
but only to the extent, that the conveyance of Purchased Receivables by Seller
hereunder is characterized by a court or other governmental authority as a loan
rather than a sale, Seller shall be deemed hereunder to have granted to Buyer
effective as of the date of the first purchase under this Agreement, a security
interest in all of Seller’s right, title and interest in, to and under all of
the Purchased Receivables sold by it, whether now or hereafter owned, existing
or arising. Such security interest shall secure any and all rights of, and
payments owed to, Buyer under this Agreement, whether now or hereafter existing
or arising, due or to become due, direct or indirect, absolute or contingent.
Buyer shall have, with respect to the property described in this Section 2.6.2,
and in addition to all the other rights and remedies available to Buyer under
this Agreement and applicable law, all the rights and remedies of a secured
party under the UCC, and this Agreement shall constitute a security agreement
under applicable law.


 


SECTION 3


FEES; ACCOUNTING


 


3.1           Enrollment Fee. Immediately
upon the execution of this Agreement, Seller shall pay to Buyer an amount equal
to fifteen thousand  dollars  ($15,000) (the “Enrollment
Fee”) in consideration of Buyer’s commitment to purchase Receivables
hereunder.


 


12

















 


3.2           Termination Fee.  In the event that Seller terminates this
Agreement prior to the end of the term of this Agreement as set forth in Section 10.10
hereof, Seller shall pay to Buyer an amount equal to zero  dollars  ($0) (the “Termination Fee”) in consideration for
such early termination of this Agreement. The Termination Fee shall be paid to
Buyer within twenty (20) days of such early termination, and may be charged to
Seller directly or offset from any Residual Purchase Price or Unpurchased
Receivable payments owed to Seller at or after the time at which such
Termination Fee arises.


 


3.3           Program Access
Fees.  On each Residual Payment Date,
Buyer shall, or shall cause KBC to, deduct from any Collections an amount equal
to the sum of .0181%  (the “PAF
Rate”) of the daily ending Account Balance for each day during the
applicable Accrual Period (the “Program Access Fees”). At all times
throughout the term of this Agreement, as set forth in Section 10.10
hereof, Buyer shall have the right to adjust the PAF Rate as Buyer may deem
necessary to account for any material changes in the direct, third party
charges that are payable by Buyer in connection with the Purchased Receivables,
including, without limitation, any servicing fees, underwriting fees and
licensing fees; provided, however, that the PAF Rate shall be
adjusted no more frequently that once per calendar quarter and any increase
shall be effective upon thirty (30) days prior written notice to Seller.


 


3.4           Program
Continuance Fee.  Throughout
the term of this Agreement, as set forth in Section 10.10 hereof,
Seller shall pay to Buyer a quarterly fee equal to three thousand seven hundred
and fifty  dollars ($3,750) (the “Program Continuance Fee”) if the average
daily use of the facility is less than $2,250,000; provided, however,
that Buyer, may reduce, in whole or in part, the Program Continuance Fee
assessed in a given calendar quarter based on Buyer’s review of the
collectability of the Purchased Receivables and the amount of Receivables
Seller elects to sell to Buyer hereunder.


 


3.5           Discount Factor. On each
Residual Payment Date, Buyer shall, or shall cause to, deduct from any
Collections an amount equal to .524% (the “Discount Factor Rate”) of the
Face Amount of each Purchased Receivable for which the Residual Purchase Price,
if any, is paid on such Residual Payment Date (the “Discount Factor”).
At all times throughout the term of this Agreement, as set forth in Section 10.10
hereof, Buyer shall have the right to adjust the Discount Factor Rate in its
sole discretion as Buyer may deem necessary to account for adjustments in the
purchase prices of Receivables hereunder; provided, however, that
the Discount Factor Rate may only be adjusted as of the first day of each
calendar month, and only shall be applied prospectively.


 


3.6           Accounting.  Buyer shall prepare and send to Seller on
each Residual Calculation Date, an accounting of the transactions as of such
Residual Calculation Date, including the amount of all Purchased Receivables,
Collections and Program Access Fees. The accounting shall be deemed correct and
conclusive unless Seller makes written objection to Buyer within thirty (30)
days after Buyer delivers the accounting to Seller.


 


13

















 


SECTION 4


NO RECOURSE; DEEMED COLLECTIONS


 


4.1           No Recourse.  Subject to Section 4.2 hereof,
the purchase and sale of Receivables under this Agreement shall be without
recourse to Seller for non-payment of Purchased Receivables due to credit
problems of the Account Debtor; provided, however, that Seller
shall be liable to Buyer for (i) any and all fraudulent statements related
to any Receivable contained in the Receivables Invoices or otherwise and (ii) any
breach of  any representations,
warranties, covenants and indemnities made by Seller pursuant to the terms of
this Agreement, it being understood that such Obligations of Seller will not
arise on account of the failure of the Account Debtor for credit reasons to
make any payment in respect of a Purchased Receivable.


 


4.2           Deemed
Collections; Repurchase


 


4.2.1        If on any  day
the Account Balance is reduced or adjusted as a result of any defective,
rejected or returned merchandise or services, any cash discount, any credit,
any incorrect billing, pricing adjustment or any other adjustment by Seller or
is reduced or canceled as a result of a setoff in respect of any claim by the
Account Debtor thereof against Seller (whether such claim arises out of the
same or a related or unrelated transaction) or as a result of any dispute or
any obligation of Seller to pay to the related Account Debtor any rebate or
refund, or to rework any product or service, Seller shall directly deposit into
the Segregated Account in immediately available funds an amount equal to the
Deemed Collections of such reduction or adjustment.


 


4.2.2        If on any day
any of the representations or warranties herein are not true with respect to
any Purchased Receivable as of the date it was sold hereunder, Seller shall
directly deposit into the Segregated Account in immediately available funds an
amount equal to the portion of the Account Balance related to such Purchased
Receivable for application by KBC to the same extent as if Collections
pertaining to such Purchased Receivable had actually been received on such
date.


 


4.2.3        If and to the
extent that Buyer shall be required for any reason to pay over to the Account
Debtor (or any trustee, receiver, custodian or similar official in the event of
bankruptcy, etc.) any amount received by it hereunder, such amount shall be
deemed not to have been so received but rather to have been retained by Seller
and, accordingly, Buyer shall have a claim against Seller for such amount,
payable when and to the extent that any distribution from or on behalf of
Seller is made in respect thereof.


 


4.2.4        If on any day,
and for any reason, a Purchased Receivable is determined to not have qualified
as an Eligible Receivable as of the date such Purchased Receivable was
purchased by Buyer from Seller in accordance with this Agreement or at any time
thereafter, Seller shall deposit directly into the Segregated Account in
immediately available funds an amount equal to the Initial Purchase Price plus
any Residual Purchase Price paid with respect to such Purchased Receivable and
any and all costs incurred by Buyer in connection with such determination and
adjustment, including reasonable fees and disbursements of counsel, within
twenty-five (25) days of Seller’s 


 


14

















 


receipt
of notice of such determination. Seller shall deposit directly into the
Segregated Account any amounts arising under this Section 4.2.4.


 


SECTION 5


POWER OF ATTORNEY; SERVICING OF PURCHASED RECEIVABLES; 


ADDITIONAL RIGHTS


 


5.1           Power of Attorney.  Seller does hereby irrevocably appoint Buyer
and its successors and assigns as Seller’s true and lawful attorney in fact,
and hereby authorizes Buyer, regardless of whether there has been an Event of
Default, (i) to sell assign, transfer, pledge, compromise or discharge the
whole or any part of the Purchased Receivables, (ii) to demand, collect,
receive, sue, and give releases to any Account Debtor for the monies due or
which may become due upon or with respect to the Purchased Receivables and to
compromise, prosecute or defend any Proceeding relating to the Purchased
Receivables, including the filing of a claim or the voting of such claims in
any bankruptcy case, all in Buyer’s name or Seller’s name, as Buyer may choose,
(iii) to prepare, file and sign Seller’s name on any notice, claim,
assignment, demand, draft or notice of or satisfaction of lien or mechanics’
lien or similar document with respect to Purchased Receivables, (iv) to
notify all Account Debtors with respect to the Purchased Receivables to pay
Buyer directly, (v) to receive, open and dispose of all mail addressed to
Seller for the purpose of collecting Purchased Receivables (provided, however,
that any mail of Seller not related to collecting Purchased Receivables shall
be promptly returned to Seller), (vi) to endorse Seller’s name on any
checks or other forms of payment on the Purchased Receivables, (vii) to
execute on behalf of Seller any and all instruments, documents, financing
statements and the like to perfect Buyer’s interests in the Purchased
Receivables, as set forth herein, (viii) to make any ministerial corrections
to invoices related to Purchased Receivables in order to ensure their timely
payment, and (ix) to do all acts and things necessary or expedient in
furtherance of any such purposes. If Buyer receives a wire transfer or item
which is payment for both a Purchased Receivable and another Receivable, the
funds shall first be applied to the Purchased Receivable and, so long as there
does not exist an Event of Default or an event that with notice, lapse of time
or otherwise would constitute an Event of Default, the excess shall be remitted
to Seller. Upon the occurrence and continuation of an Event of Default, all of
the power of attorney rights granted by Seller to Buyer hereunder shall be
applicable with respect to all Purchased Receivables.


