Document:

Filed by sedaredgar.com - Vitran Corporation Inc. - Exhibit 4.6

I N D E X

to By-Law Number 6 of 

VITRAN CORPORATION INC.

	  	Paragraph 	Page 
	Interpretation 	  	  
	  	  	  
	           
             Definitions 	1.01 	     1 
	               
         Definitions 	1.02 	     2 
	           
             Definitions 	1.03 	     2 
	  	  	  
	Business of the Corporation
    	  	  
	  	  	  
	           
             Registered Office 	2.01 	     2 
	               
         Corporate Seal 	2.02 	     2 
	           
             Financial Year 	2.03 	     2 
	               
         Execution of Instruments 	2.04 	     2 
	           
             Banking Arrangements 	2.05 	     2 
	               
         Voting Rights in Other Bodies Corporate 	2.06 	     3 
	           
             Withholding Information from Shareholders 	2.07 	     3 
	  	  	  
	Borrowing and Securities 	  	  
	  	  	  
	           
             Borrowing Power 	3.01 	     3 
	               
         Delegation 	3.02 	     3 
	  	  	  
	Directors 	  	  
	  	  	  
	               
         Number of Directors and Quorum 	4.01 	     4 
	           
             Qualification 	4.02 	     4 
	               
         Election and Term 	4.03 	     4 
	           
             Removal of Directors 	4.04 	     4 
	               
         Vacation of Office 	4.05 	     4 
	           
             Vacancies 	4.06 	     4 
	               
         Action by the Board 	4.07 	     5 
	           
             Canadian Majority 	4.08 	     5 
	               
         Meetings by Telephone 	4.09 	     5 
	           
             Place of Meetings 	4.10 	     5 
	               
         Calling of Meetings 	4.11 	     5 
	           
             Notice of Meeting 	4.12 	     5 
	               
         First Meeting of New Board 	4.13 	     6 
	           
             Adjourned Meeting 	4.14 	     6 
	               
         Regular Meetings 	4.15 	     6 
	           
             Chairman 	4.16 	     6
  

- ii - 

	  	Paragraph 	Page 
	  	  	  
	Directors (continued) 	  	  
	  	  	  
	           
             Votes to Govern 	4.17 	     6 
	               
         Conflict of Interest 	4.18 	     6 
	           
             Remuneration and Expenses 	4.19 	     6 
	  	  	  
	Committees 	  	  
	  	  	  
	           
             Committee of Directors 	5.01 	     7 
	               
         Transaction of Business 	5.02 	     7 
	           
             Advisory Bodies 	5.03 	     7 
	               
         Procedure 	5.04 	     7 
	           
             Audit Committee 	5.05 	     7 
	  	  	  
	Officers 	  	  
	  	  	  
	           
             Appointment 	6.01 	     7 
	               
         Chairman of the Board 	6.02 	     7 
	           
             Managing Director 	6.03 	     8 
	               
         President 	6.04 	     8 
	           
             Vice-President 	6.05 	     8 
	               
         Secretary 	6.06 	     8 
	           
             Treasurer 	6.07 	     8 
	               
         Powers and Duties of Other Officers 	6.08 	     8 
	           
             Variation of Powers and Duties 	6.09 	     9 
	               
         Term of Office 	6.10 	     9 
	           
             Terms of Employment and Remuneration 	6.11 	     9 
	               
         Conflict of Interest 	6.12 	     9 
	           
             Agents and Attorneys 	6.13 	     9 
	               
         Fidelity Bonds 	6.14 	     9 
	  	  	  
	Protection of Directors, Officers and Others
    	  	  
	  	  	  
	               
         Limitation of Liability 	7.01 	     9 
	           
             Indemnity 	7.02 	     10 
	               
         Insurance 	7.03 	     10 
	  	  	  
	Shares 	  	  
	  	  	  
	               
         Allotment 	8.01 	     10 
	           
             Commissions 	8.02 	     10 
	               
         Registration of Transfer 	8.03 	     10 
	           
             Transfer Agents and Registrars 	8.04 	     11 
	               
         Non-Recognition of Trusts 	8.05 	     11

- iii - 

	  	Paragraph 	Page 
	  	  	  
	Shares (continued) 	  	  
	               
         Share Certificates 	8.06 	11 
	           
             Replacement of Share Certificates 	8.07 	11 
	               
         Joint Shareholders 	8.08 	12 
	           
             Deceased Shareholders 	8.09 	12 
	  	  	  
	Dividends and Rights 	  	  
	  	  	  
	           
             Dividends 	 9.01 	12 
	               
         Dividend Cheques 	9.02 	12 
	           
             Non-Receipt of Cheques 	9.03 	12 
	               
         Record Date for Dividends and Rights 	9.04 	12 
	           
             Unclaimed Dividends 	9.05 	13 
	  	  	  
	Meetings of Shareholders 	  	  
	  	  	  
	           
             Annual Meetings 	10.01 	13 
	               
         Special Meetings 	10.02 	13 
	           
             Place of Meetings 	10.03 	13 
	               
         Notice of Meetings 	10.04 	13 
	           
             List of Shareholders Entitled to Notice 	10.05 	14 
	               
         Record Date for Notice 	10.06 	14 
	           
             Meetings without Notice 	10.07 	14 
	               
         Chairman, Secretary and Scrutineers 	10.08 	14 
	           
             Persons Entitled to be Present 	10.09 	15 
	               
         Quorum 	10.10 	15 
	           
             Right to Vote 	10.11 	15 
	               
         Proxies 	10.12 	16 
	           
             Time for Deposit of Proxies 	10.13 	16 
	               
         Joint Shareholders 	10.14 	16 
	           
             Votes to Govern 	10.15 	16 
	               
         Show of Hands 	10.16 	16 
	           
             Ballots 	10.17 	16 
	               
         Adjournment 	10.18 	17 
	           
             Resolution in Lieu of Meeting 	10.19 	17 
	               
         Only One Shareholder 	10.20 	17 
	  	  	  
	Divisions and Departments 	  	  
	  	  	  
	               
         Creation and Consolidation of Divisions 	11.01 	17 
	           
             Name of Division 	11.02 	17 
	               
         Officers of Divisions 	11.03 	18 

 - iv - 

	  	Paragraph 	Page 
	Notices 	  	  
	           
             Method of Giving Notice 	12.01 	18 
	               
         Notice of Joint Shareholders 	12.02 	18 
	           
             Computation of Time 	12.03 	18 
	               
         Undelivered Notices 	12.04 	18 
	           
             Omissions and Errors 	12.05 	19 
	               
         Persons Entitled by Death or Operation of Law 	12.06 	19 
	           
             Waiver of Notice 	12.07 	19 
	 	 	 
	Repeal 	  	  
	           
             Repeal 	13.01 	19 
	 	 	 
	Effective Date 	  	  
	           
             Effective Date 	14.01 	20 

BY-LAW NO. 6

A by-law relating generally to 
the transaction of
the business 
and affairs of 

VITRAN CORPORATION INC.

         
     BE IT ENACTED as a by-law of the Corporation as follows:

Section One 

INTERPRETATION

	1.01 	
      Definitions – In the by-laws of the
      Corporation, unless the context otherwise requires:

	 	 
		
      “Act” means the Business Corporations Act (S.O. 1982,
      c.4) and any statute that may be substituted therefore, as from time to
      time amended;

	 	 
		
      “articles” means the articles on which is endorsed the
      certificate of incorporation dated April 29, 1981, of the Corporation as
      from time to time amended or restated;

	 	 
		
      “board” means the board of directors of the
      Corporation;

	 	 
		
      “by-laws” means this by-law and all other by-laws of the
      Corporation from time to time in force and effect;

	 	 
		
      “Corporation” means the corporation incorporated under
      the Act by the said certificate endorsed on the articles now named VITRAN
      CORPORATION INC.

	 	 
		
      “meeting of shareholders” means any meeting of
      shareholders, whether annual or special;

	 	 
		
      “non-business day” means Saturday, Sunday and any other
      day that is a holiday as defined in the Interpretation Act
    (Ontario);

	 	 
		
      “offering corporation” means a corporation that is
      offering its securities to the public within the meaning of the Act and
      that is not the subject of an order of the Ontario Securities Commission
      deeming it to have ceased to be offering its securities to the
    public;

	 	 
		
      “recorded address” means in the case of a shareholder his
      address as recorded in the securities register; and in the case of joint
      shareholders the address appearing in the securities register in respect
      of such joint holding or the first address so appearing if
  there

- 2 -

are more than one; and in the case of a
director, officer, auditor or member of a committee of the board, his latest
address as recorded in the records of the Corporation; 

“signing officer” means, in relation to
any instrument, any person authorized to sign the same on behalf of the
Corporation by section 2.04 or by a resolution passed pursuant thereto; 

“special meeting of shareholders” means
a special meeting of all shareholders entitled to vote at an annual meeting of
shareholders and a meeting of any class or classes of shareholders entitled to
vote on the question at issue. 

1.02 Save as aforesaid, words and expressions defined in the
Act have the same meanings when used herein. 

1.03 Words importing the singular number include the plural and
vice versa; words importing gender include the masculine, feminine and neuter
genders; and words importing persons include individuals, bodies corporate,
partnerships, trusts and unincorporated organizations. 

Section Two

BUSINESS OF THE CORPORATION

2.01 Registered Office – Until changed in
accordance with the Act, the registered office of the Corporation shall be at
the Municipality of Metropolitan Toronto in the Province of Ontario and at such
location therein as the board may from time to time determine. 

2.02 Corporate Seal – Until changed by the board,
the corporate seal of the Corporation, if any, shall be in the form impressed
hereon. 

2.03 Financial Year – Until changed by the board,
the financial year of the Corporation shall end on the 30th day of
November in each year. 

2.04 Execution of Instruments – Deeds, transfers,
assignments, bills of sale, contracts, obligations, certificates and other
instruments may be signed on behalf of the Corporation by any two directors or
officers or any director together with any officer. In addition, the board may
from time to time direct the manner in which and the person or persons by whom
any particular instrument or class of instruments may or shall be signed. Any
signing officer may affix the corporate seal to any instrument requiring the
same. 

2.05 Banking Arrangements – The banking business
of the Corporation including, without limitation, the borrowing of money and the
giving of security therefor, shall be transacted with such banks, trust
companies or other bodies corporate or organizations as may from time to time be
designated by or under the authority of the board. Such banking business or any
part thereof shall be transacted under such agreements, instructions and
delegations of powers as the board may from time to time prescribe or authorize.

- 3 -

2.06 Voting Rights in Other Bodies Corporate –
The signing officers of the Corporation may execute and deliver proxies and
arrange for the issuance of voting certificates or other evidence of the right
to exercise the voting rights attaching to any securities held by the
Corporation. Such instruments, certificates or other evidence shall be in favour
of such person or persons as may be determined by the officers executing such
proxies or arranging for the issuance of voting certificates or such other
evidence of the right to exercise such voting rights. In addition, the board may
from time to time direct the manner in which and the person or persons by whom
any particular voting rights or class of voting rights may or shall be
exercised. 

2.07 Withholding Information from Shareholders –
Subject to the provisions of the Act, no shareholder shall be entitled to
discovery of any information respecting any details or conduct of the
Corporation’s business which, in the reasonable opinion of the board, could be
inexpedient in the interests of the shareholders or the Corporation to
communicate to the public. The board may from time to time determine whether and
to what extent and at what time and place and under what conditions or
regulations the accounts, records and documents of the Corporation or any of
them shall be open to the inspection of shareholders and no shareholder shall
have any right to inspect any account, record or document of the Corporation
except as conferred by the Act or authorized by the board. 

Section Three

BORROWING AND SECURITIES

3.01 Borrowing Power – Without limiting the
borrowing powers of the Corporation as set forth in the Act, the board may,
without authorization of the shareholders, from time to time: 

	 	(a) 	
      borrow money upon the credit of the
Corporation;

	 	 	 
	 	(b) 	
      issue, reissue, sell or pledge debt obligations of the
      Corporation;

	 	 	 
	 	(c) 	
      subject to the Act, give a guarantee on behalf of the
      Corporation to secure performance of an obligation of any person;
    and

	 	 	 
	 	(d) 	
      mortgage, hypothecate, pledge or otherwise create a
      security interest in all or any property of the Corporation, owned or
      subsequently acquired, to secure any obligation of the
  Corporation.

Nothing in this section limits or restricts the borrowing of
money by the Corporation on bills of exchange or promissory notes made, drawn,
accepted or endorsed by or on behalf of the Corporation. 

3.02 Delegation – The board may from time to time
by resolution delegate to a director, a committee of directors or an officer of
the Corporation as may be designated by the board all or any of the powers
conferred on the board by section 3.01 to such extent and in such manner as the
board shall determine at the time of each such delegation. 

- 4 -

Section Four 

DIRECTORS

4.01 Number of Directors and Quorum – Until
changed in accordance with the Act, the board shall consist of not fewer than
the minimum number and not more than the maximum number of directors provided in
the articles. Subject to the Act and to section 4.08 hereof, the quorum for the
transaction of business at any meeting of the board shall consist of a majority
of directors or such other number of directors as the board may from time to
time determine. 

4.02 Qualification – No person shall be qualified
for election as a director if he is less than 18 years of age; if he is of
unsound mind and has been so found by a court in Canada or elsewhere; if he is
not an individual; or if he has the status of a bankrupt. A director need not be
a shareholder. A majority of the directors shall be resident Canadians but where
the Corporation has only one or two directors that director or one of the two
directors, as the case may be, shall be resident Canadians. If the Corporation
is an offering corporation at least one-third of the directors shall not be
officers or employees of the Corporation or any of its affiliates. 

4.03 Election and Term – Directors shall be
elected yearly to hold office until the next annual meeting of shareholders and
until their successors are elected. At each annual meeting of shareholders, all
the directors then in office shall retire but, if qualified, shall be eligible
for reelection. The number of directors to be elected at any such meeting shall
be the number of directors as shall be determined from time to time by special
resolution or, if a special resolution empowers the directors to determine the
number, by resolution of directors. The election shall be by resolution. 

4.04 Removal of Directors – Subject to the
provisions of the Act, the shareholders may by ordinary resolution passed at a
meeting of shareholders remove any director or directors from office and the
vacancy created by such removal may be filled at the same meeting failing which
it may be filled by a quorum of directors. 

4.05 Vacation of Office – A director ceases to
hold office when he dies; or subject to the Act, he resigns; he is removed from
office by the shareholders; or he ceases to be qualified for election as a
director. A resignation of a director becomes effective at the time a written
resignation is received by the Corporation or at the time specified in the
resignation, whichever is later. 

4.06 Vacancies – Subject to the Act, a quorum of
the board may fill a vacancy in the board, except a vacancy resulting from an
increase in the number or maximum number of directors or from a failure to elect
the number of directors required to be elected at any meeting of shareholders.
In the absence of a quorum of the board, or if there has been a failure to elect
the number of directors required by the articles or by the Act, the board shall
forthwith call a special meeting of shareholders to fill the vacancy. If the
board fails to call such meeting or if there are no directors then in office,
any shareholder may call the meeting. 

- 5 -

4.07 Action by the Board – Subject to any
unanimous shareholder agreement, the board shall manage or supervise the
management of the business and affairs of the Corporation. Subject to sections
4.08 and 4.09, the powers of the board may be exercised by resolution passed at
a meeting at which a quorum is present or by resolution in writing signed by all
the directors entitled to vote on that resolution at a meeting of the board.
Where there is a vacancy in the board, the remaining directors may exercise all
the powers of the board so long as a quorum remains in office. A resolution in
writing, signed by all the directors entitled to vote on that resolution at a
meeting of directors or a committee of directors, is as valid as if it had been
passed at a meeting of directors or a committee of directors. 

4.08 Canadian Majority – The board shall not
transact business at a meeting unless a majority of the directors present are
resident Canadians, except where 

	 	(a) 	
      a resident Canadian director who is unable to be present
      approves in writing or by telephone or other communications facilities the
      business transacted at the meeting; and

	 	 	 
	 	(b) 	
      a majority of resident Canadian directors would have been
      present had that director been present at the
meeting.

4.09 Meetings by Telephone – If all the directors
present at or participating in the meeting consent, a meeting of the board or of
a committee of the board may be held by means of such telephone, electronic or
other communications facilities as permit all persons participating in the
meeting to communicate with each other simultaneously and instantaneously, and a
director participating in such a meeting by such means is deemed for the
purposes of the Act to be present at the meeting. Any such consent shall be
effective whether given before or after the meeting to which it relates and may
be given with respect to all meetings of the board and of committees of the
board held while a director holds office. 

4.10 Place of Meetings – Meetings of the board
may be held at any place within or outside Ontario and it shall not be necessary
that, in any financial year of the Corporation, a majority of the meetings of
the board be held at a place within Canada. 

4.11 Calling of Meetings – Meetings of the
board shall be held from time to time at such time and at such place as the
chairman of the board, the managing director, the president, or any director may
determine. 

4.12 Notice of Meeting – Notice of the time and
place of each meeting of the board shall be given in the manner provided in
section 12.01 to each director not less than 48 hours before the time of the
meeting. A notice of a meeting of directors need not specify the purpose of or
the business to be transacted at the meeting except where the Act requires such
purpose or business to be specified. A director may in any manner and at any
time waive a notice of a meeting of the board. Attendance of a director at a
meeting of directors is a waiver of notice of the meeting except where a
director attends a meeting for the express purpose of objecting to the
transaction of any business on the grounds that the meeting is not lawfully
called. 

- 6 -

4.13 First Meeting of New Board – Provided a
quorum of directors is present, each newly elected board may without notice hold
its first meeting immediately following the meeting of shareholders at which
such board is elected. 

4.14 Adjourned Meeting – Notice of an adjourned
meeting of the board is not required to be given if the time and place of the
adjourned meeting is announced at the original meeting. 

4.15 Regular Meetings – The board may appoint a
day or days in any month or months for regular meetings of the board at a place
and hour to be named. A copy of any resolution of the board fixing the place and
time of such regular meetings shall be sent to each director forthwith after
being passed, but no other notice shall be required for any such regular meeting
except where the Act requires the purpose thereof or the business to be
transacted thereat to be specified. 

4.16 Chairman – The chairman of any meeting of
the board shall be the first mentioned of such of the following officers as have
been appointed and who is a director and is present at the meeting: chairman of
the board, managing director, president, or a vice-president who is a director.
If no such officer is present, the directors present shall choose one of their
number to be chairman. 

4.17 Votes to Govern – At all meetings of the
board every question shall be decided by a majority of the votes cast on the
question. In case of an equality of votes the chairman of the meeting shall be
entitled to a second or casting vote. 

4.18 Conflict of Interest – A director or officer
who is a party to, or who is a director or officer of or has a material interest
in any person who is a party to, a material contract or transaction or proposed
material contract or transaction with the Corporation shall disclose the nature
and extent of his interest at the time and in the manner provided by the Act.
Any such contract or transaction or proposed contract or transaction shall be
referred to the board or the shareholders for approval even if such contract is
one that in the ordinary course of the Corporation’s business would not require
approval by the board or the shareholders, and a director interested in a
contract so referred to the board shall not vote on any resolution to approve
the same except as provided by the Act. 

4.19 Remuneration and Expenses – Subject to the
articles or any unanimous shareholder agreement, the directors shall be paid
such remuneration for their services as the board may from time to time
determine. The directors shall also be entitled to be reimbursed for travelling
and other expenses properly incurred by them in attending meetings of the board
or any committee thereof. Nothing herein contained shall preclude any director
from serving the Corporation in any other capacity and receiving remuneration
therefor. 

- 7 -

Section Five 

COMMITTEES

5.01 Committee of Directors – The board may
appoint from its members one or more committees of directors, however
designated, and delegate to any such committee any of the powers of the board
except those which, under the Act, a committee of directors has no authority to
exercise. A majority of the members of any such committee shall be resident
Canadians. 

5.02 Transaction of Business – Subject to the
provisions of section 4.09, the powers of a committee of directors may be
exercised by a meeting at which a quorum of the committee is present or by
resolution in writing signed by all the members of such committee who would have
been entitled to vote on that resolution at a meeting of the committee. Meetings
of such committee may be held at any place within or outside Ontario. 

5.03 Advisory Bodies – The board may from time to
time appoint such advisory bodies as it may deem desirable. 

5.04 Procedure – Unless otherwise determined by
the board, each committee and advisory body shall have the power to fix its
quorum at not less than a majority of its members, to elect its chairman and to
regulate its procedure. 

5.05 Audit Committee – If the Corporation is an
offering corporation, the board shall elect annually from among its number an
audit committee to be composed of not fewer than 3 directors of whom a majority
shall not be officers or employees of the Corporation or any of its affiliates.
The audit committee shall have the powers and duties provided in the Act. 

