Exhibit
10.6


 


EXECUTION
VERSION


 


 




 





 


 


 


 


PREFERRED
STOCK AND WARRANT PURCHASE AGREEMENT


 


 


among


 


 


GENUTEC
BUSINESS SOLUTIONS, INC.,


 


 


TECHNOLOGY
INVESTMENT CAPITAL CORP.,


 


 


and


 


 


SEAVIEW
MEZZANINE FUND LP


 


 


Series
A Exchangeable Preferred Stock


 


Warrants
to Purchase Class A Voting Common Stock


 


 


 


 


Dated
as of September 16, 2005


 


 


 


 




 




















 


TABLE OF CONTENTS


(Not Part of Agreement)


 


	
  Section

  	
   

  	
  Heading

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  Definitions

  	
   

  	
  2

  
	
   

  	
   

  	
  1.1.

  	
   

  	
  Defined Terms

  	
   

  	
  2

  
	
   

  	
   

  	
  1.2.

  	
   

  	
  Accounting Principles

  	
   

  	
  26

  
	
   

  	
   

  	
  1.3.

  	
   

  	
  Rules of Construction

  	
   

  	
  26

  
	
  2.

  	
   

  	
  Issuance and Sale of Preferred Shares and Warrants

  	
   

  	
  27

  
	
   

  	
   

  	
  2.1.

  	
   

  	
  Authorization of Preferred Shares and Warrants

  	
   

  	
  27

  
	
   

  	
   

  	
  2.2.

  	
   

  	
  Sale and Purchase of Preferred Shares and Warrants

  	
   

  	
  27

  
	
   

  	
   

  	
  2.3.

  	
   

  	
  Closing

  	
   

  	
  27

  
	
   

  	
   

  	
  2.4.

  	
   

  	
  Closing Fees

  	
   

  	
  28

  
	
   

  	
   

  	
  2.5.

  	
   

  	
  Right to Exchange Preferred Shares for Notes

  	
   

  	
  28

  
	
   

  	
   

  	
  2.6.

  	
   

  	
  Additional Warrants

  	
   

  	
  29

  
	
   

  	
   

  	
  2.7.

  	
   

  	
  Conditional Right to Repurchase Warrants

  	
   

  	
  29

  
	
  3.

  	
   

  	
  Redemption and Repurchase of Preferred Shares

  	
   

  	
  30

  
	
   

  	
   

  	
  3.1.

  	
   

  	
  Mandatory Redemption of Preferred Shares in Certain
  Events

  	
   

  	
  30

  
	
   

  	
   

  	
  3.2.

  	
   

  	
  Optional Repurchase of Preferred Shares

  	
   

  	
  31

  
	
   

  	
   

  	
  3.3.

  	
   

  	
  Notice of Optional Repurchase

  	
   

  	
  31

  
	
   

  	
   

  	
  3.4.

  	
   

  	
  Manner, Time and Allocation of Payments

  	
   

  	
  31

  
	
  4.

  	
   

  	
  Representations and Warranties of the Company

  	
   

  	
  32

  
	
   

  	
   

  	
  4.1.

  	
   

  	
  Corporate Existence and Power

  	
   

  	
  32

  
	
   

  	
   

  	
  4.2.

  	
   

  	
  Corporate Authority

  	
   

  	
  32

  
	
   

  	
   

  	
  4.3.

  	
   

  	
  Binding Effect

  	
   

  	
  32

  
	
   

  	
   

  	
  4.4.

  	
   

  	
  Liens and Security Interests

  	
   

  	
  32

  
	
   

  	
   

  	
  4.5.

  	
   

  	
  No Conflicts with Agreements, Etc

  	
   

  	
  33

  
	
   

  	
   

  	
  4.6.

  	
   

  	
  Consents, Etc

  	
   

  	
  33

  
	
   

  	
   

  	
  4.7.

  	
   

  	
  Equity Interests

  	
   

  	
  33

  
	
   

  	
   

  	
  4.8.

  	
   

  	
  Financial Statements; Projections; No Material
  Change

  	
   

  	
  34

  
	
   

  	
   

  	
  4.9.

  	
   

  	
  Subsidiaries

  	
   

  	
  36

  
	
   

  	
   

  	
  4.10.

  	
   

  	
  Litigation

  	
   

  	
  37

  
	
   

  	
   

  	
  4.11.

  	
   

  	
  No Violation of Law; No Non-Compliance

  	
   

  	
  37

  
	
   

  	
   

  	
  4.12.

  	
   

  	
  Title to Properties

  	
   

  	
  38

  
	
   

  	
   

  	
  4.13.

  	
   

  	
  Taxes

  	
   

  	
  38

  
	
   

  	
   

  	
  4.14.

  	
   

  	
  Labor Matters

  	
   

  	
  38

  
	
   

  	
   

  	
  4.15.

  	
   

  	
  Environmental Matters

  	
   

  	
  39

  
	
   

  	
   

  	
  4.16.

  	
   

  	
  Compliance with ERISA

  	
   

  	
  40

  
	
   

  	
   

  	
  4.17.

  	
   

  	
  Material Contracts

  	
   

  	
  40

  
										



 


i

















 


	
   

  	
   

  	
  4.18.

  	
   

  	
  Insurance

  	
   

  	
  41

  
	
   

  	
   

  	
  4.19.

  	
   

  	
  Possession of Franchises, Licenses, Etc.

  	
   

  	
  41

  
	
   

  	
   

  	
  4.20.

  	
   

  	
  Intellectual Property

  	
   

  	
  41

  
	
   

  	
   

  	
  4.21.

  	
   

  	
  Software

  	
   

  	
  43

  
	
   

  	
   

  	
  4.22.

  	
   

  	
  Deposit Accounts; Securities Accounts

  	
   

  	
  44

  
	
   

  	
   

  	
  4.23.

  	
   

  	
  Interest in Competitors

  	
   

  	
  44

  
	
   

  	
   

  	
  4.24.

  	
   

  	
  Related Party Transactions

  	
   

  	
  44

  
	
   

  	
   

  	
  4.25.

  	
   

  	
  Registration Rights

  	
   

  	
  44

  
	
   

  	
   

  	
  4.26.

  	
   

  	
  [Reserved]

  	
   

  	
  44

  
	
   

  	
   

  	
  4.27.

  	
   

  	
  Existing Indebtedness and
  Contingent Obligations

  	
   

  	
  44

  
	
   

  	
   

  	
  4.28.

  	
   

  	
  Customers

  	
   

  	
  45

  
	
   

  	
   

  	
  4.29.

  	
   

  	
  Eligible Portfolio Company

  	
   

  	
  45

  
	
   

  	
   

  	
  4.30.

  	
   

  	
  Margin Regulations; Public Utility Holding Company
  Act

  	
   

  	
  45

  
	
   

  	
   

  	
  4.31.

  	
   

  	
  Solvency

  	
   

  	
  45

  
	
   

  	
   

  	
  4.32.

  	
   

  	
  Foreign Assets Control Regulations and Anti-Money
  Laundering

  	
   

  	
  46

  
	
   

  	
   

  	
  4.33.

  	
   

  	
  Internal Accounting Controls

  	
   

  	
  46

  
	
   

  	
   

  	
  4.34.

  	
   

  	
  Offering of Securities

  	
   

  	
  46

  
	
   

  	
   

  	
  4.35.

  	
   

  	
  Broker’s or Finder’s Commissions

  	
   

  	
  46

  
	
   

  	
   

  	
  4.36.

  	
   

  	
  Acquisition Transactions

  	
   

  	
  47

  
	
   

  	
   

  	
  4.37.

  	
   

  	
  Disclosure

  	
   

  	
  47

  
	
  5.

  	
   

  	
  Representations of the Purchasers

  	
   

  	
  47

  
	
  6.

  	
   

  	
  Closing Conditions

  	
   

  	
  47

  
	
   

  	
   

  	
  6.1.

  	
   

  	
  Conditions to Initial Closing

  	
   

  	
  47

  
	
   

  	
   

  	
  6.1.

  	
   

  	
  Conditions to Second Closing

  	
   

  	
  51

  
	
  7.

  	
   

  	
  Financial Statements and Information

  	
   

  	
  53

  
	
  8.

  	
   

  	
  Inspection Rights; Board Observation Rights

  	
   

  	
  57

  
	
   

  	
   

  	
  8.1.

  	
   

  	
  Inspection of Books and Properties

  	
   

  	
  57

  
	
   

  	
   

  	
  8.2.

  	
   

  	
  Board of Directors; Observation Rights

  	
   

  	
  58

  
	
  9.

  	
   

  	
  Affirmative Covenants

  	
   

  	
  58

  
	
   

  	
   

  	
  9.1.

  	
   

  	
  Compliance with Covenants

  	
   

  	
  58

  
	
   

  	
   

  	
  9.2.

  	
   

  	
  Maintenance of Corporate Existence, Properties and
  Records

  	
   

  	
  58

  
	
   

  	
   

  	
  9.3.

  	
   

  	
  Payment of Taxes and Claims

  	
   

  	
  59

  
	
   

  	
   

  	
  9.4.

  	
   

  	
  Compliance With Law

  	
   

  	
  59

  



 


 


ii

















 


	
   

  	
   

  	
  9.5.

  	
   

  	
  Environmental Matters

  	
   

  	
  59

  
	
   

  	
   

  	
  9.6.

  	
   

  	
  Insurance

  	
   

  	
  60

  
	
   

  	
   

  	
  9.7.

  	
   

  	
  After Acquired Real Property

  	
   

  	
  61

  
	
   

  	
   

  	
  9.8.

  	
   

  	
  Future Subsidiaries

  	
   

  	
  61

  
	
   

  	
   

  	
  9.9.

  	
   

  	
  Use of Proceeds

  	
   

  	
  62

  
	
   

  	
   

  	
  9.10.

  	
   

  	
  Registration Statement

  	
   

  	
  62

  
	
   

  	
   

  	
  9.11.

  	
   

  	
  SBIC Covenants

  	
   

  	
  63

  
	
  10.

  	
   

  	
  Negative Covenants

  	
   

  	
  63

  
	
   

  	
   

  	
  10.1.

  	
   

  	
  Restrictions on Indebtedness

  	
   

  	
  63

  
	
   

  	
   

  	
  10.2.

  	
   

  	
  Restrictions on Liens

  	
   

  	
  63

  
	
   

  	
   

  	
  10.3.

  	
   

  	
  Limitation on Sale and Leasebacks

  	
   

  	
  65

  
	
   

  	
   

  	
  10.4.

  	
   

  	
  Mergers, Consolidations, Sales of Assets and
  Acquisitions

  	
   

  	
  65

  
	
   

  	
   

  	
  10.5.

  	
   

  	
  Conduct of Business

  	
   

  	
  66

  
	
   

  	
   

  	
  10.6.

  	
   

  	
  Restricted Payments and Restricted Investments

  	
   

  	
  66

  
	
   

  	
   

  	
  10.7.

  	
   

  	
  Disqualified Redeemable Stock; Issuance of Stock by
  Subsidiaries

  	
   

  	
  66

  
	
   

  	
   

  	
  10.8.

  	
   

  	
  Transactions with Affiliates

  	
   

  	
  67

  
	
   

  	
   

  	
  10.9.

  	
   

  	
  Operating Leases

  	
   

  	
  67

  
	
   

  	
   

  	
  10.10.

  	
   

  	
  Contingent Obligations

  	
   

  	
  67

  
	
   

  	
   

  	
  10.11.

  	
   

  	
  Limitation on Dividend Restrictions Affecting
  Subsidiaries

  	
   

  	
  68

  
	
   

  	
   

  	
  10.12.

  	
   

  	
  Compliance with ERISA

  	
   

  	
  68

  
	
   

  	
   

  	
  10.13.

  	
   

  	
  Accounting Changes

  	
   

  	
  68

  
	
   

  	
   

  	
  10.14.

  	
   

  	
  No Amendment of Organizational Documents or Certain
  Other Documents

  	
   

  	
  69

  
	
  11.

  	
   

  	
  Financial Covenants

  	
   

  	
  69

  
	
   

  	
   

  	
  11.1.

  	
   

  	
  Capital Expenditures

  	
   

  	
  69

  
	
   

  	
   

  	
  11.2.

  	
   

  	
  Maintenance of Minimum Interest Coverage

  	
   

  	
  69

  
	
   

  	
   

  	
  11.3.

  	
   

  	
  Maintenance of Maximum Leverage Ratio

  	
   

  	
  70

  
	
   

  	
   

  	
  11.4.

  	
   

  	
  Maintenance of Minimum Consolidated EBITDA

  	
   

  	
  71

  
	
   

  	
   

  	
  11.5.

  	
   

  	
  Maintenance of Minimum Consolidated Revenues

  	
   

  	
  71

  
	
   

  	
   

  	
  11.6.

  	
   

  	
  Maintenance of Minimum Cash Amount

  	
   

  	
  72

  
	
  12.

  	
   

  	
  Events of Non-Compliance

  	
   

  	
  72

  
	
   

  	
   

  	
  12.1.

  	
   

  	
  Events of Non-Compliance; Remedies

  	
   

  	
  72

  
	
   

  	
   

  	
  12.2.

  	
   

  	
  Suits for Enforcement

  	
   

  	
  75

  
	
   

  	
   

  	
  12.3.

  	
   

  	
  Remedies Cumulative

  	
   

  	
  75

  
	
   

  	
   

  	
  12.4.

  	
   

  	
  Remedies Not Waived

  	
   

  	
  75

  
	
   

  	
   

  	
  12.5.

  	
   

  	
  Availability of Funds for Redemption or Repurchase

  	
   

  	
  75

  



 


 


iii

















 


	
  13.

  	
   

  	
  Miscellaneous

  	
   

  	
   

  	
   

  	
  75

  
	
   

  	
   

  	
  13.1.

  	
   

  	
  Amendment and Waiver

  	
   

  	
  75

  
	
   

  	
   

  	
  13.2.

  	
   

  	
  Expenses

  	
   

  	
  76

  
	
   

  	
   

  	
  13.3.

  	
   

  	
  Survival of
  Representations and Warranties

  	
   

  	
  77

  
	
   

  	
   

  	
  13.4.

  	
   

  	
  Successors and Assigns;
  Sales and Transfers of Preferred Shares

  	
   

  	
  77

  
	
   

  	
   

  	
  13.5.

  	
   

  	
  Notices

  	
   

  	
  77

  
	
   

  	
   

  	
  13.6.

  	
   

  	
  Indemnification

  	
   

  	
  78

  
	
   

  	
   

  	
  13.7.

  	
   

  	
  Confidentiality

  	
   

  	
  79

  
	
   

  	
   

  	
  13.8.

  	
   

  	
  Punitive Damages

  	
   

  	
  80

  
	
   

  	
   

  	
  13.9.

  	
   

  	
  Integration and
  Severability

  	
   

  	
  80

  
	
   

  	
   

  	
  13.10.

  	
   

  	
  Counterparts

  	
   

  	
  80

  
	
   

  	
   

  	
  13.11.

  	
   

  	
  Governing Law

  	
   

  	
  80

  
	
   

  	
   

  	
  13.12.

  	
   

  	
  Submission to
  Jurisdiction; Waiver of Service and Venue

  	
   

  	
  80

  
	
   

  	
   

  	
  13.13.

  	
   

  	
  Waiver of Right to
  Trial by Jury

  	
   

  	
  81

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Signatures

  	
   

  	
   

  	
   

  	
  82

  



 


 


iv

















 


EXHIBITS


 


	
  Exhibit A

  	
   

  	
  —

  	
   

  	
  Form of Amendment to
  Articles of Incorporation

  
	
  Exhibit B

  	
   

  	
  —

  	
   

  	
  Form of Warrant

  
	
  Exhibit C

  	
   

  	
  —

  	
   

  	
  Form of Opinion of Counsel
  to the Company

  
	
  Exhibit D

  	
   

  	
  —

  	
   

  	
  Form of Compliance
  Certificate

  
	
  Exhibit E

  	
   

  	
  —

  	
   

  	
  Form of Registration
  Rights Agreement

  



 


v

















 


PREFERRED
STOCK AND WARRANT PURCHASE AGREEMENT


 


 


                PREFERRED
STOCK AND WARRANT PURCHASE AGREEMENT (this “Agreement”)
dated as of September 16, 2005, by and among GENUTEC BUSINESS SOLUTIONS, INC.,
a Montana corporation (the “Company”)
and each of those persons and entities, severally and not jointly, whose names
are set forth on the Schedule of Purchasers attached hereto as Schedule I (collectively, together with
their respective successors and assigns, the “Purchasers” and each individually as a “Purchaser”).


 


RECITALS


 


 WHEREAS, on or prior to the date hereof, the
Board of Directors of the Company (the “Board of Directors”)
has adopted and approved, and the Company has filed with the Secretary of State
of the State of Montana, an amendment in the form of Exhibit A
hereto (the “Charter Amendment”) to the
Amended and Restated Articles of Incorporation of the Company (as from time to
time amended or restated, the “Company Charter”),
pursuant to which, in accordance with the authority granted to it in Article V
of the Company Charter, the Board of Directors has created a series of the
preferred stock, par value $.0001 per share, of the Company, designated the
Series A Exchangeable Preferred Stock, consisting of 25,000 shares of such
preferred stock and having the preferences, limitations and relative rights set
forth in the Charter Amendment (the “Series A Preferred”);


 


WHEREAS, the Company has
proposed to issue and sell to the Purchasers (i) an aggregate of 20,000 shares
of Series A Preferred (after giving effect to the repurchase by the Company of
certain of such shares as hereinafter provided), (ii) Initial Warrants (as
hereinafter defined) initially exercisable to purchase an aggregate of
1,167,000 shares (subject to adjustment as therein provided, and after giving effect
to the repurchase by the Company of certain of such warrants as hereinafter
provided) of the Company’s Class A voting common stock, par value $.01 per
share, at an initial exercise price of $2.00 per share (subject to adjustment
as therein provided), and (iii) under certain conditions, certain Additional
Warrants (as hereinafter defined), all for an aggregate net purchase price of
$20,000,000; and


 


                WHEREAS,
the Purchasers have agreed to purchase such shares of Series A Preferred and
Initial Warrants, upon the terms and conditions hereinafter provided; and


 


WHEREAS, pursuant to the
provisions of this Agreement and of a Note Purchase Agreement of even date
herewith among the Company, Technology Investment Capital Corp., as Collateral
Agent (the “Collateral Agent”) and the
Purchasers (the “Note Purchase Agreement”),
the Purchasers have been granted an option exercisable at any time to exchange
any or all of the Preferred Shares held by the Purchasers for Senior Secured
Notes due 2010 to be issued to such Purchasers by the Company, such Notes to be
as described in, and to be issued pursuant to, the applicable provisions of the
Note Purchase Agreement (the “Notes”), at
a rate of $1,000 principal amount of Notes in exchange for each Preferred
Share;


 


 

















 


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


 


Section 1.               Definitions.


Section 1.1.            Defined
Terms. Capitalized terms used herein without definition shall have the
respective meanings ascribed to such terms in the Note Purchase Agreement. For
the purposes of this Agreement, the following terms shall have the following
respective meanings:


“Acceptable Bank” means any
commercial bank organized under the laws of the United States of America or any
state thereof that (a) has capital, surplus and undivided profits aggregating
at least $500,000,000 and (b) issues (or the parent of which issues)
certificates of deposit or commercial paper rated A-1 by S&P and P-1 by
Moody’s.


“Accountants” means Stonefield
Josephson & Company or any other nationally or regionally recognized firm
of independent certified public accountants hereafter selected from time to
time by the Company and reasonably acceptable to the Majority Purchasers.


“Acquisition Agreement” means the
Amended and Restated Agreement and Plan of Merger dated as of September 14,
2005 among SDI, the SDI Stockholder, SDIAC, SALLC, the Company and Ion
Automation Services BV, as such agreement may from time to time be amended,
modified or supplemented in accordance with its terms.


 “Acquisition Consideration”
means the aggregate consideration payable by the Company and its Subsidiaries
in connection with any Permitted Acquisition, to include (a) all cash, notes or
other evidence of Indebtedness, fair market value of assets and fair market
value of Equity Interests, whether payable at the closing of such acquisition
or thereafter through “earnouts” or otherwise, but excluding (b) any
liabilities assumed by the Company or its Subsidiaries in connection with such
Permitted Acquisition or to which any Person thereby acquired is subject
immediately following such acquisition.


“Acquisition Documents” has the
meaning specified in Section 4.36.


“Acquisition Transactions” means
collectively the transactions contemplated by the Acquisition Agreement,
including the acquisition by the Company of all of the outstanding capital
stock of SDI pursuant to a merger of SDIAC with and into SDI as provided
therein, the transfer to SDI of the assets of SBN relating to the Business, and
the subsequent merger of SDI with and into SALLC as provided therein.


“Additional Warrants” shall have the
meaning specified in Section 2.6.


“Affiliate”
means, as to any Person, any Person which directly or indirectly Controls, is
controlled by, or is under common control with such Person. For purposes of
this definition, “Control” of a Person means
the power, direct or indirect, (i) to vote or direct the voting of 5% or
more of the outstanding shares of Voting Equity Interests of such Person, or
(ii) to direct or cause the direction of the management and policies of
such Person whether by ownership of Voting Equity Interests, by contract or
otherwise. “Controlling” and “Controlled” have


 


 


2

















 


meanings correlative thereto. Notwithstanding the foregoing, for
purposes of this Agreement and the other Transaction Documents, none of the
Purchasers or their respective Affiliates shall be deemed to be Affiliates of
the Company or its Subsidiaries.


“After Acquired Real Property” has
the meaning specified in Section 9.7.


 “Attributable Indebtedness”
means, on any date, (a) in respect of any Capitalized Lease of any Person, the
capitalized amount thereof that would appear on a balance sheet of such Person
prepared as of such date in accordance with GAAP, (b) in the case of any Sale and Leaseback Transaction, the present value
(discounted in accordance with GAAP at the debt rate implied in the applicable
lease) of the obligations of the lessee for rental payments during the term of
such lease, and (c) in respect of any
Synthetic Lease, the capitalized amount of the remaining lease payments under
the relevant lease that would appear on a balance sheet of such Person prepared
as of such date in accordance with GAAP if such lease were accounted for as a
Capitalized Lease.


“Audited Financial Statements” has
the meaning specified in Section 4.8(a).


“Bankruptcy Code” means 11 U.S.C.
Sec. 101 et seq., as from time to time hereafter amended, and any successor or
similar statute.


“Board of Directors” has the meaning
specified in the Recitals to this Agreement.


“Business” means the business of
providing call messaging products and services to businesses, organizations,
governments and governmental instrumentalities, and activities incident or
related thereto.


“Business Day” means any day except a
Saturday, a Sunday or a legal holiday in New York City.


“Call Securities” has
the meaning specified in Section 4.7(a).


“Capital Expenditures” means, for any
Person, with respect to any period, the aggregate of all expenditures of such
Person during such period for the construction, acquisition or leasing
(pursuant to a Capitalized Lease) of property, plant, equipment or other fixed
assets or intangibles (including capitalized software expenditures), including
additions thereto and capitalized repairs and improvements, and which are or
are required to be capitalized on the consolidated balance sheet of such Person
in accordance with GAAP.


“Capitalized Lease” means, as to any
Person, any lease of any property (whether real, personal or mixed) by such
Person as lessee that, in accordance with GAAP, is or is required to be
accounted for as a capital lease on the balance sheet of such Person.


“Capitalized Lease Obligation” means,
as to any Person, all obligations of such Person under any leasing or similar
arrangement constituting a Capitalized Lease and, for purposes of the
Transaction Documents, the principal amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP.


 


3

















 


“Cash”
means money (in Dollars), currency (in Dollars) or a credit balance in any
Deposit Account maintained with an Acceptable Bank.


“Cash Equivalents” means


(a)           marketable direct obligations issued
by, or unconditionally guaranteed by, the United States Government or issued by
any agency thereof and backed by the full faith and credit of the United States
of America, in each case maturing within one year from the date of acquisition
thereof;


(b)
          commercial paper of an issuer
rated at least A-1 by S&P or P-1 by Moody’s, or (if both of the two named
rating agencies cease publishing ratings of commercial paper issuers generally)
carrying an equivalent rating by a nationally recognized statistical rating
organization, which is issued by a Person (other than the Company or an
Affiliate of the Company) organized under the laws of any state of the United
States or of the District of Columbia, and matures within nine months after the
date of acquisition thereof;


(c)
          certificates of deposit or
bankers’ acceptances maturing not more than one year after the date of
acquisition thereof issued by any Acceptable Bank; and


(d)           repurchase obligations of any Acceptable
Bank, having a term of not more than 30 days, for, and secured by, underlying
securities of the types (without regard to maturity) described in clauses (a)
and (c) above.


“Certified” when used with respect to
any financial information of any Person to be certified by any of its officers,
indicates that such information is to be accompanied by a certificate to the
effect that such financial information has been prepared in accordance with
GAAP consistently applied, subject in the case of interim financial information
to normal year-end audit adjustments and absence of the footnotes
required by GAAP, and presents fairly, in all material respects, the
information contained therein as at the dates and for the periods covered
thereby.


“Change of Control” means, and shall
be deemed to have occurred, if at any time (a) any Person or a group (within
the meaning of Sections 13(d) or 14(d)(2) of the Exchange Act), other than Lee
J. Danna or the SDI Stockholder, becomes the “beneficial owner” (as defined in
Rule 13d-3 promulgated under the Exchange Act) of more than 20% of the total
outstanding shares of Voting Stock of the Company (other than an underwriter or
underwriters in connection with a public offering of such stock), (b)
Continuing Directors shall not constitute a majority of the elected and acting
members of the Board of Directors, or (c) the Company shall fail to own,
directly or indirectly through its Wholly-owned Subsidiaries, 100% of the
outstanding Equity Interests of any Person that is a Subsidiary of the Company
on the Initial Closing Date.


“Charter Amendment” has the meaning
specified in the Recitals to this Agreement.


“Code” means the Internal Revenue
Code of 1986, as amended.


 


4

















 


“Collateral” has the meaning
specified in the Note Purchase Agreement.


“Collateral Agent” has the meaning
specified in the Recitals to this Agreement.


“Common Equity Interests” means, with
respect to any Person, any class of capital stock or other Equity Interests of
such Person which is not entitled to any preference or priority over any other
class of Equity Interests of such Person with respect to the distribution of
such Person’s assets, whether upon the declaration or payment of dividends, or
upon liquidation or dissolution, or otherwise.


“Company” means GenuTec Business
Solutions, Inc., a Montana corporation, and any successor thereto resulting
from a Permitted Change of Jurisdiction.


“Company Charter” has the meaning
specified in the Recitals to this Agreement.


“Company Common Stock” means the
Class A voting common stock, par value $.01 per share, of the Company.


“Company Intellectual Property” has
the meaning specified in Section 4.20(a)


“Company  Preferred
Stock” means the Preferred Stock, par value $.0001 per share, of
the Company, including the Series A Preferred and any other series thereof.


“Compliance Certificate” means, for
any fiscal quarter of the Company, an Officer’s Certificate of the Company
properly completed as of the last day of such fiscal quarter and signed by the
Chief Financial Officer of the Company, substantially in the form set forth in Exhibit D.


“Confidential Information” has the
meaning specified in Section 13.7.


“Consolidated EBITDA” means, for any
period, the sum of (a) Consolidated Net Income (Loss) plus (b) in
each case to the extent deducted in determining such Consolidated Net Income
(Loss), the sum of (i) Consolidated Interest Expense, plus
(ii) Consolidated Income Tax Expense, plus (iii) depreciation
expense, plus (iv) amortization expense, plus (v) all other
non-cash expenses and charges, minus (c) capitalized software
development costs to the extent not deducted in determining Consolidated Net
Income (Loss) and minus (d) to the extent included in determining
Consolidated Net Income (Loss), all other non-cash items of income or gain, all
as determined with respect to the Company and its Subsidiaries for such period
on a consolidated basis in accordance with GAAP.


“Consolidated Income Tax Expense”
means, for any period, the amount which, in accordance with GAAP, should be
shown as provision for current and deferred federal and state income taxes on a
consolidated statement of operations of the Company and its Subsidiaries for
such period.


“Consolidated Interest Expense”
means, for any period, all amounts which, in accordance with GAAP, should be
included as interest expense on a consolidated statement of operations of the
Company and its Subsidiaries for such period, and including in any event that 


 


5

















 


portion of any Capitalized Lease Obligations attributable to interest
expense in accordance with GAAP, debt issuance costs, capitalized interest paid
during such period, all commissions, discounts and other fees and charges
accrued with respect to letters of credit and bankers’ acceptance financing and
net costs under Swap Contracts (including amortization of such costs), all as
determined for the Company and its Subsidiaries on a consolidated basis for
such period in accordance with GAAP.