 


5.2           Servicing of Purchased
Receivables. Subject to Buyer’s ownership of the Purchased
Receivables, KBC shall have the sole right to service, administer and collect
the Purchased Receivables, to assign such right and to delegate such right to
others. In consideration of Buyer’s purchase of the Purchased Receivables,
Seller agrees to cooperate fully with Buyer and/or KBC to facilitate the full
and proper performance of such duties and obligations for the benefit of Buyer,
RCA and/or KBC. To the extent that Buyer, individually or through KBC, has
granted or grants powers of attorney to RCA or to KBC, Seller hereby grants a
corresponding power of attorney on the same terms to RCA or KBC. Seller hereby
acknowledges and agrees that Buyer, in all of its capacities, may assign to RCA,
which in turn may assign to KBC for the benefit of RCA such powers of attorney
and other rights and interests granted by Seller to Buyer pursuant to Section 5.1
hereof, and agrees to cooperate fully with KBC in the exercise of such rights. 


 


15

















 


Notwithstanding
anything herein to the contrary, to the extent that (i) Seller desires to
withdraw a contract with an Account Debtor from eligibility under the
Receivables purchase program contemplated by this Agreement and (ii) all
Collections relating to all Purchased Receivables arising under such contract
have been received in full by Buyer, then Buyer, for itself and on behalf of
its Affiliates, agrees to take all commercially reasonable efforts to cooperate
with Seller to cause such contract and any and all accounts receivable arising
thereunder to be reassigned to Seller.


 


5.3           Rights of Buyer; Enforcement
Rights.


 


5.3.1        Buyer shall
account for all collections of Receivables, but shall have no obligation to
replace, to substitute or to return any Purchased Receivables to Seller. Buyer
shall have no obligation to return to Seller, Collections, or any interest or
fees collected pursuant thereto, without regard to whether such Collections and
fees are in excess of the Initial Purchase Prices and Residual Purchase Prices
paid for such Purchased Receivables. Notwithstanding anything contained herein
to the contrary, if an Event of Default occurs, then Buyer shall be obligated
to return any and all collections of Receivables to which Seller is entitled
after all of Seller’s obligations arising under this Agreement have been paid
in full.


 


5.3.2        Buyer shall
have the unrestricted right to further assign, transfer, deliver, hypothecate,
subdivide or otherwise deal with the Purchased Receivables,
and all of Buyer’s right, title and interest in, to and under this Agreement,
on whatever terms Buyer shall determine.


 


5.3.3        Buyer shall
have the sole right to retain any gains or profits created by buying, selling
or holding the Purchased Receivables and, except as expressly set forth in the
this Agreement, shall have the sole risk of and responsibility for losses or
damages created by such buying, selling or holding.


 


SECTION 6


CONDITION TO PURCHASES


 


6.1           Conditions
Precedent to Initial Purchases. The initial purchase of
Purchased Receivables under this Agreement is subject to the condition
precedent that Buyer shall have received each of the following (with copies to
KBC), on or before the date of such purchase, each in form and substance
satisfactory to Buyer and KBC:


 


6.1.1        This Agreement,
duly executed by the parties hereto, together with evidence reasonably
satisfactory to Buyer that all conditions precedent to the initial purchase of
Purchased Receivables shall have been met;


 


6.1.2        Certificates of
officers of Seller certifying (i) a copy of the resolutions of its Board
of Directors, or similar governing body, approving this Agreement to be
delivered by it hereunder and the transactions contemplated hereby; (ii) the
names and true signatures of the officers authorized on its behalf to sign this
Agreement to be delivered by it hereunder, (iii) a copy of its by-laws or
operating 


 


16

















 


agreement,
as the case may be, and (iv) all documents evidencing other necessary
corporate action and governmental approvals, if any, with respect to this
Agreement;


 


6.1.3        Seller’s
certificate of incorporation or formation, as the case may be, duly certified
by the appropriate government official in the state where Seller is organized,
as of a recent date acceptable to Buyer;


 


6.1.4        If necessary,
acknowledgment copies or time stamped receipt copies, of the proper financing
statements that have been duly executed and name Seller as the debtor and Buyer
as the secured party and purchaser of the Receivables or other, similar
instruments or documents, which will be assigned to RCA to the extent that such
receivables are purchased by RCA under the Sale and Contribution Agreement,  as may be necessary or desirable under the
UCC or any comparable law of all appropriate jurisdictions to perfect Buyer’s
ownership interest in all Receivables in which an ownership interest may be
assigned to it hereunder; and


 


6.1.5        Such other
agreements, instruments, UCC financing statements, certificates, opinions and
other documents as Buyer or KBC may reasonably  request.


 


6.2           Conditions
Precedent to All Purchases Each purchase under this
Agreement is subject to the condition precedent that the agreement of Seller to
sell Receivables, and the agreement of Buyer to purchase Receivables, shall not
have terminated under the terms of this Agreement, and shall be subject further
to the conditions precedent that:


 


6.2.1        In the case of
each purchase, Seller shall have delivered to KBC prior to such purchase (i) all
Receivables Invoices with respect to the immediately preceding calendar month
and (ii) an Offer Notice, together with such additional information as may
be reasonably requested by Buyer or KBC;


 


6.2.2        Seller shall
have delivered acknowledgment copies of proper financing statements, if any,
necessary to release all security interests and other rights of any Person in
the Purchased Receivables previously granted by Seller;


 


6.2.3        Seller shall
have delivered to Buyer any and all financial statements of Seller required
under this Agreement or reasonably requested by Buyer;


 


6.2.4        Prior to the
sale of any Receivables hereunder, Seller shall (i) execute all other
agreements, instruments, notices, forms and documents and shall perform all further
acts which Buyer may require with respect to the Purchased Receivables to
ensure compliance with the Assignment of Claims Act, and all applicable
regulations issued pursuant thereto, (ii) cause to be filed or submitted
with the Government any and all agreements, instruments, notices, forms and
documents required pursuant to the Assignment of Claims Act and all applicable
regulations issued pursuant thereto, and (iii) have received, prior to the
sale of any Purchased Receivables under this Agreement, any and all necessary
and applicable approvals and consents from the Government pursuant to
Assignment of Claims Act and all applicable regulations issued pursuant
thereto;


 


17

















 


6.2.5        Since March 31,
2009, no event or events shall have occurred which have had or could reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect;


 


6.2.6        No Event of
Default or shall have occurred and be continuing or be imminent or pending or
result from the purchase of the Purchased Receivables;


 


6.2.7        Buyer and
Seller shall have provided any information reasonably requested by the other
party under or in connection with the USA Patriot Act;


 


6.2.8        Buyer shall
have completed any due diligence or shall have received and be satisfied in its
sole discretion with any and all confirmations related to Seller as an Eligible
Contractor or the Receivables as Eligible Receivables;


 


6.2.9        Buyer shall
have completed and be satisfied in its sole discretion any and all due
diligence performed by Buyer relating to Seller, the Receivables or any
transactions contemplated herein, and Buyer shall have approved the invoice
relating to, and be satisfied with, the Initial Purchase Price being paid by
Buyer for each Purchased Receivables sold under this Agreement;


 


6.2.10      Seller shall
have been found to have met any and all requirements of the Underwriter’s
annual review set forth in the Contractor Review Agreement.


 


6.2.11      The
representations and warranties contained herein are true and correct on and as
of such day as though made on and as of such day and shall be deemed to have
been made on such day (except that any such representation or warranty that is
expressly stated as being made only as of a specified earlier date shall be
true and correct in all material respects as of such earlier date).