Section Six 

OFFICERS

6.01 Appointment – Subject to the articles or any
unanimous shareholder agreement, the board may from time to time appoint a
president, one or more vice-presidents (to which title may be added words
indicating seniority or function), a secretary, a treasurer and such other
officers as the board may determine, including one or more assistants to any of
the officers so appointed. The board may specify the duties of and, in
accordance with this by-law and subject to the provisions of the Act, delegate
to such officers powers to manage the business and affairs of the Corporation.
Subject to sections 6.02 and 6.03, an officer may but need not be a director and
one person may hold more than one office. 

6.02 Chairman of the Board – The board may from
time to time also appoint a chairman of the board who shall be a director. If
appointed, the board may assign to him any of the powers and duties that are by
any provisions of this by-law capable of being assigned to the managing director
or to the president; and he shall, subject to the provisions of the Act, have
such other powers and duties as the board may specify. During the absence or
disability of the chairman of 

- 8 -

the board, his duties shall be performed and his powers
exercised by the managing director, if any, or by the president. 

6.03 Managing Director – The board may from time
to time appoint a managing director who shall be a resident Canadian and a
director. If appointed, he shall be the chief executive officer and, subject to
the authority of the board, shall have general supervision of the business and
affairs of the Corporation; and he shall, subject to the provisions of the Act,
have such other powers and duties as the board may specify. During the absence
or disability of the president, or if no president has been appointed, the
managing director shall also have the powers and duties of that office. 

6.04 President – The board may from time to time
appoint a president. If appointed, the president shall be the chief operating
officer if no managing director has been appointed, and, subject to the
authority of the board, shall have general supervision of the business of the
Corporation; and he shall have such other powers and duties as the board may
specify. During the absence or disability of the managing director, or if no
managing director has been appointed, the president shall also have the powers
and duties of that office. 

6.05 Vice-President – The board may from time to
time appoint one or more vice-presidents. Any vice-president so appointed shall
have such powers and duties as the board or the chief executive officer may
specify. 

6.06 Secretary – The board may from time
to time appoint a secretary. If so appointed, the secretary shall attend and be
the secretary of all meetings of the board, shareholders and committees of the
board and shall enter or cause to be entered in records kept for that purpose
minutes of all proceedings thereat; he shall give or cause to be given, as and
when instructed, all notices to shareholders, directors, officers, auditors and
members of committees of the board; he shall be the custodian of the stamp or
mechanical device generally used for affixing the corporate seal of the
Corporation and of all books, papers, records, documents and instruments
belonging to the Corporation, except when some other officer or agent has been
appointed for that purpose; and he shall have such other powers and duties as
the board or the chief executive officer may specify. 

6.07 Treasurer – The board may from time to time
appoint a treasurer. If so appointed, the treasurer shall keep proper accounting
records in compliance with the Act and shall be responsible for the deposit of
money, the safekeeping of securities and the disbursement of the funds of the
Corporation; he shall render to the board whenever required an account of all
his transactions as treasurer and of the financial position of the Corporation;
and he shall have such other powers and duties as the board or the chief
executive officer may specify. 

6.08 Powers and Duties of Other Officers – The
powers and duties of all other officers shall be such as the terms of their
engagement call for or as the board or the chief executive officer may specify.
Any of the powers and duties of an officer to whom an assistant has been
appointed may be exercised and performed by such assistant, unless the board or
the chief executive officer otherwise directs. 

- 9 - 

6.09 Variation of Powers and Duties – The board
may from time to time and subject to the provisions of the Act, vary, add to or
limit the powers and duties of any officer. 

6.10 Term of Office – The Board, in its
discretion, may remove any officer of the Corporation, without prejudice to such
officer’s rights under any employment contract. Otherwise each officer appointed
by the board shall hold office until his successor is appointed, or until his
earlier resignation or death. 

6.11 Terms of Employment and Remuneration – The
terms of employment and the remuneration of officers appointed by the board
shall be settled by it from time to time. 

6.12 Conflict of Interest – An officer shall
disclose his interest in any material contract or transaction or proposed
material contract or transaction with the Corporation in accordance with section
4.18. 

6.13 Agents and Attorneys – The board shall have
power from time to time to appoint agents or attorneys for the Corporation in or
outside Canada with such powers of management or otherwise (including the power
to sub-delegate) as may be thought fit. 

6.14 Fidelity Bonds – The board may require such
officers, employees and agents of the Corporation as the board deems advisable
to furnish bonds for the faithful discharge of their powers and duties, in such
form and with such surety as the board may from time to time determine. 

Section Seven

PROTECTION OF DIRECTORS, OFFICERS AND OTHERS

7.01 Limitation of Liability – Every
director and officer of the Corporation in exercising his powers and discharging
his duties shall act honestly and in good faith with a view to the best
interests of the Corporation and exercise the care, diligence and skill that a
reasonably prudent person would exercise in comparable circumstances. Subject to
the foregoing, no director or officer shall be liable for the acts, receipts,
neglect or default of any other director or officer or employee, or for joining
in any receipt or other act for conformity, or for any loss, damage or expense
happening to the Corporation through the insufficiency or deficiency of title to
any property acquired for or on behalf of the Corporation, or for the
insufficiency or deficiency of any security in or upon which any of the moneys
of the Corporation shall be invested, or for any loss or damage arising from the
bankruptcy, insolvency or tortious acts of any person with whom any of the
moneys, securities or effects of the Corporation shall be deposited, or for any
loss occasioned by any error of judgment or oversight on his part, or for any
other loss, damage or misfortune whatever which shall happen in the execution of
the duties of his office or in relation thereto, unless the same are occasioned
by his own wilful neglect or default; provided that nothing herein shall relieve
any director or officer from the duty to act in accordance with the Act and the
regulations thereunder or from liability for any breach thereof.

- 10 -

7.02 Indemnity – Subject to the limitations
contained in the Act, the Corporation shall indemnify a director or officer, a
former director or officer, or a person who acts or acted at the Corporation’s
request as a director officer of a body corporate of which the Corporation is or
was a shareholder or creditor (or a person who undertakes or has undertaken any
liability on behalf of the Corporation or any such body corporate) and his heirs
and legal representatives, against all costs, charges and expenses, including an
amount paid to settle an action or satisfy a judgment, reasonably incurred by
him in respect of any civil, criminal or administrative action or proceeding to
which he is made a party by reason of being or having been a director or officer
of the Corporation or such body corporate, if 

	 	(a) 	
      he acted honestly and in good faith with a view to the
      best interests of the Corporation; and

	 	 	 
	 	(b) 	
      in the case of a criminal or administrative action or
      proceeding that is enforced by a monetary penalty, he had reasonable
      grounds for believing that his conduct was lawful.

The Corporation shall also indemnify such person in such other
circumstances as the Act permits or requires. 

7.03 Insurance – Subject to the limitations
contained in the Act, the Corporation may purchase and maintain insurance for
the benefit of any person referred to in section 7.02 hereof. 

Section Eight

SHARES 

8.01 Allotment – Subject to the provisions of the
Act, the articles and any unanimous shareholder agreement, the board may from
time to time grant options to purchase or allot the whole or any part of the
authorized and unissued shares of the Corporation at such times and to such
persons and for such consideration as the board shall determine, provided that
no share shall be issued until it is fully paid as prescribed by the Act. 

8.02 Commissions – The board may from time to
time authorize the Corporation to pay a reasonable commission to any person in
consideration of his purchasing or agreeing to purchase shares of the
Corporation from the Corporation or from any other person, or procuring or
agreeing to procure purchasers for any such shares. 

8.03 Registration of Transfer(1) –
Subject to the provisions of the Act, no transfer of shares shall be registered
in a securities register except upon presentation of the certificate
representing such shares with a transfer endorsed thereon or delivered therewith
duly executed by an appropriate person as provided by the Act, together with
such reasonable assurance that the endorsement is genuine and effective as the
board may from time to time prescribe, upon payment of all applicable taxes and
any fees prescribed by the board, upon compliance with such

(1) Section 8.03 amended by resn. of board on Feb.
7/08 and confirmed by s/h April 23/08 see Annex “B” attached

- 11 -

restrictions on transfer as are authorized by the articles and
upon satisfaction of any lien referred to in the articles or by-laws of the
Corporation for a debt of the shareholder to the Corporation. 

8.04 Transfer Agents and Registrars – The board
may from time to time appoint a registrar to maintain the securities register
and a transfer agent to maintain the register of transfers and may also appoint
one or more branch registrars to maintain branch securities registers and one or
more branch transfer agents to maintain branch registers of transfers, but one
person may be appointed both registrar and transfer agent. The board may at any
time terminate any such appointment. 

8.05 Non-Recognition of Trusts – Subject to the
provisions of the Act, the Corporation shall treat the registered holder of a
security as the person exclusively entitled to vote, to receive notices, to
receive any interest, dividend or other payments in respect of such security,
and otherwise to exercise all the rights and powers of an owner of such
security. 

8.06 Share Certificates – Every holder of one or
more shares of the Corporation shall be entitled, at his option, to a share
certificate, or to a non-transferable written acknowledgment of his right to
obtain a share certificate, stating the number and class or series of shares
held by him as shown on the securities register. Share certificates and
acknowledgements of a shareholder’s right to a share certificate, respectively,
shall be in such form as the board shall from time to time approve. Any share
certificate shall be signed in accordance with section 2.04 and need not be
under the corporate seal; provided that, unless the board otherwise determines,
certificates representing shares in respect of which a transfer agent and/or
registrar has been appointed shall not be valid unless countersigned by or on
behalf of such transfer agent and/or registrar. The signature of one of the
signing officers or, in the case of share certificates which are not valid
unless countersigned by or on behalf of a transfer agent and/or registrar, the
signatures of both signing officers, may be printed or mechanically reproduced
in facsimile upon share certificates and every such facsimile signature shall
for all purposes be deemed to be the signature of the officer whose signature it
reproduces and shall be binding upon the Corporation. A share certificate
executed as aforesaid shall be valid notwithstanding that one or both of the
officers whose facsimile signature appears thereon no longer holds office at the
date of issue of the certificate. 

8.07 Replacement of Share Certificates – The
board or any officer or agent designated by the board may in its or his
discretion direct the issue of a new share certificate in lieu of and upon
cancellation of a share certificate that has been mutilated or in substitution
for a share certificate claimed to have been lost, destroyed or wrongfully taken
if the owner: 

	 	(a) 	
      so requests before the Corporation has notice that the
      security has been acquired by a bona fide purchaser;

	 	 	 
	 	(b) 	
      furnishes the Corporation with an indemnity bond
      sufficient, in the opinion of the board, to protect the Corporation and
      any transfer agent, registrar or other agent of the Corporation from any
      loss that the Corporation or any of them may suffer by complying with the
      request to issue the new share certificate;
and

- 12 -

	 	(c) 	
      satisfies any other reasonable requirements imposed by
      the Corporation from time to time, whether generally or in any particular
      case.

8.08 Joint Shareholders – If two or more
persons are registered as joint holders of any share, the Corporation shall not
be bound to issue more than one certificate or written acknowledgment referred
to in section 8.06 in respect thereof, and delivery of such certificate to one
of such persons shall be sufficient delivery to all of them. Any one of such
persons may give effectual receipts for the certificate issued in respect
thereof or for any dividend, bonus, return of capital or other money payable or
warrant issuable in respect of such share. 

8.09 Deceased Shareholders – In the event of the
death of a holder, or of one of the joint holders, of any share, the Corporation
shall not be required to make any entry in the securities register in respect
thereof or to make payment of any dividends thereon except upon production of
all such documents as may be required by law and upon compliance with the
reasonable requirements of the Corporation and its transfer agents. 

Section Nine

DIVIDENDS AND RIGHTS

9.01 Dividends – The board may from time to time
declare dividends payable to the shareholders according to their respective
rights and interests in the Corporation. Dividends may be paid by issuing fully
paid shares of the Corporation and, subject to the provisions of the Act, in
money or property. 

9.02 Dividend Cheques – A dividend payable in
cash shall be paid by cheque drawn on the Corporation’s bankers or one of them
to the order of each registered holder of shares of the class or series in
respect of which it has been declared and mailed by prepaid ordinary mail to
such registered holder at his recorded address, unless such holder otherwise
directs. In the case of joint holders the cheque shall, unless such joint
holders otherwise direct, be made payable to the order of all of such joint
holders and mailed to them at their recorded address. The mailing of such cheque
as aforesaid, unless the same is not paid on due presentation, shall satisfy and
discharge the liability for the dividend to the extent of the sum represented
thereby plus the amount of any tax which the Corporation is required to and does
withhold. 

9.03 Non-Receipt of Cheques – In the event of
non-receipt of any dividend cheque by the person to whom it is sent as
aforesaid, the Corporation shall issue to such person a replacement cheque for a
like amount on such terms as to indemnity, reimbursement of expenses and
evidence of non-receipt and of title as the board may from time to time
prescribe, whether generally or in any particular case. 

9.04 Record Date for Dividends and Rights – The
board may fix in advance a date, preceding by not more than 50 days the date for
the payment of any dividend or the date for the issue of any warrant or other
evidence of right to subscribe for securities of the Corporation, as a record
date for the determination of the persons entitled to receive payment of such
dividend or to exercise the right to subscribe for such securities, provided
that, unless notice of the record 

- 13 -

date is waived in writing by every holder of a share of the
class or series affected whose name is set out in the securities register at the
close of business on the day the directors fix the record date, notice of any
such record date shall be given not less than 7 days before such record date, by
newspaper advertisement in the manner provided in the Act and by written notice
to each stock exchange in Canada on which the shares of the Corporation are
listed for trading. Where no record date is fixed in advance as aforesaid, the
record date for the determination of the persons entitled to receive payment of
any dividend or to exercise the right to subscribe for securities of the
Corporation shall be at the close of business on the day on which the resolution
relating to such dividend or right to subscribe is passed by the board. 

9.05 Unclaimed Dividends – Any dividend unclaimed
after a period of 6 years from the date on which the same has been declared to
be payable shall be forfeited and shall revert to the Corporation. 

Section Ten

MEETINGS OF SHAREHOLDERS

10.01 Annual Meetings – Subject to section 10.19,
the board shall call an annual meeting of shareholders not later than eighteen
months after the Corporation comes into existence and subsequently not later
than fifteen months after holding the last preceding annual meeting, for the
purpose of considering the financial statements and reports required by the Act
to be placed before the annual meeting, electing directors, appointing auditors
and for the transaction of such other business as may properly be brought before
the meeting. 

10.02 Special Meetings – The board shall have
power to call a special meeting of shareholders at any time. 

10.03 Place of Meetings – Meetings of
shareholders shall be held at such place in or outside Ontario as the board
determines or, in the absence of such a determination, at the place where the
registered office of the Corporation is located. 

10.04 Notice of Meetings – Notice of the time and
place of each meeting of shareholders shall be given in the manner provided in
section 12.01 

	 	(a) 	
      if the Corporation is an offering corporation, not less
      than 21 days; and

	 	 	 
	 	(b) 	
      if the Corporation is not an offering corporation, not
      less than 10 days;

but, in either case, not more than 50 days before the date of
the meeting, to each director, to the auditor and to each shareholder who at the
close of business on the record date for notice is entered in the securities
register as the holder of one or more shares carrying the right to vote at the
meeting. Notice of a meeting of shareholders called for any purpose other than
consideration of the financial statements and auditor’s report, election of
directors and reappointment of the incumbent auditor shall state or be
accompanied by a statement of the nature of such business in sufficient detail
to permit the shareholder to form a reasoned judgment thereon, and the text of

- 14 -

any special resolution or by-law to be submitted to the
meeting. A shareholder and any other person entitled to attend a meeting of
shareholders may in any manner and at any time waive notice of or otherwise
consent to a meeting of shareholders. 

10.05 List of Shareholders Entitled to Notice –
For every meeting of shareholders, the Corporation shall prepare a list of
shareholders entitled to receive notice of the meeting, arranged in alphabetical
order and showing the number of shares entitled to vote at the meeting held by
each shareholder. If a record date for the meeting is fixed pursuant to section
10.06, the shareholders listed shall be those registered at the close of
business on such record date. If no record date is fixed, the shareholders
listed shall be those registered at the close of business on the day immediately
preceding the day on which notice of the meeting is given, or where no such
notice is given, on the day on which the meeting is held. The list shall be
available for examination by any shareholder during usual business hours at the
registered office of the Corporation or at the place where the central
securities register is maintained and at the meeting for which the list was
prepared. Where a separate list of shareholders has not been prepared, the names
of persons appearing in the securities register at the requisite time as the
holder of one or more shares carrying the right to vote at such meeting shall be
deemed to be a list of shareholders. 

10.06 Record Date for Notice – The board may fix
in advance a date, preceding the date of any meeting of shareholders by not more
than 50 days and not less than 21 days, as a record date for the determination
of the shareholders entitled to notice of the meeting. If a record date is
fixed, unless notice thereof is waived in writing by every holder of a share of
the class or series affected whose name is set out in the share register at the
close of business on the day the directors fix the record date, notice thereof
shall, not less than seven days before the date so fixed, be given in the manner
provided in the Act. If no record date is so fixed, the record date for the
determination of the shareholders entitled to receive notice of the meeting
shall be the close of business on the day immediately preceding the day on which
the notice is given or if no notice is given, the day on which the meeting is
held. 

10.07 Meetings without Notice – A meeting of
shareholders may be held without notice at any time and place permitted by the
Act: 

	 	(a) 	
      if all the shareholders entitled to vote thereat are
      present in person or represented by proxy or if those not present or
      represented by proxy waive notice of or otherwise consent to such meeting
      being held; and

	 	 	 
	 	(b) 	
      if the auditors and the directors are present or waive
      notice of or otherwise consent to such meeting being
  held.

At such a meeting any business may be transacted which the
Corporation at a meeting of shareholders may transact. 

10.08 Chairman, Secretary and Scrutineers – The
president, or in his absence, a vice-president who is a director shall preside
as chairman at a meeting of shareholders. If there is no president or such a
vice-president or if at a meeting none of them is present within 15 minutes 

- 15 -

after the time appointed for the holding of the meeting, the
shareholders present and entitled to vote shall choose a person from their
number to be the chairman. If the secretary of the Corporation is absent, the
chairman shall appoint some person, who need not be a shareholder, to act as
secretary of the meeting. If desired, one or more scrutineers, who need not be
shareholders, may be appointed by a resolution or by the chairman with the
consent of the meeting. 

10.09 Persons Entitled to be Present – The only
persons entitled to be present at a meeting of shareholders shall be those
entitled to vote thereat, the directors and auditors of the Corporation and
others who, although not entitled to vote, are entitled or required under any
provision of the Act or the articles or by-laws to be present at the meeting.
Any other person may be admitted only on the invitation of the chairman of the
meeting or with the consent of the meeting. 

10.10 Quorum(2) – Subject to the Act
in respect of a sole shareholder, a quorum for the transaction of business at
any meeting of shareholders shall be two persons present in person, each being a
shareholder entitled to vote thereat or a duly appointed proxyholder or
representative for a shareholder so entitled. If a quorum is present at the
opening of any meeting of shareholders, the shareholders present or represented
may proceed with the business of the meeting notwithstanding that a quorum is
not present throughout the meeting. If a quorum is not present at the time
appointed for the meeting or within a reasonable time thereafter as the
shareholders may determine, the shareholders present or represented may adjourn
the meeting to a fixed time and place but may not transact any other business.

(2) Section 10.10 was amended by board resolution
dated February 7/05 – Copy of amended section 10.10 is attached as Annex “A”.

10.11 Right to Vote – Subject to the provisions
of the Act as to authorized representatives of any other body corporate, at any
meeting of shareholders in respect of which the Corporation has prepared the
list referred to in section 10.05, every person who is named in such list shall
be entitled to vote the shares shown thereon opposite his name, except: 

	 	(a) 	
      where the Corporation has fixed a record date in respect
      of such meeting pursuant to section 10.06, to the extent that any such
      person has transferred any of his shares after such record date and the
      transferee either produces properly endorsed share certificates or
      otherwise establishes that he owns such shares and demands, not later than
      10 days before the meeting, that his name be included in the list before
      the meeting; or

	 	 	 
	 	(b) 	
      where the Corporation has not fixed a record date in
      respect of such meeting pursuant to section 10.06, to the extent that any
      such person has transferred any of his shares after the date on which the
      list referred to in section 10.05 is prepared and the transferee, either
      produces properly endorsed share certificates or otherwise establishes
      that he owns such shares and demands, not later than 10 days before the
      meeting, that his name be included in the list before the
  meeting,

in either of which cases the transferee is entitled to vote his
shares at the meeting.

- 16 -

In the absence of a list prepared as aforesaid in respect of a
meeting of shareholders, every person shall be entitled to vote at the meeting
whose name appears in the securities register as the holder of one or more
shares carrying the right to vote at such meeting. 