“Consolidated Net Income (Loss)”
means, for any period, the net income (or loss) of the Company and its
Subsidiaries on a consolidated basis for such period taken as a single
accounting period, determined in accordance with GAAP; provided that in
determining Consolidated Net Income (Loss) there shall be excluded (i) the
income (or loss) of any Person which is not a Subsidiary of the Company, except
to the extent of the amount of dividends or other distributions actually paid
to the Company or its Subsidiaries by such Person during such period,
(ii) the income (or loss) of any Person accrued prior to the date it
becomes a Subsidiary of the Company or is merged into or consolidated with the
Company or any of its Subsidiaries or that Person’s assets are acquired by the
Company or any of its Subsidiaries, (iii) the proceeds of any life
insurance policy, (iv) gains (but not losses) from the sale or other
Disposition of property or assets not in the ordinary course of business of the
Company and its Subsidiaries, (v) any other extraordinary or non-recurring
gains (but not losses) of the Company or its Subsidiaries, and (vi) the income
of any Subsidiary of the Company to the extent that the declaration or payment
of dividends or similar distributions by that Subsidiary of that income is not
at the time permitted by operation of the terms of its charter or of any
agreement, instrument or Requirement of Law applicable to that Subsidiary.


“Consolidated Revenues” means, for
any period, the consolidated net revenues of the Company and its Subsidiaries
(after giving effect to all proper refunds, chargebacks, credits and reserves
for such period), determined for such period on a consolidated basis in
accordance with GAAP.


“Consolidated Total Indebtedness”
means, as of any date of determination, the aggregate amount of outstanding
Funded Indebtedness of the Company and its Subsidiaries as of such date,
determined on a consolidated basis in accordance with GAAP.


“Contingent Obligation” means, as to
any Person, any direct or indirect liability of that Person, with or without
recourse, guaranteeing or intended to guarantee any Indebtedness, lease,
dividend or other monetary obligation (the “primary obligation”) of another
Person (the “primary obligor”) in any manner, including any obligation of that
Person (a) to purchase, repurchase or otherwise acquire such primary obligation
or any security therefor, (b) to advance or provide funds for the payment or
discharge of any such primary obligation or to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial condition of
the primary obligor, (c) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or
(d) otherwise to assure or hold harmless the holder of any such primary
obligation against loss in respect thereof. The amount of any Contingent
Obligation shall be deemed equal to the stated or determinable amount of the
primary obligation in respect of which such


 


6

















 


Contingent Obligation is made or, if not stated or if indeterminable,
the maximum reasonably anticipated liability in respect thereof (assuming such
Person is required to perform thereunder), as determined by such Person in good
faith. Notwithstanding the foregoing, the term “Contingent Obligation” shall
not include endorsements of instruments for deposit or collection in the
ordinary course of business.


“Continuing Director” means an
individual (a) who was a member of the Board of Directors on the Initial
Closing Date, or (b) who at any time after the Initial Closing Date is nominated
or elected to be a member of the Board of Directors by a majority of the
Continuing Directors at the time in office.


“Control,” “Controlling”
and “Controlled” have the meanings
specified in the definition of “Affiliate.”


“Control Agreement” has the meaning
specified in the Note Purchase Agreement.


“Convertible Securities”
has the meaning specified in Section 4.7(a).


“Copyright” means, with respect to
any Person, all of the following in which such Person now holds or hereafter
creates or acquires any interest: (a) all copyrights and intangible
property of like nature (whether registered or unregistered), including
manuscripts, documents, writings, derivative works, tapes, disks, storage
media, computer programs, computer databases, computer program flow diagrams,
source codes, object codes, semiconductor chip product mask works, and all
tangible property embodying or incorporating the Copyrights, all registrations
and recordings thereof, and all applications in connection therewith, including
all registrations, recordings and applications in the United States Copyright
Office or in any similar office or agency of the United States, any state or
territory thereof, or any other country or any political subdivision thereof;
(b) all reissues, extensions and renewals thereof; and (c) all income,
royalties, damages and payments now and hereafter due or payable under or with
respect to any of the foregoing, including damages and payments for past,
present and future infringements of any Copyright and the right to sue for
past, present and future infringements of any Copyright.


“Copyright License” means, with
respect to any Person, any and all rights now owned or hereafter acquired by
such Person under any written agreement granting any right to use any Copyright
or registration thereof, including any sublicense thereof.


“Copyright Security Agreement” has
the meaning specified in the Note Purchase Agreement.


“Deposit Account” means a deposit
account, as such term is defined in Section 9-102 of the Uniform Commercial
Code.


“Dispose” means, with respect to any
assets or property of any Person, to sell, convey, transfer, exchange, lease,
encumber or otherwise dispose of, such assets or property (including any
involuntary disposition by eminent domain or otherwise), and “Disposition” has a corresponding
meaning.


 


7

















 


“Disqualified Redeemable Stock” means
any Company Common Stock or Company Preferred Stock which is Redeemable Stock
and which, under the terms of the Organizational Documents of the Company or
any agreement, instrument or other document to which the Company is a party or
by which it is bound, is mandatorily required to be purchased or acquired, or
may at the option of the holder thereof be required to be purchased or
acquired, by the Company or any of its Subsidiaries at any time prior to the 91st
consecutive day following the Maturity Date.


“Dollars” and “$”
means lawful money of the United States of America.


“Eligible Assignee” means (i) a
Purchaser, (ii) an Affiliate of a Purchaser, and (iii) any other Person (other
than a natural person) approved by the Majority Purchasers.


 “Employment Agreements”
means the collective reference to the employment agreement between SDI and the
SDI Stockholder entered into on or about the Initial Closing Date pursuant to
the provisions of the Acquisition Agreement, the currently existing employment
agreements between the Company and each of Lee J. Danna, Farzad Hoorizadeh and
Matthew Pekarek, and the currently existing consulting agreement between the
Company and Tony Tseng.


“Environmental Laws” means any and
all federal, state, local, and foreign statutes, ordinances, codes, treaties,
licenses, laws, rules, regulations, per­mits, concessions, grants, franchises,
agreements and governmental restrictions relating to pollution, the protection
of the environment or the generation, treatment, storage, use, maintenance,
recycling, transportation, release or disposal of Hazardous Materials,
including the Comprehensive Environmental Response, Compensation and Liability
Act, the Resource Conservation and Recovery Act, the Emergency Planning and
Community Right to Know Act, the Safe Drinking Water Act, the Solid Waste
Disposal Act, the Hazardous Materials Transportation Act, the Clean Air Act,
the Clean Water Act, the Federal Insecticide, Fungicide and Rodenticide Act,
the Noise Control Act, the Occupational Safety and Health Act, the Toxic
Substances Control Act, any so-called “Superfund” or “Superlien” law, and any
rule or regulation promulgated under any of the foregoing, all as now or at any
time hereafter may be in effect.


“Environmental Matter” means any
claim, investigation, litigation or administrative proceeding, whether pending
or threatened, or Order, asserted, arising or entered under or pursuant to any
Environmental Law, or relating to any Hazardous Materials, in each case against
or affecting the Company or any of its Subsidiaries, their respective
operations, or any properties owned, leased or used by any of them.


“Environmental Permit” has the
meaning specified in Section 4.15(b).


“Equity
Interests” means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether voting or nonvoting) of capital stock,
including each class of common stock and preferred stock of such Person, and
(ii) with respect to any Person that is not a corporation, any and all general
partnership interests, limited partnership interests, membership or limited
liability company interests, beneficial interests or other equity interests of
or in such Person (including any


 


8

















 


common, preferred or other
interest in the capital or profits of such Person, and whether or not having
voting or similar rights).


“ERISA” means the Employee Retirement
Income Security Act of 1974, as from time to time amended.


“ERISA Affiliate” means any trade or
business (whether or not incorporated) under common control with the Company
within the meaning of Section 414(b), 414(c), 414(m) or 414(o) of the Code
or Section 4001 of ERISA.


“ERISA Event” means (a) a
Reportable Event with respect to a Pension Plan; (b) a withdrawal by the
Company or any ERISA Affiliate from a Pension Plan subject to Section 4063 of
ERISA during a plan year in which it was a substantial employer (as defined in
Section 4001(a)(2) of ERISA); (c) a complete or partial withdrawal by the
Company or any ERISA Affiliate from a Multiemployer Plan or notification that a
Multiemployer Plan is in reorganization; (d) the filing of a notice of intent
to terminate, the treatment of a plan amendment as a termination under Section
4041 or 4041A of ERISA or the commencement of proceedings by the PBGC to
terminate a Pension Plan or Multiemployer Plan; (e) a failure by the
Company or any ERISA Affiliate to make required contributions to a Pension Plan
or Multiemployer Plan; (f) an event or condition which constitutes grounds
under Section 4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any Pension Plan or Multiemployer Plan; (g) the imposition of
any liability under Title IV of ERISA, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon the Company or any ERISA
Affiliate; (h) an application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code with respect to any
Plan; (i) a non-exempt prohibited transaction occurs with respect to any Plan
for which the Company or any Subsidiary of the Company may be directly or
indirectly liable; or (j) a violation of the applicable requirements of Section
404 or 405 of ERISA or the exclusive benefit rule under Section 401(a) of the
Code by any fiduciary or disqualified person with respect to any Plan for which
the Company or any ERISA Affiliate may be directly or indirectly liable.


“ESOP” means a Plan that is intended
to satisfy the requirements of Section 4975(e)(7) of the Code.


“Event of Non-Compliance” has the
meaning specified in Section 12.1.


“Exchange Act” means as of any date
the Securities Exchange Act of 1934, as amended, or any similar federal statute
then in effect, and a reference to a particular section thereof shall include a
reference to the comparable section, if any, of any such similar federal
statute.


“Exchange Date” has the meaning
specified in Section 2.5(a).


“Exchange Option” has the meaning
specified in Section 2.5(a).


“Existing Financial Statements” has
the meaning specified in Section 4.8(a).


“Funded Indebtedness” with respect to any Person
means, without duplication:


 


9

















 


(a)           all indebtedness of such Person for
borrowed money;


(b)           all indebtedness or obligations of
such Person evidenced by bonds, debentures, notes or similar written instruments;


(c)           any obligation incurred for all or
any part of the purchase price of property or services (other than trade
accounts payable incurred in the ordinary course of business);


(d)           the principal portion of all
obligations under conditional sale or other title retention agreements relating
to property purchased by such Person (other than customary reservations or
retentions of title under agreements with suppliers entered into in the
ordinary course of business);


(d)           all reimbursement obligations of such
Person (whether contingent or otherwise) in respect of letters of credit, bank
guarantees, bankers’ acceptances, surety or other bonds and similar
instruments;


(e)           all Funded Indebtedness of others
secured by (or for which the holder of such Funded Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on, or payable out
of the proceeds of production from, property owned or acquired by such Person,
whether or not the obligations secured thereby have been assumed;


(g)           the Attributable Indebtedness of
Capitalized Leases, Sale and Leaseback Transactions and Synthetic Leases of
such Person;


(h)           all obligations of such Person to
purchase, redeem, retire, defease or otherwise make any payment in respect of
any Redeemable Stock in such Person or any other Person, valued, in the case of
any Redeemable Stock that is a Preferred Equity Interest, at the greater of its
voluntary or involuntary liquidation preference plus accrued and unpaid
dividends;


(i)            all Contingent Obligations of such
Person in respect of Indebtedness of any other Person of the types referred to
in any of the foregoing clauses (a) through (h); and


(j)
           all Indebtedness, of the types
referred to in any of the foregoing clauses (a) through (i), of any partnership
or joint venture (other than a joint venture that is itself a corporation or
limited liability company) in which such Person is a general partner or joint
venturer, unless such Indebtedness is expressly made non-recourse to such
Person.


 “GAAP” means
generally accepted accounting principles as in effect from time to time in the
United States of America, applied on a consistent basis both as to
classification of items and amounts.


 


10

















 


“Governmental Authority” means any
nation or government, any state, province, county, city, municipality, town,
village, department or other political subdivision thereof, any agency,
authority, instrumentality, regulatory body, court, administrative tribunal or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government (including any central
bank or similar monetary or regulatory authority), and any corporation or other
entity owned or controlled, through stock or capital ownership or otherwise, by
any of the foregoing.


“Hazardous Material” means:


(a)           any “hazardous substance” as defined
in, or for purposes of, the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C.A. §§ 9601 & 9602, as may be amended from time
to time, or any other so-called “superfund” or “superlien” law and any
judicial interpretation of any of the foregoing;


(b)           any “regulated substance” as defined
pursuant to 40 C.F.R. Part 280;


(c)           any “pollutant or contaminant” as
defined in 42 U.S.C.A. § 9601(33);


(d)           any “hazardous waste” as defined in,
or for purposes of, the Resource Conservation and Recovery Act;


(e)           any “hazardous chemical” as defined
in 29 C.F.R. Part 1910;


(f)            any “hazardous material” as defined
in, or for purposes of, the Hazardous Materials Transportation Act; and


(g)           any other hazardous or toxic
substance, waste or other pollutant that is regulated pursuant to, or may be
basis for liability under, any Environmental Law, whether in the form of a
solid, liquid, gas, odor, pathogen or form of energy, from whatever source,
including, but not limited to, explosive or radioactive substances or wastes,
petroleum or any distillate thereof, asbestos or asbestos-containing materials,
polychlorinated biphenyls, radon gas, and infectious or medical wastes.


“Indebtedness” with respect to any
Person means, without duplication:


(a)           all Funded Indebtedness of such
Person;


(b)           the Swap Termination Value with
respect to such Person of any Swap Contract to which such Person is a party;


(c)           all Contingent Obligations of such
Person in respect of Indebtedness of any other Person of the types referred to
in any of the foregoing clauses (a) and (b); and


(d)
          all Indebtedness, of the types
referred to in any of the foregoing clauses (a) through (c), of any partnership
or joint venture (other than a joint venture that is itself a


 


11

















 


corporation or limited liability company) in which such Person is a
general partner or joint venturer, unless such Indebtedness is expressly made
non-recourse to such Person.


“Initial Closing Date” has the
meaning specified in Section 2.3(a).


“Initial Public Offering”
means the initial underwritten public offering by the Company of its common
stock for cash pursuant to an effective registration statement under the
Securities Act, other than a registration relating solely to employee benefit
plans or solely to a transaction described in Rule 145(a) of the SEC.


“Initial Warrants” means the TICC
Initial Warrants and the Seaview Initial Warrants.


“Intellectual Property” means, with
respect to any Person, any and all of the following now owned or hereafter
created or acquired by such Person: (a) Patents, Trademarks, Copyrights and
Licenses; (b) systems software and application software (including the
Proprietary Software), source code, object code, screen displays and formats,
program structures, sequence and organization, and all documentation for such
software, including user manuals, flow charts, logic diagrams, programmers’
notes, functional specifications, operations manuals, guides, formulas,
processes, ideas and know-how embodied in or created in connection with any of
the foregoing, whether or not patentable or copyrightable; (c) concepts,
discoveries, improvements and ideas, whether or not patentable or
copyrightable; (d) all other know-how, technology, engineering drawings,
diagrams, designs, design information, trade secrets, formulas, processes,
procedures, customer lists, databases, practices, laboratory notebooks,
specifications, test procedures, maintenance manuals, research, reports, URLs,
domain names, and other manufacturing, marketing, merchandising, selling,
purchasing or accounting materials, data or information; and (e) all goodwill
associated with the items described in the foregoing clauses (a), (b), (c) and
(d).


“Interim Financial Statements” has
the meaning specified in Section 4.8(a).


“Internal Revenue Service” means the
United States Internal Revenue Service and any successor or similar agency performing
similar functions.


“Inventory” means all goods,
merchandise and other personal property which are held for sale or lease or
consignment or to be furnished under a contract of service, or are raw
materials, work in process or material used or consumed, or to be used or
consumed, in the business of the Company and its Subsidiaries.


“Investment” when used with reference
to any investment of the Company or any of its Subsidiaries means any
investment so classified under GAAP, and, whether or not so classified,
includes (a) any Indebtedness owed by any Person to the Company or to any
such Subsidiary, (b) any Contingent Obligation of the Company or any such
Subsidiary with respect to Indebtedness or other obligations of any Person, and
(c) any Equity Interests in any Person held by the Company or any such
Subsidiary; and the amount of any Investment shall be the original principal or
capital amount thereof less all cash returns of principal or equity thereof
(and without adjustment by reason of the financial condition of such other
Person).


 


12

















 


“Investment Company Act” means the
Investment Company Act of 1940, as amended, or any similar federal statute at
the time in effect, and a reference to a particular section thereof shall
include a reference to the comparable section, if any, of any such similar
federal statute.


“Landlord Agreement” has the meaning
specified in the Note Purchase Agreement.


“License” means, with respect to any
Person, any Patent License, Trademark License, Copyright License, or other
license or sublicense of rights or interests (including any license of rights
to manufacture, use, reproduce, market or sell any computer hardware or other
equipment, software, technology, trade secrets, know-how, customer lists,
databases or other materials, data or information) now held or hereafter
created or acquired by such Person, whether as licensor or licensee, as the
same may from time to time be amended, modified, renewed or extended.


“Lien” means any security interest,
mortgage, pledge, lien, claim, charge, encumbrance, conditional sale or title
retention agreement, or lessor’s interest under a Capitalized Lease or
analogous instrument, in, of or on any of a Person’s property (whether held on
the date hereof or hereafter acquired).


“Liquidation Price” means, with
respect to each share of Series A Preferred, $1,000 per share.


“Liquidity Event”
means any of the following: (i) a Sale of the Company, (ii) an Initial Public
Offering, or (iii) a Change of Control.


“Listed Intellectual Property” has
the meaning specified in Section 4.20(b).


“Majority Purchasers” means at any
time Purchasers holding a majority of the Preferred Shares then outstanding.


“Margin Stock” means “margin stock”
as such term is defined in Regulation T, U or X of the Board of Governors of
the Federal Reserve System.


“Material Adverse Effect” means any
change or changes or effect or effects that individually or in the aggregate
are or are likely to be materially adverse to (i) the assets, business,
operations, income, prospects or condition (financial or otherwise) of the
Company and its Subsidiaries taken as a whole, (ii) the legality, validity
or enforceability of this Agreement or any of the other Transaction Documents
or (iii) the ability of the Company and its Subsidiaries to fulfill their
obligations under this Agreement and the other Transaction Documents.


“Material Contract” means any
agreement or contract (including Licenses, supply agreements, requirements
contracts, customer agreements, franchise agreements, distribution agreements,
joint venture agreements, asset purchase agreements, stock purchase agreements,
merger agreements, agency or advertising agreements, leases of real or personal
property, credit agreements, loan agreements, security agreements, mortgages,
trust deeds, trust indentures, shareholder agreements, registration rights
agreements, consulting agreements, management agreements, employment
agreements, severance agreements, collective bargaining agreements, tax sharing
agreements, and other contracts, agreements and commitments) to which the


 


13

















 


Company or any of its Subsidiaries is a party and which involves obligations (contingent or otherwise) of, or
payments to, the Company and its Subsidiaries of more than $500,000 in any
fiscal year or is otherwise material to the ongoing business, operations,
financial condition or prospects of the Company and its
Subsidiaries taken as a whole.


“Maturity Date” means September 16, 2010.


“Moody’s”
means Moody’s Investors Services, Inc. and any successor that is a nationally
recognized statistical rating organization.


“Mortgage” has the meaning specified
in the Note Purchase Agreement..


“Mortgage Documents” has the meaning
specified in the Note Purchase Agreement.


“Mortgage Policy” has the meaning
specified in the Note Purchase Agreement.


“Multiemployer Plan” means a
multiemployer plan as defined in Section 3(37) or Section 4001(a)(3) of ERISA
or Section 414(f) of the Code contributed to by the Company or any of its ERISA
Affiliates.


“NASD” means the National Association
of Securities Dealers, Inc. or any successor thereto.


“Nasdaq” means The Nasdaq Stock
Market, Inc. and any successor thereto.


“Net Cash Proceeds” means, with
respect to (i) an incurrence by the Company or its Subsidiaries of any
Indebtedness, (ii) the issuance and sale by the Company of any of its Equity
Interests, (iii) any sale or other Disposition of any assets or property of the
Company or its Subsidiaries, or (iv) the receipt by the Company or its
Subsidiaries of proceeds of any insurance policy, the aggregate amount of Cash
received by the Company or its Subsidiaries in connection with such transaction
after deduction of all reasonable and customary fees, costs and expenses
directly incurred by the Company or its Subsidiaries in connection therewith,
including reasonable and customary underwriting discount, brokerage or selling
commissions, if any, taxes paid or reasonably anticipated to be payable as a
result of such transaction, and the reasonable fees and disbursements of
counsel paid by the Company or its Subsidiaries in connection therewith.


“New Subsidiary” has the meaning
specified in Section 9.8.


“Non-Compliance” means any event or
condition which, with due notice or lapse of time or both, would become an
Event of Non-Compliance.


“Note” has the meaning specified in
the Recitals to this Agreement.


“Note Documents” means collectively
the Note Purchase Agreement, the Notes, the Subsidiary Guarantee, the Security
Documents, and any other instruments or documents now or


 


14

















 


hereafter executed and delivered pursuant to or in connection with any
of the foregoing (but excluding the Transaction Documents).


“Note Purchase Agreement” has the
meaning specified in the Recitals to this Agreement.


“Observer” has the meaning set forth
in Section 8.2.


“Officer’s Certificate” means with
respect to any corporation or other entity, a certificate signed by a
Responsible Officer of the specified corporation or entity.


“Options” has
the meaning specified in Section 4.7(a).


“Order” means any order, writ,
injunction, decree, judgment, award, determination or written direction or
demand of any court, arbitrator or Governmental Authority.


“Organizational Documents” means (a)
with respect to any corporation, the certificate of incorporation, articles of
incorporation or comparable constitutional or charter document, and by-laws, of
such corporation, (b) with respect to any limited liability company, the
certificate of formation or comparable document filed with the Secretary of
State or comparable official of the state of organization of such limited
liability company, and the operating agreement, limited liability company
agreement or comparable constitutive document thereof, (c) with respect to any
limited partnership, the certificate of limited partnership or comparable
document filed with the Secretary of State or comparable official of the state
of organization of such limited partnership and the limited partnership
agreement thereof, (d) with respect to any general partnership or joint
venture, the partnership agreement or joint venture agreement relating thereto,
(e) with respect to any trust, the trust agreement or comparable agreement establishing
such trust, or (f) with respect to any other business entity, the comparable
constitutive documents, in each case with all amendments, modifications and
supplements thereto from time to time executed or filed.


“OTC Bulletin Board” means the Over-the-Counter
Bulletin Board maintained by Nasdaq or the NASD, and any successor thereto.


“Outstanding on a Fully Diluted Basis”
means, as of any date of determination, with respect to the shares of Company
Common Stock, (a) all shares of Company Common Stock that are issued and
outstanding on such date of determination, and (b) all shares of Company Common
Stock that would be outstanding as of such date of determination assuming (i)
the exercise of all then outstanding Options to subscribe for or purchase shares
of Company Common Stock, (ii) the exercise of all then outstanding Options to
subscribe for or purchase shares of Company Preferred Stock and the conversion
or exchange of all other securities that by their terms are convertible into or
exchangeable for shares of Company Preferred Stock, and (iii) the conversion or
exchange of all then outstanding shares of Company Preferred Stock or other
securities that by their terms are convertible into or exchangeable for shares
of Company Common Stock and all such shares or other securities that would be
outstanding upon the exercise of the options, warrants and other rights and the
conversion or exchange of the other securities referred to in the foregoing
clause (ii) (in each case whether or not such Options are at


 


15

















 


the time so exercisable and whether or not such shares of Company
Preferred Stock or other securities are at the time so convertible or
exchangeable).


“Patent” means, with respect to any
Person, all of the following in which such Person now holds or hereafter
creates or acquires any interest: (a) all letters patent of the United
States or of any other country, all registrations and recordings thereof, and
all applications for letters patent of the United States or of any other
country (including provisional patent applications), including registrations,
recordings and applications in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any State, or any other
country; (b) all reissues, continuations, continuations-in-part
and extensions thereof; and (c) all income, royalties, damages and payments now
or hereafter due and/or payable under or with respect to any Patent, including
damages and payments for past, present and future infringements of any of the
foregoing and the right to sue for past, present and future infringements of
any Patent.


“Patent License” means, with respect
to any Person, rights under any written agreement now owned or hereafter acquired
by such Person granting any right with respect to any invention on which a
Patent is in existence, including any sublicense thereof.


“Patent Security Agreement” has the
meaning specified in the Note Purchase Agreement.


“Patriot Act” means the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001, P.L. 107-56, as amended.


“PBGC” means the Pension Benefit
Guaranty Corporation, and any successor agency or Governmental Authority
performing similar functions.


“Pension Plan” means any “employee
pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other
than a Multiemployer Plan, that is subject to Title IV of ERISA or Section 302
of ERISA and is sponsored or maintained by the Company or any ERISA Affiliate
or to which the Company or any ERISA Affiliate contributes or has an obligation
to contribute, or in the case of a multiple employer or other plan described in
Section 4064(a) of ERISA, has made contributions at any time during the
immediately preceding five plan years.


“Permitted Acquisition”
means any acquisition (by merger, purchase of assets, purchase of stock or
otherwise) by the Company or any Subsidiary of the Company of all or
substantially all the assets and business of a Person or of a division or line
of business of a Person, or of all of the Equity Interests in a Person, if (a)
both immediately before and immediately after giving effect thereto, no
Non-Compliance or Event of Non-Compliance shall have occurred and be continuing
or would result therefrom; (b) such acquired Person or division or line of
business is engaged solely in the Business; (c) if the Equity Interests of a
Person are acquired, (i) such Person shall be organized under the laws of a
state of the United States, (ii) immediately after giving effect to such
acquisition, such Person shall be a Wholly-owned Subsidiary of the Company, and
(iii) at the time such acquisition is completed, all of the requirements of
Section 9.8 hereof shall have been complied with in respect of such Person; (d)
the Company shall be in compliance with the financial covenants set forth in
each of Sections 11.2, 11.3, 11.4, 11.5 and 11.6 as of the most recently ended
fiscal quarter of the Company on a pro forma basis, giving


 


16

















 


effect to such acquisition (without giving effect to operating expense
reductions) as if such acquisition had occurred immediately prior to the first
day of the relevant period for testing compliance as of such date; (e) the
Company shall have delivered to the Purchasers at least ten (10) Business Days
prior to consummation of such acquisition a written notice of such proposed
acquisition containing a general description thereof and the date of proposed consummation
of such acquisition, accompanied by copies of the definitive agreements and
documents governing such acquisition or final forms thereof and an Officer’s
Certificate to the effect of the matters set forth in clauses (a), (b), (c) and
(d) above, together with all relevant historical financial information for the
Person or division or line of business acquired, and pro forma financial
statements and reasonably detailed calculations demonstrating satisfaction of
the requirement set forth in clause (d) above; (f) if any part of the
consideration payable by the Company or its Subsidiaries in connection with
such acquisition shall consist of promissory notes or other obligations for
deferred payment (including by way of any earnout or other contingent obligation,
but excluding obligations payable solely in shares of Company Common Stock),
then each Person who is or may be entitled to receive such promissory notes or
payment rights shall have executed and delivered to the Purchasers a
subordination agreement subordinating in right of payment the Company’s and its
Subsidiaries’ obligations with respect thereto to the Obligations, in a manner
and to an extent satisfactory in all respects to the Majority Purchasers in
their sole discretion; (g) the aggregate fair market value of the assets
acquired by the Company and its Subsidiaries pursuant to such acquisition
(directly or indirectly by acquisition of one or more Persons) shall not be
less than the aggregate amount of all liabilities assumed by the Company or its
Subsidiaries in connection with such acquisition or to which any Person thereby
acquired is subject immediately following such acquisition; and (h) (i) the
maximum aggregate amount of Acquisition Consideration payable by the Company
and its Subsidiaries in connection with such acquisition shall not exceed
$1,000,000, and (ii) the maximum aggregate amount of Acquisition Consideration
payable by the Company and its Subsidiaries in connection with such
acquisition, together with the maximum aggregate amount of Acquisition
Consideration payable or paid by the Company and its Subsidiaries in connection
with all Permitted Acquisitions effected prior to the date of such acquisition,
shall not exceed $5,000,000.