 


6.3           Certification
as to Representations and Warranties.  Seller, by accepting the Initial Purchase
Price paid for each purchase of Purchased Receivables on any day, shall be deemed
to have certified that its representations and warranties contained herein are
true and correct on and as of such day, with the same effect as though made on
and as of such day (except that any such representation or warranty that is
expressly stated as being made only as of a specified earlier date shall be
true and correct in all material respects as of such earlier date).


 


6.4           Effect of
Payment of Purchase Price.  Upon
the payment of the Initial Purchase Price for any purchase of Purchased
Receivables, title to such Purchased Receivables shall vest in Buyer, whether
or not the conditions precedent to such purchase were in fact satisfied; provided
that Buyer shall not be deemed to have waived any claim it may have under this
Agreement for the failure by Seller  in
fact to satisfy any such condition precedent.


 


18

















 


SECTION 7


REPRESENTATIONS AND WARRANTIES


 


7.1           Representations
and Warranties.  In order to
induce Buyer to enter into this Agreement and to make purchases thereunder,
Seller hereby represents and warrants as follows:


 


7.1.1        Organization
and Good Standing.  Seller has
been duly organized and is validly existing as a corporation in good standing
under the laws of the jurisdiction of its organization, with power and
authority to own its properties and to conduct its business as such properties
are presently owned and such business is presently conducted.


 


7.1.2        Due
Qualification.  Seller is
duly qualified to do business as a foreign corporation in good standing, and
has obtained all necessary licenses and approvals, in all jurisdictions in
which the ownership or lease of property or the conduct of its business
requires such qualification, licenses or approvals except where the failure to
so qualify or have such licenses or approvals has  not had, and
could not reasonably be expected to have, a Material Adverse Effect.


 


7.1.3        Power and
Authority; Due Authorization.  Seller (A) has all necessary power,
authority and legal right to (i) execute and deliver this Agreement, (ii) carry
out the terms of this Agreement, and (iii) sell and assign the Receivables
on the terms and conditions herein provided and (B) has been duly
authorized by all necessary corporate and other action to the execute, deliver
and perform its obligations under this Agreement.


 


7.1.4        Binding
Obligations.  This
Agreement constitutes a legal, valid and binding obligation of Seller,
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors’ rights generally and by general
principles of equity, regardless of whether such enforceability is considered
in a Proceeding.


 


7.1.5        No Violation.  The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof will not
(i) conflict with, result in any breach of any of the terms and provisions
of, or constitute (with or without notice or lapse of time or both) a default
under Seller’s articles of incorporation or certification of formation, by-laws
or operating agreement, each as the case may be, or any other Obligation, (ii) result
in the creation or imposition of any Lien upon Seller’s properties pursuant to the terms of any such contractual
obligation, other than this Agreement, or (iii) violate any applicable
law.


 


7.1.6        No Proceedings.  Except as set forth on Schedule 7.1.5
attached hereto, there is no litigation, Proceeding or investigation pending
or, to the best of Seller’s knowledge, threatened, before any governmental
authority or arbitrator (i) asserting the invalidity of this Agreement, (ii) seeking
to prevent the sale and assignment of the Receivables, the collectability of
the Receivables or the consummation of any of the other transactions
contemplated by this Agreement, or (iii) seeking any determination or
ruling that could reasonably be expected to have a Material Adverse Effect.


 


19

















 


7.1.7        Government
Contract Regulatory Matters.


 


7.1.7.1     Compliance with Contract Requirements.  (i) Seller has fully complied with all
material terms and conditions of each Government Contract to which it is a
party, and has performed in all material respects all obligations required to
be performed by it thereunder, (ii) Seller has complied with all statutory
and regulatory requirements, including, without limitation, the Federal
Property and Administrative Services Act, the FAR, any applicable agency
specific acquisition regulation, related cost principles, and the cost
accounting standards, where and as applicable to each of the Government
Contracts and the Government Contract Bids, and (iii) the representations,
certifications and warranties made by Seller with respect to the Government
Contracts or Government Contract Bids were accurate as of their effective dates
and Seller has fully complied in all material respects with all such
certifications.  Seller has not received
a substantially adverse or negative government past performance evaluation or
rating for the past ten (10) years that could be reasonably expected to
adversely affect the evaluation by the Government or proposals for future
Government Contracts.


 


7.1.7.2     Notice of Non-Compliance. With respect
to any Government Contract with Seller, neither the Government, any prime
contractor or higher-tier subcontractor under a Government Contract nor any
other Person has notified Seller in writing of any actual or alleged violation
or breach of any statute, regulation, representation, certification, disclosure
obligation, contract term, condition, clause, provision or specification,
including, without limitation, the Procurement Integrity Act, the Service
Contract Act, the Trade Agreements Act and the Buy American Act, that could be
reasonably expected to adversely affect the collectability of any Purchased
Receivable or adversely affect the award of Government Contracts to Seller in
the future.


 


7.1.7.3     False Claims, Defective Pricing and Requests for
Pricing Reductions.  Seller is
not party to any ligation and has taken no action that could reasonably be
expected to give rise to (i) liability under the False Claims Act, (ii) a
claim for price adjustment under the Truth in Negotiations Act or (iii) any
other request for a material reduction in the price of any Government
Contracts.


 


7.1.7.4     Termination for Default or Convenience.  (i) Seller has not received any written
or oral show cause, cure, deficiency, default or similar notice relating to any
Government Contracts, (ii) no termination for default, cure notice or show
cause notice has been issued or threatened and remains unresolved with respect
to any Government Contract or Government Contract Bid, and no event, condition
or omission has occurred or exists that would constitute grounds for such action,
(iii) no past performance evaluation received by Seller with respect to
any such Government Contract has set forth a default or other material failure
to perform thereunder or termination or default thereof, (iv) there has
not been any material withholding or setoff under any Government Contract, (v) all
invoices and claims (including requests for progress payments and provisional 


 


20

















 


costs payments) submitted under each Government Contract were current,
accurate and complete in all material respects as of their submission date and (vi) none
of the execution, delivery or performance of this Agreement and any other
consents, certificates or deliverables required herein does or will conflict
with or result in a material breach of or default under any Government Contract
or cause a termination of any Government Contract due to loss of preferential
status.  Seller has not received any
written or oral notice terminating any of the Government Contracts for convenience
or indicating an intent to terminate any of the Government Contracts for
convenience.


 


7.1.7.5     Disputes and Claims.  Seller has not received any written notice of
any outstanding material claims or contract disputes to which Seller is a party
(i) relating to the Government Contracts or Government Contract Bids and
involving either the Government, any prime contractor, any higher-tier
subcontractor, vendor or any third party; or (ii) relating to the
Government Contracts under the Contract Disputes Act or any other federal
statute.


 


7.1.7.6     Suspension and Debarment.  Neither Seller, any of Seller’s affiliates
nor any of Seller’s respective managers, directors, officers or employees in
connection with the performance of the duties for or on behalf of Seller or any
of Seller’s affiliates has been debarred, suspended, proposed for suspension or
debarment from bidding on any Government Contract, declared nonresponsible or
ineligible, or otherwise excluded from participation in the award of any
Government Contract or for any reason been listed on the List of Parties
Excluded from Federal Procurement and Non-procurement Programs.  Within the last ten (10) years, no
debarment, suspension or exclusion proceeding has been initiated against
Seller, any of Seller’s affiliates or any of their respective directors,
officers or employees in connection with the performance of the duties for or
on behalf of Seller or any of Seller’s affiliates.  No circumstances exist that would reasonably
warrant the institution of suspension or debarment proceedings against Seller,
any of Seller’s affiliates or any of their respective managers, directors,
officers or employees in connection with the performance of the duties for or
on behalf of Seller or any of Seller’s affiliates.


 


7.1.7.7     Responsibility Determinations. No negative
determination of responsibility has been issued against Seller since its
inception with respect to any quotation, bid or proposal for a Government
Contract.


 


7.1.7.8     Audits, Investigations and Enforcement Actions.  Except as described in Schedule 7.1.7.8
attached hereto, no audit, review, inspection, investigation, survey or
examination of Seller’s records by the Government is threatened or pending; (ii) Seller
has not received any official notice that it is being specifically audited or
investigated by the Government Accountability Office, the DCAA, any state or
federal agency Inspector General, the contracting officer with respect to any
Government Contract, or the U.S. Department of Justice (including any U.S.
Attorney); and (iii) Seller has not received any written notice or
otherwise become aware that any audit, review, inspection, investigation,
survey or examination of records described in the attached 


 


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schedule, has revealed any fact, occurrence or practice that could
reasonably be expected to adversely effect Seller.