10.12 Proxies – Every shareholder entitled to
vote at a meeting of shareholders may by means of a proxy appoint a proxyholder,
or one or more alternate proxyholders, who need not be shareholders, as his
nominees to attend and act at the meeting in the manner, to the extent and with
the authority conferred by the proxy. A proxy shall be executed by the
shareholder or his attorney authorized in writing or, if the shareholder is a
body corporate, by an officer or attorney thereof duly authorized. Every form of
proxy shall comply with the regulations to the Act. 

10.13 Time for Deposit of Proxies – The board may
by resolution fix a time not exceeding 48 hours, excluding Saturdays and
holidays, preceding any meeting or adjourned meeting of 

shareholders, before which time proxies to be used at that
meeting must be deposited with the Corporation or an agent thereof, and any
period of time so fixed shall be specified in the notice calling the meeting. A
proxy shall be acted upon only if, prior to the time so specified, it shall have
been deposited with the Corporation or an agent thereof specified in such notice
or, if no such time is specified in such notice, unless it has been received by
the secretary of the Corporation or by the chairman of the meeting or any
adjournment thereof prior to the time of voting. 

10.14 Joint Shareholders – If two or more persons
hold shares jointly, any one of them present in person or represented by proxy
at a meeting of shareholders may, in the absence of the other or others, vote
the shares; but if two or more of those persons are present in person or
represented by proxy and vote, they shall vote as one on the shares jointly held
by them. 

10.15 Votes to Govern – At any meeting of
shareholders every question shall, unless otherwise required by the articles or
by-laws or by law, be determined by the majority of the votes cast on the
question. In case of an equality of votes, the chairman presiding at the meeting
shall be entitled to a second or casting vote. 

10.16 Show of Hands – Subject to the provisions
of the Act, any question at a meeting of shareholders shall be decided by a show
of hands unless a ballot thereon is required or demanded as hereinafter
provided. Upon a show of hands every person who is present and entitled to vote
shall have one vote. Whenever a vote by show of hands shall have been taken upon
a question, unless a ballot thereon is so required or demanded, a declaration by
the chairman of the meeting that the vote upon the question has been carried or
carried by a particular majority or not carried and an entry to that effect in
the minutes of the meeting shall be prima facie proof of the fact without proof
of the number or proportion of the votes recorded in favour of or against any
resolution or other proceeding in respect of the said question, and the result
of the vote so taken shall be the decision of the shareholders upon the said
question. 

10.17 Ballots – On any question proposed for
consideration at a meeting of shareholders, and whether or not a show of hands
has been taken thereon, any shareholder or proxyholder entitled to vote at the
meeting may require or demand a ballot. A ballot so required or demanded shall
be taken in such manner as the chairman shall direct. A requirement or demand
for a ballot may be 

- 17 -

withdrawn at any time prior to the taking of the ballot. If a
ballot is taken each person present shall be entitled, in respect of the shares
which he is entitled to vote at the meeting upon the question, to that number of
votes provided by the Act or the articles, and the result of the ballot so taken
shall be the decision of the shareholders upon the said question. 

10.18 Adjournment – If a quorum is not present at
the time appointed for a meeting of shareholders or within such reasonable time
thereafter as the shareholders present may determine, the shareholders present
may adjourn the meeting to a fixed time and place but may not transact any other
business. If a meeting of shareholders is adjourned for less than 30 days, it
shall not be necessary to give notice of the adjourned meeting, other than by
announcement at the earliest meeting that is adjourned. If a meeting of
shareholders is adjourned by one or more adjournments for an aggregate of 30
days or more, notice of the adjourned meeting shall be given as for an original
meeting. 

10.19 Resolution in Lieu of Meeting –
Except where a written statement with respect to the subject matter of the
resolution is submitted by a director or the auditors in accordance with the
Act, 

	 	(a) 	
      a resolution in writing signed by all the shareholders
      entitled to vote on that resolution at a meeting of shareholders is as
      valid as if it had been passed at a meeting of the shareholders;
  and

	 	 	 
	 	(b) 	
      a resolution in writing dealing with any matter required
      by the Act to be dealt with at a meeting of shareholders, and signed by
      all the shareholders entitled to vote at that meeting, satisfies all the
      requirements of the Act relating to that meeting of
  shareholders.

10.20 Only One Shareholder – Where the
Corporation has only one shareholder or only one holder of any class or series
of shares, the shareholder present in person or by proxy constitutes a meeting.

Section Eleven

DIVISIONS AND DEPARTMENTS

11.01 Creation and Consolidation of Divisions –
The board may cause the business and operations of the Corporation or any part
thereof to be divided or to be segregated into one or more divisions upon such
basis, including without limitation, character or type of operation,
geographical territory, product manufactured or service rendered, as the board
may consider appropriate in each case. The board may also cause the business and
operations of any such division to be further divided into sub-units and the
business and operations of any such divisions or sub-units to be consolidated
upon such basis as the board may consider appropriate in each case. 

11.02 Name of Division – Any division or its
sub-units may be designated by such name as the board may from time to time
determine and may transact business under such name, provided 

- 18 -

that the Corporation shall set out its name in legible
characters in all contracts, invoices, negotiable instruments and orders for
goods or services issued or made by or on behalf of the Corporation. 

11.03 Officers of Divisions – From time to time
the board or, if authorized by the board, the chief executive officer, may
appoint one or more officers for any division, prescribe their powers and duties
and settle their terms of employment and remuneration. The board or, if
authorized by the board, the chief executive officer, may remove at its or his
pleasure any officer so appointed, without prejudice to such officer’s rights
under any employment contract. Officers of divisions or their sub-units shall
not, as such, be officers of the Corporation. 

Section Twelve

NOTICES 

12.01 Method of Giving Notice – Any notice
(which term includes any communication or document) to be given (which term
includes sent, delivered or served) pursuant to the Act, the regulations
thereunder, the articles, the by-laws or otherwise to a shareholder, director,
officer, auditor or member of a committee of the board shall be sufficiently
given if delivered personally to the person to whom it is to be given or if
delivered to his recorded address or if mailed to him at his recorded address by
prepaid ordinary or air mail or if sent to him at his recorded address by any
means of prepaid transmitted or recorded communication. A notice so delivered
shall be deemed to have been given when it is delivered personally or to the
recorded address as aforesaid; a notice so mailed shall be deemed to have been
received on the fifth day after mailing; and a notice so sent by any means of
transmitted or recorded communication shall be deemed to have been given when
dispatched or delivered to the appropriate communication company or agency or
its representative for dispatch. The secretary may change or cause to be changed
the recorded address of any shareholder, director, officer, auditor or member of
a committee of the board in accordance with any information believed by him to
be reliable. 

12.02 Notice to Joint Shareholders – If
two or more persons are registered as joint holders of any share, any notice
shall be addressed to all of such joint holders but notice to one of such
persons shall be sufficient notice to all of them. 

12.03 Computation of Time – In computing the date
when notice must be given under any provision requiring a specified number of
days’ notice of any meeting or other event, “day” means a clear day and a period
of days shall be deemed to commence the day following the event that began the
period and shall be deemed to terminate at midnight of the last day of the
period except that if the last day of the period falls on a Sunday or holiday
the period shall terminate at midnight of the day next following that is not a
Sunday or holiday. 

12.04 Undelivered Notices – If any notice given
to a shareholder pursuant to section 12.01 is returned on three consecutive
occasions because he cannot be found, the Corporation shall not be required to
give any further notices to such shareholder until he informs the Corporation in
writing of his new address. 

- 19 -

12.05 Omissions and Errors – The accidental
omission to give any notice to any shareholder, director, officer, auditor or
member of a committee of the board or the non-receipt of any notice by any such
person or any error in any notice not affecting the substance thereof shall not
invalidate any action taken at any meeting held pursuant to such notice or
otherwise founded thereon. 

12.06 Persons Entitled by Death or Operation of
Law – Every person who, by operation of law, transfer, death of a
shareholder or any other means whatsoever, shall become entitled to any share,
shall be bound by every notice in respect of such share which shall have been
duly given to the shareholder from whom he derives his title to such share prior
to his name and address being entered on the securities register (whether such
notice was given before or after the happening of the event upon which he became
so entitled) and prior to his furnishing to the Corporation the proof of
authority or evidence of his entitlement prescribed by the Act. 

12.07 Waiver of Notice – Any shareholder (or his
duly appointed proxyholder), director, officer, auditor or member of a committee
of the board may at any time waive the sending of any notice, or waive or
abridge the time for any notice, required to be given to him under any provision
of the Act, the regulations thereunder, the articles, the by-laws or otherwise
and such waiver or abridgement shall cure any default in the giving or in the
time of such notice, as the case may be. Any such waiver or abridgement shall be
in writing except a waiver of notice of a meeting of shareholders or of the
board or a committee of the board which may be given in any manner. 

Section Thirteen

REPEAL 

13.01 Repeal – By-law Nos. 4 and 5 of the
Corporation are repealed as of the coming into force of this by-law. Such repeal
shall not affect the previous operation of any by-law so repealed or affect the
validity of any act done or right, privilege, obligation or liability acquired
or incurred under, or the validity of any contract or agreement made pursuant
to, or the validity of any articles (as defined in the Act) or predecessor
charter documents of the Corporation obtained pursuant to, any such by-law prior
to its repeal. All officers and persons acting under any by-law so repealed
shall continue to act as if appointed under the provisions of this by-law and
all resolutions of the shareholders or the board or a committee of the board
with continuing effect passed under any repealed by-law shall continue to be
good and valid except to the extent inconsistent with this by-law and until
amended or repealed. 

- 20 - 

Section Fourteen 

EFFECTIVE DATE 

14.01 Effective Date – This by-law shall come
into force when enacted by the directors, subject to the Act. 

         
ENACTED by the Board the 27 day of May, 1987. 

         
WITNESS the corporate seal of the Corporation. 

 

	   
         “Richard D. McGraw” 	 	“Geofrey R.K. Myers” 
	President – Richard D. McGraw 	 	Secretary – Geofrey R. K. Myers 
	  	 	c/s 

 

         
CONFIRMED by the shareholders the 27 day of May, 1987.

 

 

	 	“Geofrey R.K. Myers” 
	 	Secretary – Geofrey R. K. Myers 
	 	c/s 

ANNEX “A”

“10.10 Quorum – Subject to the Act in respect of a sole
shareholder, a quorum for the transaction of business at any meeting of
shareholders shall be a minimum of two persons present in person, each being a
shareholder entitled to vote thereat or a duly appointed proxy holder or
representative for a shareholder so entitled, holding or representing by proxy
shares at least one-third of the Common Shares entitled to be voted at such
meeting. If a quorum is present at the opening of any meeting of shareholders,
the shareholders present or represented may proceed with the business of the
meeting notwithstanding that a quorum is not present throughout the meeting. If
a quorum is not present at the time appointed for the meeting or within a
reasonable time thereafter as the shareholders may determine, the shareholders
present or represented may adjourn the meeting to a fixed time and place but may
not transact any other business.” 

ANNEX “B”

BE IT RESOLVED that section 8.03 of the Company’s by-law
Number 6 be amended by deleting the phrase “Subject to the provisions of the
Act” and replacing that phrase with “In the case of shares represented by a
certificate”.imxform8k_ex10-1.htm

EXHIBIT 10.1

 

 

 

 

 

CREDIT AGREEMENT

 

 

 

among

 

 

 

DMRJ GROUP, LLC

 

as Lender

 

 

IMPLANT SCIENCES CORPORATION

 

as Borrower

 

and

 

C ACQUISITION CORP.

ACCUREL SYSTEMS INTERNATIONAL CORPORATION

IMX ACQUISITION CORP.

as Guarantors

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130355.01002/11924525v.4

  

  

  

 

 

 

 

TABLE OF CONTENTS

 

PAGE

 

 

ARTICLE I                            CERTAIN DEFINITIONS AND TERMS................................................................................................................................................................................................................................................................................................................................................................................................................................     
2

 

ARTICLE II                          CREDIT FACILITY....................................................................................................................................................................................................................................................................................................................................................................................................................................................................     
2

 

ARTICLE III                         CONDITIONS PRECEDENT....................................................................................................................................................................................................................................................................................................................................................................................................................................................     
2

 

ARTICLE IV                         REPRESENTATIONS AND WARRANTIES........................................................................................................................................................................................................................................................................................................................................................................................................................     
2

 

ARTICLE V                          COVENANTS.............................................................................................................................................................................................................................................................................................................................................................................................................................................................................     
2

 

ARTICLE VI                         INDEMNIFICATION; INCREASED COSTS........................................................................................................................................................................................................................................................................................................................................................................................................................     
2

.

ARTICLE VII                        EVENTS OF DEFAULT...........................................................................................................................................................................................................................................................................................................................................................................................................................................................     
2

 

ARTICLE VIII                       RIGHTS AND REMEDIES......................................................................................................................................................................................................................................................................................................................................................................................................................................................     
2

 

ARTICLE IX                         MISCELLANEOUS..................................................................................................................................................................................................................................................................................................................................................................................................................................................................     
2

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130355.01002/11924525v.4

  

  

  

SCHEDULES

 

	
Schedule 1.89
	
Liens

	
Schedule 4.2
	
Authorization; Enforcement

	
Schedule 4.3 (i)
	
Capitalization

	
Schedule 4.3 (ii)
	
Warrant holders having registration rights

	
Schedule 4.3 (iii)
	
Obligation to Repurchase Shares

	
Schedule 4.3 (iv)
	
Issue Additional Shares

	
Schedule 4.3 (v)
	
Anti-Dilution Rights

	
Schedule 4.3(vi)
	
Stock Restrictions

	
Schedule 4.6
	
Commission Documents, Financial Statements

	
Schedule 4.7
	
Subsidiaries

	
Schedule 4.8
	
Names; Prior Names

	
Schedule 4.9
	
Material Adverse Change

	
Schedule 4.12
	
Undisclosed Liabilities

	
Schedule 4.13
	
Undisclosed Events or Circumstances

	
Schedule 4.14
	
Indebtedness

	
Schedule 4.15
	
Title to Assets

	
Schedule 4.16
	
Litigation

	
Schedule 4.18
	
Taxes

	
Schedule 4.21
	
Books and Records; Internal Accounting Controls

	
Schedule 4.22
	
Material Agreements

	
Schedule 4.23
	
Transactions with Affiliates

	
Schedule 4.25
	
Employees

	
Schedule 4.26
	
Intellectual Property

	
Schedule 4.27
	
Absence of Certain Developments

	
Schedule 4.29
	
ERISA

	
Schedule 4.30
	
No Integrated Offering

	
Schedule 4.31
	
DTC Status

	
Schedule 4.36
	
Accounts

	
Schedule 4.40
	
Affiliates

	
Schedule 5.3(g)
	
Acquisitions, Mergers and Dissolutions

	
Schedule 5.3(j)
	
Business Locations

	  	  
	
EXHIBITS
	  
	  	  
	
Exhibit A
	
Form of Borrowing Certificate

	
Exhibit B
	
Form of Guaranty

	
Exhibit C
	
Form of Officer’s Certificate

	
Exhibit D
	
Form of Security Agreement

	
Exhibit E
	
Form of Advance Request

	
Exhibit F
	
Form of Opinion of Counsel

	
Exhibit G
	
Form of Budget

 

 

 

{M0104990.1 }

130355.01002/11924525v.4

  

  

  

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT, dated as of September 4, 2009 (this “Agreement”), is among IMPLANT SCIENCES CORPORATION, a Massachusetts corporation as borrower (“Borrower”), C
ACQUISITION CORP., a Delaware corporation, ACCUREL SYSTEMS INTERNATIONAL CORPORATION, a California corporation, and IMX ACQUISITIONS CORP., a Delaware corporation, as guarantors (each a “Guarantor” and collectively
“Guarantors” and together with Borrower, collectively, “Loan Parties” and each individually a “Loan Party”), and DMRJ GROUP, LLC (“Lender”).

 

RECITALS

 

A. Borrower desires to borrow funds from Lender for working capital purposes, which borrowings and other Obligations (as defined herein) are to be secured by the Collateral (as defined herein).

 

B. Subject to the terms and conditions hereinafter set forth, Lender has indicated its willingness to make loans to Borrower; provided, however,
that Lender is only willing to make loans to Borrower subject to satisfaction of certain conditions as set forth herein.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

AGREEMENT

 

ARTICLE I

 

 

CERTAIN DEFINITIONS AND TERMS

 

As used herein, the following terms shall have the meanings herein indicated:

 

1.1 Account means each of the Funding Account and the Collection Account.

 

1.2 Account Bank means TD Bank, N.A. or such other bank which maintains one or more of the Accounts as may be selected by Borrower, subject to Lender’s approval.

 

1.3 Account Control Agreements means, collectively, the Account Control Agreements, dated as of the date hereof, between Borrower, Lender and the Account Bank pertaining to the Funding
Account and the Collection Account, and each other Account Control Agreement, if any, entered into among Borrower, Lender and a bank in connection herewith; provided that each such Account Control Agreement shall be in form and substance satisfactory to Lender.

 

1.4 Advance has the meaning set forth in Section 2.1.

 

1.5 Advance Date has the meaning set forth in Section 2.2.

 

 

 

1

 

 

1.6 Advance Period means the period commencing on the Closing Date and ending on the earlier of (a) October 31, 2009 and (b) the Termination Date.

 

1.7 Advance Request has the meaning set forth in Section 2.2.

 

1.8 Affected Party means Lender and its respective successors and assigns.

 

1.9 Affiliate means, in respect of any Person, (a) any other Person directly or indirectly holding 10% or more of any class of Capital Stock of that Person, (b) any other Person
10% or more of any class of whose Capital Stock is held directly or indirectly by that Person, and (c) any other Person that, directly or indirectly, controls or is controlled by or is under common control with such Person; and for the purpose of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) means the power to direct, or cause to be directed, the management and policies of a Person whether through
the ownership of securities or interests or by contract or otherwise.

 

1.10 Agreement means this Credit Agreement, including any Schedules and Exhibits hereto.

 

1.11 Applicable Law means all provisions of statutes, laws, rules, regulations, ordinances, writs, interpretations, injunctions and orders of any Governmental Authority applicable
to any Person, property, transaction or event, and all orders and decrees of all courts and arbitrators in proceedings or actions in which the Person in question is a party or which such property, transaction or event is the subject including applicable federal, state and local laws and regulations.

 

1.12 Articles of Organization shall have the meaning set forth in Section 4.5.

 

1.13 Blocked Account shall have the meaning set forth in Section 5.1(r)

 

1.14 Borrowing Certificate means a certificate from an authorized Officer of Borrower relating to a proposed Advance, in the form attached hereto as Exhibit
A, which certificate shall contain the following certifications of an Officer on behalf of Borrower: (a) as to Borrower’s compliance with all covenants set forth in the Transaction Documents; (b) that all representations and warranties of Borrower set forth in the Transaction Documents are true and correct in all material respects as if made on the date thereof (except to the extent already qualified by materiality or Material Adverse Effect, in which case such representations and warranties shall
be true and correct in all respects as if made on the date thereof); (c) that no Default or Event of Default shall have occurred and be continuing or would result from the proposed Advance; (d) the Funding Conditions have been satisfied in full (as determined by Lender in its sole and absolute discretion); and (e) as to such other information as Lender may request in connection with any proposed borrowing hereunder.

 

1.15 Budget shall have the meaning set forth in Section 5.1(e)(vi).

 

1.16 Business Day means any day banking transactions can be conducted in New York City, NY, USA and does not include any day which is a federal or state holiday in such location
or Rosh Hashanah (both days) or Yom Kippur.

 

 

 

2

 

 

1.17 Bylaws shall have the meaning set forth in Section 4.5.

 

1.18 Capital Stock means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person’s capital stock
or partnership, limited liability company or other equity interests at any time outstanding, and any and all rights, warrants or options exchangeable for or convertible into such capital stock or other interests.

 

1.19 Change of Control means the occurrence of any of the following events in one or a series of transactions:

 

(a) the consolidation, merger or other business combination of the Borrower with or into another Person (other than (A) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the
Borrower or (B) a consolidation, merger or other business combination in which holders of the Borrower’s voting power immediately prior to the transaction continue after the transaction to hold, directly or indirectly, the voting power of the surviving entity or entities necessary to elect a majority of the members of the board of directors (or their equivalent if other than a corporation) of such entity or entities);

 

(b) the sale or transfer of more than fifty percent (50%) of the Borrower’s assets (based on the fair market value as determined in good faith by the Borrower’s Board of Directors) other than inventory in the ordinary course
of business in one or a related series of transactions;

 

(c) closing of a purchase, tender or exchange offer made to the holders of more than fifty percent (50%) of the outstanding shares of Common Stock in which more than fifty percent (50%) of the outstanding shares of Common Stock were tendered
and accepted; or

 

(d) the issuance by the Borrower in one or more related or unrelated transactions of any shares, Options (other than Options granted to employees and consultants pursuant to any employee stock benefit, option, purchase or similar plan
approved by the Borrower’s Board of Directors), warrants (other than the Warrants (as defined in the Note and Warrant Purchase Agreement)), interests, participations, or other equivalents (regardless of how designated) of the Borrower, whether voting or nonvoting, including Common Stock, preferred stock or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Commission under the Exchange Act) or any equity contribution in
received by the Borrower, which in the aggregate results in Net Cash Proceeds in excess of $500,000.