 “Permitted Change of
Jurisdiction” means a reincorporation of the Company in Delaware
or Nevada pursuant to a merger of the Company with and into a corporation newly
organized in such other jurisdiction, provided that (a) no
Non-Compliance or Event of Non-Compliance shall then have occurred and be continuing,
(b) there shall be no material change as a result of such transaction in (i)
the assets, liabilities, business, operations or financial condition of the
Company and its Subsidiaries, or (ii) the corporate structure of the Company
and its Subsidiaries or the voting powers, designations, preferences,
limitations, restrictions or relative rights of any class or series of the
authorized or outstanding Equity Interests of the Company or any of its
Subsidiaries, including the Series A Preferred and the Company Common Stock,
and the surviving corporation of such merger shall have authorized classes and
series of capital stock having the same designations, preferences, limitations
and relative rights and the same number of authorized shares of each of such classes
and series as the Company immediately prior to such merger, (c) the surviving
corporation of such merger shall execute an agreement satisfactory in form and
substance to the Majority Purchasers to be bound by all of the terms and
provisions of this Agreement and all of the other Transaction Documents as though
an original party thereto,


 


17

















 


and (d) each Preferred Share outstanding immediately prior to such
merger shall be converted into an identical share of Series A Exchangeable
Preferred Stock, par value $.0001 per share, of the surviving corporation of
such merger, and each Warrant outstanding immediately prior to such merger
shall be exchanged for an identical warrant of such surviving corporation, and
the terms “Preferred Shares” and “Warrants” used herein shall thereafter be
deemed to refer to such shares of Series A Exchangeable Preferred Stock and
warrants of such surviving corporation.


“Permitted Lien” has the meaning
specified in Section 10.2.


“Person” means and includes an
individual, a corporation, a partnership, an association, a joint venture, a
limited liability company, a trust, a syndicate, an unincorporated organization
and a Governmental Authority.


“Plan” means an employee benefit plan
(as defined in Section 3(3) of ERISA) which the Company sponsors or maintains
or to which the Company or any ERISA Affiliate may have liability.


“Preferred Equity Interests” means,
with respect to any Person, any class of capital stock or other Equity Interests
of such Person which is entitled to a preference or priority over any other
class of Equity Interests of such Person with respect to any distribution of
such Person’s assets, whether upon the declaration or payment of dividends, or
upon liquidation or dissolution, or otherwise.


“Preferred Shares” means the TICC
Preferred Shares and the Seaview Preferred Shares.


“Projections” means the consolidated
financial projections of the Company and its Subsidiaries for the four years in
the period ending September 30, 2009.


“Proprietary Software” has the
meaning specified in Section 4.21(a).


“Purchase Money Indebtedness” means
Indebtedness (including Capitalized Lease Obligations) of the Company or any of
its Subsidiaries incurred for the purpose of financing all or any part of the
purchase price or cost of construction or acquisition of property, plant,
equipment or other fixed assets or intangibles (including capitalized software
expenditures), including additions thereto and capitalized repairs and
improvements, used in the business of the Company or such Subsidiary, provided
that such Indebtedness is incurred within one year after such property is
acquired or, in the case of improvements, constructed, and is not secured by
any collateral other than the property so acquired or constructed and any
accessions thereto.


“Purchaser” and “Purchasers”
have the meanings specified in the Preamble to this Agreement and include any
Person which hereafter becomes a Purchaser pursuant to the provisions of
Section 13.4.


“Qualified Equity Financing” means
(a) an Initial Public Offering in which shares of Company Common Stock are
offered and sold for the account of the Company for an aggregate initial
offering price to the public of $10,000,000 or more (a “Qualified
IPO”), or (b) a private offering and sale for cash by the
Company for its own account of shares of Company Common


 


18

















 


Stock, Company Preferred Stock that is convertible into Company Common
Stock, warrants, options or rights to subscribe for or purchase such Company
Common Stock or convertible Company Preferred Stock, or any combination of the
foregoing, if (i) the aggregate gross purchase price (before deducting
reasonable transaction expenses) of the securities so offered and sold shall be
not less than $10,000,000, and (ii) at the time such offering is completed, the
Company Common Stock is (A) registered pursuant to Section 12(b) or Section
12(g) of the Exchange Act and (B) is listed and traded on the New York Stock Exchange,
the American Stock Exchange or Nasdaq or is quoted on the OTC Bulletin Board.


“Qualified IPO” has the meaning
specified in the definition herein of “Qualified Equity Financing.”


“Records” means all of the Company’s
and its Subsidiaries’ right, title and interest in all of their respective
books, records, ledger sheets, invoices, files, tapes, cards, computer runs,
computer programs, computer files and other data and documents, including
records in any form (digital or other), and recorded in or through any tangible
medium (magnetic, lasergraphic or other) and retrievable in perceivable form,
together with all machinery and processes (including computer programming
instructions) required to read and print such records, relating to any property
or assets of the Company or its Subsidiaries.


“Redeemable  Stock”
means, with respect to any Person, any capital stock or other Equity Interest
of any class or series issued or issuable by such Person with respect to which,
pursuant to the Organizational Documents of such Person or by agreement or
otherwise, (a) such Person is or will be required to redeem or repurchase such
capital stock or Equity Interest at a fixed or determinable date or dates,
whether by operation of a sinking fund or otherwise, or upon the occurrence of
a condition not solely within the control of such Person, (b) such capital
stock or Equity Interest is redeemable at any time at the option of the holder,
or (c) the holder thereof at any time has or will have an option or right to
sell or put such capital stock or Equity Interest to such Person or any of its
Subsidiaries.


“Registration Rights Agreement” means
the Registration Rights Agreement dated as of the Initial Closing Date among
the Company and the Purchasers, in the form of Exhibit E.


“Registration
Statement” has the meaning specified in Section 9.10.


“Release” means any release,
threatened release, spill, emission, leaking, pumping, pouring, emitting,
emptying, escape, injection, deposit, disposal, discharge, dispersal, dumping,
leaching or migration of Hazardous Material in the indoor or outdoor
environment, including the movement of Hazardous Material through or in the
air, soil, surface water, ground water or property.


“Reportable Event” means any of the
events set forth in Section 4043(c) of ERISA, other than events for which the
30 day notice has been waived.


“Repurchase Notice” shall have the
meaning specified in Section 2.7.


 


19






 













 


“Requirement of Law” means any
statute, ordinance, code, treaty, directive, law, rule or regulation of any
Governmental Authority, and any Order of any court, arbitrator or Governmental
Authority.


“Responsible Officer” means, with
respect to any corporation, any of the Chief Executive Officer, the Chief
Operating Officer, the Chief Financial Officer, the President, one of the Vice
Presidents, the General Counsel or the Treasurer of such corporation, and, with
respect to any partnership, limited liability company or other type of business
entity, any individual performing comparable management functions with respect
to such entity.


“Restricted Investment” means any
Investment other than:


(a)           any Investment in Cash or Cash
Equivalents;


(b)           any Investment existing on the
Initial Closing Date;


(c)           any Investment made as part of a
Permitted Acquisition; and


(d)           any Investment by the Company in the
Equity Interests of, or loan or advance to or Contingent Obligation with
respect to the obligations of, any Wholly-owned Subsidiary of the Company, and
any Investment by any Wholly-owned Subsidiary of the Company in the Equity
Interests of, or loan or advance to or Contingent Obligation with respect to
the obligations of, any other Wholly-owned Subsidiary of the Company.


“Restricted Payment” means, with
respect to any Person,


(a)           the declaration or payment of any
dividend or other distribution on, or the incurrence of any liability to make
any other payment in respect of, Equity Interests of such Person (other than a
dividend or distribution in respect of Equity Interests that is payable solely
in Equity Interests of the same class or series of such Person);


(b)           any payment or distribution on
account of the purchase, redemption, defeasance (including in-substance or
legal defeasance) or other retirement of any Equity Interests of such Person,
or of any warrant, option or other right to subscribe for or purchase such
Equity Interests (whether directly or indirectly, and including any purchase or
other acquisition of such Equity Interests, or of any warrant, option or other
right to acquire such Equity Interests, by any Subsidiary of such Person);


(c)           any other payment or distribution by
such Person in respect of its Equity Interests, whether directly or indirectly
or through any Subsidiary of such Person;


(d)           any payment by the Company or any of
its Subsidiaries of management, consulting or similar fees to any Affiliate of
the Company, or of fees or other compensation or benefits to any officer,
director, employee, consultant or agent of the Company or any of its
Subsidiaries, except (i) payments of reasonable fees, compensation and benefits
consistent with past practice, and provision of reasonable indemnification, to
such officers, employees, consultants and agents for actual services rendered
to the


 


20

















 


Company and its Subsidiaries in the ordinary course of business, all as
determined by the Board of Directors or senior management of the Company in
good faith, (ii) payments made pursuant to and in accordance with the
provisions of the Employment Agreements, and (iii) payments to directors of the
Company and its Subsidiaries of reasonable fees for service in such capacity
consistent with past practice and reimbursement of actual out-of-pocket
expenses incurred in connection with attending meetings of the boards of
directors of the Company and its Subsidiaries and committees thereof, and
provision of reasonable indemnification to such directors, all as determined by
the Board of Directors of the Company in good faith; and


(e)           any payment of cash by the Company
pursuant to Section 2.2 of the Acquisition Agreement.


The
amount of any Restricted Payment made in the form of property shall be deemed
to be the greater of the fair market value or the net book value of such
property.


“Retiree Welfare Plan” means, at any
time, a Welfare Plan that provides for continuing coverage or benefits for any
participant or any beneficiary of a participant after such participant’s
termination of employment, other than continuation coverage provided pursuant
to Section 4980B of the Code and at the sole expense of the participant or
the beneficiary of the participant.


“S&P” means Standard & Poor’s, a division
of The McGraw-Hill Companies, Inc., or any successor that is a nationally
recognized statistical rating organization.


“Sale
and Leaseback Transaction” means, with respect to the Company or
any of its Subsidiaries, any arrangement, directly or indirectly, with any
Person whereby the Company or such Subsidiary shall sell or transfer any
property used or useful in its business, whether now owned or hereafter
acquired, and thereafter rent or lease such property or other property that it
intends to use for substantially the same purpose or purposes as the property
being sold or transferred.


“Sale
of the Company” means (i) a sale or other Disposition (including
a Disposition by means of a merger or consolidation of the Company with or into
another Person or Persons) of outstanding shares of Company Common Stock or
Call Securities constituting or representing rights to acquire 50% or more of
the shares of Company Common Stock then Outstanding on a Fully Diluted Basis,
(ii) any transaction or series of transactions described in Rule 145(a) of the
SEC pursuant to or in connection with which the Company shall issue a number of
shares of Company Common Stock or Call Securities which constitute or represent
rights to acquire in the aggregate a number of shares of Company Common stock
equal to or greater than the number of such shares that were Outstanding on a
Fully Diluted Basis immediately prior to such transaction or series of
transactions, (iii) any other transaction or series of transactions as a result
of which Persons who were not holders of Company Common Stock or Call
Securities immediately prior to such transaction or series of transactions
shall acquire shares of Company Common Stock or Call Securities constituting or
representing rights to acquire, immediately following such transaction or
series of transactions, 50% of more of the shares Company Common Stock


 


21

















 


Outstanding on a
Fully Diluted Basis, (iv) a sale or other Disposition of all or substantially
all of the assets of the Company or of the capital stock or assets of any of
its Subsidiaries (other than the capital stock or assets of Subsidiaries
representing in the aggregate less than 50% of the total consolidated assets
and less than 50% of the Consolidated Revenues of the Company and its Subsidiaries),
and (v) a voluntary or involuntary liquidation, dissolution or winding up of
the Company (including any transaction or event that is deemed to be a
liquidation, dissolution or winding up of the Company pursuant to any provision
of the Certificate of Incorporation of the Company).


“SALLC”
means Smart Acquisition, LLC, a Nevada limited liability company.


“SBA”
has the meaning specified in Section 6.2(a).


“SBIC
Investors” means Seaview and each other Purchaser which is a
licensed Small Business Investment Company.


“SBN”
has the meaning specified in Section 4.8(a).


“SDI”
means Smart Development Corp., a Nevada corporation, and, following the merger
of such corporation with and into SALLC pursuant to the terms of the
Acquisition Agreement, the surviving entity of such merger.


“SDIAC”
means SDI Acquisition Corp., a Nevada corporation.


“SDI
Group Financials” has the meaning specified in Section 4.8(a).


“SDI Stockholder” means Johan Hendrik
Smit Duyzentkunst, an individual.


“Seaview” means Seaview Mezzanine
Fund LP, a Delaware limited partnership.


“Seaview Initial Warrants” has the
meaning specified in Section 2.2.


“Seaview Preferred Shares” has the
meaning specified in Section 2.2.


“SEC” means the United States
Securities and Exchange Commission and any successor agency, authority,
commission or Governmental Authority.


“Second Closing Date” has the meaning
specified in Section 2.3(b).


“Securities Account” means, with
respect to any Person, any securities account maintained by such Person with
any bank, securities broker or dealer, or other financial intermediary, in
which such bank, broker, dealer or financial intermediary either directly or
through a nominee or depository holds investment securities for the account of
such Person.


“Securities Act” means as of any date
the Securities Act of 1933, as amended, or any similar federal statute then in
effect, and a reference to a particular section thereof shall include a
reference to the comparable section, if any, of any such similar federal
statute.


 


22

















 


“Security Agreement” has the meaning
specified in the Note Purchase Agreement.


“Security Documents” has the meaning
specified in the Note Purchase Agreement.


“Series A Preferred” has the meaning
specified in the Recitals to this Agreement.


“Software” has the meaning specified
in Section 4.21(a).


“Solvent” means, as to any Person at
any time, that (a) the fair value of the property of such Person is greater
than the amount of such Person’s liabilities (including disputed, contingent
and unliquidated liabilities) as such value is established and liabilities
evaluated for purposes of Section 101(32)(A) of the Bankruptcy Code and, in the
alternative, for purposes of the Uniform Fraudulent Transfer Act; (b) the
present fair saleable value of the property of such Person is not less than the
amount that will be required to pay the probable liability of such Person on
its debts as they become absolute and matured; (c) such Person is able to
realize upon its property and pay its debts and other liabilities (including
disputed, contingent and unliquidated liabilities) as they mature in the normal
course of business; (d) such Person does not intend to, and does not believe
that it will, incur debts or liabilities beyond such Person’s ability to pay as
such debts and liabilities mature; and (e) such Person is not engaged in
business or a transaction, and is not about to engage in business or a
transaction, for which such Person’s property would constitute unreasonably
small capital.


“Special Documents” means the
Acquisition Agreement, the Employment Agreements and the Registration Rights
Agreement.


“Subsidiary” of any Person means (a)
any corporation with respect to which more than 50% of the issued and
outstanding Voting Equity Interests of such corporation (irrespective of
whether at the time Equity Interests of any other class or classes of such
Person shall or might have voting power upon the occurrence of any contingency)
is at the time directly or indirectly owned or controlled by such Person, by
such Person and one or more of its other Subsidiaries or by one or more of such
Person’s other Subsidiaries, or (b) any partnership or limited liability
company in which such Person and/or one or more Subsidiaries of such Person
shall have an interest (whether in the form of voting or participation in
profits or capital contribution) of more than 50% or of which any such Person
is a general partner or may exercise the powers of a general partner.


“Subsidiary Guarantee” means a
guarantee in the form of Exhibit C
to the Note Purchase Agreement executed by each Subsidiary of the Company on
the Initial Closing Date, as from time to time amended, modified or
supplemented in accordance with its terms.


“Swap Contracts” means (a) any and
all rate swap transactions, basis swaps, credit derivative transactions,
forward rate transactions, commodity swaps, commodity options, forward
commodity contracts, equity or equity index swaps or options, bond or bond
price or bond index swaps or options or forward bond or forward bond price or
forward bond index transactions, interest rate options, forward foreign
exchange transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate swap


 


23

















 


transactions, currency options, spot contracts, or any other similar
transactions or any combination of the foregoing (including any options to
enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and all
transactions of any kind, and the related confirmations, which are subject to
the terms and conditions of, or governed by, any form of master agreement
published by the International Swaps and Derivatives Association, Inc., any
International Foreign Exchange Master Agreement, or any similar master
agreement, including any such obligations or liabilities under any such master
agreement or any schedule thereto.


“Swap Termination Value”
means, in respect of any one or more Swap Contracts, after taking into account
the effect of any legally enforceable netting agreement relating to such Swap
Contracts, (a) for any date on or after the date such Swap Contracts have been
closed out and termination value(s) determined in accordance therewith, such
termination value(s) and (b) for any date prior to the date referenced in
clause (a), the amount(s) determined as the mark-to-market value(s) for such
Swap Contracts, as determined based upon one or more mid-market or other
readily available quotations provided by any recognized dealer in such Swap
Contracts.


“Synthetic Lease”
means any synthetic lease, tax retention operating lease, off-balance sheet
loan or similar off-balance sheet financing arrangement whereby the arrangement
is considered borrowed money indebtedness for tax purposes but is classified as
an operating lease or does not otherwise appear on a balance sheet under GAAP.


“TICC” means Technology Investment
Capital Corp., a Maryland corporation.


“TICC Initial Warrants” has the
meaning specified in Section 2.2.


“TICC Preferred Shares” has the
meaning specified in Section 2.2.


“Trademark” means, with respect to
any Person, all of the following in which such Person now holds or hereafter
creates or acquires any interest: 
(a) all trademarks, trade names, corporate names, business names,
trade styles, service marks, logos, domain names, URL’s, other source or
business identifiers, prints and labels on which any of the foregoing have
appeared or appear, designs and general intangibles of like nature (whether
registered or unregistered), all registrations and recordings thereof, and all
applications in connection therewith, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any state or territory thereof, or any
other country or any political subdivision thereof; (b) all reissues,
extensions and renewals thereof; (c) all goodwill associated with or
symbolized by any of the foregoing; and (d) all income, royalties, damages and
payments now or hereafter due and/or payable under or with respect to any
Trademark, including damages and payments for past, present and future
infringements of any of the foregoing and the right to sue for past, present
and future infringements of any Trademark.


“Trademark License” means, with
respect to any Person, rights under any written agreement now owned or
hereafter acquired by such Person granting any right to use any Trademark,
including any sublicense thereof.


 


24

















 


“Trademark Security Agreement” has
the meaning specified in the Note Purchase Agreement.


“Transaction Documents” means this
Agreement, the Warrants, the Registration Rights Agreement and any other
instruments or documents now or hereafter executed and delivered pursuant to or
in connection with this Agreement, but excluding the Note Documents.


“Unfunded Pension Liabilities” means,
with respect to any Pension Plan on any date of determination, the
excess (if any) of that Pension Plan’s benefit liabilities over the
current value of that Pension Plan’s assets calculated in accordance
with the definition of “amount of unfunded benefit liabilities” as such
term is described in Section 4001(a)(18) of ERISA and using, for purposes of
such calculation, the valuation rules that apply to Pension
Plans placed into trusteeship by the PBGC.


“Uniform Commercial Code” has the
meaning specified in the Note Purchase Agreement.


“Voting Equity Interest” means, with
respect to any Person, (a) in the case of any Person which is a corporation,
any share of capital stock of such Person having the right to vote (other than
solely upon the occurrence of a contingency) with respect to the election of
members of the board of directors of such corporation, or (b) in the case of a
Person which is a partnership, limited liability company, or other entity
(other than a corporation), any Equity Interest of such Person having the right
to vote for or consent to (other than solely upon the occurrence of a
contingency) the election or appointment of directors or managers (or persons
performing similar functions) of such Person, or with respect to which the
holder of such Equity Interest is entitled to manage (alone or together with
holders of other such Equity Interests) the operations of such Person.


“Warrants” has the meaning specified
in Section 2.1.


“Welfare Plan” means a Plan described
in Section 3(1) of ERISA.


“Wholly-owned Subsidiary” means, with
respect to any Person, any Subsidiary of such Person all of the Equity
Interests (and all rights and options to purchase such Equity Interests) of
which, other than directors’ qualifying shares, are owned, beneficially and of
record, by such Person, or by such Person and one or more other Wholly-owned
Subsidiaries of such Person, or by one or more other Wholly-owned Subsidiaries
of such Person.


“Withdrawal Liabilities” means, as of
any date of determination, the aggregate amount of the liabilities, if any,
pursuant to Section 4201 of ERISA if the Company and its ERISA Affiliates made
a complete withdrawal from all Multiemployer Plans and any increase in
contributions pursuant to Section 4243 of ERISA.


“Works” has the meaning specified in
Section 4.21(c).


 


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Section 1.2.            Accounting
Principles.


(a)           Unless the context
otherwise clearly requires, all accounting terms not expressly defined herein
shall be construed, and all financial computations required under this Agreement
shall be made, in accordance with GAAP, consistently applied.


(b)           References herein to
“fiscal year”, “fiscal quarter” and “fiscal month” refer to such fiscal periods
of the Company, which shall not be changed without the prior written approval
of the Majority Purchasers.


(c)           If at any time after
the date hereof any change in GAAP is occasioned by promulgation of rules,
regulations, pronouncements or opinions by or is otherwise required by the
Financial Accounting Standards Board or the American Institute of Certified
Public Accountants (or successors thereto or agencies with similar functions),
and such change would affect the calculation of any financial ratio or other
financial requirement set forth in this Agreement or any other Transaction
Document, then upon the request of either the Company or the Majority
Purchasers, the Company and the Majority Purchasers shall negotiate in good
faith to amend such ratio or requirement so as to preserve the original intent
thereof in light of such change in GAAP; provided that, until so
amended, (i) such financial ratio or requirement shall continue to be computed
in accordance with GAAP as in effect immediately prior to such change therein,
and (ii) the Company shall provide to each of the Purchasers financial statements
and other documents required under this Agreement or as reasonably requested
hereunder setting forth a reconciliation between calculations of such ratio or
requirement made before and after giving effect to such change in GAAP.


Section 1.3.            Rules
of Construction.  References in this
Agreement to “Articles”, “Sections”, “Annexes”, “Exhibits” or “Schedules” shall
be to Articles, Sections, Annexes, Exhibits or Schedules of or to this
Agreement unless otherwise specifically provided.  Singular words shall connote the plural as
well as the singular, and vice versa (except as otherwise indicated), as may be
appropriate.  “Include”, “includes” and “including”
shall be deemed to be followed by “without limitation”.  Except as otherwise specified herein, references
to any Person include the successors and assigns of such Person.  Unless otherwise specified, references “from”
any date mean “from and including,” and references “to” any date mean “to but
not including.”  References to any
statute or act shall include all related current regulations and all amendments
and any successor statutes, acts and regulations.  The words “herein”, “hereof” and “hereunder”
and other words of similar import refer to this Agreement as a whole and not to
any particular section or subsection. 
Reference herein to any section or subsection refers to such section or
subsection (as the case may be) of this Agreement.  Each covenant or agreement contained in this
Agreement shall be construed (absent express provision to the contrary) as
being independent of each other covenant or agreement contained herein, so that
compliance with any one covenant or agreement shall not (absent such an express
contrary provision) be deemed to excuse compliance with any other covenant or
agreement.  Where any provision of this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether such action
is taken directly or indirectly by such Person. 
References herein to the “knowledge” of any Person that is not an
individual shall be deemed to refer to knowledge by a Responsible Officer of
such Person.


 


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Section 2.               Issuance
and Sale of Preferred Shares and Warrants.


Section 2.1.            Authorization
of Preferred Shares and Warrants. The Company has duly authorized the
issuance and sale of (a) 25,000 shares of 
Series A Preferred and (b) its Warrants, initially exercisable to
purchase an aggregate of 1,708,750 shares of authorized but unissued Company
Common Stock (subject to adjustment as provided in the Warrants), at an initial
exercise price of $2.00 per share (subject to adjustment as provided in the
Warrants), to be exercisable in whole or in part at any time and from time to time
during the period commencing on the date of issuance thereof and ending on the
fifth (5th) consecutive anniversary of the Initial Closing Date, and
to be substantially in the form of Exhibit B
hereto attached (all such Warrants issued pursuant to this Agreement, or
delivered in substitution or exchange for any thereof, being collectively
called the “Warrants” and each
individually a “Warrant”).


Section 2.2.            Sale
and Purchase of Preferred Shares and Warrants.  On the Initial Closing Date, subject to satisfaction
or waiver by TICC in writing of the conditions set forth in Section 6.1, the
Company hereby agrees to issue and sell to TICC, and TICC hereby agrees to
purchase, for an aggregate purchase price of $20,000,000, (i) an aggregate of
20,000 shares of Series A Preferred (the “TICC Preferred Shares”),
and (ii) Warrants initially exercisable to purchase an aggregate of 1,167,000
shares of Company Common Stock (the “TICC Initial Warrants”).  On the Second Closing Date, subject to
satisfaction or waiver by Seaview in writing of the conditions set forth in
Section 6.2, the Company hereby agrees to issue and sell to Seaview, and
Seaview hereby agrees to purchase, for an aggregate purchase price of
$5,000,000, (i) an aggregate of 5,000 shares of Series A Preferred (the “Seaview Preferred Shares”), and (ii)
Warrants (the “Seaview Initial Warrants”)
initially exercisable to purchase an aggregate number of shares of Company
Common Stock equal to 25% of the aggregate number of such shares for which the
TICC Initial Warrants are then exercisable (after giving effect to any
adjustments thereto that may have been required during the period since the
Initial Closing Date), at the same exercise price per share that is then
applicable to the TICC Initial Warrants (after giving effect to any such
adjustments).


Section 2.3.            Closing.


(a)           Initial Closing.  The sale and delivery of the TICC Preferred
Shares and TICC Warrants to be issued to TICC hereunder shall take place at the
offices of Nixon Peabody LLP, 437 Madison Avenue, New York, New York 10022 at
10:00 a.m., New York time on September 16, 2005 (or such other time and place
as the parties shall agree) (herein called the “Initial
Closing Date”).  On the
Initial Closing Date, subject to the satisfaction or waiver by TICC in writing
of the conditions specified in Section 6.1, the Company will deliver to TICC
the TICC Preferred Shares and the TICC Initial Warrants against payment of the
purchase price thereof to the Company in immediately available funds at such
bank account or accounts as the Company shall specify by written notice to TICC
at least two Business Days prior to the Initial Closing Date.  In addition, the fees payable by the Company
on the Initial Closing Date pursuant to Section 2.4, and the expenses of TICC
and Seaview incurred through the Initial Closing Date and required to be
reimbursed by the Company pursuant to Section 13.2 hereof (including the fees
and disbursements of Nixon Peabody LLP and Breslow & Walker, LLP) shall be
paid in full by the Company on the Initial Closing Date.


 


27





















 


(b)           Second Closing.  The sale and delivery of the Seaview
Preferred Shares and Seaview Warrants to be issued to Seaview hereunder on the
Second Closing Date shall take place at the offices of Nixon Peabody LLP, 437
Madison Avenue, New York, New York 10022 at 10:00 a.m., New York time on such
date, prior to the Exchange Date and not later than 60 days after the Initial
Closing Date, as the conditions set forth in 6.2 hereof shall be satisfied or
waived in writing by Seaview, which date shall be specified by Seaview by
written notice delivered to TICC and the Company not less than three (3)
Business Days prior thereto (herein called the “Second
Closing Date”).  On the
Second Closing Date, subject to the satisfaction or waiver by Seaview in
writing of the conditions specified in Section 6.2, the Company will deliver to
Seaview the Seaview Preferred Shares and the Seaview Initial Warrants against
payment of the purchase price thereof to the Company in immediately available
funds at such bank account or accounts as the Company shall specify by written
notice to Seaview at least two Business Days prior to the Second Closing
Date.  If Seaview shall not purchase any
Preferred Shares hereunder prior to the Exchange Date and in any event within
60 days after the Initial Closing Date, then Seaview’s right to purchase
Preferred Shares hereunder shall terminate.


(c)           Repurchase of
Certain TICC Preferred Shares and TICC Initial Warrants.  TICC and the Company hereby agree that, on
the Second Closing Date immediately following the purchase of the Seaview
Preferred Shares and Seaview Warrants by Seaview, the Company shall repurchase
from TICC 5,000 of the TICC Preferred Shares, together with TICC Initial Warrants
exercisable to purchase an aggregate number of shares of Company Common Stock
equal to the aggregate number thereof for which the Seaview Initial Warrants
are initially exercisable, for a purchase price equal to the sum of $5,000,000 plus
the aggregate amount of all unpaid dividends accrued in respect of such
repurchased shares from the Initial Closing Date to the Second Closing Date,
payable in cash on the Second Closing Date in immediately available funds to
such account as TICC shall specify to the Company in writing.  The TICC Preferred Shares and TICC Initial
Warrants so repurchased shall be cancelled and shall not be reissued.