 


7.1.7.9     Disclosure.  Seller has not made any disclosure to the
Government or other customer or prime contractor or higher-tier subcontractor
related to any suspected, alleged or possible violation of a material
requirement of a Government Contract, any apparent or alleged material
irregularity, misstatement or omission arising under or relating to a
Government Contract or Government Contract Bid, or any violation of Law or
regulation relating to a Government Contract or Government Contract Bid.


 


7.1.7.10       No Violations.  Seller has not engaged in or been charged
with, or received or been advised in writing of any charge, investigation, claim
or assertion of, nor has Seller, any of its directors, officers or employees in
their capacities as such been subject to any criminal indictment or
information, lawsuit, subpoena, civil investigative demand, discovery request,
administrative proceeding, voluntary disclosure, claim, dispute, mediation or
arbitration with regard to, any material violation of any requirement
pertaining to a Government Contract or Government Contract Bid, including
material violations of any statutory or regulatory requirements or violations
of any applicable laws relating thereto.


 


7.1.7.11       No Litigation.  Seller has not taken any action and is not a
party to any litigation that could reasonably be expected to give rise to (i) a
claim for price adjustment under the Truth in Negotiations Act; or (ii) any
other request for a material reduction in the price of any Government Contract,
including but not limited to claims based on actual or alleged defective
pricing.  To Seller’s best knowledge,
there exists no basis for a claim of any liability of Seller by the Government
as a result of defective cost and pricing data submitted to the Government.
Seller is not participating in any pending claim and Seller is unaware of any
potential claim under the Contract Disputes Act against the Government or any
prime contractor, subcontractor or vendor arising under or relating to any
Government Contract or Government Contract Bid.


 


7.1.7.12       DCAA-Approved Rates.  All Direct Costs and Indirect Cost rates are
being billed by Seller under the Government Contracts consistent with
DCAA-approved rates or provisional rate agreements.


 


7.1.7.13       National Security
Obligations.  Seller is
in compliance with all applicable national security obligations, including
those specified in the National Industrial Security Program Operating Manual,
DOD 5220.22-M (January 1995), and any supplements, amendments or revised
editions thereof.


 


7.1.7.14       No Events of Omissions.  To Seller’s best knowledge, there are no
events or omissions that would reasonably be expected to result in (i) a
material claim against Seller by the Government or any prime contractor,
subcontractor, vendor, or other third party arising under or relating to any
Government Contract or Government Contract Bid; or (ii) a material dispute



 


22

















 


between Seller and the Government or any prime contractor,
subcontractor, vendor, or other third party arising under or relating to any
Government Contract or Government Contract Bid.


 


7.1.7.15       Losses and Cost Overruns; No
Improper Payments.  No
Government Contract has incurred or currently projects losses or cost overruns
in an amount exceeding fifty thousand dollars ($50,000).  No payment has been made by Seller, or by a
Person acting on Seller’s behalf, to any Person (other than to any bona fide
employee or agent of Seller, as defined in subpart 3.4 of the FAR), which
is or was improperly contingent upon the award of any Government Contract or
which would otherwise be in violation of any applicable procurement law or
regulation or any other applicable laws.


 


7.1.7.16       Costs Allowable.  All of Seller’s costs (both Direct Costs
and/or Indirect Costs) that have been, prior to the date hereof, charged to any
Government Contract are allowable in accordance with applicable cost accounting
standards and cost principles (except for costs properly charged to a reserve
account appearing on Seller’s balance sheet as of the close of March 31,
2009).


 


7.1.8        Assignment of
Claims Act.  Prior to
each sale of Purchased Receivables hereunder, all steps shall have been taken
necessary or appropriate under the Assignment of Claims Act to insure that (i) each
Purchased Receivable being sold has been validly assigned to Buyer, or Buyer’s
designee, as bona fide financing institution(s), (ii) Seller has validly
assigned such Purchased Receivables to Buyer, or Buyer’s designee, and (ii) all
payments and Collections with respect to such Purchased Receivables have been
validly directed to be made directly to the Segregated Account.


 


7.1.9        Government
Approvals.  Except as
set forth or required herein, no governmental action, approval or consent is
required for the due execution, delivery and performance by Seller of this
Agreement.


 


7.1.10      Quality of
Title; Valid Sale; No Other Liens.


 


7.1.10.1   Seller is the sole legal and beneficial owner of the
Receivables, free and clear of any Lien. Without limiting the generality of the
foregoing, no security agreement, financing statement or other public notice
with respect to all or any part of the Receivables that evidences a Lien
securing any indebtedness of Seller is on file or of record in any public
office, except such as may have been filed in favor of Buyer pursuant to this
Agreement.


 


7.1.10.2   Seller acquired its rights in the Receivables in
good faith without notice of any Lien as defined in the UCC, except as set
forth in Section 7.1.10.1  hereof.


 


7.1.10.3   Seller has not authorized the filing of and is not
aware of any financing statements against Seller that include a description of
collateral covering the Receivables other than any financing statements
relating to any Receivables sold to Buyer hereunder.


 


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7.1.10.4         There are no judgment lien
or tax lien filings against Seller. Except as set forth in this Agreement,
Seller has not, pledged, assigned, sold, granted a security interest in or
otherwise conveyed or disposed of any interest in any of the Receivables.


 


7.1.10.5         Each Receivable constitutes
an “account” as such term is defined in the UCC.


 


7.1.11      Accuracy of
Information.  Each
report, information, exhibit, financial statement, document, book, record or
report furnished or to be furnished at any time by or on behalf of it to Buyer
or KBC in connection with this Agreement is or will be accurate in all material
respects as of its date or as of the date so furnished, and no such item
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements
contained therein, in the light of the circumstances under which they were
made, not materially misleading.


 


7.1.12      Offices;
Billing Address.  The
principal place of business and chief executive office of Seller, and the
location where Seller keeps all of its books, records and documents evidencing
or relating to Purchased Receivables, is located at the address set forth on
the first page of this Agreement. Seller has a billing address located in
the United States, its territories or possessions.


 


7.1.13      Maintenance of
Books and Records.  Seller has
accounted for each sale of Purchased Receivables in its books and financial
statements as sales, consistent with GAAP.


 


7.1.14      Solvency.  Seller is Solvent; and at the time of (and
immediately after) each sale pursuant to this Agreement it shall be Solvent.


 


7.1.15      Compliance with
this Agreement.  Seller has
complied with all of the terms, covenants and agreements contained in this Agreement
applicable to it.


 


7.1.16      Corporate Name.  Seller’s complete corporate name is as forth
on the first page of this Agreement, and Buyer does not use and has not
during the last six (6) years used any other corporate name, trade name,
doing business name or fictitious name.


 


7.1.17      Eligible
Receivables.  Each
Purchased Receivable sold by it to Buyer hereunder that is designated as an
Eligible Receivable on any Invoice Remittal is in fact an Eligible Receivable.


 


7.1.18      No Termination
Events.  No event has occurred and is
continuing, or would result from a purchase, in respect of the Receivables or
from the application of proceeds therefrom, which would cause the early
termination of this Agreement.


 


7.1.19      No Consents.  Subject to Section 6.2.4 hereof,
no authorization, consent, license, order or approval of, or registration or
declaration with, any 


 


24

















 


governmental
authority or other Person is required to be obtained, effected or made by
Seller in connection with the execution and delivery by Seller of this
Agreement or its performance of its obligations under this Agreement or the
transactions contemplated hereby, or for the exercise by Buyer of its rights
hereunder except for filings required hereunder and those that have been
obtained, effected or made.


 


7.1.20      No Default.  No Event of Default has occurred and is
continuing, both before and immediately after giving effect to this
Agreement.  Seller is not in default in
the performance, observance or fulfillment of any contractual obligations
applicable to it or its property.


 


7.1.21      ERISA.  Seller has complied in all material respects
with ERISA and has not incurred and does not expect to incur any liabilities to
the Pension Benefit Guaranty Corporation (or any successor thereto) under
ERISA.  Seller is not a sponsor of, or a
member of a controlled group of any Person that is a sponsor of, any Plan.