 

1.20 Closing Date means the date hereof.

 

1.21 Code means the Internal Revenue Code of 1986, as amended from time to time, and all regulations promulgated and rulings issued thereunder.

 

1.22 Collateral means all property and proceeds thereof now owned or hereafter acquired by any Loan Party or any other Person who has granted a Lien to Lender, in or upon which a
Lien now or hereafter exists in favor of Lender, as security for the Obligations.

 

 

 

3

 

 

1.23 Collection Account means the account of Borrower that is located at the Account Bank, control of which is provided for in an Account Control Agreement, and which account is
acknowledged and agreed to in writing by Lender as being the “Collection Account” for the purpose of this Agreement.

 

1.24 Collections means, with respect to each Receivable and all other Collateral, all cash collections and other cash proceeds of such Receivable or such other Collateral, including,
without limitation, all (a) payments or repayments of any nature, and any applicable late fees, in any such case, received and collected on such Receivable, (b) proceeds received by virtue of the liquidation of such Receivable, net of expenses incurred in connection with such liquidation, (c) proceeds received under any insurance policy with respect to such Receivable, (d) other proceeds, including recoveries or collections of any deficiency balance, relating to such Receivable, (e) all cash proceeds of the Collateral,
and (f) any other amounts received at the Collection Account in respect of a Receivable.

 

1.25 Commission means the United States Securities and Exchange Commission.

 

1.26 Commission Documents has the meaning set forth in Section 4.6.

 

1.27 Common Stock means the common stock, par value $0.10 per share, of the Borrower.

 

1.28 Concentration Account means that certain deposit account #7928416333 of Lender located at TD Bank, N.A., or such other deposit account which Lender shall identify as the “Concentration
Account” for the purpose of this Agreement.

 

1.29 Conditions Precedent means all of the conditions set forth in Article III.

 

1.30 Current Ratio has the meaning set forth in Section 5.1(u).

 

1.31 Default means any event that with the passage of time or the giving of notice or both would be an Event of Default.

 

1.32 Default Rate has the meaning set forth in Section 2.5(e).

 

1.33 Dollars and $ means United States dollars.

 

1.34 Environmental Laws means all applicable laws relating to the protection of the environment including, without limitation, all requirements pertaining to reporting, licensing,
permitting, controlling, investigating or remediating emissions, discharges, releases or threatened releases of hazardous substances, chemical substances, pollutants, contaminants or toxic substances, materials or wastes, whether solid, liquid or gaseous in nature, into the air, surface water, groundwater or land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of hazardous substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature.

 

 

 

4

 

 

1.35 ERISA means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated and rulings issued thereunder.

 

1.36 ERISA Affiliate means any Person who is a member of any Loan Party’s control group, or who is under common control with any Loan Party, within the meaning of Section 414(b)
or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code) and the regulations promulgated and rulings issued thereunder.

 

1.37 ERISA Event means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by any Loan Party 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) or a cessation of operations which is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by any Loan Party or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization or receipt by any Loan Party or any ERISA Affiliate of notice that a Multiemployer Plan is, or is expected to be in endangered or critical
status within the meaning of Section 305 of ERISA; (d) the filing of a notice of intent to terminate, the treatment of a Pension 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) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan;
(f) a determination that any Pension Plan is, or is expected to be, in “at-risk” status (as defined in Section 303(i)(4)(A) of ERISA or Section 430(i)(4)(A) of the Code); or (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 Borrower or any ERISA Affiliate.

 

1.38 Evaluation Date has the meaning set forth in Section 4.21 of this Agreement.

 

1.39 Event of Default has the meaning set forth in Article VII of this Agreement or in any other Transaction Document.

 

1.40 Exchange Act means the Securities Exchange Act of 1934, as amended.

 

1.41 Excluded Taxes means, with respect to Lender, Taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net
income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which Lender is organized or in which its principal office is located, and branch profits or similar taxes.

 

1.42 Existing Security Agreement means that certain Security Agreement dated as of December 10, 2008 among the Loan Parties and Lender.

 

1.43 Expenses means all documented out of pocket costs and expenses of Lender (including, without limitation, accounting fees, audit fees, attorneys’ fees, UCC search fees,
appraisal fees, underwriting fees, documentation costs and expenses and filing fees and

 

 

 

5

 

 

expenses) incurred in connection with this Agreement, the other Transaction Documents or the transactions contemplated hereby.

 

1.44 Facility has the meaning set forth in Section 2.1.

 

1.45 Facility Limit means $3,000,000.

 

1.46 Financial Statements means balance sheets, profit and loss statements, statements of cash flows and statements of equityholders’ equity prepared in comparative form with
respect to the corresponding period of the preceding fiscal year and prepared in accordance with GAAP.

 

1.47 Funding Account means that certain deposit account #7930880419 located at the Account Bank.

 

1.48 Funding Conditions has the meaning assigned to such term in Section 3.2.

 

1.49 GAAP means all applicable generally accepted accounting principles of the Accounting Principles Board of the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board.

 

1.50 Governmental Authority means the government of the United States of America or any political subdivision thereof, whether state, federal or local, and any agency, authority,
instrumentality, regulatory body, court, administrative court or judge, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

 

1.51 Guaranty means that certain Guaranty to be delivered by each of the Guarantors, dated as of the date hereof, substantially in the form of Exhibit
B.

 

1.52 Indebtedness means, with respect to any Person, (a) all obligations for borrowed money, (b) all obligations evidenced by bonds, debentures, notes, or other similar instruments
and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, current swap agreements, interest rate hedging agreements, interest rate swaps, or other financial products, (c) all capital lease obligations that exceed $50,000 in the aggregate in any fiscal year, (d) all obligations or liabilities secured by a lien or encumbrance on any asset of such Person, irrespective of whether such obligation or liability is assumed, (e) all obligations for the deferred purchase price of
assets, together with trade debt and other accounts payable that exceed $50,000 in the aggregate in any fiscal year, (f) all synthetic leases, (g) all obligations with respect to redeemable stock and redemption or repurchase obligations under any capital stock or other equity securities issued by such Person, (h) all reimbursement obligations and other liabilities of such Person with respect to surety bonds (whether bid, performance or otherwise), letters of credit, banker’s acceptances, drafts or similar
documents or instruments issued for such Person’s account, (i) indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer to the extent such Person is liable therefore as a result of such Person’s ownership interest in such entity, except to the extent that the terms of such indebtedness expressly provide that such Person is not liable therefore or such Person has no liability therefore as a matter of law, (j) trade debt and other account payables
which remain unpaid more than one

 

 

 

6

 

 

hundred (100) days past the invoice date, and (k) any obligation guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse) any of the foregoing obligations of any other Person; provided, however, Indebtedness shall not include (I) usual and customary trade debt and other accounts payable incurred in the ordinary course of business less than one hundred
(100) days past the invoice date and (II) endorsements for collection or deposit in the ordinary course of business.

 

1.53 Indemnified Party has the meaning assigned to such term in Section 6.1.

 

1.54 Indemnified Taxes means Taxes other than Excluded Taxes.

 

1.55 Indemnity Claim has the meaning set forth in Section 6.2.

 

1.56 Indemnity Matter has the meaning set forth in Section 6.1.

 

1.57 Interest Expense means the interest expense of Loan Parties as would be shown on a statement of earnings and cash flow of Borrower for any measurement period prepared in accordance
with GAAP, including without limitation all scheduled payments of interest on Indebtedness (specifically including the interest component of payment with respect to capital leases) and all fees (to the extent carried as interest expense on the financial statements of Borrower), as shown on a statement of income for Borrower for any measurement period prepared in accordance with GAAP.  For purposes of calculating Interest Expense, it shall be assumed that any guaranty constituting Indebtedness will require
payments of interest, if any, in the amounts as called for in the underlying obligation which is the subject of the guaranty.

 

1.58 Interest Paid means any interest actually paid in cash by Borrower under Section 2.5(b) of this Agreement.

 

1.59 Investment means, with respect to any Person, all investments (by capital contribution or otherwise) in any other Person, or any extension of credit, loan, advance, purchase
or repurchase of stock or other ownership interest, any Indebtedness or all or a substantial part of the assets or property of any Person, bonds, notes, debentures or other securities, or otherwise, and whether existing on the date of this Agreement or thereafter made, but such term shall not include the cash surrender value of life insurance policies on the lives of officers or employees, excluding amounts due from customers for services or products delivered or sold in the ordinary course of business.

 

1.60 Investment Property means all “investment property” (as defined in the Code) including, without limitation, (a) all securities, whether certificated or uncertificated,
including stocks, bonds, interests in limited liability companies, partnership interests, treasuries, certificates of deposit, and mutual fund shares; (b) all securities entitlements of Borrower (or if referring to another Person, of such other Person), including the rights of Borrower (or if referring to another Person, of such other Person) to any securities account and the financial assets held by a securities intermediary in such securities account and any free credit balance or other money owing by any securities
intermediary with respect to that account; (c) all securities accounts held by Borrower (or if referring to another Person, by such other Person); (d) all commodity contracts held by Borrower (or if referring to another Person, by such other Person);

 

 

 

7

 

 

and (e) all commodity accounts held by Borrower (or if referring to another Person, by such other Person).

 

1.61 IP Security Agreements means the Patent Security Agreement by and among the Loan Parties and the Lender, substantially in the form of Exhibit
B attached to the Security Agreement, together with any Copyright Security Agreement or Trademark Security Agreement subsequently entered into by the Borrower or any Subsidiary and the Lender pursuant to the terms of the Security Agreement.

 

1.62 Lender-Related Persons has the meaning set forth in Section 6.1.

 

1.63 Lien means any lien, security interest, mortgage, debenture, pledge, charge, claim, assignment by way of security, hypothecation or other encumbrance of any kind granted or
permitted by a Person or arising by operation of law, in respect of any Person’s property or assets, or any consignment or capital lease of property by such Person as consignee or lessee or any other security agreement, trust or arrangement, having the effect of security for the payment or performance of any debt, liability or obligation.

 

1.64 Loan Parties has the meaning set forth in the introduction to this Agreement.

 

1.65 Management Consultant shall have the meaning set forth in Section 5.1(o)(i).

 

1.66 Material Adverse Effect means any material adverse effect on the business, operations, properties or financial condition of the Borrower and its Subsidiaries (taken together
as a whole) and/or any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of any Loan Party to perform any of its obligations under this Agreement or any of the Transaction Documents in any material respect.

 

1.67 Material Agreements means any written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement, filed or required to be filed with the Commission.

 

1.68 Maturity Date means December 10, 2009.

 

1.69 Maximum Rate means the maximum rate or amount of interest that Lender is allowed to contract for, charge, take, reserve or receive under Applicable Law.

 

1.70 Minimum Balance has the meaning set forth in  Section 5.1(r).

 

1.71 Multiemployer Plan means a “multiemployer plan,” within the meaning of Section 4001(a)(3) of ERISA, to which any Loan Party or any ERISA Affiliate makes, is making,
or is obligated to make contributions or, during the preceding three calendar years, has made, or been obligated to make, contributions.

 

1.72 Net Cash Proceeds means 100% of the aggregate amount of cash received (directly or indirectly) from time to time (whether as initial consideration or through the payment or
disposition of deferred consideration) by or on behalf of Borrower in connection with a transaction or series of transactions after deducting therefrom only reasonable fees, commissions, and expenses related thereto and required to be paid by the Borrower in connection with such

 

 

 

8

 

 

transaction or transactions to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such cash, actually paid or payable to a Person that is not an affiliate of Borrower and are properly attributable to such transaction or transactions.

 

1.73 Net Income means for any period, the aggregate net income (or loss) of Loan Parties for such period on a consolidated basis determined in accordance with GAAP, provided,
the following items shall be excluded from the calculation of Net Income: (a) after-tax gains and losses from asset sales or abandonment or reserves relating thereto; (b) items classified as extraordinary, nonrecurring or unusual gains, losses or charges, and the related tax effects, each determined in accordance with GAAP; (c) the net income of any Person acquired in a “pooling of interests” transaction accrued prior to the date it becomes a Subsidiary of a Loan Party or is merged or consolidated
with a Loan Party or any Subsidiary of a Loan Party; (d) the net income (but not loss) of any Loan Party or any Subsidiary of a Loan Party to the extent that the declaration of dividends, the making of intercompany loans or similar payments by that Subsidiary of that income is restricted by a contract, operation of law or otherwise; (e) the net income of any Person, other than a Loan Party or a Subsidiary of a Loan Party, except to the extent of cash dividends or distributions paid to a Loan Party or a Subsidiary
of a Loan Party by such Person; (f) any restoration to income of any contingency reserve; (g) income or loss attributable to discontinued operations (including operations disposed of during such period whether or not such operations were classified as discontinued); and (h) income attributable to insurance proceeds, condemnation awards or litigation awards or settlements.

 

1.74 Net Profits Interest has the meaning set forth in Section 2.7.

 

1.75 Net Profits Paid means any Net Profits Interest actually paid in cash by Borrower under Section
2.7 of this Agreement.

 

1.76 Net Profits Payment Date means each Advance Date and the Termination Date.

 

1.77 Net Profits means, with respect to Loan Parties for the period commencing on the date hereof through the Termination Date, the Net Income after taxes of Loan Parties for such
period plus the sum of the following (to the extent deducted in the computation of such Net Income): (a) depreciation expense; (b) amortization expense; (c) Interest Expense; and (d) income taxes, all as shown on a statement of income for Borrower for any measurement period on a consolidated basis prepared in accordance with GAAP.

 

1.78 Note has the meaning set forth in Section 2.3.

 

1.79 Note and Warrant Purchase Agreement means that certain Note and Warrant Purchase Agreement dated as of December 10, 2008 between Borrower and Lender, as has been and may hereafter
be amended, supplemented, restated or otherwise modified from time to time.

 

1.80 Note and Warrant Purchase Agreement Documents means the Transaction Documents (as defined in the Note and Warrant Purchase Agreement, as has been and may
hereafter be amended, supplemented, restated or otherwise modified from time to time).

 

1.81 Obligations shall mean, without duplication, all present and future obligations, Indebtedness and liabilities of any Loan Party to Lender or any of its affiliates at any time
and

 

 

 

9

 

 

from time to time of every kind, nature and description arising under any Transaction Document or Note and Warrant Purchase Agreement Document, whether direct or indirect, secured or unsecured, joint and/or several, absolute or contingent, due or to become due, matured or unmatured, now existing or hereafter arising, contractual or tortious or liquidated or unliquidated, including, without limitation, the Net Profits Interest, all
interest, fees, charges, expenses and indemnities, all amounts paid or advanced by Lender to, on behalf of or for the benefit of any such Loan Party in accordance with the terms of the Transaction Documents, for any reason at any time, and all obligations of performance as well as obligations of payment and all interest, fees and other amounts that accrue after the commencement of any receivership, insolvency or bankruptcy proceeding by or against any such Loan Party or its Properties.

 

1.82 Officer means Glenn Bolduc, in his capacity as the President of Borrower, and Roger Deschenes, in his capacity as the Vice President, Finance of Borrower.

 

1.83 Officer’s Certificate means a certificate to be delivered by the Borrower, dated as of the Closing Date, substantially in the form of Exhibit
C attached hereto.

 

1.84 Opinion of Counsel means a written opinion of counsel in form and substance acceptable to Lender.

 

1.85 Other Taxes means all present or future stamp or documentary taxes or any other excise, goods and services, sales or property taxes, charges or similar levies arising from any
payment made hereunder or under any other Transaction Document or from the execution, delivery, performance or enforcement of, or otherwise with respect to, this Agreement or any other Transaction Document.

 

1.86 Payment Date means the first day of each calendar month.

 

1.87 PBGC means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA.

 

1.88 Pension Plan means a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA (other than a Multiemployer Plan) which any Loan Party or any ERISA Affiliate
sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding five (5) plan years.

 

1.89 Permitted Liens means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental charges or levies not yet due or Liens
for taxes, assessments and other governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Borrower) have been established in accordance with GAAP; (b) Liens imposed by law which were incurred in the ordinary course of the Borrower’s business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in the ordinary
course of the Borrower’s business, and which (x) do not individually or in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Borrower and its

 

 

 

10

 

 

consolidated Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien; (c) the Liens set forth in Schedule 1.89 hereto in effect on the date hereof; (d) the Liens of Lender set forth in the Existing
Security Agreement; and (e) Liens of Lender as set forth in the Transaction Documents.

 

1.90 Person means any individual, sole proprietorship, joint venture, corporation, partnership, limited liability company, association, joint-stock company, trust, banking association,
unincorporated organization, cooperative, estate or Governmental Authority or any agency or political subdivision thereof or any other entity of any kind or nature whatsoever.

 

1.91 Plan means an employee benefit plan (as defined in Section 3(3) of ERISA) that any Loan Party or any of its ERISA Affiliates sponsors or maintains or to which any Loan Party
or any of its ERISA Affiliates makes, is making, or is obligated to make contributions other than a Pension Plan or Multiemployer Plan.

 

1.92 Receivable means an account as defined in the UCC.

 

1.93 Reportable Event means, any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder, other than any such event for which the thirty (30) day notice
requirement under ERISA has been waived in regulations issued by the PBGC.

 

1.94 Right means, with respect to any Person, any rights, remedies, powers, privileges and/or benefits of such Person whether at law or in equity.

 

1.95 Securities Act means the Securities Act of 1933, as amended.

 

1.96 Security Agreement means that certain Security Agreement, dated as of the Closing Date, from Loan Parties in favor of Lender, substantially in the form of Exhibit
D attached hereto.

 

1.97 Security Documents means (a) the Guaranty, (b) the Security Agreement, (c) the Account Control Agreements, (d) the IP Security Agreements and (e) all other documents, certificates
and instruments from time to time securing or guaranteeing the Obligations under the Transaction Documents, or relating to the perfection or priority of any such security interest or guaranty, including, without limitation, all security agreements, financing statements, fixture filings and chattel mortgages, title insurance policies and endorsements, segregated account and depository account agreements, blocked account agreements, control agreements, copies of leases, landlord waivers, bailee agreements, and
other agreements affecting the Collateral, insurance certificates and endorsements, and other documentation relative to the liens and security interests in the Collateral as Lender may request.

 

1.98 Subsidiary means, with respect to any Person, any other Person of which at least 50% of the securities or other ownership interests having ordinary voting power (absolutely
or contingently) for the election of directors or other Persons performing similar functions of such corporation, limited liability company, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, limited liability company, partnership or other entity shall have voting power by

 

 

 

11

 

 

reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person.

 

1.99 Taxes means all taxes, assessments, fees, levies, imposts, duties, deductions, withholdings, or other charges of any nature whatsoever from time to time or at any time imposed
by any Applicable Law or Governmental Authority.

 

1.100 Termination Date means earlier of (a) the Maturity Date, (b) the date on which the Obligations, or any part thereof, are accelerated (or deemed accelerated) in accordance with Article
VIII or (c) the date on which Borrower notifies Lender of its election to terminate the Facility at such time as all Obligations have been indefeasibly paid in full in cash.

 

1.101 Transaction Documents means this Agreement, the Note, the Security Documents, the Officer’s Certificate and any other agreements, notes, guaranties, certificates, instruments
or other documents delivered pursuant to or therewith, as each may be amended, modified, replaced or restated from time to time.

 

1.102 UCC means the Uniform Commercial Code as in effect in the relevant jurisdiction, as amended from time to time.

 

1.103 Voidable Transfer has the meaning set forth in Section 9.23.

 

1.104 Welfare Plan means a “welfare plan,” as such term is defined in Section 3(1) of ERISA

 

ARTICLE II

 

CREDIT FACILITY.

 

2.1 Credit Facility.  Subject to and in reliance upon the terms, conditions, representations and warranties contained in this Agreement, Lender hereby establishes a revolving
credit facility (the “Facility”) for Borrower pursuant to which Lender may, in Lender’s sole discretion, make loans during the Advance Period to Borrower in one or more advances (the “Advances”) for uses expressly permitted under Section 2.12 hereto; provided, however,
that in no event shall (a) the aggregate principal balance or all Advances exceed the Facility Limit, (b) the amount of any Advance be less than $100,000, (c) any Advance be available after the Advance Period, and (d) any Advance be made until the Funding Conditions for such Advance have been satisfied.

 

2.2 Borrowing Procedures.  Borrower shall request each Advance by delivering to Lender a written notice (by facsimile or an electronic format acceptable to Lender) (an
“Advance Request”) to Lender specifying (i) the amount of the requested Advance, (ii) the proposed date of funding of the Advance (which shall be a Business Day) (the “Advance Date”), and (iii) the aggregate amount of Net Profits generated by the Loan Parties since the Closing Date through such Advance Request.  Each Advance Request shall be in substantially the form
attached hereto as Exhibit E, shall be delivered together with an executed Borrowing Certificate and must be received by Lender no later than noon (New York City time) five (5) Business Days prior to the applicable Advance Date.  In the event that Lender elects to fund the Advance and

 

 

 

12

 

 

the Funding Conditions are satisfied, Lender shall remit the amount of the Advance in immediately available funds to the Funding Account by 3:00 p.m. (New York City time) on the Advance Date.