Section 2.4.            Closing
Fees.  On the Initial Closing Date,
the Company shall pay to TICC a fully earned and non-refundable fee in an
amount equal to $300,000. On the Second Closing Date, the Company shall pay to
Seaview a fully earned and non-refundable fee in an amount equal to $100,000; provided
that, if Seaview shall not purchase Preferred Shares hereunder within 60 days
after the Initial Closing Date, and shall not purchase Notes within such period
pursuant to Section 2.2(d) of the Note Purchase Agreement, then the Company
shall pay to TICC, on the 61st day following the Initial Closing
Date (or, if such day is not a Business Day, on the next succeeding Business
Day), an additional fully earned and non-refundable closing fee in the amount
of $100,000.


Section 2.5.            Right
to Exchange Preferred Shares for Notes. 


(a)           Exchange Option.  The Purchasers shall have an option (the “Exchange Option”) exercisable by the
Majority Purchasers at any time to exchange any or all of the outstanding
Preferred Shares owned by such Purchasers for Notes, at the rate of $1,000
principal amount of Notes for each Preferred Share.  The Exchange Option may be exercised upon
written notice thereof given to the Company by the Majority Purchasers, stating
the date on which such exchange of Preferred Shares for Notes shall occur (the “Exchange Date”), which date shall be


 


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not
less than two (2) Business Days nor more than ten (10) Business Days after the
date of such notice.  Notwithstanding the
foregoing, the Exchange Option may be exercised in any event by any Purchaser
upon written notice to the Company and the other Purchasers at any time after
the earlier of (i) ten (10) Business Days after the date on which TICC shall
receive a license from the California Department of Corporations pursuant to
the California Finance Lenders Law and (ii) May 3, 2006.


(b)           Exchange of Notes
for Shares.  The issuance, sale and
delivery of Notes in exchange for Preferred Shares shall be effected in
accordance with the provisions of Section 2.2(b) of the Note Purchase
Agreement.


(c)           Payment of
Remaining Accumulated Dividends.  Not
later than 2:00 p.m. (New York City time) on the Exchange Date, the Company
shall pay to each Purchaser which is exchanging Preferred Shares on such
Exchange Date in immediately available funds the amount of all unpaid dividends
accrued on the Preferred Shares being exchanged by such Purchaser to but not
including such Exchange Date (whether or not earned or declared).


Section 2.6.            Additional
Warrants.  If, on or prior to the
first anniversary of the Initial Closing Date, the Company shall not have
completed a Qualified IPO, then on such date the Company shall execute, issue
and deliver to each of the Purchasers, pro rata in accordance with the
respective amounts of the aggregate Liquidation Price of Preferred Shares held
by them and/or the aggregate principal amount of Notes held by them, without
the payment of any additional consideration by the Purchasers, additional
Warrants (the “Additional Warrants”)
initially exercisable to purchase an aggregate of 250,000 shares of Company
Common Stock (subject to adjustment as therein provided) at an initial exercise
price of $2.00 per share (subject to adjustment as therein provided); provided
that if after the Initial Closing Date and on or prior to such first
anniversary date, any event shall have occurred that under the terms of the
Additional Warrants would have required an adjustment in the number of shares
of Company Common Stock issuable thereunder or in the exercise price thereof,
or both, then such initial aggregate number of shares and/or initial exercise
price of the Additional Warrants shall be adjusted on the date of issuance
thereof in such manner as would have been the case if the Additional Warrants
had been issued on the Initial Closing Date and had been outstanding at all
times thereafter to and including such first anniversary date.  The rights of the Purchasers and the
obligations of the Company under this Section 2.6 shall survive the redemption
or repurchase of the Preferred Shares, the exercise of the Exchange Option, and
the enforcement of any provision hereof or thereof, and shall also apply to
Seaview with respect to any Notes purchased by it pursuant to Section 2.2(d) of
the Note Purchase Agreement.


Section 2.7.            Conditional
Right to Repurchase Warrants.  If, at
any time while any Warrants are outstanding and unexercised, the Company shall
complete a Qualified IPO and the initial offering price to the public per share
of the Company Common Stock issued and sold in such Qualified IPO shall be
equal to or greater than $5.00 (subject to adjustment for stock splits, stock
dividends and the like), then, upon written notice (the “Repurchase
Notice”) given by the Company to each holder of such Warrants
not less than 30 days prior to the date of completion of such Qualified IPO
(which notice shall refer to this Section 2.7 and shall state the date on which
such Qualified IPO is expected to be completed and the anticipated initial
offering price to the 


 


29





















 


public
of the shares of Company Common Stock expected to be offered and sold therein),
the Company shall have the right to repurchase from each such holder, at any
time within 30 days after the date such Qualified IPO is completed, all
unexercised Warrants then held by such holders at a purchase price equal to the
product of $.01 multiplied by the number of shares of Company Common Stock for
which such Warrants can then be exercised; provided, however,
that at all times on or prior to the date of completion of such Qualified IPO,
each such holder shall have the right to exercise any or all of the Warrants
held by it in accordance with their terms, and the right of repurchase set
forth herein shall not apply to any Warrants so exercised.  The rights and obligations of the Company and
such holders under this Section 2.7 shall survive the redemption or repurchase
of the Preferred Shares, the exercise of the Exchange Option, and the
enforcement of any provision hereof or thereof. 
At least two (2) Business Days prior to date of completion of such
Qualified IPO, the Company shall advise each such holder of the actual initial
offering price to the public of the shares of Company Common Stock be offered
and sold therein and the aggregate number of shares of Company Common  Stock to be offered and sold for the account
of the Company therein.


Section 3.               Redemption
and Repurchase of Preferred Shares.  


Section 3.1.            Mandatory
Redemption of Preferred Shares in Certain Events.


(a)           The Preferred Shares
shall be redeemed by the Company in full on the Maturity Date in accordance
with the terms thereof set forth in the Company Charter, for their Liquidation
Price of $1,000 per Preferred Share, together with all unpaid dividends accrued
thereon to the Maturity Date.


(b)           Upon receipt by the
Company or its Subsidiaries of any Net Cash Proceeds resulting from:


(i)            any
Initial Public Offering or other public or private offering, issuance and sale
of Equity Interests of the Company, other than Net Cash Proceeds received in
connection with (A) a Qualified Equity Financing completed on or prior to June
16, 2006, (B) issuances of Equity Interests of the Company as full or partial
consideration for or to finance a Permitted Acquisition, (C) any issuance
relating solely to employee benefit plans or solely to a transaction described
in Rule 145(a) of the SEC), and (D) the sale of the Seaview Preferred Shares to
Seaview,


(ii)           the
issuance and sale of debt securities of the Company or any of its Subsidiaries
or of any other incurrence of Indebtedness by the Company and its Subsidiaries
(other than the issuance and sale of the Notes and the incurrence of
Indebtedness pursuant to the Note Purchase Agreement),


(iii)          a
Sale of the Company, or any other sale or other Disposition of assets or
property of the Company or its Subsidiaries, other than in the ordinary course
of business, or


 


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(iv)          subject
to the provisions of the last sentence of this subsection (b), the receipt of
payment due from any policy of property or casualty insurance in respect of any
loss or damage to Collateral or other assets or property of the Company or its
Subsidiaries covered by such policy,


the
Company shall (A) deliver to each of the Purchasers an Officer’s Certificate
setting forth the amount of such Net Cash Proceeds and containing a calculation
in reasonable detail of such amount and a description of the transaction giving
rise thereto, and (B) redeem and repurchase such number of Preferred Shares
from the Purchasers (pro rata in accordance with the respective numbers of
Preferred Shares at the time held by each, and in each case rounded down to the
nearest whole share), at a purchase price equal to the sum of $1,000 per
Preferred Share plus all unpaid dividends accrued thereon to the date of such
payment, in such manner that the aggregate purchase price of the Preferred
Shares so redeemed shall be equal (to the nearest whole share) to the amount of
such Net Cash Proceeds; provided that if both Preferred Shares and Notes
are outstanding, such Net Cash Proceeds shall be shared among the respective
holders thereof pro rata in accordance with the aggregate outstanding amounts
of the Liquidation Price and/or principal amounts thereof.  No such repurchase or redemption need be made
out of the insurance proceeds referred to in clause (iv) above, and such
proceeds may be retained by the Company or its Subsidiaries, in any case where
(x) the amount of such insurance proceeds does not exceed $100,000 and (y) no
Non-Compliance or Event of Non-Compliance shall have occurred and be
continuing, provided that such proceeds shall be used to repair or
replace the property so damaged or destroyed.


Section 3.2.            Optional
Repurchase of Preferred Shares.  Upon
notice given as provided in Section 3.3, the Company, at its option, may at any
time or from time to time repurchase any or all of the Preferred Shares (in an
aggregate amount of 100 Preferred Shares or any greater amount which is an even
multiple of 100, or any lesser amount that shall constitute the remaining
number of outstanding Preferred Shares), pro rata from each of the Purchasers
in accordance with the respective aggregate numbers of Preferred Shares at the
time held by them, at a purchase price equal to $1,000 per share (plus, in
respect of any such repurchase made on or prior to the first anniversary of the
Initial Closing Date, a premium of $50 per share, except that no such premium
shall be payable if such repurchase is made out of the Net Cash Proceeds of a
substantially concurrent Sale of the Company or Qualified Equity Financing),
plus all unpaid dividends accrued on the Preferred Shares being repurchased to
the date of such repurchase.


Section 3.3.            Notice
of Optional Repurchase.  The Company
shall exercise its option to repurchase Preferred Shares pursuant to Section
3.2 by giving written notice thereof to each of the Purchasers not less than 30
nor more than 60 days prior to the date fixed for such repurchase.  Such notice shall specify (a) the date fixed
for such repurchase, and (b) the purchase price therefor to be paid on such
date, including the amount of accrued dividends to be paid on such date.  Notice of repurchase having been so given,
the Preferred Shares to be repurchased as specified in such notice shall be
repurchased on the specified repurchase date in accordance with the foregoing
provisions of this Section 3.


Section 3.4.            Manner,
Time and Allocation of Payments. 
Each amount payable hereunder or upon redemption or repurchase of
Preferred Shares, and all payments of dividends


 


31





















 


on the Preferred Shares, shall be paid in Dollars, by wire transfer or
other immediately available funds, without deduction, set-off or
counterclaim, to the Purchasers at such accounts and banks as shall be
designated by the respective Purchasers from time to time by written notice to
the Company, not later than 2:00 p.m. (New York City time) on the day on which
such amount is due hereunder.  Any amount
received later than 2:00 p.m. (New York City time) on any day shall be deemed
received on the next succeeding Business Day.


Section 4.               Representations
and Warranties of the Company. The Company represents and warrants to the
Purchasers that, as of the Initial Closing Date after giving effect to the
Acquisition Transactions and the transactions contemplated by this Agreement:


Section 4.1.            Corporate
Existence and Power.  Each of the
Company and its Subsidiaries (a) is a corporation or (as the case may be) a
limited liability company duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation or organization,
(b) is duly qualified to do business in each additional jurisdiction where the
failure to so qualify would have a Material Adverse Effect, and (c) has all
requisite power (corporate or limited liability company, and other) to own its
respective properties and to carry on its respective businesses as now being
conducted and as proposed to be conducted, and to execute, deliver and perform
its Obligations under the Transaction Documents to which it is respectively a
party.


Section 4.2.            Corporate
Authority.  The execution, delivery
and performance by the Company of this Agreement and the other Transaction
Documents to which the Company is a party have been duly authorized by all
necessary corporate action on the part of the Board of Directors and
stockholders of the Company.  The
execution, delivery and performance by each Subsidiary of the Company of the
Transaction Documents to which such Subsidiary is a party have been duly
authorized by all necessary corporate or (as the case may be) limited liability
company action on the part of such Subsidiary.


Section 4.3.            Binding
Effect.  This Agreement and each of
the other Transaction Documents to which the Company is a party have been duly
executed and delivered by the Company and are the legal, valid and binding
obligations of the Company, in each case enforceable against the Company in
accordance with their respective terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency and other
similar laws affecting creditors’ rights generally and by general principles of
equity.  Each of the Transaction
Documents to which any Subsidiary of the Company is a party has been duly
executed and delivered by such Subsidiary and is the legal, valid and binding
obligation of such Subsidiary, enforceable against such Subsidiary in
accordance with its terms, except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency and other similar laws affecting
creditors’ rights generally and by general principles of equity.


Section 4.4.            Liens
and Security Interests.   On the
Exchange Date, the Liens and security interests created pursuant to the
Security Documents will constitute legal, valid and perfected first priority
Liens and security interests in all of the Collateral purported to be covered
thereby, subject to no other Liens except Permitted Liens.


 


32





















 


Section 4.5.            No
Conflicts with Agreements, Etc. 
Neither the execution and delivery by the Company of this Agreement or
any of the other Transaction Documents to which it is a party, nor the
execution and delivery by any Subsidiary of the Company of any of the Transaction
Documents to which it is a party, nor the offering, issuance or sale of the
Preferred Shares nor the fulfillment of or compliance with the terms and
provisions hereof or thereof, will conflict with, or result in a breach or
violation of the terms, conditions or provisions of, or constitute a default
under, or result in the creation of any Lien (other than Liens created pursuant
to the Security Documents) on any properties or assets of the Company or its
Subsidiaries pursuant to, the Organizational Documents of the Company or any of
its Subsidiaries, or any contract, agreement, mortgage, indenture, lease or
instrument to which any of them is a party or by which any of them is bound or
to which any of them or any of their respective assets are subject, or any
Requirement of Law to which any of them or any of their respective assets are
subject.


Section 4.6.            Consents,
Etc.  No consent, approval or
authorization of or declaration, registration or filing with any Governmental
Authority or any nongovernmental Person, including any creditor or stockholder
of the Company or any of its Subsidiaries, is required in connection with the
execution or delivery by the Company of this Agreement or the other Transaction
Documents to which the Company is a party, or in connection with the execution
or delivery by any Subsidiary of the Company of the Transaction Documents to
which it is respectively a party, or the performance by the Company or such
Subsidiary of its obligations hereunder and thereunder, or as a condition to
the legality, validity or enforceability of this Agreement or any other
Transaction Document, except for filing of financing statements required in
order to perfect the Liens of the Collateral Agent in the Collateral or to
exercise remedies thereunder, and except for such consents, approvals,
authorizations, declarations, registrations or filings as are listed in Schedule 4.6, all of which have been or will on or prior to
the Initial Closing Date be obtained and are or will then be in full force and
effect.


Section 4.7.            Equity
Interests.


(a)           The authorized
Equity Interests of the Company consist of 100,000,000 shares of Company Common
Stock and 10,000,000 shares of Company Preferred Stock, including 25,000 shares
of Series A Preferred Stock.  Set forth in
Schedule 4.7 is a true and complete
list of the holders of five percent (5%) or more of the outstanding shares of
Company Common Stock and of all of the Company Preferred Stock, and of all
outstanding Options, Convertible Securities and other Call Securities (each as
defined below), together with the number of such shares of each class, or
amount of Options, Convertible Securities or other Call Securities, held by
each such holder.  All of the issued and
outstanding shares of Company Common Stock and Company Preferred Stock are
validly issued, fully paid and non-assessable.  Except as set forth in Schedule 4.7
and except for the Warrants, there are no outstanding (i) options, warrants or
rights to subscribe for or purchase, or agreements (contingent or otherwise)
providing for the issuance of, or calls, commitments or claims of any character
relating to, any shares of Company Common Stock or Company Preferred Stock (“Options”), (ii)
securities (including debt securities and equity securities) that are or by
their terms may become convertible into or exchangeable for any shares of
Company Common Stock or Company Preferred Stock (“Convertible Securities”), or (iii)
options, warrants or rights to subscribe for or purchase, or agreements
(contingent or otherwise) providing for the issuance of, or calls, commitments
or claims of any character 


 


33





















 


relating
to, any Convertible Securities (together with Options and Convertible
Securities, “Call
Securities”).  Except as
set forth in Schedule 4.7, none of
the authorized Equity Interests of the Company constitutes Redeemable Stock,
and the Company has no obligation, whether mandatory or at the option of any
other Person, at any time to redeem or repurchase any shares of Company Common
Stock or Company Preferred Stock or any Call Securities, pursuant to the terms
of the Company’s Organizational Documents or by contract or otherwise.


(b)           The shares of
Company Common Stock issuable upon exercise of the Warrants have been duly and
validly reserved for issuance upon such exercise and, when issued and delivered
against payment therefor as provided therein, will be duly authorized, validly
issued, fully paid and non-assessable and subject to no Liens in respect of the
issuance thereof.


Section 4.8.            Existing
Financial Statements; Projections; No Material Change. 


(a)           The Company has
delivered to the Purchasers true and complete copies of (i) the audited
consolidated balance sheets of the Company and its Subsidiaries as of September
30, 2003 and 2004, and the related audited consolidated statements of income,
retained earnings and cash flows for each of the fiscal years then ended,
together with the notes thereto and the reports thereon of the Accountants (the
“Audited Financial Statements”), (ii)
the unaudited consolidated balance sheets of the Company and its Subsidiaries
as of June 30, 2005, and the related unaudited consolidated statements of
income, retained earnings and cash flows for the nine-month then ended (the “Interim Financial Statements”), and
(iii) the unaudited combined balance sheets of SDI and its Affiliate SBN
Peripherals, Inc. (“SBN”) as of October 31, 2003
and 2004 and as at June 30, 2005 and the related unaudited combined statements
of income of SDI and SBN for each of the two fiscal years ended October 31,
2004 and the twelve months ended June 30, 2005 (collectively, the “SDI Group Financials”; the Audited
Financial Statements, the Interim Financial Statements and the SDI Group
Financials are sometimes hereinafter collectively referred to as the “Existing Financial Statements”).  The Existing Financial Statements have been
prepared in accordance with GAAP (except as noted thereon) consistently applied
throughout the periods involved, and present fairly, in all material respects,
the consolidated financial position and related consolidated income, retained
earnings and cash flows of the Company and its Subsidiaries and the combined
financial position and income of SDI and SBN (the “SDI
Group”) as at each of the dates and for each of the periods
covered thereby, subject, in the case of the Interim Financial Statements and
the SDI Group Financials, to non-material year-end audit adjustments and
absence of the notes required by GAAP.


(b)           As of the date of
each of the balance sheets included in the Existing Financial Statements,
neither the Company nor any of its Subsidiaries, nor the SDI Group had any
Indebtedness or liability, absolute or contingent, liquidated or unliquidated,
except Indebtedness and liabilities reflected or reserved against on such respective
balance sheets or described in the notes thereto.


(c)           The Projections, a true and complete copy of which is
attached hereto as Schedule 4.8(c),
are reasonable in light of the historical operations and results of the
Predecessor Company, represent management’s good faith best estimate of the
future operating performance of the Company and its Subsidiaries and were
prepared on an accounting basis consistent with 


 


34





















 


the Audited Financial Statements.
The Projections reflect all adjustments recommended by the Accountants.


(d)           The pro forma
balance sheet of the Company as of June 30, 2005, a copy of which is attached
hereto as Schedule 4.8(d),
presents fairly in all material respects, in conformity with GAAP applied on a
basis consistent with the Audited Financial Statements, the consolidated
financial position of the Company as of such date, as adjusted to give effect
(as if such events had occurred on such date) to (i) the Acquisition
Transactions, (ii) the transactions contemplated by the Stock Purchase
Agreement, and (iii) the payment of all legal, accounting and other fees and
expenses related thereto to the extent known at the time of the preparation of
such balance sheet.


(e)           Except as set forth in Schedule
4.8(e), there has not been, since September 30, 2004:


(i)            any change in the business,
financial condition, properties, operations or prospects of the Company and its
Subsidiaries from that reflected in the Audited Financial Statements, other
than changes in the ordinary course of business, none of which individually or
in the aggregate has had or is expected to have a Material Adverse Effect;


(ii)           any resignation or termination of any
officers or key employees of the Company or any of its Subsidiaries, and the
Company and its Subsidiaries have no knowledge of any impending resignation or
termination of employment of any such officer or key employee;


(iii)          any material change, except in the
ordinary course of business, in the contingent obligations of the Company or
any of its Subsidiaries by way of guaranty, endorsement, indemnity, warranty or
otherwise;


(iv)          any damage, destruction or loss,
whether or not covered by insurance, which has had a Material Adverse Effect;


(v)           any waiver by the Company or any of
its Subsidiaries of a valuable right or of a material debt owed to it;


(vi)          any direct or indirect loans made by
the Company or any of its Subsidiaries to any stockholder, employee, officer or
director of the Company or any of its Subsidiaries, other than advances made in
the ordinary course of business;


(vii)         any material change in any compensation
arrangement or agreement with any employee, officer or director of the Company
or any of its Subsidiaries;


(viii)        any declaration or payment of any
dividend or other distribution of the assets of the Company or any of its
Subsidiaries;


 


35





















 


(ix)           to the knowledge of the Company and
its Subsidiaries, any labor organization activity with respect to any employees
of the Company or any of its Subsidiaries;


(x)            any debt, obligation or liability
incurred, assumed or guaranteed by the Company or any of its Subsidiaries,
except those for immaterial amounts and for current liabilities incurred in the
ordinary course of business;


(xi)           any sale, assignment or transfer of
any Patents, Trademarks, Copyrights, trade secrets or other Intellectual
Property by the Company or any of its Subsidiaries;


(xii)          any change in any Material Contract
that could reasonably be expected to have a Material Adverse Effect;


(xiii)         any satisfaction or discharge of any
Lien or payment of any obligation by the Company or any of its Subsidiaries,
except in the ordinary course of business and that is not material to the
business, properties, financial condition, operations or prospects of the
Company or any of its Subsidiaries;


(xiv)        any Lien 
on any asset of the Company or any of its Subsidiaries except Permitted
Liens;


(xv)         any action, suit, proceeding or
investigation against the Company or any of its Subsidiaries, except any such
action, suit, proceeding or investigation that (i) is not material to the
business, properties, financial condition, operations or prospects of the
Company or any of its Subsidiaries or (ii) is set forth on Schedule 4.8(e);


(xvi)        any written communication received by
the Company or any of its Subsidiaries alleging that the Company or any of its
Subsidiaries or any of its products or services has violated any of the Patents
or Patent Licenses  and other proprietary
rights and processes of any other Person; or


(xvii)       any other events or conditions of any character that,
either individually or in the aggregate, have resulted or could reasonably be
expected to result in a Material Adverse Effect.


Section 4.9.            Subsidiaries.  Set forth in Schedule 4.9
attached hereto is a true and complete list of all direct and indirect
Subsidiaries of the Company, setting forth as to each such Subsidiary its
jurisdiction of incorporation or organization and the percentage of each class
of Equity Interests of such Subsidiary owned by the Company or a Subsidiary of
the Company.  Neither the Company nor any
Subsidiary of the Company owns any Equity Interests of any Person other than
the Subsidiaries listed in Schedule 4.9.  The Company and its Subsidiaries have good
title to all of the Equity Interests owned by them of each of the Company’s
direct and indirect Subsidiaries, free and clear in each case of any Lien other
than Permitted Liens.  All of the Equity
Interests of each Subsidiary have been duly and validly issued, and are fully
paid and non-assessable and owned of record or beneficially by the
Company and/or one or more of its Subsidiaries. 
There are no securities outstanding that are convertible into or
exchangeable for 


 


36





















 


any
Equity Interests of the Company’s Subsidiaries, nor are there outstanding any
rights to subscribe for or purchase, or any options or warrants for the
purchase of, or any agreements (contingent or otherwise) providing for the
issuance of, or any calls, commitments or claims of any character relating to,
any Equity Interests of the Company’s Subsidiaries or any securities
convertible into or exchangeable for any such Equity Interests.


Section 4.10.          Litigation.  


(a)           Except as set forth
on Schedule 4.10, there are no actions,
suits or proceedings pending, or, to the Company’s knowledge, threatened
against or affecting the Company or any of its Subsidiaries or any properties
or rights of any of them which, if adversely determined, individually or in the
aggregate would have a Material Adverse Effect.


(b)           There are no
actions, suits or proceedings pending, or, to the Company’s knowledge,
threatened against or affecting the Company or any of its Subsidiaries which
seek to enjoin, or otherwise prevent the consummation of, the transactions
contemplated herein or to recover any damages or obtain any relief as a result
of any of the transactions contemplated herein in any court or before any
arbitrator of any kind or before or by any Governmental Authority.


Section 4.11.          No
Violation of Law; No Non-Compliance.


(a)           None of the Company
or its Subsidiaries is now, or will be after or as a result of giving effect to
the transactions contemplated herein, in default under or in violation of any Order
of any court, arbitrator or Governmental Authority or of any federal, state,
local or foreign Requirement of Law, which default or violation could
reasonably be expected to have a Material Adverse Effect.  In particular, without limiting the generality
of the foregoing, the Company and its Subsidiaries are in compliance in all
material respects with the provisions of the Telemarketing Sales Rule of the
Federal Trade Commission, 16 U.S.C. Part 310, including the “Do-Not-Call”
provisions thereof, the regulations of the Federal Communications Commission
with respect to Restrictions on Telemarketing and Telephone Solicitation, 47
C.F.R. Section 64.1200(a) — (f), including the “Do-Not-Call” provisions
thereof, and similar state laws and regulations.


(b)           Neither the Company
nor any of its Subsidiaries is in default under or with respect to any
provision of any security issued by any such Person, of any of their respective
Organizational Documents, or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement
to which any such Person is a party or by which it or any of its property is
bound which, individually or together with all such defaults, could reasonably
be expected to have a Material Adverse Effect or that would, if such default
had occurred after the Initial Closing Date, create an Event of Non-Compliance
under Section 12.1(e).


(c)           No Non-Compliance or
Event of Non-Compliance will exist on the Initial Closing Date immediately
after giving effect to the execution and delivery by the Company and its
Subsidiaries of this Agreement and the other Transaction Documents and the
incurrence by them 


 


37





















 


of
their respective obligations hereunder and thereunder, including the grant or
perfection of any Lien on the Collateral granted pursuant to the Security
Documents.


Section 4.12.          Title to
Properties.  The Company and its
Subsidiaries own no real property.   Schedule 4.12 sets forth a true and complete list of all
leases of real property to which any of such Persons is a party, identifying
the parties to each such lease and the property to which it relates.  True and complete copies of all such leases,
together with all amendments, modifications and supplements thereto to the date
hereof, have been delivered to the Purchasers. 
Each of the Company and its Subsidiaries has valid leasehold interests
in all real property leased by it, and valid title to all owned personal property
and valid leasehold interests in all leased personal property, in each case,
necessary or used in the ordinary conduct of their respective businesses,
subject to no Liens other than Permitted Liens.


Section 4.13.          Taxes.  The Company and its Subsidiaries have filed
all federal and other material tax returns and reports required to be filed,
and have paid all federal and other material taxes, assessments, fees and other
governmental charges levied or imposed upon them or their properties, income or
assets otherwise due and payable, except those which are being contested in
good faith by appropriate proceedings diligently prosecuted and for which
adequate reserves have been provided in accordance with GAAP, and no notice of
Lien has been filed or recorded in respect of any such taxes. There is no
proposed tax assessment against the Company or any of its Subsidiaries which
would, if the assessment were made, either individually or in the aggregate,
have a Material Adverse Effect.


Section 4.14.          Labor
Matters.