 


7.1.22      Anti-Money
Laundering Laws; Patriot Act.  Seller is in compliance, in all material
respects, with the (a) Trading with the Enemy Act, and each of the foreign
assets control regulations of the United States Treasury Department (31 CFR,
Subtitle B, Chapter V, as amended), and any other enabling legislation or
executive order relating thereto, and (b) any applicable anti money
laundering laws and regulations, including the USA Patriot Act.


 


7.1.23      Taxes  Seller has filed or caused to be filed all
federal and material state, local and foreign tax returns which are required to
be filed with any governmental authority after giving effect to applicable
extensions, and has paid or has caused to be paid all taxes as shown on said
returns or on any assessment received by it in writing, to the extent that such
taxes have become due other than those (a) not yet delinquent or (b) being
diligently contested in good faith by appropriate Proceedings as to which
adequate reserves have been provided in accordance with GAAP and which if
unpaid, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect. No tax return is under audit or examination by
any governmental authority and no notice of such an audit or examination or any
assertion of any claim for taxes has been given or made by any governmental
authority, except such audits, examinations or claims that have been disclosed
to Buyer in writing, none of which could, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Seller believes that
the charges, accruals and reserves on its books in respect of taxes or other
governmental charges are adequate.


 


7.1.24      True and
Complete Disclosure.


 


7.1.24.1   Neither this Agreement nor any agreement, document,
certificate or written statement furnished to Buyer by or on behalf of Seller
in connection with the transactions contemplated hereby, at the time it was
furnished, contained any untrue statement of 
material fact or omitted to state a material fact, under the
circumstances under which it was made, necessary in order to make the
statements contained herein or therein not misleading, it being understood that
for purposes of this Section 7.1.24.1, such factual information and



 


25

















 


data shall not include pro forma financial information or projections (including
financial estimates, forecasts and other forward looking information or
information of a general economic or general industry nature).


 


7.1.24.2   The written projections
(including any financial estimates, forecasts and other forward-looking information)
contained in the information and data referred to in paragraph (a) above
were based on good faith estimates and assumptions believed by the Person
making such projections to be reasonable at the time made, it being recognized
by Buyer that such projections as to future events are not to be viewed as
facts and that actual results during the period or periods covered by any such
projections may differ from the projected results.


 


7.1.25      Material
Adverse Effect. Since March 31, 2009, there have been no
events, circumstances, developments or other changes in facts that,
individually or in the aggregate, would have or could reasonably be expect to
result in a Material Adverse Effect.


 


7.1.26      Environmental
Matters. (a) The operations of Seller are and have been in compliance
with all applicable Environmental Laws, including obtaining, maintaining and
complying with all permits required by any applicable Environmental Law, other
than non-compliances that, in the aggregate, would not have a reasonable likelihood
of resulting in liabilities exceeding ten thousand dollars ($10,000) in the
aggregate, (b) Seller is not party to, and no real property currently or,
to the knowledge of Seller, previously owned, leased, subleased, operated or
otherwise occupied by or for Seller is subject to or the subject of, any
contractual obligation or any pending or, to the knowledge of Seller,
threatened, order, action, investigation, suit, Proceeding, audit, claim,
demand, dispute or notice of violation or of potential liability or similar
notice under or pursuant to any Environmental Law other than those that, in the
aggregate, are not reasonably likely to result in liabilities exceeding ten
thousand dollars ($10,000) in the aggregate, (c) no Lien in favor of any
governmental authority securing, in whole or in part, environmental liabilities
has attached to any property of Seller and, to the knowledge of Seller, no
facts, circumstances or conditions exist that could reasonably be expected to
result in any such Lien attaching to any such property, (d) Seller has not
caused or suffered to occur a release of hazardous materials at, to or from any
real property of Seller and each such real property is free of contamination by
any hazardous materials except for such release or contamination that could not
reasonably be expected to result, in the aggregate, in liabilities exceeding
ten thousand dollars ($10,000) in the aggregate, (e) Seller (i) is
not or has not been engaged in, or has permitted any current or former tenant
to engage in, operations, or (ii) does not know of any facts,
circumstances or conditions, including receipt of any information request or
notice of potential responsibility under any Environmental Laws, that, in the
aggregate, would have a reasonable likelihood of resulting in liabilities
exceeding ten thousand dollars ($10,000) in the aggregate and (f) Seller
has made available to Buyer copies of all existing environmental reports,
reviews and audits and all documents pertaining to actual or potential
environmental liabilities, in each case to the extent such reports, reviews,
audits and documents are in their possession, custody or control.


 


26

















 


7.1.27      Transfer
Filings.  Each Purchased Receivable been
validly sold or contributed to Buyer free and clear of all Liens and rights of
others; all filings (including filings under the UCC) necessary in the United
States to give Buyer an ownership interest in such Purchased Receivables have
been duly executed and delivered to Buyer; all such filings indicate that they
are being made in order to perfect absolute assignments (rather than pledges)
of the Purchased Receivables; and all fees in connection with such filings have
been paid.


 


7.1.28      Eligible
Receivables; Eligible Contractor.  Each Purchased Receivable sold by Seller
hereunder shall at the time of such sale meet in all respects all requirements
to constitute an “Eligible Receivable” within the definition of such term set
forth herein. Without limiting the foregoing, Seller meets or shall at the time
of such sale of any Purchased Receivables shall meet in all respects the
requirements to constitute an “Eligible Contractor” within the definition of
such term set forth herein.


 


7.1.29      Origination of
Purchased Receivables.  All
Purchased Receivables purchased or to be purchased by Buyer (a) were
originated or shall at the time of such purchase have been originated in the
regular course of business of Seller in accordance with applicable laws and (b) were
or will be purchased Buyer from Seller and no adverse selection procedures have
been or will have been utilized in selecting such Purchased Receivables from
all other similar Receivables owned by Seller.


 


SECTION 8


COVENANTS


 


8.1           Affirmative
Covenants.  From the
date hereof until the termination of this Agreement:


 


8.1.1        Compliance with
Laws, Etc.  Seller will
comply in all material respects with all applicable laws, including those with
respect to the Receivables, except where noncompliance could not reasonably  be
expected to have a Material Adverse Effect, and Seller shall provide Buyer with
a Compliance Certificate (i) on a quarterly basis to be received by Buyer
not later than the fifth calendar day following each calendar quarter, and (ii) on
a more frequent or other basis if and as requested by Buyer.


 


8.1.2        Preservation of
Corporate Existence.  Seller will
preserve and maintain its corporate or limited liability existence, rights,
franchises and privileges in the jurisdiction of its formation, and qualify and
remain qualified in good standing as a foreign corporation or organization in
each jurisdiction where the failure to preserve and maintain such existence,
rights, franchises, privileges and qualification could reasonably be expected
to have a Material Adverse Effect.


 


8.1.3        Audits.  (A) Seller will at any time and from
time to time during regular business hours, permit Buyer or KBC or any of its
agents or representatives, (i) to examine and make copies of and abstracts
from all books, records and documents (including, without limitation, computer
tapes and disks) in its possession or under its control relating to Purchased
Receivables, (ii) to visit its offices and properties for the purpose of
examining such materials described in clause (A)(i) above, and with
the 


 


27

















 


permission
of Seller’s senior management, which shall not be unreasonably withheld, to
discuss matters relating to Purchased Receivables or its performance hereunder
with any of its officers or employees having knowledge of such matters, and (iii) to
verify the existence and amount of the Purchased Receivables; and (B) without
limiting the provisions of clause (A) above, from time to time on
request of KBC, permit certified public accountants or other auditors acceptable
to KBC to conduct, at Seller’s expense, a review of its books and records with
respect to the Purchased Receivables; provided that unless this
Agreement is terminated early, Seller shall not be responsible for the cost of
more than three (3) such audits during the twelve (12) month period
beginning on the date of the initial purchase of Purchased Receivables, or one
such audit in any calendar year thereafter.


 


8.1.4        Keeping of
Records and Books of Account.  Seller will maintain and implement administrative
and operating procedures (including, without limitation, an ability to recreate
records evidencing Purchased Receivables in the event of the destruction of the
originals thereof), and keep and maintain all documents, books, records and
other information reasonably necessary or advisable for the collection of all
Purchased Receivables (including, without limitation, records adequate to
permit the daily identification of each new Purchased Receivable and all
Collections of and adjustments to each existing Purchased Receivable). Further,
Seller shall indicate in its consolidated financial statements and computer
records that the Purchased Receivables have been absolutely transferred,
conveyed, sold and assigned to Buyer or its designee, and Seller will not
otherwise claim in its records ownership of any of the Purchased Receivables or
the proceeds thereof. Seller shall not take any action that is inconsistent
with Buyer’s ownership of the Purchased Receivables. Without limiting the
foregoing, Seller shall treat the sale of the any Purchased Receivables as a
sale for federal, state and local income tax purposes.