 

2.3 Promissory Note.  All Advances made by Lender shall be evidenced by a promissory note executed by Borrower in favor of Lender in form and substance satisfactory to
Lender (the “Note”).

 

2.4 Manner of Payments.  All payments made by or on behalf of Borrower to Lender under this Agreement or the other Transaction Documents on account of principal, interest
or otherwise shall, unless otherwise specified in this Agreement or by Lender in writing, be made directly by Borrower or via wire transfer on behalf of Borrower to Lender and shall be received by Lender on each related due date not later than noon (New York City time), in immediately available funds, in the Collection Account or such other account or place as Lender shall direct, in immediately available funds.  If any payment by or on behalf of Borrower under this Agreement or the other Transaction
Documents is to be made on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time will in such case be included in computing interest in connection with such payment.  All payments shall be made by Borrower to Lender without offset, deduction, defense or counterclaim.

 

2.5 Interest and Other Payments.

 

(a) Borrower shall pay to Lender interest on the outstanding principal amount of the Advances at a rate equal to the lesser of 25% per annum and the Maximum Rate (which interest accruing at the Maximum Rate shall compound at the maximum
frequency permitted under Applicable Law).

 

(b) On each Payment Date, Borrower shall pay to Lender, with respect to each Advance, all accrued and unpaid interest on the outstanding Obligations.

 

(c) [Intentionally Omitted]

 

(d) At all times after the occurrence and during the continuation of any Event of Default, interest shall be payable on demand.  If interest in excess of the Maximum Rate is at any time received by Lender, as determined by a
court of competent jurisdiction, such excess shall be applied against other outstanding Obligations.

 

(e) At the option of Lender, following any Event of Default and to the extent permitted by Applicable Law, all Obligations shall bear interest at the per annum rate set forth in Section
2.5(a) plus 5% (the “Default Rate”) until paid, regardless of whether such payment is made before or after entry of a judgment, provided that the Default Rate shall never exceed the Maximum Rate.

 

2.6 Computation of Interest.  Interest shall be calculated on the basis of a three hundred sixty (360) day year and the actual number of days elapsed.  Further,
for the purpose of computing interest, all items of payment in immediately available funds received by Lender shall be applied by Lender against the Obligations on the Business Day immediately following the

 

 

 

13

 

 

date on which such payment is received, and (subject to final payment of all drafts and other items) any other items of payment received by Lender shall be applied by Lender against the Obligations on the Business Day such payment constitutes good funds in Lender’s account.  The determination of when a payment is received by Lender will be made in accordance with Section
2.4.

 

2.7 Net Profits Interest.  As additional compensation to Lender for its extensions of credit under this Agreement, Borrower shall pay to Lender on each Net Profits Payment
Date an amount equal to 50% of the aggregate Net Profits generated by Loan Parties between the Closing Date through such Net Profits Payment Date less any amounts previously paid to Lender pursuant to this Agreement as either Interest Paid and/or any Net Profits Paid prior to such Net Profits Payment Date (the “Net Profits Interest”) (the Advance Request delivered to Lender on or about such
date, as applicable, shall include calculations of the Net Profits from the Closing Date through such date in reasonable detail, together with such other information necessary or reasonably requested to support such calculations).  The payment of Net Profits Interest shall apply to all Net Profits generated by Loan Parties between the Closing Date and Termination Date.  Borrower’s obligation to pay Net Profits Interest to Lender shall exist regardless of, and shall not be diminished
by, the actual amount outstanding, if any, under this Agreement and regardless of whether there are any claims, defenses or offsets, it being understood that said obligation is not subject to any rights, claims, defenses or offsets, each of which are knowingly, expressly and unequivocally waived by Borrower with respect to the obligations contained in this paragraph.

 

2.8 Principal Payments.  Notwithstanding anything to the contrary contained herein, any unpaid principal balance of the Advances and any accrued and unpaid interest and
all other Obligations, including without limitation, the Net Profits Interest shall be due and payable on the Termination Date.

 

2.9 Cash Management; Distribution of Funds.  (a) Borrower shall establish and maintain, at its expense, the Funding Account and the Collection Account.  Borrower
shall instruct, or shall cause all payments in respect of Receivables to be deposited in the Collection Account (either directly by wire transfer or electronic funds transfer).  In addition, Borrower shall promptly (and in any event not later than one (1) Business Day following receipt thereof) remit to the Collection Account all Collections, if any, received by Borrower.  Borrower shall not permit funds other than Collections to be deposited into the Collection Account.  If any
such funds are nevertheless deposited into the Collection Account, Borrower shall promptly identify such funds for segregation.  Borrower shall not, and shall not permit any Person to, commingle Collections or other funds to which Lender is entitled with any other funds.  The Collection Account, and all funds on deposit therein, shall, at all times, be subject to an Account Control Agreement pursuant to which (i) Lender has “control” (within the meaning of the applicable UCC) over
such Accounts and all funds on deposit therein and (ii) Lender, Borrower and Account Bank shall agree to cause all funds in the Collection Account in excess of a minimum balance to be swept into the Concentration Account on a daily basis.  Borrower shall have no right of access to or withdrawal from the Collection Account.

 

 

 

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(b) (i)  Subject to Section 2.9(b)(ii), on each Payment Date or Net Profits Payment Date, Lender shall distribute, or cause to be distributed, the funds on deposit
in the Concentration Account representing the cash proceeds of Collateral in the following order:

 

first, to Lender an amount equal to all costs and expenses then owing to Lender;

 

second, to Lender all amounts owing under Section 2.5 herein;

 

third, to Lender an amount equal to the Net Profits Interest;

 

fourth, to Lender all amounts owing consisting of accrued but unpaid interest owing pursuant to or under the Note and Warrant Purchase Agreement Documents;

 

fifth, to Lender an amount equal to the aggregate principal amount of the Obligations outstanding under this Agreement;

 

sixth, unless otherwise required by Applicable Law, to the Borrower’s Operating Account, an amount equal to any surplus after giving effect to the distributions made pursuant to clauses first through fifth of
this Section 2.9(b)(i), for use by the Borrower.

 

(ii) Notwithstanding anything to the contrary contained in Section 2.9(b)(i) or in any other provision of this Agreement or the other Transaction Documents, during the
existence of an Event of Default, Lender may apply all payments and proceeds of Collateral to the Obligations in any order as determined by Lender in its sole discretion.

 

2.10 No Termination.  This Agreement shall not be deemed to be terminated solely because the Obligations may from time to time be paid in full.

 

2.11 Voluntary Principal Prepayments.  Advances may be prepaid in whole or in part prior to the applicable Payment Dates.  In the event that Borrower proposes
to make any prepayment, Borrower shall give Lender at least five (5) Business Days prior written notice thereof.

 

2.12 Use of Proceeds.  Borrower shall use the proceeds of each Advance solely for working capital purposes that are consistent with all Applicable Laws.

 

2.13 Borrower’s Loan Account.

 

(a) Lender shall maintain one or more loan account(s) on its books in which shall be recorded (i) all Advances and other Obligations and the Collateral, (ii) all payments made by or on behalf of Borrower and (iii) all other appropriate
debits and credits as provided in this Agreement, including interest, costs and expenses.  All entries in the loan account(s) shall be made in accordance with Lender’s customary practices as in effect from time to time.

 

(b) Upon the reasonable request of Borrower and at reasonable intervals, Lender shall render to Borrower a statement setting forth the balance in the Borrower’s loan account(s) maintained by Lender for Borrower pursuant to the provisions
of this Agreement, including

 

 

 

15

 

 

principal, interest, Net Profits Interest, fees, expenses and any other amounts owing to Lender under the Transaction Documents, within a reasonable period of time following the request of Borrower.  Each such statement shall be subject to subsequent adjustment by Lender but shall, absent manifest errors or omissions, be considered correct and deemed accepted by Borrower and conclusively binding upon Borrower as an account
stated except to the extent that Lender receives a written notice from Borrower of any specific exceptions of Borrower thereto within thirty (30) days after the date such statement has been mailed by Lender.  Until such time as Lender shall have rendered to Borrower a written statement as provided above, the balance in Borrower’s loan account(s) shall be presumptive evidence of the amounts owing to Lender by Borrower.

 

ARTICLE III

 

CONDITIONS PRECEDENT.

 

3.1 Initial Advance.  Lender has indicated that it does not intend to make the initial Advance unless Lender has received all of the following items described in this Section
3.1, in each case, in form and substance satisfactory to Lender, and unless Borrower has complied with all of the following conditions and terms described in this Section 3.1, in each case, to the satisfaction of Lender (unless waived in writing in any instance):

 

(a) Lender shall have received a fully executed copy of (i) this Agreement, (ii) the Note, (iii) each other Transaction Document, and (iv) such other documents and instruments as Lender may request;

 

(b) Each of the representations and warranties of the Loan Parties in this Agreement, the Note and Warrant Purchase Agreement Documents and the other Transaction Documents shall be true and correct in all respects as of the Closing Date,
except for representations and warranties that speak as of a particular date, which shall be true and correct in all respects as of such date;

 

(c) The Loan Parties shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement, the Note and Warrant Purchase Agreement Documents and the other Transaction
Documents to be performed, satisfied or complied with by the Loan Parties at or prior to the Closing Date;

 

(d) No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation
of any of the transactions contemplated by this Agreement;

 

(e) No action, suit or proceeding before any arbitrator or any governmental authority shall have been commenced, and no investigation by any governmental authority shall have been threatened, against any Loan Party or any Subsidiary of
a Loan Party, or any of the officers, directors or affiliates of any Loan Party or any Subsidiary of a Loan Party seeking to restrain, prevent or change the transactions contemplated by this Agreement, or seeking damages in

 

 

 

16

 

 

connection with such transactions and there shall be no pending or threatened material litigation, investigations or other matters affecting any Loan Party;

 

(f) The Lender shall have received an Opinion of Counsel, dated the Closing Date, substantially in the form of Exhibit F hereto, with such exceptions and limitations as
shall be reasonably acceptable to counsel to the Lender;

 

(g) Lender shall have received a good standing certificate issued by the Secretary of State or comparable officer of the jurisdiction of formation, as applicable, as of a recent date acceptable to Lender, evidencing the legal existence
and good standing of Borrower;

 

(h) Each of the Loan Parties shall have delivered to the Lender a secretary’s certificate, dated as of the Closing Date, as to (i) the resolutions adopted by the Board of Directors of such Loan Party approving the transactions contemplated
hereby, (ii) the Articles of Organization or comparable formation documents, duly certified by the Secretary of State or comparable officer of the jurisdiction of incorporation as of a recent date acceptable to Lender, (iii) the Bylaws or comparable organizational document, each as in effect as of the Closing Date, and (iv) the authority and incumbency of the officers of such Loan Party executing the Transaction Documents and any other documents required to be executed or delivered in connection therewith;

 

(i) On the Closing Date, the Borrower shall have delivered to the Lender a certificate signed by an executive officer on behalf of the Borrower, dated as of the Closing Date, (A) confirming the accuracy of the Loan Parties’ representations,
warranties and covenants as of such date, (B) confirming the compliance by the Loan Parties with the conditions precedent set forth in paragraphs (b)-(e) and (j) of this Section 3.1 as of the Closing Date and (C) certifying that no Event of Default or Default has occurred and is continuing, or would result from the making of the initial Advance;

 

(j) Except as disclosed on Schedule 4.9 hereto, no Material Adverse Effect shall have occurred since December 31, 2008;

 

(k) The Borrower shall have permitted Lender to make such audits and inspections as the Lender deems reasonably appropriate and the Lender is satisfied, in its reasonable discretion, with the results thereof.  Such audits and
inspections by the Lender shall not affect any of the representations and warranties made by the Loan Parties in this Agreement or any of the Transaction Documents and shall not, under any circumstances constitute a waiver of the Lender’s indemnification rights under Article VI hereof, or otherwise relieve the Loan Parties of any liability thereunder;

 

(l) The Borrower shall have paid the fees and expenses described in Section 9.11 of this Agreement (including, without limitation, the Expenses);

 

(m) The Loan Parties shall have obtained all consents, approvals, or waivers from all governmental authorities, third parties and Loan Party security holders necessary for the execution, delivery and performance of this Agreement and
the Transaction Documents and the transactions contemplated hereby and thereby;

 

 

 

17

 

 

(n) Lender shall have received copies of UCC, tax and judgment lien reports (the expense of which shall be paid directly by Borrower) from all jurisdictions requested by Lender, covering such periods as Lender may request and listing
effective financing statements and tax and judgment liens filed against Borrower, together with copies of all financing statements or liens disclosed in such reports, and none of such financing statements (except those filed in favor of Lender and the holders of Permitted Liens) or liens shall refer to the Collateral, unless releases therefor, in form and substance satisfactory to Lender, have been obtained, and UCC-3 termination statements have been filed, on or prior to the Closing Date;

 

(o) Lender shall have received evidence satisfactory to it that all security interests in favor of Lender in the Collateral are fully perfected, first priority security interests and are subject to no other liens or adverse claims other
than Permitted Liens;

 

(p) Lender shall have received a fully executed copy of an Account Control Agreement in respect of (i) the Collection Account and (ii) the Funding Account;

 

(q) Lender shall have received a fully executed copy of a consent letter or amendment to the Note and Warrant Purchase Agreement Documents consenting to the transactions contemplated hereby and by the Transaction Documents; and

 

(r) all other terms and conditions of this Agreement and the other Transaction Documents and each other document executed in connection herewith or therewith shall have been complied with, except to the extent expressly waived in writing
by Lender.

 

3.2 Each Advance.  Lender shall not be obligated to make any Advance (including the initial Advance) unless the following conditions have been satisfied (such conditions
the “Funding Conditions”):

 

(a) Lender shall have received an Advance Request with respect to such proposed Advance together with a detailed calculation of the aggregate cumulative Net Profits and a completed Borrowing Certificate, and each statement or certification
made by Borrower in the Advance Request and the Borrowing Certificate shall be true and correct on the Advance Date;

 

(b) At the time of each Advance (i) the representations and warranties made in this Agreement, the Note and Warrant Purchase Agreement Documents and in Transaction Documents shall be, in the case of the initial Advance, true and correct
in all respects as of the date of the initial Advance, and in the case of any subsequent Advance, true and correct in all material respects as of the date of such Advance (except to the extent already qualified by materiality or Material Adverse Effect, in which case such representations and warranties shall be true and correct in all respects, and except for representations and warranties that are only made as of a specific earlier date), and (ii) no Default or Event of Default shall have occurred and be continuing,
or would result from the making of the Advance;

 

(c) The making of each Advance shall be permitted by all Applicable Law;

 

(d) All conditions related to any Advance shall have been met in a manner satisfactory to Lender, and, if requested by Lender, Borrower shall have delivered to Lender

 

 

 

18

 

 

evidence in form and substance satisfactory to Lender substantiating any of the conditions contained in this Agreement that are necessary to enable Borrower to qualify for any Advance;

 

(e) From the date of the Borrower’s most recent audited financial statements delivered to Lender, no Material Adverse Effect shall have occurred; and

 

(f) Lender shall have received such other items, in form and substance satisfactory to Lender, as Lender may request.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES

 

Each of the Loan Parties represents and warrants to Lender as follows:

 

4.1 Organization, Good Standing and Power.  The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the Commonwealth of
Massachusetts and has the requisite corporate power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted.  Each Guarantor and Subsidiary of a Guarantor is a corporation duly incorporated, validly existing and in good standing under the laws or its jurisdiction of incorporation and laws of the jurisdictions set forth on Schedule 4.7 and has the requisite corporate power to own, lease
and operate its properties and assets and to conduct its business as it is now being conducted.  The Borrower does not have any direct or indirect Subsidiaries or own securities of any kind in any other entity except as set forth on Schedule 4.7 hereto.  The Borrower and each such Subsidiary is duly qualified as a foreign corporation, limited liability company or limited partnership to do business and is in good standing in every
other jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary except for any jurisdiction(s) (alone or in the aggregate) in which the failure to be so qualified would not reasonably be expected to have a Material Adverse Effect.

 

4.2 Authorization; Enforcement.  Each Loan Party has the requisite corporate power and authority to enter into and perform this Agreement, the Note, the Security Agreement,
the Officer’s Certificate, the IP Security Agreements and the Guaranty.  The execution, delivery and performance of the Transaction Documents by the Loan Parties and the consummation by them of the transactions contemplated thereby have been duly and validly authorized by all necessary corporate action, and, except as set forth on Schedule 4.2, no further consent or authorization of the Loan Parties, their Board of Directors, stockholders
or any other third party is required.  When executed and delivered by the Loan Parties, each of the Transaction Documents shall constitute a valid and binding obligation of the Loan Parties enforceable against the applicable Loan Party in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights
and remedies or by other equitable principles of general application.

 

4.3 Capitalization.  The authorized capital stock and the issued and outstanding shares of capital stock of the Borrower as of the Closing Date is set forth on Schedule
4.3(i)

 

 

 

19

 

 

hereto.  All of the outstanding shares of the Common Stock and any other outstanding security of the Borrower have been duly and validly authorized.  Except as set forth in the Note and Warrant Purchase Agreement, or as set forth on Schedule 4.3(ii) hereto, no shares of Common Stock or any other security of the Borrower or any other Loan Party are
entitled to preemptive, conversion or other rights or registration rights and there are no outstanding options, warrants, scrip, rights to subscribe to, call or commitments of any character whatsoever relating to, or securities or rights convertible into, or agreements granted or issued by or binding upon any Loan Party or any Subsidiary of a Loan Party of for the purchase or acquisition of any shares of capital stock of such Person or any other securities convertible into, exchangeable for or evidencing the
rights to subscribe for any shares of capital stock of the Borrower or such Loan Party.  Neither the Borrower nor any Subsidiary is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of the capital stock of any Subsidiary or any convertible securities, rights, warrants or options of the type described in the preceding sentence except as set forth on Schedule 4.3(iii) hereto.  Furthermore,
except as set forth in this Agreement, the Note and Warrant Purchase Agreement and as set forth on Schedule 4.3(iv) hereto, there are no contracts, commitments, understandings, or arrangements by which the Borrower or any other Loan Party is or may become bound to issue additional shares of the capital stock of the Borrower or any other Loan Party or options, securities or rights convertible into shares of capital stock of the Borrower or such Loan
Party.  Except as provided on Schedule 4.3(v) hereto, neither the Borrower nor any other Loan Party is a party to or bound by any agreement or understanding granting registration or anti-dilution rights to any person with respect to any of its equity or debt securities.  Except as set forth on Schedule 4.3(vi), neither the Borrower nor any other Loan Party is a
party to, and it has no knowledge of, any agreement or understanding restricting the voting or transfer of any shares of the capital stock of the Borrower or such other Loan Party.

 

4.4 Issuance of Note.  The Note has been duly authorized by all necessary corporate action and, when paid for or issued in accordance with the terms hereof, the Note shall
be validly issued and outstanding, free and clear of all liens, encumbrances and rights of refusal of any kind.

 

4.5 No Conflicts.  The execution, delivery and performance of the Transaction Documents by the Loan Parties, the performance by the Borrower of its obligations under the
Note and the consummation by the Loan Parties of the transactions contemplated hereby and thereby do not and will not (i) violate or conflict with any provision of the Borrower’s Amended and Restated Articles of Organization (the “Articles of Organization”) or Bylaws (the “Bylaws”), each as amended to date, or any other Loan Party’s comparable charter documents, (ii)
conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Borrower, any other Loan Party or any of their Subsidiaries is a party or by which the Borrower, any other Loan Party or any of their Subsidiaries’ respective properties
or assets are bound, (iii) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Borrower, any other Loan Party or any of their Subsidiaries or by which any property or asset of the Borrower, any other Loan Party or any of its Subsidiaries are bound or affected, or (iv) create or impose a lien,

 

 

 

20

 

 

mortgage, security interest, charge or encumbrance of any nature on any property or asset of the Borrower, any other Loan Party or any of their Subsidiaries under any agreement or any commitment to which the Borrower, any other Loan Party or any of their Subsidiaries is a party or by which the Borrower, any other Loan Party or any of their Subsidiaries is bound or by which any of their respective properties or assets are bound,
except, in all cases, for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect (other than violations pursuant to clauses (i) or (iii) (with respect to federal and state securities laws)).  None of the Borrower, any other Loan Party nor any of their Subsidiaries is required under federal, state, foreign or local law, rule or regulation to obtain any consent, authorization or order
of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under the Transaction Documents in accordance with the terms hereof (other than any filings, consents and approvals which may be required to be made by the Borrower under applicable state and federal securities laws, rules or regulations).  The business of the Borrower, any other Loan Party and their Subsidiaries is not being conducted in violation of any
laws, ordinances or regulations of any governmental entity.