(a)           Except as set forth
in Schedule 4.14, (i) no strikes, work
stoppages, slowdowns or other labor disputes or grievances against the Company
or any of its Subsidiaries are pending or, to the Company’s knowledge,
threatened, which individually or in the aggregate could reasonably be expected
to have a Material Adverse Effect, (ii) none of the Company or any of its
Subsidiaries is a party to any collective bargaining agreement and none of them
has any knowledge of any pending or threatened effort to organize any of their
employees, (iii) there are no representation proceedings pending or, to the
Company’s knowledge, threatened before the National Labor Relations Board, and
no labor organization or group of employees of the Company or any of its
Subsidiaries has made a pending demand for recognition, (iv) neither the
Company nor any of its Subsidiaries is
engaged in any unfair labor practice or discriminatory employment practice and
no complaint of any such practice against the Company or any of its
Subsidiaries has been filed or, to the best knowledge of the Company and its
Subsidiaries, threatened to be filed with or by the National Labor Relations
Board, the Equal Employment Opportunity Commission or any other administrative
agency, federal or state, that regulates labor or employment practices, nor has
any grievance been filed or, to the best knowledge of the Company and its
Subsidiaries, threatened to be filed, against the Company or any of its
Subsidiaries by any employee pursuant to any collective bargaining or other
employment agreement to which the Company or any such Subsidiary is a party or
is bound, and (v) the Company and its Subsidiaries are in compliance with the
Fair Labor Standards Act and all other applicable federal, state, local and
foreign Requirements of Law relating to the employment of 


 


38





















 


labor,
except such non-compliance as individually and in the aggregate could not
reasonably be expected to have a Material Adverse Effect.


(b)           Schedule 4.14
sets forth a true and complete list of all employees representing executive
management of the Company and its Subsidiaries and all independent contractors
or consultants hired or engaged by the Company or any of its Subsidiaries.  Except as set forth on Schedule 4.14, the employment of all
Persons and officers employed by the Company and each of its Subsidiaries in
connection with the preceding sentence is terminable at will without any
penalty or severance obligation of any kind on the part of the employer.  Except as set forth on Schedule  4.14, all sums due for employee compensation and benefits
and all vacation time owing to any employees of any of the Company and its
Subsidiaries have been duly and adequately accrued on the accounting records of
the Company and its Subsidiaries.


(c)           None of the Company or its Subsidiaries has knowledge that
any of its employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of such employee’s best efforts to promote the interests
of the Company and its Subsidiaries or that would conflict with the Company’s
or its Subsidiaries’ business as proposed to be conducted.


Section 4.15.          Environmental
Matters. Except as set forth in Schedule 4.15:


(a)           The Company and its
Subsidiaries, and their respective operations and properties, are in compliance
in all material respects with all applicable Environmental Laws, except such
non-compliance which would not (if enforced in accordance with applicable law)
reasonably be expected to result in, either individually or in the aggregate, a
Material Adverse Effect.


(b)           The Company and each
of its Subsidiaries have obtained all licenses, permits, authorizations and
registrations required under any applicable Environmental Law and necessary for
their respective operations (“Environmental Permits”),
all such Environmental Permits are in good standing and in full force and
effect, and the Company and each of its Subsidiaries are in compliance with all
material terms and conditions of such Environmental Permits, except where the
failure to obtain, to maintain in good standing and in full force and effect,
or to be in compliance with such Environmental Permits could not reasonably be
expected to result in, either individually or in the aggregate, a Material
Adverse Effect.


(c)           None of the Company,
any of its Subsidiaries or any of their respective present properties or
operations is subject to any outstanding written order from or agreement with
any Governmental Authority, nor subject to any judicial or docketed
administrative proceeding, with respect to any Environmental Law, Environmental
Matter or Hazardous Material which could reasonably be expected to result in,
either individually or in the aggregate, a Material Adverse Effect.


(d)           There are no
Hazardous Materials or other conditions or circumstances existing with respect
to any property of the Company or its Subsidiaries, or arising from operations
of the


 


39





















 


Company
or its Subsidiaries prior to the Initial Closing Date, that could reasonably be
expected to result, either individually or in the aggregate, in a Material
Adverse Effect.


Section 4.16.          Compliance
with ERISA.


(a)           Neither the Company
nor any ERISA Affiliate has established or maintains any Pension Plan or
Multiemployer Plan, and no event or fact exists which could give rise to any
liability to the Company or any ERISA Affiliate under Title IV of ERISA,
Section 302 of ERISA or Section 412 of the Code.  Schedule 4.16
lists (i) all ERISA Affiliates and (ii) all Plans, including all Welfare Plans,
Retiree Welfare Plans and ESOPs and all bonus,
commission, profit-sharing, saving, stock option, stock purchase, stock
bonus, stock appreciation right, insurance, deferred compensation, or other
employee benefit plans or arrangements, maintained or contributed to by the
Company or any ERISA Affiliate to its employees or under which the Company or
any ERISA Affiliate has any obligation or liability.  Copies of all such listed Plans have been
delivered to the Purchasers.


(b)           The Company and each
of the ERISA Affiliates is in compliance in all material respects with all
requirements of each Plan maintained or contributed to by it or under which it
has any obligation or liability, and each Plan complies in all material
respects, and is operated in compliance in all material respects, with all
applicable provisions of ERISA and the Code, including the timely filing of all
reports required under the Code or ERISA, including the statement required by
29 CFR Section 2520.104-23. 
Except with respect to Multiemployer Plans, each Pension Plan that is
intended to be tax-qualified under Section 401(a) of the Code has
been determined by the IRS to qualify thereunder, the trusts created thereunder
have been determined to be exempt from tax under the provisions of
Section 501 of the Code, and nothing has occurred that would cause the
loss of such qualification or tax-exempt status.  Except for claims for benefits made in the
ordinary course of business of the Company and its Subsidiaries, no material
proceeding, claim, lawsuit and/or investigation is pending concerning any Plan.  All required contributions have been made in
accordance with the provisions of each Pension Plan and Multiemployer Plan, and
with respect to the Company or any ERISA Affiliate, there are no material
Unfunded Pension Liabilities or Withdrawal Liabilities.


(c)           No ERISA Event has
occurred or is expected to occur with respect to any Pension Plan,
Multiemployer Plan or other Plan which could reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect.


(d)           The Company and the
ERISA Affiliates currently comply and have complied in all material respects
with the notice and continuation coverage requirements of Section 4980B of the
Code.


Section 4.17.          Material
Contracts.  Schedule
4.17 contains a list of all Material Contracts to which the Company
or any of its Subsidiaries is a party (other than leases listed on Schedule 4.12 and Licenses listed on Schedule
4.20(c)).  True and complete
copies of each of the Material Contracts, with all amendments, modifications
and supplements thereto to the date hereof, have previously been furnished by
the Company to the Purchasers or their representatives.  Each of such Material Contracts is valid,
subsisting and in full force and effect. 
None of the Company 


 


40





















 


and
its Subsidiaries is in breach or violation of any of the terms, conditions or
provisions of any of such Material Contracts, and to the best knowledge of the
Company no third party to any of the Material Contracts is in breach or
violation of any of the terms, conditions or provisions thereof.  Neither the Company nor any of its
Subsidiaries has transferred or subordinated any of its rights or interests in
any of the Material Contracts, and such rights and interests are subject to no
Liens except Permitted Liens.  Neither
the Company nor any of its Subsidiaries is a party to any Material Contract or
is subject to any restriction contained in the charter or by-laws of any
of them which individually or in the aggregate has had or is reasonably likely
to have a Material Adverse Effect.


Section 4.18.          Insurance.  The Company and its Subsidiaries and their
respective properties are insured with insurance companies reasonably believed
by the Company to be financially sound and reputable, and which are not
Affiliates of the Company, in such amounts, with such deductibles and covering
such risks as are customarily carried by companies engaged in similar
businesses and owning similar properties in localities where the Company or
such Subsidiary operates.  A true and
complete listing of such insurance, including issuers, coverages and
deductibles is set forth in Schedule 4.18.  All premiums in respect of such policies have
been paid through the Initial Closing Date.


Section 4.19.          Possession
of Franchises, Licenses, Etc.  The
Company and its Subsidiaries possess all franchises, certificates, licenses,
permits, registrations, and other authorizations from Governmental Authorities,
free from burdensome restrictions, that are necessary for the ownership,
maintenance and operation of their respective properties and assets, and for
the conduct of their respective businesses as now conducted, and none of the
Company or any of its Subsidiaries is in violation of any thereof in any
material respect.


Section 4.20.          Intellectual
Property.


(a)           The Company and its Subsidiaries own all right, title and
interest in and to, or have valid and enforceable Licenses to use, all of the
Intellectual Property used by them in connection with their business as
presently conducted (the “Company
Intellectual Property”), which represents all intellectual
property rights necessary to the conduct of the business of the Company and its
Subsidiaries as now conducted and as presently contemplated to be
conducted.  The Company and its Subsidiaries
are in compliance with the contractual obligations relating to the protection
of such of the Company Intellectual Property that it uses pursuant to
Licenses.  To the knowledge of the
Company and its Subsidiaries, there are no conflicts with or infringements by
any third party of any Company Intellectual Property,  and the conduct of the business of the
Company and its Subsidiaries as currently conducted or as currently
contemplated to be conducted does not and will not conflict with or infringe
any proprietary right of any third party. 
There is no material claim, suit, action or proceeding pending or, to
the knowledge of the Company and its Subsidiaries, threatened against the
Company or any of its Subsidiaries:  (i)
alleging any such conflict or infringement with any third party’s proprietary
rights; or (ii) challenging the ownership or use by the Company or any such
Subsidiary of, or the validity or enforceability of, any Company Intellectual
Property.


 


41





















 


(b)           Schedule 4.20(b)
sets forth a true and complete list of all Patents, Patent applications,
registered Trademarks (and applications therefor) and registered Copyrights
(and applications therefor) used by Company or any of its Subsidiaries in
connection with its business as presently conducted (“Listed Intellectual Property”)
and the owner of record, date of application or issuance and relevant
jurisdiction as to each.  Except as
described in Schedule 4.20(b), all
Listed Intellectual Property is owned by the Company and its Subsidiaries, free
and clear of Liens or claims of any nature. Except as listed in Schedule 4.20(b), no Listed Intellectual
Property is the subject of any legal or governmental proceeding before any
governmental, registration or other authority in any jurisdiction, including
any office action or other form of preliminary or final refusal of
registration.


(c)           Schedule 4.20(c)
sets forth a true and complete list of all: 
(i) Licenses and other agreements in which the Company or any Subsidiary
of the Company or any sublicensee of any thereof has granted to any Person the
right to use the Company Intellectual Property; and (ii) all other consents,
indemnifications, forbearances to sue, settlement agreements and licensing or
cross-licensing arrangements to which the Company or any of its Subsidiaries is
a party relating to the Intellectual Property or the proprietary rights of any
third party, other than “off-the-shelf” software and the like licensed by the
Company or any of its Subsidiaries as licensee. 
Except as set forth in Schedule
4.20(c), neither the Company nor any of its Subsidiaries is under
any obligation to pay royalties or other payments in connection with any
license, sublicense or other agreement, nor restricted from assigning its
rights under any sublicense or agreement respecting the Company Intellectual
Property nor will the Company nor any of its Subsidiaries otherwise be, as a
result of the execution and delivery of this Agreement or the performance of
its obligations under this Agreement, in breach of any license, sublicense or
other agreement relating to the Company Intellectual Property.


(d)           No present or former employee, officer or director of the
Company or any of its Subsidiaries, or agent or outside contractor of the
Company or any of its Subsidiaries, holds any right, title or interest,
directly or indirectly, in whole or in part, in or to any Company Intellectual
Property.


(e)           Except as set forth on Schedule
4.20(e), to the knowledge of the Company and its Subsidiaries: (i)
none of the Company Intellectual Property has been used, divulged, disclosed or
appropriated to the detriment of the Company or any of its Subsidiaries for the
benefit of any Person other than the Company and its Subsidiaries; and (ii) no
employee, independent contractor or agent of the Company or any of its
Subsidiaries has misappropriated any trade secrets or other confidential
information of any other Person in the course of the performance of his or her
duties as an employee, independent contractor or agent of the Company and its
Subsidiaries.


(f)            To the knowledge of the Company and its Subsidiaries, the
Company’s and its Subsidiaries’ transmission, use, modification (including
framing, if applicable), linking and other practices in respect of content
proprietary to any other Person do not infringe or violate any proprietary or
other right of any such Person and, to the knowledge of the Company and its
Subsidiaries, no claim in respect of any such infringement or violation is
threatened or pending.


 


42





















 


Section
4.21.          Software. 


(a)           Schedule 4.21
hereto lists the operating systems and applications computer software programs
and databases used by the Company or any of its Subsidiaries that are material
to the conduct of their business as now conducted and as presently contemplated
to be conducted, other than “off-the-shelf” software and the like licensed by
the Company or any of its Subsidiaries as licensee (collectively, the “Software”), and
separately identifies that portion of the Software that was developed by or
under contract with the Company and its Subsidiaries (collectively, the “Proprietary Software”).
The Company and its Subsidiaries: (i) hold valid licenses to use, reproduce,
modify, distribute and sublicense all copies of the Software, other than the
Proprietary Software, and (ii) either own, or have a perpetual, royalty-free
license to use, reproduce, modify, distribute and sublicense the Proprietary
Software, and, except as listed on Schedule
4.21, the Company and its Subsidiaries have not sold, licensed,
leased or otherwise transferred or granted any interest or rights in or to any
portion thereof.  To the knowledge of the
Company and its Subsidiaries, none of the Software used by the Company or any
of its Subsidiaries, nor any use thereof, conflicts with, infringes upon or
violates any Intellectual Property or other proprietary rights of any other
Person and, to the knowledge of the Company and its Subsidiaries, no claim,
suit, action or other proceeding with respect to any such infringement or
violation is threatened or pending. 
Except as set forth on Schedule 4.21,
the Company and its Subsidiaries have taken steps reasonably necessary to
protect their right, title and interest in and to the Proprietary Software,
including the execution of appropriate confidentiality agreements.


(b)           The Company and its Subsidiaries possess or have access to
the original and all copies of all documentation and all source code or
password protected code, as applicable, for all the Proprietary Software owned
by them.  Upon consummation of the
transactions contemplated by this Agreement, the Company and its Subsidiaries
will continue to own all the Proprietary Software owned by them, free and clear
of all claims, liens, encumbrances, obligations and liabilities other than
Permitted Liens and, with respect to all agreements for the lease or license of
Proprietary Software which require consents or other actions as a result of the
consummation of the transactions contemplated by this Agreement in order for
the Company and its Subsidiaries to continue to use and operate such Software
after the Initial Closing Date, the Company and its Subsidiaries will have
obtained such consents or taken such other actions so required.


(c)           Any material programs, modifications, enhancements or
other inventions, improvements, discoveries, methods or works of authorship (“Works”) that were
created by employees of the Company or its Subsidiaries were made in the
regular course of such employees’ employment or service relationships with the
Company and its Subsidiaries using the Company’s and its Subsidiaries’
facilities and resources and, as such, constitute works made for hire.  Each such employee who has created Works or
any employee who in the regular course of his employment may create Works and
all consultants have signed an assignment or similar agreement with the Company
or its Subsidiaries confirming the Company’s or such Subsidiaries’ ownership
or, in the alternative, transferring and assigning to the Company or one of its
Subsidiaries all right, title and interest in and to such programs,
modifications, enhancements or other inventions including copyright and other
intellectual property rights therein.


 


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Section 4.22.          Deposit
Accounts; Securities Accounts.  Schedule 4.22 hereto contains a true and complete list of
all Deposit Accounts, and a separate true and complete list of all Securities
Accounts maintained by the Company or any of its Subsidiaries, setting forth
the name and address of each bank, savings institution or other depositary
institution at which each such Deposit Account is maintained and the name and
address of each bank, securities broker or dealer, or other financial
intermediary at which each such Securities Account is maintained, and stating
the title and account number of each such Deposit Account or Securities Account
(as the case may be).


Section 4.23.          Interest in Competitors.   Neither the Company
nor any of its Subsidiaries, nor any of their respective officers or (to their
knowledge) directors, has any interest, either by way of contract or by way of
investment (other than as holder of not more than 2% of the outstanding Equity
Interests of a publicly traded Person) or otherwise, directly or indirectly, in
any Person other than the Company and its Subsidiaries that (i) provides any
services or designs, produces or sells any product or product lines or engages
in any activity competitive with any activity currently proposed to be
conducted by the Company or any of its Subsidiaries or (ii) has any direct or
indirect interest in any asset or property, real or personal, tangible or
intangible, of the Company or any of its Subsidiaries.


Section 4.24.          Related Party Transactions.  Except as set forth in Schedule 4.24, (i) no officer, director or
Affiliate of the Company or its Subsidiaries provides or causes to be provided
any assets, services or facilities to the Company or its Subsidiaries, or has
entered into any agreement or arrangement to provide such assets, services or
facilities to the Company or its Subsidiaries (except, in the case of any such
officer or director, for services provided in his or her capacity as such and
agreements with respect thereto), (ii) the Company and its Subsidiaries do not
provide or cause to be provided any assets, services or facilities to any such
officer, director or Affiliate, and have not entered into any agreement or
arrangement to provide any such assets, services or facilities to any such
Persons (except, in the case of any such officer or director, for compensation
and benefits paid to such Person for his or her services in such capacity in
the ordinary course of business and agreements and arrangements with respect
thereto), and (iii) there are no other leases, Licenses or other contracts or
contractual arrangements between the Company or any of its Subsidiaries and any
such officer, director or Affiliate.


Section 4.25.           Registration
Rights.   Except as set forth in Schedule
4.25 and except as provided in the Registration Rights Agreement,
neither the Company nor any of its Subsidiaries is under any obligation to
register under the Securities Act any of its outstanding securities or any of
its securities that may be issued subsequently. 



Section 4.26.          [Reserved].   


Section 4.27.          Existing Indebtedness and
Contingent Obligations.  Set forth on Schedule
4.27 is a true and complete list and brief description of (a) all
Indebtedness of the Company and its Subsidiaries, specifying in each case the
name and address of each Person to whom such Indebtedness is owed and the
outstanding amount of the principal thereof, accrued interest thereon and any
other amounts owed in connection therewith, and indicating in each case whether
such Indebtedness is secured and, if so, describing the assets constituting the
collateral 


 


44





















 


therefor, and (b) all Contingent
Obligations of the Company and its Subsidiaries, including the amounts thereof
and the name and address of each Person to whom any such Contingent Obligation
is owed, and indicating in each case whether such Contingent Obligation is
secured and, if so, describing the assets constituting the collateral
therefor.  True and complete copies of
all credit agreements, loan agreements, mortgages, indentures, security
agreements, notes, guarantees, letters of credit and other agreements,
instruments and documents evidencing such Indebtedness and Contingent
Obligations, with all amendments thereto, have previously been delivered to the
Purchasers or their representatives.


Section 4.28.          Customers.   Set forth on Schedule 4.28 is a true and complete list of the names and
addresses of all customers of the Company and its Subsidiaries which accounted
for 5% or more of the Company’s and its Subsidiaries’ gross revenues during the
fiscal year ended September 30, 2004, together with the respective percentages
of the Company’s and its Subsidiaries’ gross revenues represented by each such
customer.  Except as set forth on Schedule 4.28, the Company has no notice or
knowledge that any such customer will, or has any plan or intention to, cease
to purchase products or services from the Company or its Subsidiaries or reduce
to a material extent the amount of products and services it purchases from the
Company or its Subsidiaries.


Section 4.29.          Eligible
Portfolio Company.  The Company is
organized under the laws of the State of Montana and has its principal place of
business in the State of California. 
After giving effect to the transactions contemplated by this Agreement,
the Company is neither an investment company as defined in Section 3 of the
Investment Company Act nor a company which would be an investment company
except for the exclusion from the definition of investment company in Section
3(c) of the Investment Company Act.  The
Company does not have any class of securities with respect to which a member of
a national securities exchange, broker, or dealer may extend or maintain credit
to or for a customer pursuant to rules or regulations adopted by the Board of
Governors of the Federal Reserve System under Section 7 of the Exchange Act.


Section 4.30.          Margin
Regulations; Public Utility Holding Company Act.


(a)           Neither the Company
nor any of its Subsidiaries is engaged or will engage, principally or as one of
its important activities, in the business of purchasing or selling Margin
Stock, or extending credit for the purpose of purchasing or carrying Margin
Stock.


(b)           Neither the Company
nor any of its Subsidiaries is a “holding company” or a “subsidiary company” of
a “holding company”, within the meaning of the Public Utility Holding Company
Act of 1935, as amended.


Section 4.31.          Solvency.  Both immediately before and immediately after
giving effect to the issuance of the Preferred Shares and the transactions
contemplated by this Agreement, the Company is, individually, and the Company
and its Subsidiaries on a consolidated basis are, Solvent.


 


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Section 4.32.          Foreign
Assets Control Regulations and Anti-Money Laundering. 


(a)           OFAC.  Neither the Company nor any Subsidiary of the
Company (i) is a Person whose property or interest in property is blocked or
that has been determined to be subject to blocking pursuant to Section 1 of
Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism
(66 Fed. Reg. 49079 (2001)), (ii) knowingly engages in any dealings or
transactions prohibited by Section 2 of such executive order, or otherwise
knowingly associates with any such person in any manner violative of Section 2,
or (iii) is a Person on the list of Specially Designated Nationals and Blocked
Persons published by the Office of Foreign Assets Control of the United States
Department of the Treasury on June 24, 2003, as updated from time to time, or
subject to the limitations or prohibitions under any other United States
Department of the Treasury’s Office of Foreign Assets Control regulation or
executive order.


(b)           Patriot Act.  The Company and each of its Subsidiaries are
in compliance, in all material respects, with the Patriot Act.  No part of the proceeds of the Preferred
Shares will be used, directly or indirectly, for any payments to any
governmental official or employee, political party, official of a political
party, candidate for political office, or anyone else acting in an official
capacity, in order to obtain, retain or direct business or obtain any improper
advantage, in violation of the United States Foreign Corrupt Practices Act of
1977, as amended.


Section 4.33.          Internal Accounting Controls.  The
Company and its Subsidiaries have established a system of internal accounting
controls sufficient to provide reasonable assurance that: (i) transactions are
executed in accordance with management’s general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.


Section 4.34.          Offering
of Securities.  None of the Company
or its representatives has, directly or indirectly, offered any of the
Preferred Shares, Warrants or Notes or any security similar to any of them for
sale to, or solicited any offers to buy any of the Preferred Shares, Warrants
or Notes or any security similar to any of them from, or otherwise approached
or negotiated with respect thereto with, more than ten (10) Persons including
the Purchasers, and none of the Company or its representatives has taken or
will take any action which would subject the issuance or sale of any of the
Preferred Shares, Warrants or Notes to the provisions of Section 5 of the
Securities Act or violate the provisions of any securities or Blue Sky laws of
any applicable jurisdiction.


Section 4.35.          Broker’s
or Finder’s Commissions.  Except as
set forth on Schedule 4.35 hereto, no broker’s
or finder’s fee or commission will be payable by the Company with respect to
the issuance and sale of the Preferred Shares, Warrants or Notes.  The Company agrees to indemnify each of the
Purchasers and hold each of them harmless against any loss, cost, claim or
liability (including reasonable attorneys’ fees and disbursements for the
investigation and defense of claims) arising out of or relating to any such
actual or alleged fee or commission. 


 


46






 













 


Section 4.36.          Acquisition
Transactions.  The Acquisition
Agreement and the other agreements and documents contemplated thereby (the “Acquisition Documents”) have been
duly executed, delivered and performed in accordance with their terms by the
respective parties thereto in all respects, including the fulfillment (not
merely the waiver, except as may be disclosed to and consented to in writing by
the Purchaser) of all conditions precedent set forth therein, the Acquisition
Transactions have been completed in accordance with the terms and provisions of
the Acquisition Documents, and the Company or its subsidiaries have acquired
and have good and marketable title to the assets and business of SDI and
SBN.  All actions and proceedings
required by the Acquisition Documents, applicable law or regulation (including,
but not limited to, compliance with the Hart-Scott-Rodino Anti-Trust
Improvements Act of 1976, as amended, if applicable) have been taken and the
transactions required thereunder have been duly and validly taken and
consummated.  No court of competent
jurisdiction has issued any injunction, restraining order or other order which
prohibits consummation of the Acquisition Transactions and no governmental or
other action or proceeding has been threatened or commenced, seeking any
injunction, restraining order or other order which seeks to void or otherwise
modify the Acquisition Transactions.  The
Company has delivered, or caused to be delivered, to the Purchaser true,
correct and complete copies of all of the Acquisition Documents, including all
amendments thereto.


Section 4.37.          Disclosure.  Neither this Agreement nor any other
document, certificate or statement furnished to the Purchasers by or on behalf
of the Company in connection herewith, contained, as of its respective date, or
now contains, any untrue statement of a material fact or as of any such date
omitted, or now omits, to state a material fact necessary in order to make the
statements contained herein and therein not misleading.


Section 5.               Representations
of the Purchasers.  Each of the
Purchasers represents to the Company that (a) it is an “accredited investor,”
within the meaning of Rule 501 promulgated by the SEC under the Securities Act,
and (b) it is acquiring the Preferred Shares to be purchased by it hereunder
for its own account, for investment, and not with a view to or for sale in
connection with any distribution thereof in violation of the registration
provisions of the Securities Act or the rules and regulations promulgated
thereunder.


Section 6.               Closing
Conditions.


Section 6.1.            Conditions
to Initial Closing.  TICC’s
obligations to purchase and pay for the TICC Preferred Shares and TICC Initial
Warrants shall be subject to the satisfaction, or waiver by TICC in writing, on
or before the Initial Closing Date, of the following conditions:


(a)           Proceedings
Satisfactory.  All corporate and
other proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to TICC and its special counsel.


(b)           Deliveries.  TICC and its special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as it may reasonably request, including:


(i)            stock
certificates representing the TICC Preferred Shares;


 


47





















 


(ii)           the
TICC Initial Warrants, each dated the Initial Closing Date and duly executed by
the Company;


(iii)          the
Registration Rights Agreement, duly executed by the Company;


(iv)          the
Note Purchase Agreement, duly executed by the Company, and the Subsidiary
Guarantee, duly executed by each Subsidiary of the Company;


(v)           the
Security Agreement, duly executed by the Company and each of its Subsidiaries
(including all Subsidiaries of the Company existing immediately after giving
effect to the Acquisition Transactions) in favor of the Collateral Agent and
dated the Initial Closing Date, together with:


(A)          financing
statements in proper form for filing under the Uniform Commercial Code in
all such jurisdictions as the Collateral Agent may deem necessary or desirable
in order to perfect the Liens created by the Security Agreement, covering the
Collateral described in the Security Agreement,


(B)           stock
certificates or other certificates representing all of the issued and
outstanding certificated Equity Interests of each direct or indirect Subsidiary
of the Company (including all Subsidiaries of the Company existing immediately
after giving effect to the Acquisition Transactions), accompanied by stock
powers or other transfer documents satisfactory to the Collateral Agent in form
and substance duly executed by each holder of such Equity Interests in blank,
and


(C)           the
originals of all promissory notes owned or held by the Company and such
Subsidiaries, accompanied by bond powers or other transfer documents
satisfactory to the Collateral Agent in form and substance duly executed by
each holder of such notes in blank;


(vi)          a
Control Agreement satisfactory in form and substance to the Collateral Agent
with (A) each bank or other depositary institution at which any of the Deposit
Accounts of the Company or any of its Subsidiaries are located as shown in Schedule 4.22, and (B) each bank, securities broker or
dealer or other financial intermediary at which any Securities Accounts of the
Company or its Subsidiaries are located as shown in such Schedule, covering all
Deposit Accounts and Securities Accounts of the Company and such Subsidiaries,
in each case duly executed by the Company or the applicable Subsidiary and by
such bank, depositary institution, securities broker or dealer or financial
intermediary (as the case may be), together with all other documents which may
be necessary or appropriate (in the sole judgment of the Collateral Agent) to
grant to the Collateral Agent valid and perfected first priority security
interests in such Deposit Accounts and Securities Accounts;


(vii)         Patent
Security Agreements, Trademark Security Agreements and Copyright Security
Agreements, each duly executed and acknowledged by the Company 


 


48





















 


and such of its Subsidiaries as own any Patents, Patent Licenses,
Trademarks, Trademark Licenses, Copyrights or Copyright Licenses (as the case
may be);


(viii)        such
assignments, each satisfactory in form and substance to the Collateral Agent,
in respect of any or all of the Material Contracts (including the Licenses) as
the Collateral Agent may reasonably request in order to effectuate its security
interest therein;


(ix)           certificates
dated as of a recent date as to the good standing and payment of taxes of the
Company and each of its Subsidiaries in each jurisdiction where any of such
Persons is incorporated or is authorized to do business as a foreign
corporation;


(x)            certified
copies of the Organizational Documents of the Company and each of its
Subsidiaries;


(xi)           certified
copies of resolutions of the Boards of Directors of the Company and each
Subsidiary of the Company authorizing the execution, delivery and performance
of this Agreement and the other Transaction Documents and Note Documents to
which the Company or such Subsidiary is respectively a party;


(xii)          certificates
as to the incumbency and signatures of each of the officers of the Company and
its Subsidiaries who shall execute this Agreement or any other Transaction
Document or Note Document on behalf of such respective party;


(xiii)         an
Officer’s Certificate, dated the Initial Closing Date, to the effect of the
matters stated in Section 6.1(c), (d), (e), (f) and (g) hereof;


(xiv)        an
opinion of Gersten Savage, LLP, counsel to the Company in connection with the
transactions contemplated by this Agreement, dated the Initial Closing Date and
addressed to the Purchasers, covering the matters specified in Exhibit C and such other matters incident to the
transactions herein contemplated as TICC may reasonably request;


(xv)         such
consents, approvals and authorizations of, and declarations, registrations and
filings with, Governmental Authorities, and such consents, waivers, amendments,
estoppel letters, subordination and nondisturbance agreements, and other
agreements and confirmations of bailees, lessors of real and personal property
owned or used by the Company and its Subsidiaries and of other nongovernmental
third parties  (including a Landlord
Agreement signed by each lessor of real property leased by the Company and its
Subsidiaries), as the Collateral Agent may deem necessary or desirable in
connection with the use, occupancy or operation of the real properties owned or
used by the Company and its Subsidiaries, or the assignment or use of any of
the Intellectual Property of the Company or its Subsidiaries, or otherwise in
order to effectuate or protect the rights and interests of the Collateral Agent
in the Collateral;


(xvi)        searches,
by a Person satisfactory to Collateral Agent, of the Uniform Commercial Code,
judgment and tax lien filings which may have been filed with respect to the
Collateral confirming that all Collateral constituting personal property is
subject to no Liens except Permitted Liens; and


 


49





















 


(xvii)       evidence
satisfactory to the Collateral Agent that valid policies of insurance are in
full force and effect in accordance with the requirements of the Security
Documents, in each case naming the Collateral Agent as loss payee and
additional insured, as its interests may appear.