 


8.1.5        Financial
Statements; Reports.  Seller
shall furnish or cause to be furnished to Buyer (i) within ninety (90)
days after the end of each fiscal year of Seller commencing with the fiscal
year ending 2009, the audited balance sheet of Seller (or, if audited financial
statements are not available, unaudited balance sheet and unaudited combined
statements of income, stockholder or member equity and cash flows of Seller
together with a certificate of an officer of Seller, to the effect that such
financial statements present fairly in all material respects the financial
positions of Seller as at the end of the fiscal year and the results of operations
for the fiscal year then ended in conformity with GAAP)  as at the end of, and the related audited
combined statements of income, stockholder or member equity and cash flows for,
such fiscal year, together with a certificate signed by an officer of Seller,
to the effect that such financial statements, present fairly in all material
respects the consolidated financial condition and results of operation of
Seller as of the dates and for the periods indicated in accordance with GAAP
applied on a basis consistent with that of the preceding year or containing
disclosure of the effect on the financial condition or results of operations of
any change in the application of accounting principles and practices during
such year; and (ii) within forty-five (45) days after the end of each of
the first three (3) fiscal quarters of each fiscal year of Seller,
commencing with the fiscal quarter ending September 30, 2009, the
unaudited consolidated balance sheets of Seller and the related unaudited
consolidated statements of income, stockholder or member equity and cash flows
of Seller for, such fiscal quarter, 


 


28

















 


and
for the portion of the fiscal year through the end of such fiscal quarter,
together with a certificate signed by an officer of Seller, to the effect that
such financial statements present fairly in all material respects the financial
positions of Seller as at the end of the fiscal quarter and the results of
operations for the fiscal quarter then ended in conformity with GAAP, subject
to normal year-end audit adjustments and the absence of footnotes.


 


8.1.6        Due Diligence.  Seller agrees to satisfy or cause to be
satisfied any and all due diligence or confirmation requests of Buyer or KBC
related to this Agreement, as deemed reasonably necessary in Buyer’s or KBC’s
sole discretion.


 


8.1.7        Deemed
Collections; Repurchase.  If
it is determined that Seller is obligated to Buyer or its designee any amounts
with respect to any Deemed Collections or repurchase amounts arising pursuant
to Section 4.2 hereunder, Seller will, within two (2) Business
Days of such determination, pay such amounts to the Segregated Account. Seller
shall also pay promptly to the Segregated Account upon demand any reasonable
out-of-pocket expenses incurred by Buyer or KBC in connection with any such
Deemed Collection or repurchase, including reasonable fees and disbursements of
counsel. All payments under this Section 8.1.7 shall be paid by
Seller in immediately available funds directly to the Segregated Account,
without any withholding, deduction, set-off or counterclaim.


 


8.1.8        Notices.  Seller will give written notice to Buyer and
KBC promptly, but in any event within three (3) Business Days, upon
becoming aware of the occurrence of (i) any Event of Default or pending or
anticipated Event of Default; (ii) the submission of any claim or the
initiation or threat of any legal process or Proceeding, or rule making or
disciplinary proceeding by or against Seller, or the promulgation of any
proceeding or any proposed or final rule which could reasonably be
expected to have a Material Adverse Effect; (iii) any damage to or loss,
elimination or destruction of any portion of the Purchased Receivables or (iv) the
receipt of notice that (a) any license, permit, charter, registration or
approval necessary for the conduct of Seller’s business is to be, or may be,
suspended or revoked or (b) Seller is to cease and desist any practice,
procedure or policy employed by Seller in the conduct of its business, and such
suspension, revocation or cessation may reasonably be expected to have a
Material Adverse Effect.


 


8.1.9        Maintenance of
Insurance.  (A) Seller
shall (i) maintain or cause to be maintained in full force and effect all
policies of insurance of any kind with respect to Seller’s property and
business (including policies of life (including “key man” coverage, as
applicable), fire, theft, product liability, public liability, property damage,
other casualty, employee fidelity, workers’ compensation, business interruption
and employee health and welfare insurance) with financially sound and reputable
insurance companies or associations (in each case that are not affiliates of
Seller) of a nature and providing such coverage as is sufficient and as is
customarily carried by businesses of the size and character of Seller’s
business and in any event in form and substance reasonably acceptable to Buyer
and (ii) cause all such insurance relating to any property or business
Seller to name Buyer, as additional insured or loss payee, as appropriate and
shall use its commercially reasonable efforts to provide that no cancellation,
material addition in amount or material change in coverage shall be effective
until after thirty (30) days (or 


 


29

















 


ten
(10) days in the case of a payment default) notice thereof to Buyer. Buyer
shall be entitled, upon reasonable advance notice, to review Seller’s insurance
policies carried and maintained with respect to the Grantors’ obligations under
this Section 8.1.9.  Upon
request, Seller shall furnish Buyer with copies of all insurance policies,
binders, and cover notes or other evidence of such insurance.  Notwithstanding anything to the contrary
herein, no provision of this Section 8.1.9 or any provision of this
Agreement shall impose on Buyer any duty or obligation to verify the existence
or adequacy of the insurance coverage maintained by Seller, nor shall Buyer be
responsible for any representations or warranties made by or on behalf of
Seller to any insurance broker, company or underwriter. Buyer, at its sole
option, may obtain such insurance if not provided by Seller and in such event,
Seller shall reimburse Buyer upon demand for the cost thereof together with
interest.  Seller shall also carry and
maintain, should Seller’s risk profile change during the term of this
Agreement, any other insurance that Buyer may reasonably require from time to
time.


 


8.1.10      Location of
Records.  Seller will keep its principal
place of business and chief executive office, and the offices where it keeps
its records concerning the Purchased Receivables, at its address set forth on
the first page of this Agreement or, upon thirty (30) days’ prior written
notice to KBC, at such other locations acceptable to Buyer and KBC.


 


8.1.11      Further
Assurances.  Seller,
upon the reasonable request of Buyer, shall duly execute and deliver, or cause
to be duly executed and delivered, at the cost and expense of Seller, such
further agreements, documents and instruments, and do such other acts and
things, as may be necessary or reasonably requested by Buyer to carry out the
provisions and purposes of this Agreement.


 


8.1.12      Maintenance of
Licenses.  Seller
shall maintain all licenses, permits, charters and registrations the loss or
suspension of which could reasonably be expected to have a Material Adverse
Effect.


 


8.2           Negative
Covenants.  From the
date hereof until the termination of this Agreement without Buyer’s prior
written consent:


 


8.2.1        Sales, Liens,
Etc.  Seller will not, except as
otherwise provided herein, sell, assign (by operation of law or otherwise) or
otherwise dispose of, or create or suffer to exist any Lien upon or with
respect to, any Purchased Receivable or any interest therein.


 


8.2.2        Extension or
Amendment of Receivables. 
Seller will not extend, amend or otherwise modify, or permit any Person
to extend, amend or otherwise modify, the terms of any Purchased Receivable.


 


8.2.3        Change in
Business or Credit and Collection Policy.  Seller will not make any change in the
character of its business, which change
could impair the collectability of any Purchased Receivable or otherwise adversely affect the
interests or remedies of Buyer under this Agreement or result in a Material
Adverse Effect.


 


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8.2.4        Termination.  Seller will not terminate, or take or permit
any action that would cause the termination of this Agreement other than in
accordance with the terms herein.


 


8.2.5        Consolidation;
Merger.  Seller will not consolidate or
merge with or into any other Person or convey, transfer or dispose of its
properties and assets in one or more transactions substantially as an entirety
to any Person, or wind up, liquidate or dissolve its affairs.


 


8.2.6        Impair
Effectiveness.  Seller will
not permit the validity or effectiveness of this Agreement to be impaired, or
permit any Person (other than Buyer) to be released from any covenants or
obligations with respect to this Agreement, except as may be expressly
permitted hereby.