 

4.6 Commission Documents, Financial Statements.  The Common Stock of the Borrower is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and, except as set
forth on Schedule 4.6, the Borrower has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the Commission pursuant to the reporting requirements of the Exchange Act (all of the foregoing including filings incorporated by reference therein being referred to herein as the “Commission Documents”).  Except as set forth
on Schedule 4.6, each Commission Document complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder and other federal, state and local laws, rules and regulations applicable to such documents, and the Commission Documents did not, as of their respective filing dates, contain any untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  Except as set forth on Schedule 4.6, as of their respective dates, the financial statements of the Borrower included in the Commission Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Commission or other
applicable rules and regulations with respect thereto.  Such financial statements have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements), and fairly present in all material respects the financial position of the Borrower and
its Subsidiaries as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).

 

4.7 Subsidiaries.  Schedule 4.7 hereto sets forth each Subsidiary of the Borrower, showing the jurisdiction
of its incorporation or organization and showing the percentage of each person’s ownership of the outstanding stock or other interests of such Subsidiary.  All of the outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued, and are fully paid and nonassessable.

 

 

 

21

 

 

4.8 Name; Prior Names.  The complete and exact legal name of each Loan Party is set forth on the signature page to this Agreement.  Neither Borrower nor any other
Loan Party has transacted business under any other corporate or trade name within the last five years, been a party to any merger, combination or consolidation or acquired all or substantially all of the assets of any Person other than as set forth on Schedule 4.8.

 

4.9 No Material Adverse Change.  Except as disclosed in the Commission Documents or on Schedule 4.9 hereto,
since December 31, 2008, the Borrower has not experienced or suffered any Material Adverse Effect.  There are no facts or conditions relating to the Transaction Documents, any of the Collateral or the financial condition and business of any Loan Party that would, individually or collectively, cause a Material Adverse Effect.

 

4.10 Licenses, Registrations and Approvals.  Each Loan Party possesses all necessary authority and has obtained all the licenses, registrations and approvals necessary
for the conduct of such Loan Party’s business in each jurisdiction where such Loan Party operates, and to continue to conduct its business as presently conducted and as expected to be conducted in each jurisdiction and for the performance of such Loan Party’s obligations hereunder and under each of the Transaction Documents to which such Loan Party is a party and all such licenses, registrations and approvals are in full force and effect, except, in each case, as could not reasonably be expected to
have a Material Adverse Effect.

 

4.11 Ability to Perform.  No Loan Party believes, nor does any Loan Party nor have any reason or cause to believe, that it cannot perform each and every one of its obligations
under this Agreement and under the other Transaction Documents.

 

4.12 No Undisclosed Liabilities.  Except as disclosed on Schedule 4.12 hereto, since December 31, 2008,
none of the Borrower, any other Loan Party nor any of their Subsidiaries has incurred any liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise) other than those incurred in the ordinary course of the Borrower’s, such Loan Party’s or their Subsidiaries’ respective businesses or which, individually or in the aggregate, are not reasonably likely to have a Material Adverse Effect.

 

4.13 No Undisclosed Events or Circumstances.  Since December 31, 2008, except as disclosed on Schedule 4.13 hereto,
no event or circumstance has occurred or exists with respect to the Borrower, the other Loan Parties or their Subsidiaries or their respective businesses, properties, prospects, operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Borrower but which has not been so publicly announced or disclosed.

 

4.14 Indebtedness.  Schedule 4.14 hereto sets forth as of the date hereof all outstanding secured and unsecured
Indebtedness of the Loan Parties or any Subsidiary of a Loan Party, or for which any Loan Party or any Subsidiary of a Loan Party has commitments.  Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.

 

4.15 Title to Assets.  Each Loan Party and each Subsidiary of a Loan Party has good and valid title to all of its real and personal property reflected in the Commission
Documents,

 

 

 

22

 

 

free and clear of any mortgages, pledges, charges, liens, security interests or other encumbrances, except for those indicated on Schedule 4.15 hereto.  Any leases of each Loan Party and each of its Subsidiaries are valid and subsisting and in full force and effect.  Pursuant to, and upon execution and delivery of, the Security Agreement and any
applicable IP Security Agreements, the Loan Parties shall have granted to the Lender a perfected, first priority security interest in substantially all of the assets of each of the Loan Parties.

 

4.16 Actions Pending.  There is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or other proceeding pending or, to the knowledge
of the Loan Parties, threatened against any Loan Party or any Subsidiary of a Loan Party which questions the validity of this Agreement or any of the other Transaction Documents or any of the transactions contemplated hereby or thereby or any action taken or to be taken pursuant hereto or thereto or any of the Note and Warrant Purchase Agreement Documents or any of the transactions contemplated thereby or any action taken or to be taken pursuant thereto.  Except as set forth on Schedule
4.16 hereto, there is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or other proceeding pending or, to the knowledge of the Loan Parties, threatened against or involving any Loan Party, any Subsidiary of a Loan Party or any of their respective properties or assets, which individually or in the aggregate, would reasonably be expected, if adversely determined, to have a Material Adverse Effect.  There are no outstanding orders, judgments, injunctions,
awards or decrees of any court, arbitrator or governmental or regulatory body against any Loan Party or any Subsidiary of a Loan Party or any officers or directors of any Loan Party or Subsidiary in their capacities as such, which individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

4.17 Compliance with Law.  The business of the Loan Parties and the Subsidiaries of the Loan Parties has been and is presently being conducted in accordance with all Applicable
Law, except such that, individually or in the aggregate, the noncompliance therewith could not reasonably be expected to have a Material Adverse Effect.  Each Loan Party and each of the Subsidiaries of the Loan Parties have all franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals necessary for the conduct of its business as now being conducted by it unless the failure to possess such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

4.18 Taxes.  Each Loan Party and each of the Subsidiaries of the Loan Parties has accurately prepared and filed (or validly extended) all federal, state and other tax returns
required by law to be filed by it, has paid or made provisions for the payment of all taxes shown to be due and all additional assessments, and adequate provisions have been and are reflected in the financial statements of the Loan Parties and the Subsidiaries for all current taxes and other charges to which any Loan Party or any Subsidiary of a Loan Party is subject and which are not currently due and payable.  Except as disclosed on Schedule
4.18 hereto, none of the federal income tax returns of any Loan Party or any Subsidiary of a Loan Party have been audited by the Internal Revenue Service.  No Loan Party has any knowledge of any additional assessments, adjustments or contingent tax liability (whether federal or state) of any nature whatsoever, whether pending or threatened against any Loan Party or any Subsidiary of any Loan Party for any period, nor of any basis for any such assessment, adjustment or contingency.

 

 

 

23

 

 

4.19 Disclosure.  Except for the transactions contemplated by this Agreement, each Loan Party confirms that neither it nor any other person acting on its behalf has provided
the Lender or its agents or counsel with any information that constitutes or might constitute material, nonpublic information.  To each Loan Party’s knowledge, neither this Agreement or the Schedules hereto nor any other documents, certificates or instruments furnished to the Lender by or on behalf of any Loan Party or any Subsidiary of a Loan Party in connection with the transactions contemplated by this Agreement, taken together as a whole, contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements made herein or therein, in the light of the circumstances under which they were made herein or therein, not misleading.

 

4.20 Environmental Compliance.  Except as would not reasonably be expected to have a Material Adverse Effect, each Loan Party and each of its Subsidiaries have obtained
all approvals, authorization, certificates, consents, licenses, orders and permits or other similar authorizations of all governmental authorities, or from any other person, that are required under any Environmental Laws.  Except as would not reasonably be expected to have a Material Adverse Effect, each Loan Party has all necessary governmental approvals required under all Environmental Laws as necessary for such Loan Party’s business or the business of any of its subsidiaries.  To
each Loan Party’s knowledge, each Loan Party and each of its Subsidiaries are also in compliance with all other limitations, restrictions, conditions, standards, requirements, schedules and timetables required or imposed under all Environmental Laws.  Except for such instances as would not individually or in the aggregate have a Material Adverse Effect, there are no past or present events, conditions, circumstances, incidents, actions or omissions relating to or in any way affecting any Loan Party
or its Subsidiaries that violate or may violate any Environmental Law after the Closing Date or that may give rise to any environmental liability, or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing, study or investigation (i) under any Environmental Law, or (ii) based on or related to the manufacture, processing, distribution, use, treatment, storage (including without limitation underground storage tanks), disposal, transport or handling, or the emission, discharge, release or
threatened release of any hazardous substance.

 

4.21 Books and Records; Internal Accounting Controls.  The records and documents of the Loan Parties and their Subsidiaries accurately reflect in all material respects
the information relating to the business of the Loan Parties and their Subsidiaries, the location and collection of their assets, and the nature of all transactions giving rise to the obligations or accounts receivable of any Loan Party or any Subsidiary of a Loan Party. The Loan Parties are in material compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to the Loan Parties as of the Closing Date. The Loan Parties and their Subsidiaries maintain 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 conformity 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. The Loan Parties have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for each of the Loan Parties and designed such disclosure controls and procedures to ensure that

 

 

 

24

 

 

information required to be disclosed by the Borrower in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Except as set forth on Schedule 4.21, the Borrower’s certifying officers have evaluated the effectiveness of the Loan Parties’
disclosure controls and procedures as of the end of the period covered by the Company’s most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”).  Except as set forth on Schedule 4.21, the Borrower presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness
of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no changes in the Loan Parties’ internal control over financial reporting (as such term is defined in the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Loan Parties’ internal control over financial reporting.

 

4.22 Material Agreements.  Except as would not reasonably be expected to have a Material Adverse Effect, each Loan Party and each of its Subsidiaries have performed all
obligations required to be performed by them to date under any Material Agreements.  Except as disclosed on Schedule 4.22 hereto, no Loan Party nor any of Subsidiary of any Loan Party has received any notice of default under any Material Agreement, which has not been waived or cured.  Except as disclosed on Schedule 4.22 hereto, no Loan Party nor any Subsidiary
of any Loan Party is currently in default under any Material Agreement now in effect.

 

4.23 Transactions with Affiliates.  Except as set forth on Schedule 4.23 hereto or in the Commission Documents,
there are no loans, leases, agreements, contracts, royalty agreements, management contracts or arrangements or other continuing transactions between (a) any Loan Party, any Subsidiary of any Loan Party or any of their respective customers or suppliers on the one hand, and (b) on the other hand, any officer, employee, consultant or director of any Loan Party, or any Subsidiary of a Loan Party, or any person owning at least 5% of the outstanding capital stock of any Loan Party or any Subsidiary or any member of
the immediate family of such officer, employee, consultant, director or stockholder or any corporation or other entity controlled by such officer, employee, consultant, director or stockholder, or a member of the immediate family of such officer, employee, consultant, director or stockholder which, in each case, is required to be disclosed in the Commission Documents or in the Borrower’s most recently filed definitive proxy statement on Schedule 14A, that is not so disclosed in the Commission Documents
or in such proxy statement.

 

4.24 Securities Act of 1933.  The Borrower is not, and has never been, a company described in Rule 144(i)(1) under the Securities Act, and is a “reporting issuer”
as described in Rule 144(c)(1) under the Securities Act.   Neither the Borrower, nor any of its directors, officers or controlling persons, has taken or will, in violation of applicable law, take, any action designed to or that might reasonably be expected to cause or result in, or which has constituted, stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the securities issued or issuable in connection with the transactions contemplated hereunder.

 

4.25 Employees.  No Loan Party nor any Subsidiary has any collective bargaining arrangements or agreements covering any of its employees, except as set forth on Schedule
4.25 hereto.  Except as set forth on Schedule 4.25 hereto, no Loan Party nor any Subsidiary has any employment contract, agreement regarding proprietary information, non-competition agreement,

 

 

 

25

 

 

non-solicitation agreement, confidentiality agreement, or any other similar contract or restrictive covenant, relating to the right of any officer, employee or consultant to be employed or engaged by such Loan Party or such Subsidiary required to be disclosed in the Commission Documents that is not so disclosed.  No officer, consultant or key employee of any Loan Party or any Subsidiary of a Loan Party whose termination,
either individually or in the aggregate, would be reasonably likely to have a Material Adverse Effect, has terminated or, to the knowledge of the Loan Parties, has any present intention of terminating his or her employment or engagement with any Loan Party or any Subsidiary.

 

4.26 Intellectual Property.  Except as set forth on Schedule 4.26 hereto, each Loan Party and each Subsidiary
of the Loan Parties owns, or possesses the rights to use, all patents (and any patentable improvements thereof), trademarks, service marks, trade names, domain names, copyrights and websites (or copyrightable derivative works thereof), and intellectual property rights relating thereto (to any of the foregoing list, whether or not registered), licenses and authorizations which are necessary for the conduct of its business as now conducted without infringement or any conflict with the rights of others.

 

4.27 Absence of Certain Developments.  Except as set forth in the Commission Documents or provided on Schedule
4.27 hereto, since December 31, 2008, no Loan Party nor any Subsidiary of a Loan Party has:

 

(a) issued any stock, bonds or other corporate securities or any right, options or warrants with respect thereto;

 

(b) borrowed any amount in excess of $100,000 or incurred or become subject to any other liabilities in excess of $100,000 (absolute or contingent) except current liabilities incurred in the ordinary course of business which are comparable
in nature and amount to the current liabilities incurred in the ordinary course of business during the comparable portion of its prior fiscal year, as adjusted to reflect the current nature and volume of the business of the Loan Parties and their Subsidiaries;

 

(c) discharged or satisfied any lien or encumbrance in excess of $100,000 or paid any obligation or liability (absolute or contingent) in excess of $100,000, other than current liabilities paid in the ordinary course of business;

 

(d) declared or made any payment or distribution of cash or other property to stockholders with respect to its stock, or purchased or redeemed, or made any agreements so to purchase or redeem, any shares of its capital stock, in each
case in excess of $50,000 individually or $100,000 in the aggregate;

 

(e) sold, assigned or transferred any other tangible assets, or canceled any debts or claims, in each case in excess of $100,000, except in the ordinary course of business;

 

(f) sold, assigned or transferred any patent rights, trademarks, trade names, copyrights, trade secrets or other intangible assets or intellectual property rights in excess of $100,000, or disclosed any proprietary confidential information
to any person except to customers in the ordinary course of business or pursuant to nondisclosure agreements;

 

 

 

26

 

 

(g) suffered any material losses or waived any rights of material value, whether or not in the ordinary course of business, or suffered the loss of any material amount of prospective business;

 

(h) made any changes in employee compensation except in the ordinary course of business and consistent with past practices;

 

(i) made capital expenditures or commitments therefor that aggregate in excess of $100,000;

 

(j) entered into any material transaction, whether or not in the ordinary course of business;

 

(k) made charitable contributions or pledges in excess of $10,000;

 

(l) suffered any material damage, destruction or casualty loss, whether or not covered by insurance;

 

(m) experienced any material problems with labor or management in connection with the terms and conditions of their employment; or

 

(n) entered into an agreement, written or otherwise, to take any of the foregoing actions.

 

4.28 Public Utility Holding Company Act and Investment Company Act Status.  No Loan Party is a “holding company” or a “public utility company” as
such terms are defined in the Public Utility Holding Company Act of 1935, as amended.  No Loan Party is, and as a result of and immediately upon the Closing Date will not be, an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.

 

4.29 ERISA.  No liability to the Pension Benefit Guaranty Corporation has been incurred with respect to any Plan by any Loan Party or any Subsidiary of a Loan Party which
is or would be materially adverse to the Loan Parties and their Subsidiaries.  The execution and delivery of this Agreement and the Transaction Documents will not involve any transaction which is subject to the prohibitions of Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Internal Revenue Code of 1986, as amended.  As used in this Section 4.29, the term “Plan”
shall mean an “employee pension benefit plan” (as defined in Section 3 of ERISA) which is or has been established or maintained, or to which contributions are or have been made, by any Loan Party or any Subsidiary of a Loan Party or by any trade or business, whether or not incorporated, which, together with the Loan Parties or any Subsidiary of a Loan Party, is under common control, as described in Section 414(b) or (c) of the Code.

 

4.30 No Integrated Offering.  The Borrower does not have any registration statement pending before the Commission or currently under the Commission’s review and except
as set forth on Schedule 4.30 hereto, since January 1, 2008, the Borrower has not offered or sold any of its equity securities or debt securities convertible into shares of Common Stock.

 

 

 

27

 

 

4.31 DTC Status.   Except as set forth on Schedule 4.31 hereto, the Borrower’s transfer agent
is a participant in and the Common Stock is eligible for transfer pursuant to the Depository Trust Company Automated Securities Transfer Program.  The name, address, telephone number, fax number, contact person and email of the Borrower’s  transfer agent is set forth on Schedule 4.31 hereto.

 

4.32 Governmental Approvals.  Except for the filing of any notice prior or subsequent to the closing that may be required under applicable state and/or federal securities
laws (which if required, shall be filed on a timely basis), no authorization, consent, approval, license, exemption of, filing or registration with any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, is or will be necessary for, or in connection with, the execution or delivery of this Agreement or the Note, or for the performance by the Loan Parties of their obligations under the Transaction Documents.

 

4.33 Reserved.

 

4.34 General.  All writings heretofore or hereafter exhibited or delivered to Lender by or on behalf of any Loan Party are and will be genuine and in all respects what
they purport and appear to be.  No information furnished to Lender by or on behalf of any Loan Party contains any material misstatement of fact or omits to state any fact necessary to make the statements contained herein or therein, in light of the circumstances in which they were made, not misleading.

 

4.35 Anti-Money Laundering.  No Loan Party nor any Affiliate: (i) is a person named on the Executive Order No. 13224 on Terrorist Financing (effective September 24, 2001)
or the list of Specially Designated Nationals or Blocked Persons maintained by the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) (available at http://www.treas.gov/offices/enforcement/ofac/sdn/ or as otherwise published from time to time); (ii) is (A) an agency of the government of a country, (B) an organization controlled by a country, or (C) a person resident in a country that is subject to a sanctions program identified on the list maintained by OFAC (and available
at http://www.treas.gov/offices/enforcement/ofac/sanctions or as otherwise published from time to time), as such program may be applicable to such agency, organization or person; or (iii) does business in such country or with any such agency, organization, or person in violation of the economic sanctions of OFAC.

 

4.36 Accounts.  Except as set forth on Schedule 4.36, no Loan Party has any deposit accounts or securities
accounts.  The Accounts and all amounts or other property deposited or on deposit therein are not subject to, and are free and clear of, any Liens except for Liens in favor of Lender.

 

4.37 Partnerships; Joint Ventures.  No Loan Party nor any Subsidiary of a Loan Party is a partner or joint venturer in any partnership or joint venture.

 

4.38 Transaction Document Representations.  All of the representations and warranties made in the other Transaction Documents and in the Note and Warrant Purchase Agreement
Documents are true and correct in all material respects (except to the extent already

 

 

 

28

 

 

qualified by materiality or Material Adverse Effect, in which case such representations and warranties shall be true and correct in all respects).

 

4.39 Security Interest.  Lender has a valid and perfected first priority security interest in each Loan Party’s rights in the Collateral as security for the obligations
of the Loan Parties under this Agreement, the Note and Warrant Purchase Agreement Documents and the other Transaction Documents, subject to no prior Lien.

 

4.40 Affiliates.  All Affiliates are set forth on Schedule 4.40.

 

4.41 Purpose of Loan.  The proceeds of the Facility will be used only for the purposes set forth in Section 2.12 and
shall not be used (a) to purchase or carry any “Margin Stock” (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System), or (b) for any purpose in violation of Regulations T, U or X of said Board of Governors.

 

4.42 Default; Event of Default.  No Default or Event of Default has occurred and is continuing.

 

4.43 Real Property.  No Loan Party nor Subsidiary of a Loan Party owns any real property.

 

4.44 Corrective Measures.  No Loan Party nor any Subsidiary of a Loan Party has entered into any settlement agreement, discontinuance agreement, assurance of discontinuance,
letter agreement or other similar agreement with any Governmental Authority regarding such entity’s business or any aspect thereof.

 

4.45 Insurance.  Each Loan Party and each of its Subsidiaries and their respective properties are insured with financially sound and reputable insurance companies which
are not Affiliates of any Loan Party, 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 such Person operates.  A true and complete listing of such insurance, including issuers, coverages and deductibles, has been provided to Lender.

 

4.46 Brokers.  No broker, finder or other intermediary has brought about the obtaining, making or closing of the transactions contemplated by the Transaction Documents,
and no Loan Party has or will have any obligation to any Person in respect of any finder’s or brokerage fees, commissions or other expenses in connection herewith or therewith.  All brokerage and finder’s fees, commissions and other expenses payable in connection with the transactions contemplated by the Transaction Documents have been paid in full by Borrowers contemporaneously with the execution of the Transaction Documents.