(c)           Representations
and Warranties True.  The
representations and warranties of the Company contained in Section 4 of this
Agreement and in the other Transaction Documents and Note Documents shall be
true on and as of the Initial Closing Date with the same effect as if such
representations and warranties had been made on and as of the Initial Closing
Date.


(d)           Performance of
Obligations.  The Company shall have
performed all agreements on its part required to be performed under this
Agreement on or prior to the Initial Closing Date.


(e)           No Non-Compliance.  There shall exist on the Initial Closing Date
immediately after giving effect to the transactions contemplated hereby no
Non-Compliance or Event of Non-Compliance.


(f)            Absence of
Material Adverse Change, Etc.  Since
September 30, 2004, no change or changes shall have occurred to the business,
operations, properties, assets, income, prospects or condition, financial or
otherwise, of the Company and its Subsidiaries, taken as a whole, which TICC
reasonably believes in good faith to constitute a Material Adverse Effect.


(g)           Consents and
Approvals.  All necessary consents,
approvals and authorizations of, and declarations, registrations and filings
with, Governmental Authorities and nongovernmental Persons required in order to
consummate the transactions contemplated herein shall have been obtained or
made and shall be in full force and effect.


(h)           Absence of
Litigation, Orders, Etc.  Except as
disclosed on Schedule 4.10 hereto, there shall
not be pending or, to the knowledge of the Company and its Subsidiaries,
threatened, any action, suit, proceeding, governmental investigation or
arbitration against or affecting any of the Company or its Subsidiaries or
their respective assets or property (and, as to any action, suit, proceeding,
governmental investigation or arbitration so disclosed, there shall not have
occurred since the date of this Agreement any development) which seeks to
enjoin or restrain any of the transactions contemplated herein or which TICC
reasonably believes in good faith is likely to have a Material Adverse
Effect.  No Order of any court,
arbitrator or Governmental Authority shall be in effect which purports to
enjoin or restrain any of the transactions contemplated herein or which TICC
reasonably believes in good faith to constitute a Material Adverse Effect.


(i)            Acquisition
Transactions.  The Acquisition Agreement
and the other Acquisition Documents shall have been duly executed and delivered
by each of the parties thereto, and shall be in full force and effect.  True and complete copies of such documents,
with all amendments thereto, shall have been delivered to TICC.  All conditions precedent to the consummation
of the Acquisition Transactions have been fulfilled and no such condition has
been waived (unless such waiver was disclosed to and consented to in writing by
TICC).  The Acquisition Transactions shall
have been consummated in accordance with the provisions of the Acquisition
Documents,


 


50





















 


and
TICC and its counsel shall have received such evidence thereof as they may
reasonably request.


(j)            Charter Amendment.  The Charter Amendment shall have been duly
adopted and approved by the Board of Directors, shall have been filed with and
accepted by the Secretary of State of the State of Montana, and shall be in
full force and effect, and TICC shall have received such evidence thereof as it
shall reasonably request.


(k)           Discharge of
Existing Loans.  All Indebtedness of
the Company and its Subsidiaries outstanding on the Initial Closing Date in
respect of each of the items of Indebtedness shown on Schedule
4.27 (other than those payable in the form of shares of stock) shall
be paid and satisfied in full, all Liens and guarantees securing such
Indebtedness shall be released and discharged in a manner satisfactory to TICC,
and TICC shall have received satisfactory evidence of such payment,
satisfaction, release and discharge.


(l)            Fees and
Expenses.  The fees payable by the
Company on the Initial Closing Date pursuant to Section 2.4, and the expenses
of TICC incurred through the Initial Closing Date and required to be reimbursed
by the Company pursuant to Section 13.2 hereof (including the fees and
disbursements of Nixon Peabody LLP, counsel to the Purchasers, in connection
with the preparation of this Agreement and the transactions contemplated
hereby) shall be paid in full by the Company on the Initial Closing Date.


Section 6.2.            Conditions
to Second Closing.  Seaview’s
obligations to purchase and pay for the Seaview Preferred Shares and Seaview
Initial Warrants shall be subject to the satisfaction, or waiver by Seaview in
writing, on or before the Second Closing Date, of the following conditions:


(a)           Approval by SBA.  Seaview shall have received all necessary
approvals with respect to its investment as contemplated by this Agreement and
the Note Purchase Agreement from the United States Small Business
Administration (“SBA”).


(b)           Proceedings
Satisfactory.  All corporate and
other proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to TICC and its special counsel.  In addition, the Company shall have delivered
to TICC the items set forth in Section 6.1(b)(iv), (v), (vi), (vii), (viii),
(xv), (xvi) and (xvii).


(c)           Deliveries.  Seaview and its special counsel shall have
received:


(i)            stock
certificates representing the Seaview Preferred Shares;


(ii)           the
Seaview Initial Warrants, each dated the Second Closing Date and duly executed
by the Company;


(iii)          the
Registration Rights Agreement and the Note Purchase Agreement, each duly
executed by the Company;


 


51





















 


(iv)          certificates
dated as of a recent date as to the good standing and payment of taxes of the
Company and each of its Subsidiaries in each jurisdiction where any of such
Persons is incorporated or is authorized to do business as a foreign
corporation;


(v)           certified
copies of the Organizational Documents of the Company and each of its
Subsidiaries;


(vi)          certified
copies of resolutions of the Boards of Directors of the Company and each
Subsidiary of the Company authorizing the execution, delivery and performance
of this Agreement, the Note Documents and the other Transaction Documents to
which the Company or such Subsidiary is respectively a party;


(vii)         certificates
as to the incumbency and signatures of each of the officers of the Company and
its Subsidiaries who shall execute this Agreement or any other Transaction
Document or Note Document on behalf of such respective party;


(viii)        an
Officer’s Certificate, dated the Second Closing Date, to the effect of the
matters stated in Section 6.2(c), (d), (e), (f) and (g) hereof; and


(ix)           an
opinion of Gersten Savage, LLP, counsel to the Company in connection with the
transactions contemplated by this Agreement, dated the Initial Closing Date and
addressed to the Purchasers, covering the matters specified in Exhibit C and such other matters incident to the
transactions herein contemplated as Seaview may reasonably request.


(d)           Representations
and Warranties True.  The
representations and warranties of the Company contained in Section 4 of this
Agreement and in the other Transaction Documents and Note Documents shall be
true on and as of the Second Closing Date with the same effect as if such
representations and warranties had been made on and as of the Initial Closing
Date, except to the extent that they are affected by events occurring after the
Initial Closing Date in the ordinary course of business of the Company and its
Subsidiaries and which do not constitute a Material Adverse Effect.


(e)           Performance of
Obligations.  The Company shall have
performed all agreements on its part required to be performed under this
Agreement on or prior to the Second Closing Date.


(f)            No
Non-Compliance.  There shall exist on
the Second Closing Date immediately after giving effect to the transactions
contemplated hereby no Non-Compliance or Event of Non-Compliance.


(g)           Absence of
Material Adverse Change, Etc.  Since
the September 30, 2004 and through the Second Closing Date, no Material Adverse
Effect shall have occurred.


(h)           Consents and
Approvals.  All necessary consents,
approvals and authorizations of, and declarations, registrations and filings
with, Governmental Authorities and nongovernmental


 


52





















 


Persons
required in order to consummate the transactions contemplated herein to occur
on the Second Closing Date shall have been obtained or made and shall be in
full force and effect.


(i)            Absence of
Litigation, Orders, Etc.  Except as disclosed
on Schedule 4.10 hereto, there shall not
be pending or, to the knowledge of the Company and its Subsidiaries,
threatened, any action, suit, proceeding, governmental investigation or
arbitration against or affecting any of the Company or its Subsidiaries or
their respective assets or property (and, as to any action, suit, proceeding,
governmental investigation or arbitration so disclosed, there shall not have
occurred since the date of this Agreement any development) which seeks to
enjoin or restrain any of the transactions contemplated herein or which is
reasonably likely to have a Material Adverse Effect.  No Order of any court, arbitrator or
Governmental Authority shall be in effect which purports to enjoin or restrain
any of the transactions contemplated herein or which is reasonably likely to
have a Material Adverse Effect.


(j)            Other
Transactions.  The conditions set
forth in Section 6.1(i), (j) and (k) shall have been satisfied on the Initial
Closing Date and shall remain satisfied as of the Second Closing Date.


(k)           Fees and Expenses.  The fees payable by the Company on the Second
Closing Date pursuant to Section 2.4, and the expenses of Seaview incurred
through the Second Closing Date and required to be reimbursed by the Company
pursuant to Section 13.2 hereof (including the fees and disbursements of
Breslow & Walker, LLP, special counsel to Seaview in connection with the
transactions contemplated hereby), shall be paid in full by the Company on the
Second Closing Date.


Section 7.               Financial
Statements and Information.  The
Company will furnish to each Purchaser, so long as it shall hold any Preferred
Shares, and, in the case of the items referred to in subsections (a), (b),
(c)(i), (f) and (g) of this Section 7, so long as it shall hold any Warrants or
any shares of Company Common Stock issued upon the exercise of Warrants:


(a)           Monthly Financials. 
As soon as available and in any event within 30 days after the end of
each of month, copies of the unaudited consolidated and
consolidating balance sheets of the Company and its Subsidiaries as of the end
of such month, and of the related unaudited consolidated and consolidating
statements of income, retained earnings and cash flows for such month and for
the portion of the fiscal year ended with the last day of such month, all in
reasonable detail and stating in comparative form (i) the consolidated and
consolidating figures as of the end of and for the corresponding date and month
in the previous fiscal year and (ii) the corresponding figures from the consolidated
budget of the Company and its Subsidiaries for such period, all Certified by
the Chief Financial Officer of the Company.


(b)           Quarterly
Financial Statements.  As soon as
available and in any event within 45 days after the end of each fiscal quarter
of the Company, copies of the unaudited consolidated and consolidating balance
sheets of the Company and its Subsidiaries as of the end of such fiscal
quarter, and of the related unaudited consolidated and consolidating statements
of income, retained earnings and cash flows for such fiscal quarter and for the
portion of the fiscal year ended with the last day of such fiscal quarter, all
in reasonable detail and stating in comparative


 


53





















 


form
(i) the consolidated and consolidating figures as of the end of and for the
corresponding date and fiscal quarter in the previous fiscal year and (ii) the
corresponding figures from the consolidated budget of the Company and its
Subsidiaries for such period, all Certified by the Chief Financial Officer of
the Company.


(c)           Annual Financial
Statements.  As soon as available and
in any event within 90 days after the end of each fiscal year of the Company,


(i)            copies
of the audited consolidated and unaudited consolidating balance sheets of the
Company and its Subsidiaries as of the end of such fiscal year, and of the
related audited consolidated and unaudited consolidating statements of income,
retained earnings and cash flows for such fiscal year, together with the notes
thereto, all in reasonable detail and stating in comparative form (A) the
respective audited consolidated and unaudited consolidating figures as of the
end of and for the previous fiscal year and (B) the corresponding figures from
the consolidated budget of the Company and its Subsidiaries for such fiscal
year furnished pursuant to Section 7(n), (x) in the case of such audited
consolidated financial statements, accompanied by a report thereon of the
Accountants, which report shall be unqualified as to going concern and scope of
audit and shall state that such consolidated financial statements present
fairly, in all material respects, the consolidated financial position of the
Company and its Subsidiaries as at the end of such fiscal year and the
consolidated results of their operations, retained earnings and cash flows for
such fiscal year in accordance with GAAP applied on a basis consistent with
prior years (except as otherwise stated therein) and that the examination by
the Accountants in connection with such consolidated financial statements has
been made in accordance with generally accepted auditing standards, and (y) in
the case of such unaudited consolidating financial statements, Certified by the
Chief Financial Officer of the Company; and


(ii)           a
written statement of the Accountants that (A) based upon their review of
the statements with respect to financial covenants contained in the Compliance
Certificate furnished by the Company as of the end of such fiscal year, they
have no reason to believe that such statements are not true and accurate in all
material respects, and (B) in making the examination necessary for their
report on such financial statements they obtained no knowledge of any
Non-Compliance or Event of Non-Compliance that occurred or existed during such
fiscal year, or if such Accountants shall have obtained knowledge of any such
Non-Compliance or Event of Non-Compliance, specifying the nature and status
thereof.


(d)           Compliance
Certificate.  Concurrently with each
of the quarterly and annual financial statements furnished pursuant to Section
7(b) and Section 7(c), a Compliance Certificate properly completed as of the
last day of the applicable fiscal quarter or fiscal year and signed by the
Chief Financial Officer of the Company.


(e)           Bank Statements.  Promptly after receipt thereof, copies of
monthly statements for each of the Deposit Accounts and Securities Accounts
maintained by the Company and each of its Subsidiaries.


 


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(f)            Shareholder Reports.  Promptly after the same are available and in
any event within 15 days thereof, copies of all such proxy statements,
financial statements, notices and reports as the Company or any of its
Subsidiaries shall send or make available generally to their securityholders,
and copies of all regular and periodic reports and of all registration
statements (other than on Form S-8 or a similar form) which the Company
or any of its Subsidiaries may file with the SEC or with any securities
exchange.


(g)           Management Letters.  Promptly after the receipt thereof by the
Company or any of its Subsidiaries, and in any event within 15 days thereof,
copies of any management letters and any reports as to material inadequacies in
accounting controls (including reports as to the absence of any such
inadequacies) submitted to the Company by the Accountants in connection with
any audit thereof made by the Accountants.


(h)           Notice of
Non-Compliance.  Promptly (and in any
event within 5 Business Days) after any Responsible Officer of the Company or
any of its Subsidiaries has knowledge of (1) the existence of any
Non-Compliance or Event of Non-Compliance on the part of the Company, an
Officer’s Certificate of the Company specifying the nature and period of
existence thereof and what action the Company is taking or proposes to take
with respect thereto; or (2) any Indebtedness of the Company or any of its
Subsidiaries being declared due and payable before its expressed maturity, or
any holder of such Indebtedness having the right to declare such Indebtedness
due and payable before its expressed maturity, because of the occurrence of any
default (or any event which, with notice and/or the lapse of time, shall
constitute any such default) under such Indebtedness, an Officer’s Certificate
of the Company describing the nature and status of such matters and what action
the Company or such Subsidiary is taking or proposes to take with respect
thereto.


(i)            Regulatory and Intellectual Property Filings.  As soon as
reasonably practicable but in any event within five (5) Business Days after
receipt or delivery thereof, (i) copies of any and all material notices and
other material communications received by and the Company or its Subsidiaries
from, or sent by the Company to, any federal or state regulatory body with
jurisdiction over the Company’s or such Subsidiary’s products, services,
business and/or processes with respect to the Company or any of its
Subsidiaries or any of their respective products, services or practices and
(ii) copies of all filings by the Company or its Subsidiaries with the United
States Patent and Trademark Office or the United States Copyright Office with
respect to any Intellectual Property of the Company or its Subsidiaries, all
non-infringement opinions of counsel or advisors to the Company or its
Subsidiaries pertaining thereto and all material Licenses entered into by the
Company or its Subsidiaries in respect thereof (whether as licensor or
licensee).


(j)            Notice of
Infringement Claims.  As soon as
reasonably practicable and in any event within five
(5) Business Days after a Responsible Officer of the Company has
knowledge of the assertion by or against the Company or any of its Subsidiaries
of any claim for, or the actual or threatened commencement of any judicial,
administrative or arbitral action, suit or proceeding by or against the Company
or any of its Subsidiaries with respect to, (i) any actual or alleged
infringement by any third party of any Patent, Trademark, Copyright or other
Intellectual Property or rights relating thereto owned or used by the Company
or any of its Subsidiaries, (ii) 


 


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any
actual or alleged infringement by the Company or any of its Subsidiaries of any
Patent, Trademark, Copyright or other Intellectual Property or rights relating
thereto owned or used by any third party, or (iii) any actual or alleged breach
or violation of any License to which the Company or any of its Subsidiaries is
a party, whether by the Company or any of its Subsidiaries or by any other
party thereto, an Officer’s Certificate of the Company describing the nature
and status of such matter in reasonable detail.


(k)           Notice of
Litigation.  Promptly (and in any
event within 15 days) after the Company has knowledge of (i) the institution
of, or threat of, any action, suit, proceeding, governmental investigation or
arbitration against or affecting the Company or any of its Subsidiaries or any
property of any of them, or (ii) any material development in any such
action, suit, proceeding, governmental investigation or arbitration, which, in
either case, if adversely determined, is likely to have a Material Adverse
Effect, an Officer’s Certificate of the Company describing the nature and
status of such matter in reasonable detail.


(l)            ERISA Notices.  Promptly after any Responsible Officer of the
Company or any of its Subsidiaries has knowledge of any of the following events
if the same would reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect, an Officer’s Certificate describing the
nature and status of such event, together with a copy of any notice with
respect to such event that may be required to be filed with a Governmental
Authority and any notice delivered by a Governmental Authority to the Company
or any ERISA Affiliate with respect to such event:


(i)            an
ERISA Event;


(ii)           the
adoption of any new Pension Plan by the Company or any ERISA Affiliate;


(iii)          the
adoption of any amendment to a Pension Plan, if such amendment results in a
material increase in benefits or unfunded liabilities; or


(iv)          the
commencement of contributions by the Company or any ERISA Affiliate to any
Multiemployer Plan or any Pension Plan.


(m)          Notice of Material
Adverse Effect.  Promptly after any
Responsible Officer of the Company or any of its Subsidiaries has knowledge of
any Material Adverse Effect with respect to which notice is not otherwise
required to be given pursuant to this Section 7, an Officer’s Certificate of
the Company setting forth the details of such Material Adverse Effect and
stating what action the Company or any of its Subsidiaries has taken or
proposes to take with respect thereto.


(n)           Annual Budget.  Not later than 30 days prior to the beginning
of each fiscal year, an annual operating budget of the Company and its
Subsidiaries, on both a consolidated and consolidating basis, (i) for such
fiscal year, containing projections of profit and loss, cash flow and ending
balance sheets for each month of such fiscal year, and (ii) for the succeeding
two (2) years, containing projections of profit and loss, cash flow and ending
balance sheets for each of


 


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such
years; and thereafter, promptly upon preparation thereof, all amendments and
revisions thereto which may be made from time to time.


(o)           Annual Insurance
Report.  At least once in each fiscal
year, a report of a reputable insurance broker with respect to all insurance
maintained by the Company and its Subsidiaries, together with a certificate of
insurance evidencing the effectiveness of the policies of insurance required to
be maintained by the provisions of Section 9.6.


(p)           Certain Changes and Conduct of Business.  Promptly after the
occurrence thereof, notice of all material developments in the assets,
liabilities, ownership, operations or business of the Company and its
Subsidiaries, including (i) any issuance of debt securities or incurrence of
any Indebtedness by the Company or any of its Subsidiaries, (ii) a change in
the number of members of the Board of Directors,
(iii) a sale, lease or transfer of any material portion of the assets of the
Company or any of its Subsidiaries, other than in the ordinary course of
business, (iv) an acquisition of the Equity Interests of any Person, or of any
material assets of any Person or division or line of business of any Person,
other than in the ordinary course of business, and (v) any change in the
outstanding number or ownership of the shares of Company Common Stock or
Company Preferred Stock (specifying the details of any such change, including
the identity and ownership amount of any new owner).  The Company shall provide the Purchasers with
any written information provided to the board of directors or board of managers
(or similar body) of the Company or any of its Subsidiaries in their respective
capacities as such.


(q)           Related Party Transactions.  Within 90 days after the end of each fiscal
year, a report describing in reasonable detail the nature and amount of (i) all
transactions of the type disclosed in Schedule 4.24
engaged in by the Company and its Subsidiaries during such fiscal year, and
(ii) all other transactions during such fiscal year between the Company or its
Subsidiaries and any officer, director or Affiliate of the Company or any such
Subsidiary, other than compensation and benefits paid by the Company and its
Subsidiaries to their officers, directors and employees in the ordinary course
of business consistent with past practice.


(r)            Other
Information.  Any other information,
including financial statements and computations, relating to the performance of
obligations arising under this Agreement or the other Transaction Documents, or
the assets, liabilities, business, operations or prospects of the Company or
any of its Subsidiaries, that the Majority Purchasers may from time to time
reasonably request and which is capable of being obtained, produced or
generated by the Company or such Subsidiary or of which any of them has
knowledge.


Section 8.               Inspection
Rights; Board Observation Rights.


Section 8.1.            Inspection
of Books and Properties.   So long as
any Preferred Shares shall be outstanding, the Purchasers and their
representatives and independent contractors shall have the right to visit and
inspect any of the properties and locations of the Company and its
Subsidiaries, to examine their books of account and Records, to make copies and
extracts therefrom at their expense, and to discuss their affairs, finances and
accounts with, and to be advised as to the same by, their officers and
employees and their independent public accountants, all at such reasonable
times during normal business hours as the Purchasers may desire, upon 


 


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reasonable
advance notice to the Company and at the sole cost and expense of the
Purchasers; provided that, during the continuance of any Non-Compliance
or Event of Non-Compliance, the Purchasers and their representatives and
independent contractors shall have the right to do any of the foregoing at the
expense of the Company at any time during normal business hours and without
advance notice.


Section 8.2.            Board
of Directors; Observation Rights. 
The Company shall cause the Board of Directors to hold a meeting at
least once during each fiscal quarter of the Company.  So long as any Preferred Shares shall be
outstanding, the Majority Purchasers may at their option designate by written
notice to the Company a representative (the “Observer”),
who shall have the right to attend all meetings of the board of directors of
the Company and of any Subsidiary thereof, and of any committees of such boards
of directors, without voting on or consenting to any matters presented at such
meetings.  The Observer shall be entitled
to receive copies of all notices of meetings of the board of directors of the
Company or any such Subsidiary and of any such committee, and all written
materials distributed to members thereof in connection with such meetings, in
each case at the same time and in the same manner as the members of such board
of directors or committee (as the case may be) receive such notices or
materials.  If such board of directors or
committee proposes to take any action by written consent in lieu of a meeting,
the Company will give written notice thereof to the Observer prior to the effective
date of such consent describing in reasonable detail the nature of such action,
together with copies of any written materials distributed to directors in
connection therewith.


Section 9.               Affirmative
Covenants.  The Company covenants and
agrees that so long as any of the Preferred Shares shall be outstanding:


Section 9.1.            Compliance
with Covenants.  The Company will
comply with all of the covenants, agreements and conditions contained in this
Agreement, and will not violate any provision of the Company Charter.


Section 9.2.            Maintenance
of Corporate Existence, Properties and Records.  The Company will, and will cause each of its
Subsidiaries to:


(a)           do or cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence, rights, powers and franchises including any necessary
qualification or licensing in any foreign jurisdiction, provided that
the Company may effect a Permitted Change of Jurisdiction;


(b)           maintain its
properties in good condition, reasonable wear and tear excepted, and make all
necessary renewals, repairs, replacements, additions, betterments, and
improvements thereto;


(c)           preserve or renew
all of its Patents, Trademarks, Copyrights, Licenses and other Intellectual
Property, the non-preservation of which would reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect, and
conduct its business and affairs without infringement of or interference with
any Intellectual Property of any other Person in any material respect;


 


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(d)           keep books of
account and other Records in which full and correct entries will be made of all
of its business transactions, and reflect in its financial statements adequate
accruals and appropriations to reserves, all in accordance with GAAP; and


(e)           maintain the same
fiscal year during and after the current fiscal year ending September 30, 2005.


Section 9.3.            Payment
of Taxes and Claims.  The Company
will, and will cause each of its Subsidiaries to, pay before they become
delinquent:


(a)           all taxes,
assessments and governmental charges or levies imposed upon the Company or any
of its Subsidiaries or their income or profits or upon their property, real,
personal or mixed, or upon any part thereof;


(b)           all claims for
labor, materials and supplies which, if unpaid, might result in the creation of
a Lien upon property of the Company or any of its Subsidiaries; and


(c)           all claims,
assessments, or levies required to be paid by the Company or any of its ERISA
Affiliates pursuant to any Plan or Multiemployer Plan or any agreement,
contract or Requirement of Law governing or relating to any such plan;


provided, that the taxes, assessments,
claims, charges and levies described in subsections (a) and (b) of this Section
9.3 need not be paid while being diligently contested in good faith and by
appropriate proceedings so long as (i) adequate book reserves have been
established with respect thereto in accordance with GAAP and (ii) neither the
Company’s nor any such Subsidiary’s title to or right to use its property is
materially adversely affected by such non-payment. The Company will timely
file, and will cause its Subsidiaries to file, all tax returns required to be
filed in connection with the payment of taxes required by this Section 9.3.


 


Section 9.4.            Compliance
With Law.  The Company will, and will
cause each of its Subsidiaries to comply with all applicable Requirements of
Law, franchises, authorizations, licenses and permits of, and all applicable
restrictions imposed by, any Governmental Authority in respect of the conduct
of its business and the ownership of its properties (including all
Environmental Laws and all applicable Requirements of Law, franchises,
authorizations, licenses and permits relating to fair labor standards, equal
employment opportunities and occupational health and safety), including the
timely filing or distribution to the Company’s stockholders of all reports and
statements which the Company is required to so file or distribute under the
Exchange Act, the rules and regulations of the SEC promulgated thereunder or
the applicable rules of any securities market on which the Company Common Stock
is listed.


Section 9.5.            Environmental
Matters.  The Company will, and will
cause each of its Subsidiaries to: 
(a) conduct its operations and keep and maintain all real property
owned or used by it in compliance with all Environmental Laws and Environmental
Permits other than noncompliance that could not reasonably be expected to have
a Material Adverse Effect; (b) implement any and all investigations,
remediations, removals and response actions that are appropriate or necessary
to maintain the value and marketability of such real property or to 


 


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otherwise
comply with Environmental Laws and Environmental Permits pertaining to the
presence, generation, treatment, storage, use, disposal, transportation or
Release of any Hazardous Material on, at, in, under, above, to, from or about
any of such real property; (c) notify the Purchasers promptly after any
Responsible Officer of the Company or any of its Subsidiaries has knowledge of
any violation of Environmental Laws or Environmental Permits or any Release on,
at, in, under, above, to, from or about any such real property that is
reasonably likely to result in liabilities in excess of $50,000 in the
aggregate; and (d) promptly forward to the Purchasers a copy of any order,
notice, request for information or any communication or report received by the Company
or any of its Subsidiaries in connection with any such violation or Release or
any other matter relating to any Environmental Laws or Environmental Permits
that could reasonably be expected to result in liabilities in excess of $50,000
in the aggregate, in each case whether or not the Environmental Protection
Agency or any Governmental Authority has taken or threatened any action in
connection with any such violation, Release or other matter.  If the Majority Purchasers at any time have a
reasonable basis to believe that there may be a violation of any Environmental
Laws or Environmental Permits by any the Company or any of its Subsidiaries or
any liability arising thereunder, or a Release of Hazardous Materials on, at,
in, under, above, to, from or about any of such real property, that, in each
case, could reasonably be expected to have a Material Adverse Effect, then upon
the Majority Purchasers’ written request the Company shall, and shall cause its
Subsidiaries to, (i) cause the performance of such environmental audits
including subsurface sampling of soil and groundwater, and preparation of such
environmental reports, at the Company’s expense, as the Majority Purchasers may
from time to time reasonably request, which shall be conducted by reputable
environmental consulting firms reasonably acceptable to the Majority Purchasers
and shall be in form and substance reasonably acceptable to the Majority
Purchasers, and (ii) permit the Majority Purchasers or their
representatives to have access to all such real property for the purpose of
conducting such environmental audits and testing as the Majority Purchasers
deem appropriate, including subsurface sampling of soil and groundwater.  The Company shall reimburse the Purchasers
upon demand for the costs of such audits and tests.