 


8.2.7        Prohibited
Transactions. Seller will not engage in a “prohibited
transaction”, as defined in Section 406 of ERISA or Section 4975 of
the Code, with respect to any Plan or knowingly consent to any other “party in
interest” or any “disqualified person”, as such terms are defined in Section 3(14)
of ERISA and Section 4975(e)(2) of the Code, respectively, engaging
in any “prohibited transaction”, with respect to any Plan; or permit any Plan
to incur any “accumulated funding deficiency”, as defined in Section 302 of
ERISA or Section 412 of the Code, unless such incurrence shall have been
waived in advance by the Internal Revenue Service; or terminate any Plan in a
manner which could result in the imposition of a Lien on any property of Seller
pursuant to Section 4068 of ERISA; or breach or knowingly permit any
employee or officer or any trustee or administrator of any Plan to breach any
fiduciary responsibility imposed under Title I of ERISA with respect to
any Plan; engage in any transaction which would result in the incurrence of a
liability under Section 4069 of ERISA; or fail to make contributions to a
Plan which could result in the imposition of a Lien on any property of Seller
pursuant to Section 302(f) of ERISA or Section 412(n) of
the Code, if the occurrence of any of the foregoing events (alone or in the
aggregate) would result in a liability which would be reasonably likely to
result in a Material Adverse Effect.


 


8.2.8        Instructions to
Account Debtors.  Seller will
not provide any instructions to Account Debtors contrary to the requirement
that Collections be deposited directly into the Segregated Account.


 


8.2.9        Waiver of Stay
or Execution of Laws.  Seller
covenants (to the extent it may lawfully do so) that it shall not at any time
insist upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or execution law, including filing a voluntary petition
under Chapter 11 of the Bankruptcy Code, wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of or the
exercise of any remedies under this Agreement. Seller (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any
such law, and covenants that it shall not hinder, delay or impede the execution
of any power herein granted to Buyer, but shall suffer and permit the execution
of every such power as though no such law had been enacted.


 


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8.2.10      Mergers,
Acquisitions, Sales, Etc. 
Seller will not (i) be a party to any merger or consolidation, or
purchase or otherwise acquire all or substantially all of the assets or any
stock of any class of, or any partnership or joint venture interest in, any
other Person or (ii) sell, transfer, convey or lease all or any
substantial part of its assets, or sell or assign with or without recourse any
Receivables or any interest therein (other than pursuant hereto or to this
Agreement), in each case if such actions would have any adverse or potentially
adverse effect on the validity or effectiveness of this Agreement or the
Purchased Receivables.


 


SECTION 9


DEFAULT


 


9.1           Events of Default.  The occurrence of any one or more of the
following shall constitute an “Event of Default” hereunder:


 


9.1.1        Seller fails to
pay any amount owed to Buyer or its designee as and when due under this
Agreement or otherwise;


 


9.1.2        There shall be
commenced by or against Seller any voluntary or involuntary case under the
Bankruptcy Code, any assignment for the benefit of creditors or appointment of
a receiver or custodian for any of its assets;


 


9.1.3        Seller shall
not be Solvent, or Seller is generally not paying its debts as they become due
or is left with unreasonably small capital;


 


9.1.4        Any voluntary
Lien, garnishment, attachment or the like is issued against or attaches to the
Receivables;


 


9.1.5        Seller shall
breach any condition, warranty, representation or covenant set forth herein
other than as set forth in Section 9.1.1, unless the same is cured to
Buyer’s satisfaction within five (5) days after Buyer has given Seller
oral or written notice thereof; provided, that if such breach is
incapable of being cured within such five (5)-day cure period, it shall
constitute an immediate default hereunder;


 


9.1.6        Subject to the
provisions set forth in Section 9.1.5 above, Seller is not in compliance
with, or otherwise is in default under, any term of any document, instrument or
agreement evidencing a debt, obligation or liability of any kind or character
of Seller, now or hereafter existing, in favor of Buyer or any division or
affiliate of Buyer, regardless of whether such debt, obligation or liability is
direct or indirect, primary or secondary, joint, several or joint and several or
fixed or contingent, together with any and all renewals and extensions of such
debts, obligations and liabilities, or any part thereof; or


 


9.1.7        This Agreement
or any material provision herein shall terminate in whole (except in accordance
with the terms hereof), or shall cease to be effective or to be the legally
valid, binding and enforceable obligation of Buyer or Seller.


 


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9.2           Remedies upon
Default.  Upon the occurrence of an
Event of Default, (i) without implying any obligation to buy Receivables,
Buyer may cease buying Receivables or extending any financial accommodations to
Seller, (ii) all or a portion of the Seller Obligations shall be, at the
option of and upon demand by Buyer, or with respect to an Event of Default
described in Section 9.1.2 hereof, automatically and without notice
or demand, due and payable in full, and (iii) Buyer shall have and may
exercise all the rights and remedies under this Agreement and under applicable
law, including the rights and remedies of a secured party under the UCC, all
the power of attorney rights described in Section 5.1 hereof with
respect to the Purchased Receivables and the right to collect, dispose of,
sell, lease, use and realize upon such Purchased Receivables in any
commercially reasonable manner. Seller and Buyer agree that any notice of sale
required to be given to Seller shall be deemed to be reasonable if given ten (10) days
prior to the date on or after which the sale may be held.


 


SECTION 10


MISCELLANEOUS


 


10.1         Accrual of
Interest.  If any
amount owed by Seller hereunder is not paid when due, including, without
limitation, any Deemed Collections or repurchases due under Section 4.2
hereof or amounts due under Section 10.2 hereof, such amounts shall
bear interest at a per annum rate equal to the PAF Rate until the earlier of (i) payment
in immediately available funds or (ii) entry of a final judgment thereof,
at which time the principal amount of any money judgment remaining unsatisfied
shall accrue interest at the highest rate allowed by applicable law.


 


10.2         Fees, Costs and
Expenses.  Seller will
pay to Buyer immediately on demand all fees, costs and expenses (including
attorneys’ and professional fees and their costs and expenses) that Buyer or its
designee incurs or may impose in connection with any of the following: (i) preparing,
negotiating, administering and enforcing this Agreement or any other agreement
executed in connection with this Agreement, including any amendments, waivers
or consents, (ii) any litigation or dispute (whether instituted by Buyer,
Seller or any other Person) about the Purchased Receivables, this Agreement or
any other agreement executed in connection with this Agreement, (iii) enforcing
any rights against Seller, any guarantor or any Account Debtor, (iv) protecting
or enforcing its interest in the Purchased Receivables, (v) collecting the
Purchased Receivables and the Obligations and (vi) the representation of
Buyer or its designee in connection with any bankruptcy case or insolvency
proceeding involving Seller, any Purchased Receivable, any Account Debtor or
any guarantor.  The maximum fees, costs
and expenses payable by the Seller in connection with the underwriting, site
review and Buyer’s legal fees in connection with the execution of
this Agreement shall be seven thousand five hundred dollars ($7,500.00).


 


10.3         Indemnification.


 


10.3.1      Seller agrees
to pay, indemnify and hold Buyer, its designees and their respective directors,
officers, employees and agents harmless from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever
arising out of, relating 


 


33

















 


to
or resulting from any of the following (collectively, the “Buyer Indemnified
Liabilities”): (i) the failure of any representation or warranty or
statement made or deemed made by Seller under or in connection with this
Agreement or in any certificate or report delivered pursuant hereto, including,
without limitation, any Receivables Invoice, to be true and correct in any
material respect when made; (ii) the failure by Seller to perform its
Seller Obligations under this Agreement or (iii) the failure by Seller to
comply with any Applicable Law, rule or regulation of any governmental
authority with respect to the sale, transfer, delivery and assignment of any
Purchased Receivables.


 


10.3.2      Without
limiting or being limited by the foregoing, Seller agrees to pay, on demand, to
each of Buyer and its directors, officers, employees and agents any and all
amounts necessary to indemnify Buyer and its directors, officers, employees and
agents from and against any and all Buyer Indemnified Liabilities relating to
or resulting from any Proceeding related to any of the matters referred to in Section 10.3.1
hereof or any investigation, litigation or proceeding with respect to any
action, or failure to act, by Seller under this Agreement.


 


10.3.3      Notwithstanding
anything in this Section 10.3 to the contrary, Seller shall have no
obligation to indemnify any of the Buyer and its directors, officers, employees
and agents under this Section 10.3 in respect of Buyer Indemnified
Liabilities to the extent resulting from (i) the gross negligence or
willful misconduct on the part of Buyer or its directors, officers, employees
and agents as determined by the final judgment of a court of competent
jurisdiction no longer subject to appeal or (ii) litigation between Buyer
and its Buyer and its directors, officers, employees and agents not involving
an actual or alleged act or omission of Seller or any of Seller’s affiliates.