 

ARTICLE V

 

COVENANTS.

 

5.1 Affirmative Covenants.  Each Loan Party covenants and agrees with Lender, so long as this Agreement or any of the other Transaction Documents shall remain in effect
and the principal of or interest on the Notes, or any other Obligation, shall be unpaid, as follows:

 

 

 

29

 

 

(a) Securities Compliance. The Borrower shall notify the Commission in accordance with its rules and regulations, of the transactions contemplated by any of the Transaction Documents
and shall take all other necessary action and proceedings as may be required and permitted by Applicable Law in connection therewith.

 

(b) Registration and Listing.  The Borrower shall cause its Common Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange Act, to comply in all
respects with its reporting and filing obligations under the Exchange Act and to not take any action or file any document (whether or not permitted by the Securities Act or the rules promulgated thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under the Exchange Act or Securities Act.  The Borrower will take all action necessary to continue the listing or trading of its Common Stock on the OTC Bulletin Board, the New York Stock Exchange,
the NYSE Alternext Exchange, the Nasdaq Capital Markets, the Nasdaq Global Markets, or the Nasdaq Global Select Market. If required, the Borrower will promptly file the “Listing Application” for, or in connection with, the issuance and delivery of the Warrant Shares (as defined in the Note and Warrant Purchase Agreement).   Subject to the terms of the Transaction Documents, the Borrower further covenants that it will take such further action as the Lender may reasonably request, all
to the extent required from time to time to enable the Lender, in its capacity as Investor under the Note and Warrant Purchase Agreement, to sell the Warrant Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act.  Upon the request of the Lender, the Borrower shall deliver to the Lender a written certification of a duly authorized officer as to whether it has complied with such requirements.

 

(c) Compliance with Laws.  Each Loan Party shall, and shall cause each of its Subsidiaries to, do or cause to be done all things necessary (i) to preserve and keep in full
force and effect at all times its existence as a company in good standing under the laws of its jurisdiction of formation or incorporation and each jurisdiction in which it operates, and its rights, licenses and franchises, (ii) to continue to conduct its business as now conducted, (iii) to comply in all material respects with all Applicable Law, including all applicable environmental requirements and Environmental Laws, and (iv) to maintain all material licenses and approvals necessary for the conduct of such
Loan Party’s or Subsidiary’s business and the performance of such Loan Party’s Obligations.

 

(d) Keeping of Records and Books of Account. Each Loan Party shall keep and cause each of its Subsidiaries
to keep adequate records and books of account, in which complete entries will be made in accordance with GAAP consistently applied, reflecting all financial transactions of such Loan Party and its Subsidiaries, and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made.  Upon request of Lender, the Loan Parties shall furnish to Lender any and all books and records or
any other information reasonably requested by Lender relating to the financial condition of the Loan Parties, the technology of the Loan Parties or otherwise.

 

(e) Reporting Requirements.  The Loan Parties shall furnish, or cause to be furnished, to Lender such information as may be reasonably requested by Lender.  In
addition, Borrower shall cause the following to be furnished to Lender:

 

 

 

30

 

 

	
(i)  
	
Electronic notification of the filing of all Quarterly Reports filed with the Commission on Form 10-Q as soon as practical after the document is or would have been required to be filed with the Commission;

 

	
(ii)  
	
Electronic notification of the filing of all Annual Reports filed with the Commission on Form 10-K as soon as practical after the document is or would have been required to be filed with the Commission;

 

	
(iii)  
	
Electronic notification of the filing of all Current Reports filed with the Commission on Form 8-K as soon as practical after the document is or would have been required to be filed with the Commission;

 

	
(iv)  
	
Electronic notification of the filing of any other filings filed or required to be filed with the Commission as soon as practical after the document is or would have been required to be filed with the Commission;

 

	
(v)  
	
A current schedule of accounts payable aging within five (5) days of the end of each calendar month;

 

	
(vi)  
	
A budget prepared on a weekly basis in good faith based upon assumptions which the Loan Parties believe to be reasonable setting forth, inter alia, a thirteen (13) week cash flow forecast in reasonable detail satisfactory to
Lender including receipts, disbursements and such line item detail as satisfactory to Lender, in the form attached hereto as Exhibit G, as updated bi-weekly with Lender’s consent, including a comparison of actual cash funds and revenues received by the Borrower and cash disbursements and expenses made by the Borrower for the most recent four-week period then ended to the budget previously delivered to Lender (the “Budget”);
and

 

	
(vii)  
	
Copies of all notices, information and proxy statements in connection with any meetings that are, in each case, provided to holders of shares of Common Stock, contemporaneously with the delivery of such notices or information to such holders of Common Stock.

 

(f) Use of Proceeds.  The proceeds of the Advances hereunder shall be used by the Borrower (i) to repay indebtedness to Lender in the principal amount of $700,000, together
with all interest accrued thereon, under and in connection with that certain Senior Secured Promissory Note dated August 5, 2009, executed by Borrower and delivered in favor of Lender; and (ii) for working capital and ordinary course general corporate purposes not inconsistent with or prohibited by any covenant in the Transaction Documents.  In no event shall the proceeds be used to redeem any Common Stock or securities convertible, exercisable or exchangeable into Common Stock (except as permitted
pursuant to Section 5.3(c) hereof) or to settle any outstanding litigation.

 

(g) Reporting Status. The Borrower shall timely file all reports required to be filed with the Commission
pursuant to the Exchange Act, and the Borrower shall not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or

 

 

 

31

 

 

the rules and regulations thereunder would permit such termination.  The Borrower shall promptly disclose on Form 8-K the occurrence of any Material Adverse Effect or any event that could reasonably be expected to cause a Material Adverse Effect.

 

(h) Compliance with Transaction Documents.  Each Loan Party shall, and shall cause its Subsidiaries to, comply with their respective obligations under the Note and the
other Transaction Documents and the Note and Warrant Purchase Agreement Documents.

 

(i) Payment of Taxes, Etc.  Each Loan Party shall, and shall cause each of its Subsidiaries to, promptly pay and discharge, or cause to be paid and discharged, when due
and payable, all Taxes imposed upon the income, profits, property or business of the Loan Parties and their Subsidiaries; provided, however, that any such Taxes need not be paid if the validity thereof shall currently be contested in good faith by appropriate proceedings and if such Loan Party or Subsidiary shall have set aside on its books adequate reserves with respect thereto, and provided, further, that such Loan Party or Subsidiary will pay all such Taxes forthwith upon the commencement of proceedings to
foreclose any lien which may have attached as security therefor.

 

(j) Corporate Existence.  Each Loan Party shall, and shall cause each of its Subsidiaries to, maintain in full force and effect its corporate existence, rights and franchises
and all licenses and other rights to use property owned or possessed by it and reasonably deemed to be necessary to the conduct of its business; provided, however, that the Borrower may dissolve or cause one or more of its Subsidiaries to merge or consolidate with the Borrower or any of its other Subsidiaries, provided, that if any such consolidation or merger involves the Borrower,
then the Borrower must be the survivor of such consolidation or merger.

 

(k) Maintenance of Assets.  Each Loan Party shall, and shall cause its Subsidiaries to, keep its properties in good repair, working order and condition, reasonable wear
and tear excepted, and from time to time make all necessary and proper repairs, renewals, replacements, additions and improvements thereto.

 

(l) [Intentionally Omitted].

 

(m) Acquisition of Assets.  In the event any Loan Party or any Subsidiary of a Loan Party acquires any assets or other properties, without limiting or impairing the limitations
set forth in Section 5.3(g) below, such assets or properties shall constitute a part of the Collateral (as defined in the Security Agreement) and the Loan Parties shall take all action necessary to perfect the Lender’s security interest in such assets or properties.

 

(n) Notices of Certain Events.  The Loan Parties shall promptly notify the Lender of any event or events that have had or could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on any Loan Party.

 

(o) Consultant.

 

(i) The Borrower shall retain on or before the Closing Date and at all times thereafter, at the Borrower’s expense, a management consultant or financial advisor reasonably satisfactory to the Lender (the “Management
Consultant”)

 

 

 

32

 

 

pursuant to an engagement letter, in form and substance (including as to the scope of the engagement) satisfactory to the Lender.  The Borrower acknowledges and agrees that the termination of the engagement of the Management Consultant, absent the simultaneous appointment of a replacement Management Consultant that is acceptable to the Lender, on terms and conditions acceptable
to the Lender, shall constitute an immediate Event of Default.

 

(ii) The Borrower shall work with the Management Consultant to prepare, develop and deliver such written reports to the Lender as the Lender may reasonably require.  At any time and from time to time, the Borrower shall make
its officers and consultants (including, without limitation, the Management Consultant) available, whether by telephone or in person, to review and discuss such matters relating the business, operations, prospects, properties, assets, liabilities or condition, financial or otherwise, of the Borrower as the Lender may reasonably require.  The Borrower irrevocably authorizes the Management Consultant (i) to deliver to the Lender all written reports prepared by the Management Consultant for or at the request
of the Borrower or at the request of the Lender, and (b) to meet with representatives of the Lender independently at such times as the Lender may reasonably require as set forth in the preceding sentence.

 

(iii) In the event that Grey Wolf Partners, LLC, is not, at any time, fully engaged to act as Management Consultant, Borrower will immediately advise Lender of such fact, and, if requested by Lender, Borrower agrees to promptly thereafter
engage a financial advisor to assist the Borrower as requested by the Borrower and agreed to by the Lender. 

 

(p)   Notices of Certain Events.  The Borrower shall promptly notify the Lender of any event or events that have had or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Borrower.

 

(q) Budget Compliance.

 

(i)           As of each week, for the four-week period ended as of the end of such week, the actual cash receipts received by the Borrower shall not be less than 75% of the cash receipts for the corresponding period in the Budget.

 

(ii)           As of each week, for the four-week period ended as of the end of such week, the actual cash disbursements of the Borrower shall be no more than 110% of the cash disbursements for the corresponding period as set forth in the Budget.

 

(r) Minimum Cash Balance.  The Borrower shall maintain a cleared balance of at least (i) $250,000 through and including September 4, 2009 and (ii) $500,000 at all times
thereafter (collectively, the “Minimum Balance”) in a deposit account held at a depository institution satisfactory to Lender and pledged to Lender pursuant to a blocked account agreement with such depository institution in form and substance satisfactory to Lender, such account to be

 

 

 

33

 

 

free and clear of any Liens other than Liens in favor of Lender (the “Blocked Account”).  Until the Note and all obligations of the Borrower hereunder have been indefeasibly paid and satisfied in full, Lender shall have sole dominion and control over the Blocked Account and the Borrower shall have no right of access to or withdrawal from the Blocked Account.  If,
notwithstanding the prior sentence, Lender shall, in its sole discretion, permit the Borrower, following the Borrower’s request, to have access to the Blocked Account and maintain less than the Minimum Balance therein, the Lender, as a condition thereto and in addition to any other conditions that the Lender may then establish, may require the Borrower to engage in a sale process satisfactory to the Lender in its sole discretion, including, without limitation, conditions, timing and milestones which may
be established by the Lender, including, without limitation, the engagement of a third party investment banker acceptable to the Lender in its sole and absolute discretion.

 

(s) Inspection.  Each Loan Party, upon reasonable notice, shall permit Lender and its duly authorized representatives or agents to visit any of the Borrower’s properties
and inspect any of its assets or books and records, to examine and make copies of its books and records and to discuss its affairs, finances, technology and accounts with, and to be advised as to the same by, its officers and employees at such reasonable times and intervals as Lender may designate.

 

(t) Accounts Payable. The Borrower will pay its accounts payable in the ordinary course, consistent with past practices and not allow the average age, calculated as (i) the product
of (x) the dollar amount of each payable times (y) the number of days past due of such payable divided by (ii) the aggregate dollar amount of all accounts payable, of such accounts payable to be more than one hundred (100) days past due.

 

(u) Current Ratio.  The Borrower shall maintain at all times a Current Ratio of not less than 0.60 to 1.00.  “Current
Ratio” shall be defined as current assets minus current liabilities, all as determined in accordance with GAAP.

 

(v) Payment of Obligations.  Each Loan Party shall, and shall cause each of its Subsidiaries to, promptly pay all of its Indebtedness as it becomes due except, to the extent
that any such Indebtedness is being contested in good faith and by appropriate and lawful proceedings diligently conducted and for which adequate reserves shall have been made; provided, however, that no Loan Party shall, directly or indirectly, make (i) any prepayment of principal of or interest any Indebtedness (other than as expressly permitted hereunder) or (ii) any payment of
principal of or interest on any Indebtedness subordinated to the Obligations.

 

(w) Further Assurances.  Each Loan Party shall, and shall cause each applicable Person to, execute any and all further documents and instruments and take all further actions
that may be required under Applicable Law, or that Lender may reasonably request, to more fully effect the purposes, and carry out the terms, of this Agreement and to grant, preserve, protect and perfect the first priority Lien granted by Borrower against the Collateral, including without limitation, those actions required to perfect Liens on and assignment of any interest of any Loan Party in any Collateral in accordance with the laws of the jurisdiction governing such Liens.

 

(x) Proceeds of Collateral.  In the event any Loan Party receives any proceeds of Collateral, such Loan Party shall cause such funds to be immediately transferred and deposited
into the Collection Account.

 

 

 

34

 

 

(y) Notification of Litigation.  Each Loan Party shall promptly notify Lender in writing of the commencement of any litigation, action, suit, dispute, assertion, arbitration,
proceeding, investigation or other circumstance against or affecting such Loan Party or any of its Subsidiaries, and such Loan Party shall from time to time provide Lender with all information reasonably requested by Lender concerning the status thereof.

 

(z) Information Regarding Collateral.  Promptly following any request therefore from Lender, each Loan Party shall provide to Lender any information regarding the Collateral
that Lender may reasonably request, including, without limitation, schedules, certificates and reports in such form and detail as Lender may reasonably specify.

 

(aa) Preservation of Rights.  Each Loan Party shall, and shall cause each of its Subsidiaries to, preserve and maintain all of its material rights, privileges, licenses
and franchises.

 

(bb) Form of Documents.  Unless otherwise specified herein, or in any relevant Transaction Document, each Loan Party shall, and shall cause each of its Subsidiaries to,
cause all copies of documents delivered to Lender pursuant to any Transaction Document to be delivered in an electronic or digital format reasonably satisfactory to Lender.

 

(cc) Perfection.  Each Loan Party shall cause Lender to have a first priority, perfected security interests in the Collateral and shall take all action necessary to maintain
the first priority, perfected status of such security interests.  In furtherance of the foregoing, each Loan Party shall from time to time and within the time limits established by law, prepare and present to Lender for Lender’s authorization and approval all financing statements, amendments, continuations or initial financing statements in lieu of a continuation statement or other filings necessary to continue, maintain and perfect Lender’s security interests as first-priority interests.  Lender’s
approval of such filings shall authorize Borrower to file such documents under the UCC.  Notwithstanding anything else in the Transaction Documents to the contrary, no Loan Party shall have any authority to file a termination, partial termination, release, partial release, or any amendment of any such financing statements.  Each Loan Party hereby authorizes Lender to file such UCC financing statements naming such Loan Party as debtor as Lender shall deem to be necessary or desirable, and each
Loan Party hereby further authorizes the use of an “All Assets” collateral description therein.

 

(dd) Intellectual Property.  Each Loan Party shall, and shall cause each of its Subsidiaries to, at all times maintain possession and ownership of good and marketable title
to, or, with respect to all trademarks, trade names, copyrights, patents, patent rights, franchises, licenses and other intellectual property not owned by such Person on the date hereof, at all times maintain all necessary and appropriate licenses to use, all trademarks, trade names, copyrights, patents, patent rights, franchises licenses and other intellectual property that are used by such Person or that are material to the conduct of its business as now operated.

 

(ee) Withholding.  Each Loan Party shall, and shall cause each of its Subsidiaries to, from time to time withhold and remit all amounts required to be withheld (including
without limitation, in respect of income tax, withholding taxes on payments to non-residents, any plan and employment insurance) from all payments made to officers and employees or to all non-

 

 

 

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residents and to all other applicable Persons and each Loan Party shall, and shall cause each of its Subsidiaries to, (i) hold all such withheld funds in trust for the benefit of the appropriate authority and (ii) pay all such amounts, together with any interest and penalties due, to the appropriate authority when due as required by law.

 

(ff) Expenses of Lender.  Borrower shall pay on demand all documented Expenses of Lender (including, without limitation, fees and expenses of counsel and other third party
service providers for Lender), including, without limitation, such Expenses incurred in connection with (i) the negotiation, preparation and execution of the Transaction Documents and (ii) the filing, recording, refiling, re-recording, amendment, modification, release, supplement, waiver and enforcement of the Transaction Documents and the making, servicing, administering and collection of the obligations pursuant to the Transaction Documents.  In addition, and not in limitation of the foregoing, Borrower
shall pay the actual expenses of Lender (including expenses of Lender’s representatives) incurred in connection with the accounting, auditing and making of Advances and the accounting, auditing and monitoring of the Collateral.  Such expenses shall be payable on each Payment Date, or on such other basis as may be determined by Lender in its sole discretion.  Borrower’s Obligations under this Section 5.1(ff) are subject
to Section 9.11 hereof.

 

(gg) Agreements Enforceable.  Each agreement that Borrower enters into will be, at the time of execution thereof, duly authorized, executed and delivered by Borrower and
each other party thereto and each such agreement will be, at the time of execution thereof, a legal, valid and binding obligation of each party thereto enforceable against each such party in accordance with its terms (except as enforcement thereof may be limited by bankruptcy, reorganization, insolvency, moratorium or other laws affecting the enforcement of creditors’ rights generally and equitable principles relating to or affecting enforcement of creditors’ rights generally or relief of debtors
generally).

 

(hh) Qualification to Do Business.  At all times, Borrower shall be qualified to do business in each state in the United States, other than states where the failure to
so qualify does not have, and could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect

 

(ii) Compliance with ERISA.  Each Loan Party shall, and shall cause its ERISA Affiliates to:  (a) maintain each Plan, Pension Plan and Multiemployer Plan in compliance
in all material respects with the applicable provisions of ERISA, the Code and other federal or state law; (b) cause each Plan and Pension Plan that is qualified under Section 401(a) of the Code to maintain such qualification; and (c) make all required contributions to any Plan and Pension Plan subject to Section 412 of the Code.

 

(jj) Notification of ERISA Event.  Each Loan Party shall notify Lender in writing (and provide copies of all related documentation) immediately upon becoming aware of (i)
the institution of any steps by such Loan Party or any other Person to terminate any Pension Plan, (ii) the failure to make a required contribution to a Pension Plan if such failure is sufficient to give rise to a lien under Section 303(k) of ERISA or Section 430(k) of the Code, (iii) the taking of any action with respect to a Pension Plan that could result in the requirement that such Loan Party or any ERISA Affiliate furnish a bond or other security to the PBGC or such Pension Plan,

 

 

 

36

 

 

(iv) the occurrence of any event with respect to any Plan, Pension Plan or Multiemployer Plan that could result in such Loan Party or any ERISA Affiliate incurring any material liability, fine or penalty, or (v) any material increase in the contingent liability of such Loan Party or any ERISA Affiliate with respect to any post-retirement Welfare Plan benefit.

 

(kk) Supplemented Schedules.  Each Loan Party shall as soon as possible and in any event no later than the earlier of (i) the next succeeding date on which an Advance is
to be made and (ii) the date that is thirty (30) days after the occurrence thereof, supplement in writing and deliver to Lender revisions of the Schedules annexed to this Agreement to the extent necessary to disclose new or changed facts or circumstances after the Closing Date so as to cause the representations and warranties set forth herein to remain accurate and not misleading; provided that subsequent disclosures shall not constitute a cure
or waiver of any Default or Event of Default resulting from the matters disclosed.

 

5.2 Audits.  Each Loan Party covenants and agrees with Lender, so long as this Agreement or any of the other Transaction Documents shall remain in effect and the principal
of or interest on the Note, or any other Obligation, shall be unpaid, that each Loan Party shall, and shall cause each of its Subsidiaries to, permit Lender or its designated representative to enter upon such Loan Party’s or Subsidiary’s premises (at any of such Loan Party’s or Subsidiary’s business locations) to conduct periodic audits of such Loan Party’s or Subsidiary’s books, accounts, inventory and operations.  Such audits shall be conducted during each calendar
quarter during the term of this Agreement; provided, the frequency of such audits may be increased or decreased within the sole discretion of Lender.  If no Default or Event of Default has occurred and is continuing, each such Person shall provide reasonable notice to Borrower of such audits and shall conduct such audits during regular business hours.

 

5.3 Negative Covenants.  Each Loan Party covenants and agrees with Lender, so long as this Agreement or any of the other Transaction Documents shall remain in effect and
the principal of or interest on the Note, or any other Obligation, shall be unpaid, as follows:

 

(a) Other Agreements.  No Loan Party shall enter into any agreement in which the terms of such agreement would restrict or impair the right or ability of such Loan Party
to perform under any Transaction Document or Note and Warrant Purchase Agreement Document.