Section 9.6.            Insurance.


(a)           The Company shall maintain, and shall cause each of
its Subsidiaries to maintain, with independent insurers reasonably believed by
the Company to be financially sound and reputable, (i) property
damage and casualty insurance on all real and personal property of the Company
and its Subsidiaries on an all risks basis, covering the repair and replacement
cost of all such property, and (ii) other insurance with respect to its
business against loss or damage of the kinds customarily insured against by
Persons engaged in the same or similar business, of such types and in such
amounts as are customarily carried under similar circumstances by such other
Persons, including in any event workers’ compensation insurance, public
liability (including products/completed operations liability coverage) and
business interruption insurance. The coverage amounts of such insurance shall
not be reduced by the Company or any of its Subsidiaries in the absence of
thirty (30) days’ prior written notice to the Collateral Agent.  All property damage and casualty insurance
shall name the Collateral Agent as lender loss payee/mortgagee, all liability
insurance shall name the Collateral Agent as an additional insured and all
business interruption insurance shall name the Collateral Agent as assignee.


 


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(b)           If the amount of any
insurance proceeds received by the Company or its Subsidiaries in respect of
any occurrence of loss or damage to property of the Company or its Subsidiaries
is less than $100,000 and no Non-Compliance or Event of Non-Compliance shall
have occurred and be continuing, such proceeds shall be retained by the Company
or such Subsidiary and used to pay for the repair, replacement or
reconstruction of the property subject to such loss or damage. If the amount of
such insurance proceeds is equal to or greater than such amount or if a
Non-Compliance or Event of Non-Compliance shall have occurred and be
continuing, then such proceeds shall be immediately paid over to the Purchasers
and applied to the repurchase of Preferred Shares in accordance with the
provisions of Section 3.1(b).


Section 9.7.            After
Acquired Real Property.  Without
affecting the Obligations of the Company or any of its Subsidiaries under any
of the Security Documents, in the event that the Company or any of its
Subsidiaries at any time after the date hereof acquires any material interest
(including a leasehold interest) in any real property, or any Person having
such an interest in real property shall become a New Subsidiary (each such
interest, an “After Acquired Real Property”),
the Company shall immediately provide written notice thereof to the Collateral
Agent, setting forth with specificity a description of the interest acquired,
the location of the After Acquired Real Property, any structures or
improvements thereon and the fair market value of such real property.  As soon as practicable thereafter, the
Company shall execute and deliver, or shall cause the Person holding such After
Acquired Real Property (if other than the Company) to execute and deliver, to
the Collateral Agent a Mortgage on such After Acquired Real Property together
with such other Mortgage Documents relating thereto as the Collateral Agent
shall reasonably require.  The Company
shall also deliver to the Collateral Agent one or more opinions of counsel for
the Company or such Subsidiary (including opinions of local counsel) covering
such legal matters with respect to such Mortgage Documents as the Collateral
Agent may reasonably request.  The
Company shall pay all fees and expenses, including attorneys’ fees and expenses
of counsel for the Collateral Agent, and all title insurance charges and
premiums, in connection with its Obligations under this Section 9.7.


Section 9.8.            Future
Subsidiaries.  If any Person which is
not a Subsidiary of the Company on the date hereof shall hereafter become a
direct or indirect Subsidiary of the Company (each a “New
Subsidiary”), the Company shall, not later than the date on
which such Person becomes such a Subsidiary of the Company, (a) provide written
notice to the Collateral Agent of the formation or acquisition of the New
Subsidiary by the Company or its Subsidiaries, which notice shall describe in
reasonable detail the New Subsidiary, its operations and assets and the nature
and ownership of its outstanding Equity Interests, (b) deliver to the
Collateral Agent stock certificates or other certificates representing all of
the outstanding Equity Interests of the New Subsidiary held by the Company and
its Subsidiaries, accompanied by appropriate stock powers or other assignments
duly executed in blank by the Company or such Subsidiaries (as the case may
be), and (c) shall promptly cause the New Subsidiary to deliver to the
Collateral Agent:


(i)            an
Assumption Agreement in the form attached as Annex 1 to the Subsidiary
Guarantee, duly executed by the New Subsidiary;


(ii)           an
Assumption Agreement in the form attached as Annex 1 to the Security Agreement,
duly executed by the New Subsidiary;


 


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(iii)          Mortgage
Documents with respect to each After Acquired Real Property of the New
Subsidiary, and all other items required by Section 9.7 with respect thereto;


(iv)          all
other Security Documents and other documents which may be required under
applicable law, or which the Collateral Agent may reasonably request, in order
to grant, preserve, protect and perfect the validity and first priority of the
Liens and security interests created by the Security Documents in the
Collateral of such New Subsidiary, each duly executed by the New Subsidiary;
and


(v)           one
or more opinions of counsel (including opinions of local counsel) covering such
legal matters with respect to the foregoing agreements and documents as the
Collateral Agent may reasonably request.


The Company and the New Subsidiary shall also take all such other
actions, including the filing or recording of appropriate Uniform Commercial
Code financing statements, fixture filings and other filings, which the
Collateral Agent may reasonably request in order to grant to the Collateral
Agent valid and perfected first priority Liens and security interests in all of
the Collateral owned by the New Subsidiary and otherwise to effectuate the
transactions contemplated by this Agreement and the Note Documents.


Section 9.9.            Use of
Proceeds.  The proceeds from the sale
and issuance of the Preferred Shares and Warrants will be used solely
(i) to retire existing Indebtedness of the Company and its Subsidiaries,
(ii) to pay all or part of the purchase price of the Acquisition and fees and
expenses incurred by the Company or its Subsidiaries in connection therewith,
and (iii) for general corporate purposes; provided that the
proceeds of the sale and issuance of the Seaview Preferred Shares and Seaview
Initial Warrants will be used to repurchase Preferred Shares and Initial
Warrants from TICC pursuant to Section 2.3(c). 
The Company shall provide each SBIC Investor and the SBA reasonable
access to the Company’s books and records for the purpose of confirming the use
of proceeds from the sale of the Preferred Shares and Warrants.


Section 9.10.          Registration
Statement.  Within 30 days after the
Initial Closing Date, the
Company will file with the SEC either (i) a registration statement on Form
10-SB under the Exchange Act with respect to the Company Common Stock or (ii) a
registration statement on Form SB-2 under the Securities Act (either such
registration statement, as filed and as from time to time amended, the “Registration Statement”).  The Registration Statement will comply in all
material respects as to form with the applicable requirements of the Exchange
Act or the Securities Act (as the case may be) and the rules promulgated by the
SEC thereunder, and will not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein
not misleading. Following the filing of the Registration Statement,
the Company will take all such actions with respect to thereto (including
responding promptly and appropriately to any comments on such registration
statement received from the SEC) that may be reasonably required in order to
induce the SEC to declare the Registration Statement effective at the earliest
practicable date.


 


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Section 9.11.          SBIC
Covenants. 


(a)           So long as any SBIC
Investor holds any securities of the Company, the Company will at all times
comply with the non-discrimination requirements of 13 C.F.R. Parts 112, 113 and
117.


(b)           Within forty-five
(45) days after the end of each fiscal year of the Company and at such other
times as an SBIC Investor may reasonably request, the Company shall deliver to
each SBIC Investor a written assessment, in form and substance satisfactory to
such SBIC Investor, of the economic impact of such SBIC Investor’s financing
specifying the full-time equivalent jobs created or retained in connection with
such investment, and the impact of the financing on the Company’s business in
terms of profits and on taxes paid by the Company and its employees. Upon
request, the Company agrees to promptly provide each SBIC Investor with
sufficient information to permit such SBIC Investor to comply with their
obligations under the Small Business Investment Act of 1958, as amended, and
the regulations promulgated thereunder and related thereto.  Any submission of any financial information
under this Section shall include a certificate of the Company’s president,
chief executive officer, treasurer or chief financial officer.


Section 10.             Negative
Covenants.  The Company covenants and
agrees that so long as any of the Preferred Shares shall be outstanding:


Section 10.1.          Restrictions
on Indebtedness.  The Company will
not, and will not permit any of its Subsidiaries to, incur, create, assume,
guarantee or in any way become liable for, or permit to exist, Indebtedness
other than:


(a)           Indebtedness of the
Company and its Subsidiaries existing on the Initial Closing Date and listed on
Schedule 4.27;


(b)           Purchase Money
Indebtedness incurred to finance Capital Expenditures permitted by Section
11.1; provided that the principal amount of Purchase Money Indebtedness
incurred pursuant to this Section 10.1(b) shall not exceed $500,000 in the
aggregate at any time outstanding;


(c)           Indebtedness of any
Wholly-owned Subsidiary of the Company to the Company or to another
Wholly-owned Subsidiary of the Company; and


(d)           Indebtedness
represented by the Notes.


Section 10.2.          Restrictions
on Liens.  The Company will not, and
will not permit any of its Subsidiaries to, directly or indirectly, create,
assume or suffer to exist any Lien upon any of their respective properties or
assets whether now owned or hereafter acquired, except for the following (the “Permitted Liens”):


(a)           Liens for taxes,
assessments, governmental charges or claims the payment of which is not at the
time required by Section 9.3;


 


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(b)           statutory Liens of
landlords and Liens of carriers, warehousemen, mechanics, materialmen and other
Liens imposed by law incurred in the ordinary course of business for sums, the
payment of which is not at the time required by Section 9.3;


(c)           Liens (other than
any Lien imposed by ERISA, and other than any Lien securing an obligation for
the payment of borrowed money or for the deferred purchase price of property or
services) incurred or deposits made in the ordinary course of business in
connection with obligations not due or delinquent with respect to workers’ compensation,
unemployment insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, surety and appeal bonds, bids,
leases, government contracts, performance and return-of-money bonds
and other similar obligations;


(d)           attachment or
judgment Liens (including judgment or appeal bonds) not exceeding $100,000 in
the aggregate at any time outstanding, provided that any such Lien shall,
within 30 days after the entry thereof, have been discharged or execution thereof
stayed pending appeal, or shall have been discharged within 30 days after the
expiration of any such stay;


(e)           zoning restrictions,
easements, licenses, reservations, restrictions on the use of real property or
minor irregularities incident thereto (and, with respect to leasehold
interests, Liens and other encumbrances that are incurred, created, assumed or
permitted to exist on or with respect to the leased property and arise by,
through or under or are asserted by a landlord or owner of the leased property,
with or without consent of the lessee) which were not incurred in connection
with the borrowing of money and which do not in the aggregate materially
detract from the value of the property of the Company or any of its
Subsidiaries, as the case may be, or impair the use of such property for the
purposes for which such property is held by the Company or any such Subsidiary;


(f)            Liens securing
Indebtedness of a Wholly-owned Subsidiary of the Company to the Company or to
another Wholly-owned Subsidiary of the Company;


(g)           Liens existing on
the Initial Closing Date (other than any such Liens that secure Purchase Money
Indebtedness);


(h)           Liens securing
Purchase Money Indebtedness incurred in connection with the purchase,
acquisition or construction by the Company or its Subsidiaries of real
property, improvements thereto, equipment or other fixed assets or intangibles
(including software); provided that (i) such security interests secure
Indebtedness permitted by Section 10.1(b), (ii) such security interests are
incurred, and the Indebtedness secured thereby is created, within one year
after such acquisition (or construction), (iii) the Indebtedness secured
thereby does not exceed the fair market value of such real property,
improvements or equipment at the time of such acquisition (or construction) and
(iv) such security interests do not apply to any other property or assets
(other than accessions to such real property, improvements or equipment) of the
Company or any of its Subsidiaries;


(i)            any Lien on property
of a Subsidiary of the Company existing at the time it becomes such a
Subsidiary;


 


64





















 


(j)            the Liens created
by the Security Documents; and


(k)           the extension,
renewal or replacement of any Lien permitted by subsection (g), (h) or (i)
of this Section 10.2, but only if the principal amount of the Indebtedness
secured by such Lien immediately prior to such extension, renewal or
replacement is not increased and the Lien is not extended to other property.


Section 10.3.          Limitation
on Sale and Leasebacks.  The Company
will not, and will not permit any of its Subsidiaries to:


(a)           enter into any Sale
and Leaseback Transaction other than any Sale and Leaseback Transaction for
which the lease is a Capitalized Lease and the Capitalized Lease is permitted
under Section 10.1(b); or


(b)           enter into any
Synthetic Lease.


Section 10.4.          Mergers,
Consolidations, Sales of Assets and Acquisitions.  The Company will not, and will not permit any
of its Subsidiaries to, (i) consolidate with or be a party to a merger with any
other Person, or (ii) sell or otherwise Dispose of any or all of the assets of
the Company and its Subsidiaries, or any of the Equity Interests of any direct
or indirect Subsidiary of the Company, or (iii) acquire by purchase or
otherwise a majority of any class of the Equity Interests of any Person, or all
or substantially all of the business or property of any Person or of any
operating division or line of business of any Person, except as follows:


(a)           any Wholly-owned
Subsidiary of the Company may merge or consolidate with or into the Company or
with or into any other Wholly-owned Subsidiary of the Company so long as in any
merger or consolidation involving the Company, the Company shall be the
surviving or continuing corporation;


(b)           the Company may
effect a Permitted Change of Jurisdiction;


(c)           the Company or any
Wholly-owned Subsidiary of the Company may merge or consolidate with a Person
acquired pursuant to a Permitted Acquisition, so long as, in the case of any
such merger by the Company, the Company shall be the surviving or continuing
corporation;


(d)           the Company or any
Wholly-owned Subsidiary of the Company may purchase or acquire all of the
Equity Interests of a Person, or all or substantially all of the assets of a
Person or of a division or line of business of a Person, pursuant to a
Permitted Acquisition;


(e)           the Company and any
of its Subsidiaries may, in the ordinary course of its business, sell or
otherwise Dispose of Inventory owned by the Company or such Subsidiary and
grant non-exclusive licenses on Intellectual Property owned by the Company or
such Subsidiary;


(f)            the Company and any
of its Subsidiaries may sell or otherwise Dispose of obsolete or worn out
property in the ordinary course of business, in an amount not to exceed
$150,000 in the aggregate during any fiscal year of the Company;


 


65





















 


(g)           any Subsidiary of
the Company may sell, lease or otherwise Dispose of all or any part of its
assets to the Company or any Wholly-owned Subsidiary of the Company; and


(h)           the Company and its
Subsidiaries may sell or otherwise Dispose of assets other than in the ordinary
course of business (excluding Equity Interests in any direct or indirect
Subsidiary of the Company) if (i) the consideration received by the Company and
its Subsidiaries in respect of any such sale or other Disposition shall be not
less than the fair market value of the assets thereby sold or Disposed of, (ii)
at least seventy-five percent (75%) of the aggregate sales price of such sale
or other Disposition shall be paid in Cash or Cash Equivalents, (iii) both
immediately before and immediately after giving effect to such sale or other
Disposition, no Non-Compliance or Event of Non-Compliance shall have occurred
and be continuing, and (iv) the aggregate fair market value of all assets sold
or otherwise Disposed of by the Company and its Subsidiaries pursuant to this
subsection (h) in any fiscal year of the Company shall not exceed $150,000.


Section 10.5.          Conduct
of Business.  The Company will not,
and will not permit any of its Subsidiaries to, engage in any business or
activities other than the Business and any businesses or activities
substantially similar or related thereto. 
Without limiting the foregoing, for a period of one year following the
Second Closing Date, the Company shall not change the nature of its business
activities if such change would render the Company ineligible as provided in 13
C.F.R. Section 107.720.


Section 10.6.          Restricted
Payments and Restricted Investments. 
The Company will not, will not permit any of its Subsidiaries to,
directly or indirectly make any Restricted Payment or Restricted Investment,
except:


(a)           payments to the
Purchasers required by the provisions of this Agreement, the other Transaction
Documents or the Note Documents;


(b)           the declaration and
payment of dividends and distributions by a Wholly-owned Subsidiary of the
Company on its outstanding Equity Interests to the Company or to another
Wholly-owned Subsidiary of the Company; and


(c)           Investments made as
part of a Permitted Acquisition.


Section 10.7.          Disqualified
Redeemable Stock; Issuance of Stock by Subsidiaries.


(a)           The Company will not
issue or at any time have outstanding any Disqualified Redeemable Stock or any
options, warrants or other rights to subscribe for or purchase Disqualified
Redeemable Stock, other than the Preferred Shares.


(b)           The Company will not
permit any Subsidiary of the Company to (i) issue, sell or otherwise
Dispose of any shares of its common stock or other Common Equity Interests, or
any warrants, options, conversion rights or other rights to subscribe for,
purchase or acquire such common stock or other Common Equity Interests (other
than directors’ qualifying shares, to satisfy preemptive rights or in
connection with a split or combination of shares or a dividend payable in
shares of the same class of common stock or other Common Equity Interests),
except 


 


66





















 


to
the Company or to a Wholly-owned Subsidiary of the Company, or (ii) issue
or have outstanding any of its shares of preferred stock or other Preferred
Equity Interests (or any warrants, options, conversion rights or other rights
to subscribe for, purchase or acquire such preferred stock or other Preferred
Equity Interests) other than shares of such preferred stock or Preferred Equity
Interests owned by the Company or a Wholly-owned Subsidiary of the Company.


Section 10.8.          Transactions
with Affiliates.  Except in the case
of (i) transactions among the Company and its Wholly-owned Subsidiaries, (ii)
payments of reasonable fees, compensation and benefits consistent with past
practice, and provision of reasonable indemnification, to officers, employees,
consultants and agents of the Company and its Subsidiaries for actual services
rendered to the Company and its Subsidiaries in the ordinary course of
business, all as determined by the Board of Directors or senior management of
the Company in good faith, (iii) payments made pursuant to and in accordance
with the provisions of the Employment Agreements, (iv) payments to directors of
the Company and its Subsidiaries of reasonable fees for service in such
capacity consistent with past practice and reimbursement of actual out-of-pocket
expenses incurred in connection with attending meetings of the boards of
directors of the Company and its Subsidiaries and committees thereof, and
provision of reasonable indemnification to such directors, all as determined by
the Board of Directors in good faith, and (v) a Permitted Change of
Jurisdiction, the Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, enter into or permit to exist any transaction
(including the purchase, sale, lease or exchange of any property or the
rendering of any service), with any Affiliate of the Company or such Subsidiary
unless such transaction is otherwise permitted under this Agreement, is in the
ordinary course of the Company’s or such Subsidiary’s business and is on fair
and reasonable terms that are not less favorable to the Company or such
Subsidiary, as the case may be, than those that would be obtainable at the time
in an arms’ length transaction with a Person who is not such an Affiliate.


Section 10.9.          Operating
Leases.  The Company will not, and
will not permit any of its Subsidiaries to, enter into (as lessee) any lease of
real or personal property (other than Capitalized Leases) having a term greater
than one year (including options to renew or extend any term, whether or not
exercised) if, after giving effect thereto, the aggregate amount of rentals and
other payments required to be made by the Company and its Subsidiaries during
any fiscal year of the Company under all such leases would be greater than
$250,000.


Section 10.10.        Contingent
Obligations.  The Company will not,
and will not or permit any of its Subsidiaries to, create, incur, assume or
suffer to exist any Contingent Obligations except:


(a)           Swap Contracts
entered into in the ordinary course of business for bona fide hedging purposes
and not for purposes of speculation;


(b)           Contingent
Obligations of the Company and its Subsidiaries existing as of the Initial
Closing Date and listed in Schedule 4.27,
including extensions and renewals thereof which do not increase the amount of
such Contingent Obligations as of the date of such extension or renewal;


 


67





















 


(c)           Contingent
Obligations incurred in the ordinary course of business with respect to surety
and appeal bonds, performance bonds and other similar obligations (exclusive of
obligations for the payment of borrowed money);


(d)           Contingent
Obligations resulting from endorsements for collection or deposit in the
ordinary course of business;


(e)           Contingent
Obligations arising under indemnity agreements to title insurers to cause such
title insurers to issue title insurance policies required hereunder; and


(f)            Contingent
Obligations arising with respect to customary indemnification obligations in
favor of purchasers in connection with Dispositions permitted under Section
10.4(h).


Section 10.11.        Limitation
on Dividend Restrictions Affecting Subsidiaries.  Except pursuant to this Agreement, the
Company will not permit any of its Subsidiaries directly or indirectly to
create or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction which by its terms restricts the ability of any such
Subsidiary to (a) pay dividends or make any other distributions on such
Subsidiary’s Equity Interests, (b) pay any Indebtedness owed to the Company or
any other Subsidiary of the Company, (c) make any loans or advances to the
Company or any other Subsidiary of the Company or (d) transfer any of its
property or assets to the Company or any other Subsidiary of the Company.


Section 10.12.        Compliance with ERISA.   The Company will not, and will not permit
any of its Subsidiaries to:


(a)           terminate any Plan
subject to Title IV of ERISA so as to result in any material liability to the
Company or any ERISA Affiliate;


(b)           permit to exist any
ERISA Event or any other event or condition, which would reasonably be expected
to have a Material Adverse Effect;


(c)           make a complete or
partial withdrawal (within the meaning of ERISA Section 4201) from any
Multiemployer Plan so as to result in any material liability to the Company or
any ERISA Affiliate;


(d)           enter into any new
Pension Plan or Multiemployer Plan or modify any existing Pension Plan so as to
increase its obligations thereunder which would reasonably be expected to have a
Material Adverse Effect; or


(e)           permit the present
value of all nonforfeitable accrued benefits under any Pension Plan subject to
Title IV of ERISA (using the actuarial assumptions utilized by the PBGC upon
termination of a Plan) materially to exceed the fair market value of Plan
assets allocable to such benefits, all determined as of the most recent
valuation date for each such Plan.


Section 10.13.        Accounting
Changes.  The Company will not, and
will not permit any of its Subsidiaries to, (a) make any material change in
accounting treatment or reporting practices, 


 


68





















 


except
any material change required by GAAP and which is approved in writing by the
Accountants, or (b) adopt or utilize any change in GAAP or the application
thereof for purposes of determining compliance with the covenants contained in
Sections 10 and 11 hereof or elsewhere herein except as permitted by Section
1.2(c).


Section 10.14.        No
Amendment of Organizational Documents or Certain Other Documents.  The Company will not, and will not permit any
of its Subsidiaries to, without the prior written consent of the Majority
Purchasers, (a) make any material changes in its equity capital structure
(including in the terms of its authorized or outstanding capital stock), (b)
permit any amendment to, modification of or supplement to the Company Charter
or the other Organizational Documents of the Company or any Subsidiary of the
Company (including the filing of any certificate establishing, setting forth,
amending, modifying or supplementing the designations, preferences or rights
pertaining to or other terms of any class or series of capital stock of the
Company or its Subsidiaries), or (c) permit any amendment to, modification of
or supplement to any of the Special Documents.


Section 11.             Financial
Covenants.  The Company covenants and
agrees that so long as any of the Preferred Shares shall be outstanding:


Section 11.1.          Capital
Expenditures.


(a)           The Company will
not, and will not permit any of its Subsidiaries to, make or incur any Capital
Expenditure or any contractual commitment with respect to any Capital
Expenditure if, after giving effect thereto, the aggregate amount of all
Capital Expenditures by the Company and its Subsidiaries in any fiscal year
(commencing with the fiscal year ending on September 30, 2006) would exceed
$400,000.


(b)           No commitment for
any new Capital Expenditures shall be made at any time when a Non-Compliance or
Event of Non-Compliance shall have occurred and shall be continuing.