 


10.4         Severability,
Waiver and Amendment.  In the
event that any provision of this Agreement is deemed invalid by reason of law,
this Agreement will be construed as not containing such provision and the
remainder of the Agreement shall remain in full force and effect. Buyer retains
all of its rights, even if it makes payment of Initial Purchase Price after a
default. If Buyer waives a default, it may enforce a later default. Any consent
or waiver under, or amendment of, this Agreement must be in writing. Nothing
contained herein, or any action taken or not taken by Buyer at any time, shall
be construed at any time to be indicative of any obligation or willingness on
the part of Buyer to amend this Agreement or to grant to Seller any waivers or
consents.


 


10.5         Choice of Law.  This Agreement is governed by and interpreted
in accordance with the laws of the State of New York, excluding principles of
conflict of laws.


 


10.6         Waiver of Jury
Trial.  Each of the parties hereto
hereby irrevocably waives all right to a trial by jury in any Proceeding or
counterclaim arising out of or relating to this Agreement or any agreement or
any instrument or document delivered thereunder.


 


10.7         Notices.  All notices shall be given to Buyer and
Seller at the address set forth on the first page of this Agreement, or
the facsimile number or email address as the parties may exchange from time to
time, and shall be deemed to have been delivered and received (i) if
mailed, three (3) calendar days after deposited in the U.S. mail, first
class, 


 


34

















 


postage
pre-paid, (ii) one (1) calendar day after deposit with an overnight
mail or messenger service, or (iii) on the same date of confirmed
transmission if sent by hand delivery, facsimile or email.


 


10.8         Arbitration.  At the request at any time of either party,
any controversies concerning this Agreement will be settled by arbitration in
accordance with the U.S. Arbitration Act, and under the Commercial Arbitration Rules and
Administration of the American Arbitration Association. The U.S. Arbitration
Act will supplement New York law, as appropriate, even though this Agreement
provides that it is otherwise governed by New York law.


 


10.9         Successors and
Assigns.  This Agreement shall be
binding upon and inure to the benefit of Seller and Buyer and their respective
successors (whether by merger, consolidation or otherwise) and assigns. The
provisions of this Agreement are for the benefit of Seller and Buyer and such
respective successors and assigns, and nothing in this Agreement, whether
express or implied, shall be construed to give to any other Person any legal or
equitable right, remedy or claim in the Purchased Receivables or under or in
respect of this Agreement or any covenants, conditions or provisions contained
herein, except as provided in the last sentence of this Section 10.9.  Seller may not assign, transfer or dispose of
all or any portion of its rights or obligations hereunder without the prior
written consent of Buyer, and any such assignment without the prior written
consent of Buyer shall be null and void. Seller hereby consents to the grant by
Buyer to RCA of all Buyer’s right, title and interest in and to the Purchased
Receivables, including the collateral assignment of any interest of Buyer in
and to this Agreement.  Seller
understands that Buyer or RCA may grant a security interest in all its right,
title and interest in the Purchased Receivables (including the right to all
revenues and proceeds of the Purchased Receivables), and its rights under this
Agreement, to secure future debt obligations. Seller hereby consents to the
grant of such security interest and, in connection therewith, (a) agrees
that any such future lender shall be a third party beneficiary of this
Agreement, (b) agrees that such lender may have the right to exercise
Buyer’s rights and remedies hereunder, (c) agrees that such lender may
have the right to foreclose on its security interest in Buyer’s rights under
this Agreement and to exercise Buyer’s rights and remedies hereunder, and (d) acknowledges
and agrees that it will upon the reasonable request of Buyer agree with such
lender that neither this Agreement nor any of the terms hereof may be amended,
supplemented, modified or waived without the written consent of such
lender.  Seller and Buyer hereby consent
to the grant by RCA to KBC of all RCA’s right, title and interest in and to the
Purchased Receivables, including the collateral assignment of any interest of
RCA in and to this Agreement.


 


10.10       Term and
Termination.  The term of
this Agreement shall expire December 31, 2009, and shall be year to year
thereafter unless terminated in writing by Buyer or Seller. Seller and Buyer
shall each have the right to terminate this Agreement at any time.
Notwithstanding the foregoing, any termination of this Agreement shall not
affect Buyer’s security interest, if any, in and ownership of the Purchased
Receivables, and this Agreement shall continue to be effective, and Buyer’s
rights and remedies hereunder shall survive such termination, until all
transactions entered into and Obligations incurred hereunder or in connection
herewith have been completed and satisfied in full.


 


35

















 


10.11       Survival of
Agreement.  All
covenants, agreements, representations and warranties made by Seller herein
and/or in the exhibits, schedules, certificates or other instruments prepared
or delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by Buyer, shall survive the sale of any
Purchased Receivables to Buyer, regardless of any investigation made by Buyer or
any party providing financing to Buyer or on their behalf, and shall continue
in full force and effect so long as this Agreement has not been terminated.


 


10.12       Titles and Section Headings.  The titles and section headings used herein
are for convenience only and shall not be used in interpreting this Agreement.


 


10.13       Other
Agreements.  The terms
and provisions of this Agreement shall not adversely affect the rights of Buyer
or any other division or affiliate of Buyer under any other document,
instrument or agreement. The terms of such other documents, instruments and
agreements shall remain in full force and effect notwithstanding the execution
of this Agreement. In the event of a conflict between any provision of this
Agreement and any provision of any other document, instrument or agreement
between Seller on the one hand, and Buyer or any other division or affiliate of
Buyer on the other hand, Buyer shall determine, in its sole discretion, which
provision shall apply. Seller acknowledges specifically that any Liens and/or
security interests currently securing payment of any obligations of Seller
owing to Buyer or any other division or affiliate of Buyer also secure Seller’s
obligations under this Agreement, and are valid and subsisting and are not
adversely affected by execution of this Agreement. Seller further acknowledges
that (i) any collateral under other outstanding security agreements or
other documents between Seller and Buyer or any other division or affiliate of
Buyer secures the obligations of Seller under this Agreement and (ii) a
default by Seller under this Agreement constitutes a default under other
outstanding agreements between Seller and Buyer or any other division or
affiliate of Buyer.


 


10.14       Counterparts.  This Agreement may be executed by the parties
hereto individually or in any combination, in one or more counterparts, each of
which shall be an original and all of which together constitute one and the
same agreement.


 


10.15       Confidentiality.  Seller and Buyer each agrees to maintain the
confidentiality of this Agreement in communications with third parties and
otherwise; provided, that this Agreement may be disclosed (i) to
third parties to the extent such disclosure is made pursuant to a written
agreement of confidentiality in form and substance reasonably satisfactory to
Buyer, (ii) to the legal counsel and auditors of Buyer and Seller if they
agree to hold it confidential (iii) to the extent required by applicable
law or regulation or by any court, regulatory body or agency having jurisdiction
over such party, and (iv) to the extent required under applicable
securities laws, the Securities and Exchange Commission or the NYSE Amex; and provided,
further, that such party shall have no obligation of confidentiality in
respect of any information which may be generally available to the public or
becomes available to the public through no fault of such party.


 


36

















 


10.16       Acknowledgments. Seller hereby
acknowledges that (i) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement, (ii) no joint venture is created
hereby or otherwise exists by virtue of the transactions contemplated hereby
between Buyer and Seller and (iii) that nothing in this Agreement or
otherwise will be deemed to create an advisory, fiduciary or agency
relationship or fiduciary or other implied duty between Buyer and Seller.


 


{Signatures appear on the following page.}


 


37

















 


IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be signed by their duly authorized representatives all
as of the day and year first above written, with the specific intention that
this Agreement constitutes a document under seal.


 


 


	
   

  	
  SELLER:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  AMERICAN
  DEFENSE SYSTEMS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Gary Sidorsky

  
	
   

  	
  Name:

  	
  Gary
  Sidorsky

  
	
   

  	
  Title:

  	
  CFO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BUYER:

  
	
   

  	
   

  	
   

  
	
   

  	
  REPUBLIC
  CAPITAL ACCESS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Timothy J. Gilmore

  
	
   

  	
  Name:

  	
  Timothy
  J. Gilmore

  
	
   

  	
  Title:

  	
  Chief
  Financial Officer

  
				



 


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