AND
OTHER AMOUNTS DUE IN CONNECTION WITH ANY INDEBTEDNESS OF BORROWER WITH RESPECT
TO THAT CERTAIN PROMISSORY NOTE AND THAT CERTAIN SECURITY AGREEMENT, EACH DATED
AS OF JUNE 1, 2004, BY AND BETWEEN BORROWER AND LAKESIDE BANK (THE "SENIOR LOAN
DOCUMENTS"). [
2.
INSOLVENCY PROCEEDINGS.
IF THERE SHALL
OCCUR ANY RECEIVERSHIP, INSOLVENCY, ASSIGNMENT FOR THE BENEFIT OF CREDITORS,
BANKRUPTCY, REORGANIZATION, OR ARRANGEMENTS WITH CREDITORS (WHETHER OR NOT
PURSUANT TO BANKRUPTCY OR OTHER INSOLVENCY LAWS), SALE OF ALL OR SUBSTANTIALLY
ALL OF THE ASSETS, DISSOLUTION, LIQUIDATION, OR ANY OTHER MARSHALING OF THE
ASSETS AND LIABILITIES OF BORROWER, NO AMOUNT SHALL BE PAID BY BORROWER IN
RESPECT OF THE PRINCIPAL OF, INTEREST ON OR OTHER AMOUNTS DUE WITH RESPECT TO
THIS NOTE AT THE TIME OUTSTANDING, UNLESS AND UNTIL THE PRINCIPAL OF AND
INTEREST ON THE SENIOR INDEBTEDNESS THEN OUTSTANDING SHALL BE PAID IN FULL.
3.
SUBROGATION.
AFTER, AND DURING THE
CONTINUANCE OF, AN EVENT OF DEFAULT ON THE SENIOR INDEBTEDNESS, SUBJECT TO THE
PAYMENT IN FULL OF ALL SENIOR INDEBTEDNESS, LENDER'S RIGHTS UNDER THIS NOTE
SHALL BE SUBROGATED TO THE RIGHTS OF THE HOLDER(S) OF SUCH SENIOR INDEBTEDNESS
(TO THE EXTENT OF THE PAYMENTS OR DISTRIBUTIONS MADE TO THE HOLDER(S) OF SUCH
SENIOR INDEBTEDNESS PURSUANT TO THE PROVISIONS OF THIS SECTION) TO RECEIVE
PAYMENTS AND DISTRIBUTIONS OF ASSETS OF
BORROWER APPLICABLE TO THE SENIOR
INDEBTEDNESS.
NO SUCH PAYMENTS OR DISTRIBUTIONS APPLICABLE TO THE SENIOR
INDEBTEDNESS SHALL, AS BETWEEN BORROWER AND ITS CREDITORS, OTHER THAN THE
HOLDERS OF SENIOR INDEBTEDNESS AND LENDER, BE DEEMED TO BE A PAYMENT BY BORROWER
TO OR ON ACCOUNT OF THIS NOTE; AND FOR PURPOSES OF SUCH SUBROGATION, NO PAYMENTS
OR DISTRIBUTIONS TO THE HOLDERS OF THE SENIOR INDEBTEDNESS TO WHICH LENDER WOULD
BE ENTITLED EXCEPT FOR THE PROVISIONS OF THIS SECTION SHALL, AS BETWEEN BORROWER
AND ITS CREDITORS, OTHER THAN THE HOLDERS OF SENIOR INDEBTEDNESS AND LENDER, BE
DEEMED TO BE A PAYMENT BY BORROWER TO OR ON ACCOUNT OF THE SENIOR INDEBTEDNESS.
G.
REPRESENTATIONS AND WARRANTIES.
BORROWER
REPRESENTS AND WARRANTS TO LENDER THAT:
1.
COLLATERAL.
BORROWER IS THE TRUE AND
LAWFUL OWNER OF THE COLLATERAL, HAVING GOOD AND MARKETABLE TITLE THERETO, FREE
AND CLEAR OF ANY AND ALL LIENS OTHER THAN LIENS AND SECURITY INTERESTS GRANTED
TO LENDER HEREUNDER AND THE PERMITTED LIENS SET FORTH ON THE SCHEDULE.
BORROWER
SHALL NOT CREATE OR ASSUME OR PERMIT TO EXIST ANY SUCH LIEN ON OR AGAINST ANY OF
THE
4
COLLATERAL EXCEPT AS CREATED OR PERMITTED BY THE LOAN DOCUMENTS AND PERMITTED
LIENS, AND BORROWER SHALL PROMPTLY NOTIFY LENDER OF ANY SUCH OTHER LIEN AGAINST
THE COLLATERAL AND SHALL DEFEND THE COLLATERAL AGAINST, AND TAKE ALL SUCH ACTION
AS MAY BE NECESSARY TO REMOVE OR DISCHARGE, ANY SUCH LIEN.
2.
DUE AUTHORIZATION; NO CONFLICT.
THE
EXECUTION, DELIVERY, AND PERFORMANCE OF THE LOAN DOCUMENTS ARE WITHIN BORROWER'S
POWERS, HAVE BEEN DULY AUTHORIZED, AND ARE NOT IN CONFLICT WITH NOR CONSTITUTE A
BREACH OF ANY PROVISION CONTAINED IN BORROWER'S CERTIFICATE OF INCORPORATION OR
BYLAWS, NOR WILL THEY CONSTITUTE