Section 11.2.          Maintenance
of Minimum Interest Coverage.  With
respect to each of the periods of four consecutive fiscal quarters ending on
the respective dates set forth below, the ratio of (i) Consolidated EBITDA for
such period to (ii) Consolidated Interest Expense for such period will not be
less than the corresponding amount set forth opposite such date:


 


69





















 




	
  Period of Four

  	
   

  	
   

  	
   

  
	
  Fiscal Quarters Ended:

  	
   

  	
  Minimum
  Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2005

  	
   

  	
  2.00
  to 1.00

  	
   

  
	
  March 31, 2006

  	
   

  	
  2.50
  to 1.00

  	
   

  
	
  June 30, 2006

  	
   

  	
  2.50
  to 1.00

  	
   

  
	
  September 30, 2006

  	
   

  	
  3.00
  to 1.00

  	
   

  
	
  December 31, 2007

  	
   

  	
  3.25
  to 1.00

  	
   

  
	
  March 31, 2007

  	
   

  	
  3.25
  to 1.00

  	
   

  
	
  June 30, 2007

  	
   

  	
  3.25
  to 1.00

  	
   

  
	
  September 30, 2007

  	
   

  	
  3.50
  to 1.00

  	
   

  
	
  December 31, 2007

  	
   

  	
  3.50
  to 1.00

  	
   

  
	
  March 31, 2008

  	
   

  	
  3.50
  to 1.00

  	
   

  
	
  June 30, 2008

  	
   

  	
  3.75
  to 1.00

  	
   

  
	
  September 30, 2008

  	
   

  	
  3.75
  to 1.00

  	
   

  
	
  December 31, 2008

  	
   

  	
  3.75
  to 1.00

  	
   

  
	
  March 31, 2009 and the
  last day of any subsequent fiscal quarter

  	
   

  	
  4.00
  to 1.00

  	
   

  






 


Section 11.3.          Maintenance of Maximum Leverage
Ratio.   With respect to each of the
periods of four consecutive fiscal quarters ending on the respective dates set
forth below, the ratio of (i) Consolidated Total Indebtedness as of the last
day of such period to (ii) the Consolidated EBITDA for such period will not be
greater than the corresponding amount set forth opposite such date:


 




	
  Period of Four

  	
   

  	
   

  	
   

  
	
  Fiscal Quarters Ended:

  	
   

  	
  Maximum
  Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2005

  	
   

  	
  4.00
  to 1.00

  	
   

  
	
  March 31, 2006

  	
   

  	
  3.50
  to 1.00

  	
   

  
	
  June 30, 2006

  	
   

  	
  3.00
  to 1.00

  	
   

  
	
  September 30, 2006

  	
   

  	
  3.00
  to 1.00

  	
   

  
	
  December 31, 2007

  	
   

  	
  3.00
  to 1.00

  	
   

  
	
  March 31, 2007

  	
   

  	
  2.75
  to 1.00

  	
   

  
	
  June 30, 2007

  	
   

  	
  2.75
  to 1.00

  	
   

  
	
  September 30, 2007

  	
   

  	
  2.75
  to 1.00

  	
   

  
	
  December 31, 2007

  	
   

  	
  2.75
  to 1.00

  	
   

  
	
  March 31, 2008

  	
   

  	
  2.50
  to 1.00

  	
   

  
	
  June 30, 2008

  	
   

  	
  2.50
  to 1.00

  	
   

  
	
  September 30, 2008

  	
   

  	
  2.50
  to 1.00

  	
   

  
	
  December 31, 2008

  	
   

  	
  2.50
  to 1.00

  	
   

  
	
  March 31, 2009 and the
  last day of any subsequent fiscal quarter

  	
   

  	
  2.25
  to 1.00

  	
   

  






 


 


70






 













Section 11.4.          Maintenance
of Minimum Consolidated EBITDA.  With
respect to each of the periods of four consecutive fiscal quarters ending on
the respective dates set forth below, the amount of Consolidated EBITDA for
such period will not be less than the corresponding amount set forth opposite
such date:




	
  Period of Four

  	
   

  	
   

  	
   

  
	
  Fiscal Quarters Ended:

  	
   

  	
  Minimum Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2005

  	
   

  	
  $

  	
  5,187,000

  	
   

  
	
  March 31, 2006

  	
   

  	
  $

  	
  6,096,000

  	
   

  
	
  June 30, 2006

  	
   

  	
  $

  	
  7,006,000

  	
   

  
	
  September 30, 2006

  	
   

  	
  $

  	
  7,006,000

  	
   

  
	
  December 31, 2007

  	
   

  	
  $

  	
  7,238,000

  	
   

  
	
  March 31, 2007

  	
   

  	
  $

  	
  7,417,000

  	
   

  
	
  June 30, 2007

  	
   

  	
  $

  	
  7,541,000

  	
   

  
	
  September 30, 2007

  	
   

  	
  $

  	
  7,719,000

  	
   

  
	
  December 31, 2007

  	
   

  	
  $

  	
  7,882,000

  	
   

  
	
  March 31, 2008

  	
   

  	
  $

  	
  8,085,000

  	
   

  
	
  June 30, 2008

  	
   

  	
  $

  	
  8,329,000

  	
   

  
	
  September 30, 2008

  	
   

  	
  $

  	
  8,533,000

  	
   

  
	
  December 31, 2008

  	
   

  	
  $

  	
  8,712,000

  	
   

  
	
  March 31, 2009

  	
   

  	
  $

  	
  8,935,000

  	
   

  
	
  June 30, 2009

  	
   

  	
  $

  	
  9,203,000

  	
   

  
	
  September 30, 2009

  	
   

  	
  $

  	
  9,426,000

  	
   

  
	
  December 31, 2009

  	
   

  	
  $

  	
  9,621,000

  	
   

  
	
  March 31, 2010

  	
   

  	
  $

  	
  9,864,000

  	
   

  
	
  June 30, 2010

  	
   

  	
  $

  	
  10,155,000

  	
   

  






 


Section 11.5.          Maintenance
of Minimum Consolidated Revenues. 
With respect to each of the periods of four consecutive fiscal quarters
ending on the respective dates set forth below, the amount of Consolidated
Revenues for such period will not be less than the corresponding amount set
forth opposite such date:


 


71





















 




	
  Period of Four

  	
   

  	
   

  	
   

  
	
  Fiscal Quarters Ended:

  	
   

  	
  Minimum Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2005

  	
   

  	
  $

  	
  16,493,000

  	
   

  
	
  March 31, 2006

  	
   

  	
  $

  	
  18,554,000

  	
   

  
	
  June 30, 2006

  	
   

  	
  $

  	
  20,615,000

  	
   

  
	
  September 30, 2006

  	
   

  	
  $

  	
  20,615,000

  	
   

  
	
  December 31, 2007

  	
   

  	
  $

  	
  21,027,000

  	
   

  
	
  March 31, 2007

  	
   

  	
  $

  	
  21,543,000

  	
   

  
	
  June 30, 2007

  	
   

  	
  $

  	
  22,161,000

  	
   

  
	
  September 30, 2007

  	
   

  	
  $

  	
  22,677,000

  	
   

  
	
  December 31, 2007

  	
   

  	
  $

  	
  23,130,000

  	
   

  
	
  March 31, 2008

  	
   

  	
  $

  	
  23,697,000

  	
   

  
	
  June 30, 2008

  	
   

  	
  $

  	
  24,378,000

  	
   

  
	
  September 30, 2008

  	
   

  	
  $

  	
  24,945,000

  	
   

  
	
  December 31, 2008

  	
   

  	
  $

  	
  25,444,000

  	
   

  
	
  March 31, 2009

  	
   

  	
  $

  	
  26,067,000

  	
   

  
	
  June 30, 2009

  	
   

  	
  $

  	
  26,816,000

  	
   

  
	
  September 30, 2009

  	
   

  	
  $

  	
  27,439,000

  	
   

  
	
  December 31, 2009

  	
   

  	
  $

  	
  27,988,000

  	
   

  
	
  March 31, 2010

  	
   

  	
  $

  	
  28,674,000

  	
   

  
	
  June 30, 2010

  	
   

  	
  $

  	
  29,497,000

  	
   

  






 


Section 11.6.          Maintenance
of Minimum Cash Amount.  The
aggregate amount of Cash on hand (net of any overdrafts on Deposit Accounts) of
the Company and its Subsidiaries as of the close of business on the last day of
any fiscal quarter (commencing with the fiscal quarter ending December 31,
2005) will not be less than $500,000.


Section 12.             Events
of Non-Compliance.


Section 12.1.          Events
of Non-Compliance; Remedies.  If any
of the following events (herein called “Events of Non-Compliance”)
shall have occurred and be continuing (whatever the reason for such Event of
Non-Compliance and whether it shall be voluntary or involuntary or by operation
of law or otherwise):


(a)           the Company shall
fail to comply with any requirement contained herein or in the Company Charter
to redeem or repurchase and pay the applicable redemption or repurchase price
of any Preferred Shares at the time such redemption or repurchase and payment
are so required;


(b)           the Company shall
fail to pay any dividends in respect of the Preferred Shares when and as such
dividends shall become due and payable under the provisions of the Company
Charter;


(c)           the Company shall
fail to comply with any of the covenants, agreements or conditions contained in
Section 7(a), Section 7(b), Section 7(c), Section 7(d), Section 7(h), 


 


72





















 


Section
7(i), Section 9.2(a), Section 9.2(c), Section 9.6, Section 9.7, Section 9.8,
Section 9.10 and Section 11 of this Agreement;


(d)           the Company or any
of its Subsidiaries shall fail to comply with any of the covenants, agreements
or conditions contained in this Agreement or any of the other Transaction
Documents (other than those referred to in any subsection of this Section 12.1
other than this subsection (d)), and such failure shall continue for a period
of 30 days;


(e)           (i) the Company or
any of its Subsidiaries shall fail to pay any principal of, or interest on, or
any other amount payable in respect of Indebtedness of such Person that is
outstanding in a principal amount of at least $500,000 in the aggregate when
the same becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such Indebtedness; or (ii) any other event shall occur
or condition shall exist under any agreement or instrument relating to any such
Indebtedness and shall continue after the applicable grace period, if any, specified
in such agreement or instrument, if the effect of such event or condition is to
permit the acceleration of the maturity of such Indebtedness (whether or not
such acceleration occurs); or (iii) any such Indebtedness shall be declared to
be due and payable or required to be prepaid (other than by a regularly
scheduled required prepayment), redeemed, purchased or defeased, or an offer to
prepay, redeem, purchase or defease such Indebtedness shall be required to be
made, in each case prior to the stated maturity thereof;


(f)            the Company or any
of its Subsidiaries shall (i) voluntarily commence any proceeding or file any
petition seeking relief under the Bankruptcy Code, or any other federal, state
or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to
the institution of, or fail to contest in a timely and appropriate manner, any
proceeding or the filing of any petition described in (g) below, (iii) apply
for or consent to the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Company or any of its Subsidiaries, or
for a substantial part of the property or assets of the Company or any of its
Subsidiaries, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general assignment
for the benefit of creditors, (vi) admit in writing its inability to pay its
debts as they become due or (vii) take any action for the purpose of effecting
any of the foregoing;


(g)           an involuntary proceeding
shall be commenced or an involuntary petition shall be filed in a court of
competent jurisdiction seeking (i) relief in respect of the Company or any of
its Subsidiaries, or of a substantial part of the property or assets of the
Company or any of its Subsidiaries, under the Bankruptcy Code, or any other
federal, state or foreign bankruptcy, insolvency, receivership or similar law,
(ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Company or any of its Subsidiaries, or
for a substantial part of the  property
or assets of the Company or any of its Subsidiaries, or (iii) the winding-up or
liquidation of the Company or any of its Subsidiaries, and such proceeding or
petition shall continue undismissed for 60 days, or an order or decree
approving or ordering any of the foregoing shall be entered;


 


73





















 


(h)           final judgment for
the payment of money shall be rendered by a court of competent jurisdiction against
the Company or any of its Subsidiaries, and the Company or such Subsidiary, as
the case may be, shall not discharge the same or provide for its discharge in
accordance with its terms, or procure a stay of execution thereof, within 30
days from the date of entry thereof and within said period of 30 days, or such
longer period during which execution of such judgment shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal, and such judgment together with all other such judgments shall exceed
in the aggregate $250,000;


(i)            any representation,
warranty or statement made by or on behalf of the Company or any of its
Subsidiaries or by or on behalf of any officer of the Company or any of its
Subsidiaries in this Agreement, any other Transaction Document or any Note
Document, or in any financial statement, certificate or other instrument or
document now or hereafter delivered pursuant to or in connection with any
provision of this Agreement, any other Transaction Document or any Note
Document, shall prove to be false or incorrect or breached in any material
respect on the date as of which made;


(j)            a Liquidity Event
shall occur;


(k)           (i) an ERISA Event
shall occur with respect to a Pension Plan or a Multiemployer Plan which shall
have resulted or could reasonably be expected to result in liability of the
Company or any ERISA Affiliate under Title IV of ERISA to such Pension Plan or
Multiemployer Plan or to the PBGC in an aggregate amount in excess of $500,000;
(ii) the Company or any ERISA Affiliate shall fail to pay when due, after the
expiration of any applicable grace period, any installment payment with respect
to its Withdrawal Liabilities under a Multiemployer Plan, in an aggregate
amount in excess of $500,000; or (iii) the aggregate amount of Unfunded Pension
Liabilities among all Pension Plans at any time shall exceed $1,500,000;


(l)            any provision of
this Agreement or any other Transaction Document shall, for any reason, not be
or shall cease to be in full force and effect, or not be, or be asserted in
writing by the Company or any of its Subsidiaries not to be, valid, binding and
enforceable against any Person purported to be bound by it;


(m)          as of the first
anniversary of the Initial Closing Date, neither an Initial Public Offering
shall have occurred nor shall the Registration Statement have been declared
effective by the SEC; or


(n)           any Material Adverse Effect shall occur;


then
upon the occurrence of any such Event of Non-Compliance, the Purchasers shall
have the right, upon written notice to the Company from the Majority
Purchasers, immediately to sell to the Company, and the Company shall have the
obligation immediately to redeem and repurchase from each Purchaser all of the
outstanding Preferred Shares held by such Purchaser for a purchase price in
cash equal to $1,000 per Preferred Share plus all unpaid dividends accrued
thereon to the date of such repurchase, and the amount (if any) of the
repurchase premium that 


 


74

















 


would
have been payable if the Preferred Shares had then been voluntarily
repurchased, and the Company shall further immediately pay to the Purchasers
all expenses, costs, indemnification amounts and other amounts owed to the
Purchasers under this Agreement and the other Transaction Documents.


 


Section 12.2.          Suits
for Enforcement.  If any Event of
Non-Compliance shall have occurred and be continuing, the Purchasers may
proceed to protect and enforce their rights, either by suit in equity or by action
at law, or both, whether for the specific performance of any covenant or
agreement contained in this Agreement or the other Transaction Documents or in
aid of the exercise of any power granted in this Agreement or the other
Transaction Documents, and the Purchasers may proceed to enforce the payment of
all sums due upon any redemption and repurchase of the Preferred Shares
referred to above or under this Agreement or any other Transaction Document,
and such further amounts as shall be sufficient to cover the costs and expenses
of collection (including reasonable counsel fees and disbursements), or to
enforce any other legal or equitable right of the Purchasers.


Section 12.3.          Remedies
Cumulative.  No remedy conferred upon
the Purchasers in this Agreement or in any of the other Transaction Documents
is intended to be exclusive of any other remedy and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or otherwise.


Section 12.4.          Remedies
Not Waived.  No course of dealing
between the Company and the Purchasers, and no delay or failure in exercising
any rights under this Agreement or any of the other Transaction Documents,
shall operate as a waiver of any of the rights of the Purchasers.


Section 12.5.          Availability
of Funds for Redemption or Repurchase. 
Notwithstanding anything to the contrary in this Section 12 or any other
provisions of this Agreement requiring a redemption or repurchase of Preferred Shares
by the Company, if the Company has insufficient funds legally available on the
redemption or repurchase date to redeem Preferred Shares on the date therefor
required herein, then funds to the extent legally available shall be used to
redeem or repurchase such Preferred Shares, in which case such Preferred Shares
shall be redeemed or repurchased pro rata from each holder thereof.  At any time thereafter when additional funds
of the Company are legally available for the redemption or repurchase of the unredeemed
or unrepurchased Preferred Shares, such funds shall be immediately used to
redeem such Preferred Shares.


Section 13.             Miscellaneous.


Section 13.1.          Amendment
and Waiver.


(a)           No provision of this
Agreement or any other Transaction Document may be amended, waived or otherwise
modified unless such amendment, waiver or other modification is in writing and
is signed by the Company and the Majority Purchasers; provided that no such amendment,
waiver or other modification shall, unless signed by all of the Purchasers
directly affected thereby, (i) change the definition of the term “Majority
Purchasers” or the percentage of Purchasers which shall be required for the
Purchasers to take any action hereunder, which change 


 


75





















 


shall
be deemed to directly affect all Purchasers; (ii) amend, waive or
otherwise modify this Section 13.1(a) or the definitions of the terms used
in this Section insofar as the definitions affect the substance of this
Section, which amendment, waiver or other modification shall be deemed to
directly affect all Purchasers; (iii) consent to the assignment, delegation or
other transfer by the Company or any of its Subsidiaries of any of their rights
and obligations under any Transaction Document, which consent shall be deemed
to directly affect all Purchasers; or (iv) permit the Company and its
Subsidiaries to incur additional Indebtedness not permitted to be incurred
under Section 10.1 as in effect on the date hereof.


(b)           No failure or delay
by any Purchaser in exercising any right, remedy, power or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege.  The rights, remedies, powers
and privileges herein provided are cumulative and are not exclusive of any
rights, remedies, powers and privileges provided by law.


Section 13.2.          Expenses.


(a)           The Company agrees,
whether or not the transactions hereby contemplated shall be consummated, to
pay and save the Purchasers harmless against any and all liability for the
payment of all expenses arising in connection with this Agreement and the other
Transaction Documents, including all expenses incurred in connection with (i)
the reproduction of such agreements and instruments and all stamp and other
similar taxes (together in each case with interest and penalties, if any) which
may be payable in respect of the execution and delivery of such agreement or
instruments or the issuance, delivery or acquisition by the Purchasers of any
Preferred Share pursuant to this Agreement, (ii) all fees, taxes and other
charges incurred in connection with the filing or recording of any Security
Documents and in connection with any Lien, tax and judgment searches, (iii) the
fees and disbursements of Nixon Peabody LLP and of any special or local counsel
(including Breslow & Walker, LLP) incurred in connection with the performance
of due diligence in respect of the Company and its Subsidiaries, the
preparation and negotiation of this Agreement and the other Transaction
Documents, and the consummation of the transactions hereby and thereby
contemplated, and (iv) the expenses of the Purchasers incurred in connection
with its investigation of the business, assets and financial condition of the
Company and its Subsidiaries, including the fees and disbursements of any
accountants or other experts retained by the Purchasers for such purposes.


(b)           The Company also
agrees to pay to the Purchasers on demand all expenses hereafter incurred by
the Purchasers (including reasonable counsel fees and disbursements) from time
to time in connection with (i) the enforcement, attempted enforcement or preservation
of any of the rights or remedies of the Purchasers under this Agreement or any
of the other Transaction Documents, (ii) any amendment or requested amendment
of, or waiver or consent or requested waiver or consent under or with respect
to, this Agreement or any of the other Transaction Documents, whether or not
the same shall become effective, (iii) attendance by the Observer at meetings
of the boards of directors (and committees thereof) of the Company and its
Subsidiaries as permitted by Section 8.2, and (iv) the negotiation and
documentation of any workout, restructuring or similar arrangement relating to
the Company or its Subsidiaries.


 


76





















 


(c)           The obligations of
the Company under this Section 13.2 shall survive the redemption or repurchase
of the Preferred Shares, the exercise of the Exchange Option, the enforcement
of any provision of this Agreement or the other Transaction Documents, any such
amendments, waivers or consents, and any such workout, restructuring or similar
arrangement.


Section 13.3.          Survival
of Representations and Warranties. 
All representations and warranties contained herein or made in writing
by or on behalf of any party to this Agreement or otherwise in connection
herewith shall (a) survive the execution and delivery of this Agreement and the
delivery of the Preferred Shares to the Purchasers and shall continue in effect
as long as any of the Preferred Shares is outstanding and thereafter as
provided in Section 13.2  and Section
13.6, and (b) be deemed to be material and to have been relied upon by the
Purchasers, regardless of any investigation made by the Purchasers or on their
behalf.


Section 13.4.          Successors
and Assigns; Sales and Transfers of Preferred Shares.


(a)           This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that neither the Company nor any of
its Subsidiaries may transfer or assign any of their respective rights or
obligations hereunder or under the other Transaction Documents without the
prior written consent of the Majority Purchasers.


(b)           Any Purchaser may at
any time sell, assign and transfer to one or more Eligible Assignees all or any
portion of such Purchaser’s Preferred Shares, and each such purchaser or
assignee of Preferred Shares shall thereupon be deemed a “Purchaser” hereunder.


(c)           Notwithstanding the
foregoing provisions of this Section 13.4 or any other provision of this
Agreement, any Purchaser may at any time pledge, and grant or assign a security
interest in, all or any portion of the Preferred Shares held by it and its
rights under this Agreement and the other Transaction Documents to secure
obligations of such Purchaser, and in the event of any foreclosure of such pledge
and security interest, the secured party thereof may sell and assign such
Preferred Shares, together with such rights and interests of such Purchaser
under this Agreement and the other Transaction Documents, in a public or
private sale and may exercise all other rights of a secured party with respect
thereto in accordance with the documentation governing such pledge and security
interest and applicable law; provided that
no such pledge or assignment shall release such Purchaser from any of its
obligations hereunder or substitute any such pledgee or assignee for such
Purchaser as a party hereto.


Section 13.5.          Notices.  All notices hereunder shall be in writing and
shall be conclusively deemed to have been received and shall be effective (a)
on the day on which delivered if delivered personally or transmitted by
facsimile transmission, (b) one Business Day after the date on which the same
is delivered to a nationally recognized overnight courier service, (c) three
Business Days after being sent by registered or certified United States mail,
return receipt requested, or (d) if sent by e-mail as provided below, and shall
be addressed:


(i)            if
to any Purchaser, to it at the
address, facsimile number or e-mail address for such Purchaser set forth on Schedule I attached hereto;


 


77





















 


(ii)           if
to the Company or any of its Subsidiaries, to:


GenuTec Business Solutions, Inc.


6A Liberty Street, Suite 200


Aliso Viejo, CA  92656


Attention:


Facsimile: Lee J. Danna, President


E-mail: ldanna@genutec.com;


 


with a copy to:


 


Gersten Savage, LLP


600 Lexington Avenue


New York, NY  10022


Attention: Stephen A. Weiss


Facsimile: (212) 980-5192


E-mail: sweiss@gskny.com;


 


or to such other address or addresses or
telecopy number or numbers as any of such Persons may most recently have
designated in writing to the others by such notice.  Notices and other communications sent to an
e-mail address shall be deemed received upon the sender’s receipt of an
acknowledgement from the intended recipient (such as by the “return receipt
requested” function, as available, return e-mail or other written
acknowledgement), provided that if such notice or other communication is
not sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next Business Day.


 


Section 13.6.          Indemnification.  In consideration of the execution and
delivery of this Agreement by the Purchasers, the Company hereby agrees to
defend, indemnify, exonerate and hold harmless each Purchaser and each of the
officers, directors, stockholders, partners, members, managers, Affiliates,
trustees, employees and agents of each Purchaser (herein collectively called
the “Indemnitees”) from and against any and
all liabilities, obligations, losses, damages, claims, actions, suits,
proceedings, judgments, costs and expenses, including legal fees and other
expenses incurred in the investigation, defense, appeal and settlement of
claims, actions, suits and proceedings (herein collectively called the “Indemnified Liabilities”), incurred
by the Indemnitees or any of them arising out of or resulting from any act or
failure to act by the Company or any of its Subsidiaries or their respective
officers, directors, employees, agents, representatives or Affiliates relating
to:


(i)            this
Agreement, any of the other Transaction Documents, the issuance of the
Preferred Shares or the transactions contemplated hereby or thereby, or the
performance by the Company of its obligations hereunder or thereunder, or


(ii)           any
Environmental Matter, any Environmental Law or the actual or alleged existence
or release of any Hazardous Material,


 


78





















 


except for any such Indemnified Liabilities which
are finally judicially determined to have resulted from the Indemnitee’s gross
negligence or willful misconduct, and if and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Company hereby agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law.  The obligations of the Company under this
Section 13.6 shall survive the redemption or repurchase of the Preferred
Shares, the exercise of the Exchange Option, and the enforcement of any
provision hereof or thereof.


 


Section 13.7.          Confidentiality.  (a) 
Each Purchaser shall maintain in confidence in accordance with its
customary procedures for handling confidential information and not disclose to
any Person, all written information clearly marked “Confidential” that the
Company or any of its Subsidiaries, or any of their authorized representatives,
furnishes to such Purchaser on a confidential basis (“Confidential
Information”), other than any such Confidential Information that
becomes generally available to the public other than as a result of a breach by
any Purchaser of its obligations hereunder or that is or becomes available to
such Purchaser from a source other than the Company or any of its Subsidiaries,
or any of their authorized representatives, and that is not, to the actual
knowledge of the recipient thereof, subject to obligations of confidentiality
with respect thereto; provided, however, that each of the
Purchasers shall in any event have the right to deliver copies of any such
documents, and to disclose any such information, to:


(i)            its
directors, officers, trustees, partners, employees, agents and attorneys;


(ii)           its
Affiliates, accountants, investment advisers, other professional consultants
and rating agencies, and the directors, officers, trustees, partners,
employees, agents and attorneys of each of the foregoing;


(iii)          any
Person to which any Purchaser offers to sell or pledge, or sells or pledges,
any Preferred Shares or interest or participation therein, and any other Person
which offers to provide or is providing financing to such Purchaser; provided
such Person agrees to keep such information confidential on terms similar to
those set forth in this Section 13.7;


(iv)          the
SEC and any other federal or state regulatory authority or examiner which
regulates or has jurisdiction over such Purchaser; and


(v)           any
other Person to which such delivery or disclosure may be necessary or
appropriate (A) in compliance with any applicable law, rule, regulation or
order, (B) in response to any subpoena or other legal process or informal
investigative demand, (C) in connection with any litigation to which the
Purchaser is a party, or (D) in connection with the enforcement of the rights
and remedies of the Purchaser under this Agreement and the other Transaction
Documents at any time when an Event of Non-Compliance shall have occurred and
be continuing (with respect to clauses (A), (B) and (C) of this subparagraph
(v), in each case upon prior written notice to the Company to the extent
reasonably practicable and not prohibited by law or court order, so that the
Company may, at its sole cost and expense, contest such disclosure or seek
confidential treatment thereof).


 


79





















 


(b)           Notwithstanding any other provision contained herein, each
Purchaser shall have the right to issue a press release or other public
statement, in form and substance as shall be determined by such Purchaser in
its sole discretion, with respect to the transactions contemplated by this
Agreement and the Transaction Documents.  Each Purchaser shall also have the right to
list the Company as a portfolio company of such Purchaser on the web site or
sites owned and maintained by such Purchaser and in any other marketing
materials as such Purchaser, in its sole discretion, shall determine.


Section 13.8.          Punitive
Damages.   Each party to this
Agreement agrees that it shall not have a remedy of punitive, special,
exemplary, indirect or consequential damages against any other party to this
Agreement in connection with any claim or dispute arising hereunder and hereby
waives any right or claim to any such damages that such party now has or which
may arise in the future in connection with any such claim or dispute, whether
such claim or dispute is resolved by arbitration or judicially.


Section 13.9.          Integration
and Severability.  This Agreement
embodies the entire agreement and understanding among the Purchasers and the
Company with regard to its subject matter, and supersedes all prior agreements
and understandings relating to the subject matter hereof.  In case any one or more of the provisions
contained in this Agreement or in any instrument contemplated hereby for such
date, or any application thereof, shall be invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein, and any other application thereof,
shall not in any way be affected or impaired thereby.


Section 13.10.        Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
together constitute one and the same instrument.  Delivery of an executed counterpart of a
signature page of this Agreement by telecopy or other electronic means shall be
effective as delivery of a manually executed counterpart of this
Agreement.  Delivery of manually executed
counterparts of this Agreement shall immediately follow delivery by telecopy or
other electronic means, but the
failure to so deliver a manually executed counterpart shall not affect the
validity, enforceability, or binding effect hereof.


Section 13.11.      Governing
Law.  THIS
AGREEMENT AND THE NOTES SHALL BE CONSTRUED IN ACCORDANCE WITH AND SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.


Section 13.12.      Submission
to Jurisdiction; Waiver of Service and Venue.


(a)           THE COMPANY CONSENTS
AND AGREES TO THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT
SITTING IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, AND WAIVES ANY OBJECTION
BASED ON VENUE OR FORUM NON CONVENIENS WITH RESPECT TO ANY ACTION INSTITUTED
THEREIN.


 


80





















 


(b)           THE COMPANY HEREBY
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS MAY BE MADE BY HAND DELIVERY OR BY REGISTERED OR
CERTIFIED UNITED STATES MAIL TO THE COMPANY AT ITS ADDRESS SET FORTH IN SECTION
13.5.


(c)           NOTHING IN THIS SECTION
13.12 SHALL AFFECT THE RIGHT OF THE PURCHASERS OR THE COLLATERAL AGENT TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE
PURCHASERS OR THE COLLATERAL AGENT TO BRING ANY ACTION OR PROCEEDING AGAINST
THE COMPANY OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.


Section 13.13.      Waiver of
Right to Trial by Jury.  EACH OF THE COMPANY AND THE PURCHASERS HEREBY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (i) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR (ii) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO
OR ANY OF THEM IN RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS
RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.  THE COMPANY AND THE PURCHASERS HEREBY AGREE
AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY
JURY.


 [REMAINDER OF PAGE
INTENTIONALLY BLANK.  SIGNATURES FOLLOW.]


 


81

















 


 


                IN WITNESS WHEREOF, the Company
and the Purchasers have executed this Agreement by their duly authorized
officers as of the date first written above.


 


	
  COMPANY:

  
	
   

  
	
  GENUTEC BUSINESS
  SOLUTIONS, INC.

  
	
   

  
	
  By:

  	
  /s/
  Lee Danna

  
	
   

  	
  Name:
  Lee J. Danna

  
	
   

  	
  Title:
  President/CEO

  
	
   

  
	
  PURCHASERS:

  
	
   

  
	
  TECHNOLOGY
  INVESTMENT CAPITAL CORP.

  
	
   

  
	
  By:

  	
  /s/
  Saul B. Rosenthal

  
	
   

  	
  Name:

  	
  Saul
  B. Rosenthal

  
	
   

  	
  Title:

  	
  President

  
	
   

  
	
  SEAVIEW MEZZANINE FUND LP

  
	
   

  
	
  By:

  	
  David S. Montoya

  
	
   

  	
  Name: David S. Montoya 

  
	
   

  	
  Title: Managing
  Director

  
	
   

  	
   

  



 


 


82

















 


SCHEDULE
I


 


SCHEDULE
OF PURCHASERS


 


 


 


	
  Name and Address of

  Purchaser

  	
   

  	
  Number of

  Preferred Shares

  	
   

  	
  Number of Common

  Shares Purchasable

  Under Initial Warrants

  	
   

  	
  Purchase Price

  	
   

  
	
  Technology Investment
  Capital Corp. 8 Sound Shore Drive, Suite 255 Greenwich, CT 06830 Attention:
  Saul B. Rosenthal Facsimile: (203) 983-5290 E-mail: srosenthal@ticc.com

  	
   

  	
  15,000

  	
  *

  	
  875,250

  	
  *

  	
  $

  	
  15,000,000*

  	
   

  
	
  Seaview Mezzanine Fund LP
  30 Kennedy Plaza, Suite 400 Providence, RI 02903 Attention: David S. Montoya
  Facsimile: (401) 421-3533 E-mail: david@seaviewcapital.com

  	
   

  	
  5,000

  	
   

  	
  291,750

  	
   

  	
  $

  	
  5,000,000

  	
   

  



 






* 
Numbers give effect to the repurchase by the Company pursuant to Section
2.3(c) of certain of the Preferred Shares and Initial Warrants originally
issued to TICC.


 


 


A-83