 

(b) Amendments.  No Loan Party shall amend or waive any provision of its Articles of Organization or Bylaws or comparable organizational documents in any way that would
adversely affect exercise or other rights of the Lender.

 

(c) Distributions. Each Loan Party agrees that it shall not, and shall not permit any of its Subsidiaries to (i) declare or pay any dividends or make any distributions (by reduction
of capital or otherwise) to any holder(s) of Common Stock (or security convertible into or exercisable for Common Stock) or set aside or otherwise deposit or invest any sums for such purpose, or (ii) redeem, retire, defease, purchase or otherwise acquire for value, directly or indirectly, any Common Stock or other equity security of the any Loan Party or set aside or otherwise deposit or invest any sums for such purpose; provided, however, that
the Borrower may repurchase shares of Common Stock from former employees permitted or required by any

 

 

 

37

 

 

stock restriction or purchase agreements by and between the Borrower and such former employees in an aggregate amount not to exceed $100,000.

 

(d) Prohibition on Liens. No Loan Party shall, and no Loan Party shall permit any of its Subsidiaries to, enter into, create, incur, assume, suffer or permit to exist any Lien on
or with respect to any of its assets, including the Collateral (as defined in the Security Agreement), now owned or hereafter acquired or any interest therein or any income or profits therefrom, or file or permit the filing of, or permit to remain in effect any financing statement or other similar notice of any Lien with respect to such assets, other than Permitted Liens.

 

(e) Prohibition on Indebtedness.  Other than (i) Indebtedness existing on the date hereof and disclosed in Schedule
4.14 to this Agreement and (ii) Indebtedness in favor of the Lender, the no Loan Party shall, nor shall any Loan Party permit any Subsidiary to, enter into, create, incur, assume, suffer, become or be liable for in any manner with respect to, or permit to exist, any Indebtedness, or guarantee, assume, endorse or otherwise become responsible for (directly or indirectly), any Indebtedness, performance, obligations or dividends of any other Person.

 

(f) Transactions with Affiliates.  No Loan Party shall, and no Loan Party shall permit any of its Subsidiaries to, directly or indirectly, (i) purchase, acquire or lease
any property from, or sell, transfer or lease any property to any officer, director, agent, employee or any Affiliate of any Loan Party or any Subsidiary or Loan Party, or (ii) make any payments of management, consulting or other fees for management or similar services, or of any Indebtedness owing to any officer, director, agent, employee, or other Affiliate of any Loan Party or any Subsidiary of a Loan Party, including any contract, agreement or other arrangement providing for the furnishing of services to
or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director, agent or such employee or, to the knowledge of the such Loan Party, any entity in which any officer, director, agent or any such employee has a substantial interest or is an officer, director, trustee or partner, in each case in excess of $50,000, other than (i) for payment of reasonable salary for services actually rendered, as approved by the Board of Directors of such Loan
Party as fair and reasonable in all respects to such Loan Party or the applicable Subsidiary and upon terms no less favorable to such Loan Party or Subsidiary that such Loan Party or Subsidiary would obtain in a comparable arm’s length transaction with an unaffiliated person, (ii) reimbursement for expenses incurred on behalf of the Loan Party in the ordinary course of and pursuant to the reasonable requirements of the business of any Subsidiary and (iii) as set forth on Schedule
4.23 hereof.

 

(g) Acquisitions, Mergers and Dissolutions.  No Loan Party shall, and no Loan Party shall permit any of its Subsidiaries to, directly or indirectly, (i) merge into or with
or consolidate with any other Person (other than into the Borrower or a Subsidiary of the Borrower) or permit any other Person (other than the Borrower or a Subsidiary of the Borrower) to merge into or with or consolidate with it, provided, that if any such consolidation or merger involves the Borrower, then the Borrower must be the survivor of such consolidation or merger; (ii) sell, issue, assign, lease, license, transfer, abandon or otherwise
dispose of any or all of its assets (other than inventory in the ordinary course of business and the sales described on Schedule 5.3(g) hereof, the purchase price for which sales shall be no less than $300,000); (iii) in any way or manner alter its organizational structure or effect a change of entity (except as expressly

 

 

 

38

 

 

permitted in this Agreement); (iv) form or create any subsidiary or become a partner in any partnership or joint venture, or make any acquisition of any interest in any Person or acquire substantially all of the assets of any Person; (v) wind up, liquidate or, subject to the proviso in Section 5.1(j) above, dissolve or (vi) agree to do any of the foregoing.

 

(h) No Investments.  No Loan Party shall, and no Loan Party shall permit any of its Subsidiaries to, make or suffer to exist any Investments or commitments therefor, other
than Investments made in the ordinary course of business.

 

(i) Compliance with Laws and Documents.  No Loan Party shall, and no Loan Party shall permit any of its Subsidiaries to, directly or indirectly, violate the provisions
of any Applicable Laws, its articles of organization or its limited liability partnership agreement, other constituting or governing documents or any material indenture, mortgage, lease, deed of trust, agreement, contract, instrument or document to which such Loan Party or Subsidiary is a party or by which such Loan Party or Subsidiary or any of such Loan Party’s or Subsidiary’s respective property, assets or revenue is or may be bound or to which it is subject.

 

(j) Business Locations; Jurisdiction of Organization.  All present business locations of Loan Parties are set forth on Schedule
5.3(j), including, without limitation, Borrower’s principal place of business.  No Loan Party shall conduct its business operations or store or otherwise locate any of the Collateral at any other location except as set forth on Schedule 5.3(j).  Each Loan Party is “located” in the its jurisdiction of formation within the meaning of Section 9-307 of the UCC.  No Loan Party shall establish a new
registered location, chief executive office or principal place of business or change its jurisdiction of organization without giving written notice to Lender ninety (90) days prior to such establishment and executing and delivering to Lender any documents considered necessary or desirable by Lender, in its discretion, to perfect or continue perfection of its interest in the Collateral or the Liens created hereunder or under the other Transaction Documents.

 

(k) Change of Name.  No Loan Party shall change its name, identity, or organizational structure in any manner, including in any manner that would, could, or might make
any financing statement or continuation statement filed by Lender, Borrower or any of the Loan Parties seriously misleading within the meaning of Section 9-506(b) of the UCC, unless such Loan Party shall have given Lender at least ninety (90) days prior written notice thereof and shall have taken such steps as may be required to maintain the perfection of the security interest in the Collateral granted to Lender or the Liens created hereunder or under the other Transaction Documents in connection with such change,
including, without limitation, promptly filing appropriate amendments to all previously filed financing statements or continuation statements.  Each Loan Party hereby gives Lender the authority to file, without the signature of Borrower to the extent permitted by law, any financing statements or continuation statements or amendments to financing statements or any similar document in any jurisdictions and with any filing offices as Lender may determine, in its sole discretion, are necessary or advisable
to perfect, protect, continue or amend the security interest granted to Lender herein and in the Security Documents.

 

(l) New Business.  Borrower shall not engage in any business other than the Business or enter into any agreements other than the Transaction Documents and the documents
expressly contemplated by the Transaction Documents.

 

 

 

39

 

 

(m) Operation of Business.  No Loan Party shall, and no Loan Party shall permit any of its Subsidiaries to, operate its business in a manner that would reasonably be expected
to lead to a Material Adverse Effect.

 

(n) Use of Name; Confidentiality.  No Loan Party shall, and no Loan Party shall permit any of its Subsidiaries to, use the name or trademark of Lender or any of Lender’s
affiliates in its business, including, but not limited to, any advertising undertaken by any Loan Party or Subsidiary, and each Loan Party shall, and shall cause each of its Affiliates to, keep confidential the terms and conditions of the Transaction Documents except as required to satisfy disclosure requirements of a supervising governmental agency.

 

(o) Fiscal Year and Accounting Methods.  No Loan Party shall, and no Loan Party shall permit any of its Subsidiaries to, change its fiscal year, which currently ends each
June 30, or method of accounting, other than immaterial changes in methods to which its independent certified public accountants concur.

 

(p) Reserved.

 

(q) Employee Benefit Plans.  No Loan Party shall, and no Loan Party shall permit any of its ERISA Affiliates to, directly or indirectly, sponsor or contribute to, or create
or suffer to exist any contractual or other obligation to contribute to, any Pension Plan or Multiemployer Plan.  No Loan Party shall, and no Loan Party shall permit any of its ERISA Affiliates to: (a) engage in a prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan or Pension Plan which has resulted or could reasonably be expected to result in any material liability of Borrower; or (b) engage in a transaction that would be subject to Section 4069 or 4212(c)
of ERISA.

 

(r) Waiver of Rights.  No Loan Party shall waive or otherwise diminish or release any of its rights under any indenture, mortgage, lease, deed of trust, agreement, contract,
instrument or document to which such Loan Party is a party or by which such Loan Party or any of such Loan Party’s property, assets or revenue is or may be bound or to which it is subject, or permit any of such rights to be waived or otherwise diminished or released.

 

(s) Investment Property; Bank Accounts, Etc.  No Loan Party shall purchase, own, hold, invest in or otherwise acquire any Investment Property (except deposit accounts with
financial institutions as required by this Agreement, which deposit accounts shall be subject to an Account Control Agreement).  No Loan Party shall make or permit to exist any loans, advances, investments or guarantees to, in or for the benefit of any Person or assume, guarantee, endorse, contingently agree to purchase or otherwise become liable for or upon or incur any obligation of any Person.

 

ARTICLE VI

 

INDEMNIFICATION; INCREASED COSTS

 

6.1 Indemnity.  Each Loan Party agrees, jointly and severally, to indemnify and hold harmless the Lender and its affiliates (and each of their respective directors, officers,
members, partners, affiliates, agents, managers, successors, assigns, participants and heirs, and each of their

 

 

 

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respective directors, officers, agents, attorneys, employees, managers, controlling persons and representatives, each a “Lender-Related Person”) and each party that is a lender to or investor in any Lender-Related Person or has a controlling interest, or equity investment, in any of the foregoing (each, an “Indemnified
Party”) from and against any and all actions, suits, proceedings (including any investigations, litigation or inquiries), claims, demands, causes of action, losses, liabilities, penalties, fines, forfeitures, deficiencies, costs, damages, judgments or fees or expenses (including, without limitation, reasonable attorneys’ fees, charges and disbursements) of any kind or nature whatsoever (collectively, the “Indemnity Matters”),
incurred by or asserted against or involve any of them (whether or not any of them is designated a party thereto) as a result of, in connection with, arising out of or in any way related to the execution or delivery of this Agreement, the other Transaction Documents or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder, the consummation of the transactions contemplated hereby or thereby or the administration
of this Agreement and the other Transaction Documents, including, without limitation, (i) as a result of any inaccuracy in or breach of the representations, warranties or covenants made by the Loan Parties herein or in any of the other Transaction Documents, (ii) any actual or proposed use by Borrower of the proceeds of any of the Advances, or (iii) any other obligation of a Loan Party or Affiliate under this Agreement, the other Transaction Documents or the transactions contemplated hereby or thereby, including,
without limitation, the reasonable fees and disbursements of counsel (including allocated costs of internal counsel), and all other expenses incurred in connection with investigating, defending or preparing to defend any such Indemnity Matter.

 

6.2 Indemnification Procedure.  Any party entitled to indemnification under this Article VI (an
“indemnified party”) will give written notice to the indemnifying party of any matter giving rise to a claim for indemnification (an “Indemnity Claim”); provided, that the failure of any party entitled to indemnification hereunder to give notice of such Indemnity Claim as provided herein shall not relieve the indemnifying party of its obligations under this Article
VI except to the extent that the indemnifying party is actually prejudiced by such failure to give notice.  In the case of any such Indemnity Claim, the indemnifying party shall be entitled to participate in and, unless in the reasonable judgment of the indemnifying party a conflict of interest between it and the indemnified party exists with respect to such Indemnity Claim (in which case the indemnifying party shall be responsible for the reasonable fees and expenses of one separate counsel
for the indemnified parties), to assume the defense thereof with counsel reasonably satisfactory to the indemnified party.  In the event that the indemnifying party advises an indemnified party that it will contest such Indemnity Claim hereunder, or fails, within thirty (30) days of receipt of any notice of an Indemnity Claim to notify, in writing, such person of its election to defend, settle or compromise, at its sole cost and expense, any action, proceeding or claim (or discontinues its defense at
any time after it commences such defense), then the indemnified party may, at its option, defend, settle or otherwise compromise or pay such action or Indemnity Claim.  In any event, unless and until the indemnifying party elects in writing to assume and does so assume the defense of any such claim, proceeding or action, the indemnified party’s costs and expenses arising out of the defense, settlement or compromise of any such action, claim or proceeding shall be losses subject to indemnification
hereunder.  The indemnified party shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such Indemnity Claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the indemnified party which

 

 

 

41

 

 

relates to such Indemnity Claim.  The indemnifying party shall keep the indemnified party fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto.  If the indemnifying party elects to defend any such Indemnity Claim, then the indemnified party shall be entitled to participate in such defense with counsel of its choice at its sole cost and expense.  The
indemnifying party shall not be liable for any settlement of any action, claim or proceeding effected without its prior written consent.  Notwithstanding anything in this Article VI to the contrary, the indemnifying party shall not, without the indemnified party’s prior written consent, settle or compromise any Indemnity Claim or consent to entry of any judgment in respect thereof which imposes any future obligation on the indemnified
party or which does not include, as an unconditional term thereof, the giving by the claimant or the plaintiff to the indemnified party of a release from all liability in respect of such claim.  The indemnification obligations to defend the indemnified party required by this Article VI shall be made by periodic payments of the amount thereof during the course of investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred, so long as the indemnified party shall refund such moneys if it is ultimately determined by a court of competent jurisdiction that such party was not entitled to indemnification.  The indemnity agreements contained herein shall be in addition to (a) any cause of action or similar rights of the indemnified party against the indemnifying party or others, and (b) any liabilities the indemnifying party may be subject to pursuant to the law.

 

6.3 Tax Indemnification.

 

(a) Distributions and Payments Free of Taxes.  Any and all payments to be made to Lender hereunder and any other payments by or on account of any obligation of
Borrower hereunder or under any other Transaction Document shall be made free and clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes; provided, however, that if Borrower or any other Person shall be required by Applicable Law to deduct any such Indemnified Taxes (including any such Other Taxes), then (i) the sum to be distributed or paid shall be
increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section), Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrower or such other Person, as applicable, shall make such deductions and (iii) Borrower or such other Person, as applicable, shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with Applicable Law.

 

(b) Payment of Other Taxes by Borrower.  Without limiting the provisions of paragraph (a) above, Borrower shall timely pay any Other Taxes to the relevant Governmental
Authority in accordance with all Applicable Law.

 

(c) Indemnification.  (a) Each Loan Party shall, jointly and severally, indemnify each Lender-Related Person, within ten (10) days after demand therefor, for the
full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts paid under this Section) payable by such Lender-Related Person and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such

 

 

 

42

 

 

payment or liability delivered to Borrower, on behalf of the Loan Parties, by such Lender-Related Person shall be conclusive absent manifest error.

 

(d) Evidence of Payments.  As soon as practicable after any payment of Indemnified Taxes or Other Taxes by Borrower or another Loan Party to a Governmental Authority,
Borrower, on behalf of the Loan Parties, shall deliver to the applicable Lender-Related Person the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to such Lender-Related Person.

 

(e) Status of Lender.  Lender, to the extent it is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which Borrower
is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Transaction Document, shall deliver to Borrower, on or prior to the Closing Date, and at such other time or times prescribed by Applicable Law or reasonably requested by Borrower, such properly completed and executed documentation prescribed by Applicable Law as will permit such payments to be made without withholding or at a reduced rate of withholding, including, but not limited
to, Forms W-8ECI, W-8BEN, W-8IMY, W-9 (as applicable) or other applicable form, certificate or document prescribed by the United States Internal Revenue Service.  In addition, Lender, if requested by Borrower, shall deliver such other documentation prescribed by Applicable Law or reasonably requested by Borrower as will enable Borrower to determine whether or not Lender is subject to backup withholding or information reporting requirements.  Borrower shall not be required to pay any additional
amounts to Lender pursuant to Section 6.3(a) or (c) to the extent that the obligation to pay such additional amounts would not have arisen but for the failure of Lender to comply with this paragraph.  Notwithstanding the foregoing, this Section 6.3(e) shall only apply to Lender, to the extent that Lender is
not a United States person under and as defined in Section 7701(a)(30) of the Code.

 

(f) Treatment of Certain Refunds.  If Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been
indemnified by the Loan Parties, or with respect to which any Loan Party has paid additional amounts pursuant to this Section 6.3, it shall pay to the applicable Loan Parties an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Loan Parties under this Section 6.3 with respect to the Taxes or Other Taxes giving rise to
such refund), net of all out-of-pocket expenses of Lender, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided, that the Loan Parties, upon the request of Lender, agree to repay the amount paid over to the Loan Parties (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to Lender in the event Lender is required to repay such refund
to such Governmental Authority.  This paragraph shall not be construed to require Lender to make available its tax returns (or any other information relating to its taxes that it deems confidential) to any Loan Party or any other Person.  The Loan Parties’ Obligations under this Section 6.3 are subject to Section 9.14.

 

6.4 Increased Costs.  If any change occurring after the date hereof in any Applicable Law (or in the interpretation, application or effectiveness thereof) shall increase
the cost to (or impose a cost on) an Affected Party funding or making or maintaining any Advance, reduce the

 

 

 

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amount of any sum payable to or received by an Affected Party under this Agreement or the Note or in the good faith determination of such Affected Party, reduce the rate of return of an Affected Party in connection herewith to a level below that which such Affected Party would otherwise have achieved, then upon the written demand by such Affected Party to Borrower (which demand shall be delivered no more than three months after
a responsible officer of the applicable Affected Party has actual knowledge of such increased cost, and shall be accompanied by a written statement setting forth the basis of such demand), Borrower shall promptly pay to the Affected Party such additional amount or amounts as will (in the reasonable determination of such Affected Party) compensate such Affected Party for such increased cost or such reduction.  Such written statement (which shall include calculations in reasonable detail) shall be conclusive
and binding for all purposes, absent manifest error.  Borrower’s Obligations under this Section 6.4 are subject to Section 9.14.

 

6.5 Waiver of Consequential Damages, Etc.  To the fullest extent permitted by Applicable Law, each Loan Party shall not assert, and hereby waives, any claim against any
Indemnified Party, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Transaction Document or any agreement or instrument contemplated hereby or thereby, or the transactions contemplated hereby or thereby.

 

ARTICLE VII

 

EVENTS OF DEFAULT

 

The term “Event of Default” means the occurrence of any one or more of the following events:

 

7.1 Payment of Obligations.  The failure of any Loan Party to make any payment of the principal amount, interest or any other monetary obligation under this Agreement,
the Note or any Transaction Document as and when the same shall be due and payable (whether on the Maturity Date or by acceleration or otherwise) and, other than with respect to payments of principal, such failure or refusal continued for more than one (1) Business Day; or

 

7.2 Listing.  The suspension from listing, without subsequent listing on any one of, or the failure of the Common Stock to be listed on at least one of the OTC Bulletin
Board, the Nasdaq Capital Markets, the Nasdaq Global Market, the Nasdaq Global Select Market, The New York Stock Exchange, Inc. or the NYSE Alternext Exchange for a period of five (5) consecutive Trading Days, such a suspension to only constitute an Event of Default if the Lender provides the Borrower written notification that it deems such suspension to be an Event of Default; or

 

7.3 Covenants.  The Loan Parties shall default in the performance or observance of any undertaking, covenant, condition or agreement contained in Sections
5.1(e), 5.1(j), 5.1(o), 5.1(r), 5.1(s), and 5.3 of this Agreement; or

 

7.4 Other Covenants.  The Loan Parties shall default in the performance or observance of any undertaking, covenant, condition or agreement contained in this Agreement (other
than those Sections listed in Section 7.3 above) or any other Transaction Document and

 

 

 

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such failure continues for a period of ten (10) days after the earlier of (i) the date on which such failure first becomes known to any officer of any Loan Party or (ii) notice thereof is given to any Loan Party by Lender; or

 

7.5 Representations and Warranties.  Any representation or warranty made by any Loan Party herein or in any other Transaction Document shall prove to have been false or
incorrect or breached in a material respect on the date as of which made; or

 

7.6 Cross-Default.  (i) Default in any payment of any amount or amounts of principal of or interest on any Indebtedness of any Loan Party (other than the Indebtedness hereunder),
the aggregate principal amount of which Indebtedness is in excess of $50,000; (ii) a default in the observance or performance of any other agreement or condition relating to any Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit, after any applicable grace period, the holder
or holders or beneficiary or beneficiaries of such Indebtedness to cause with the giving of notice if required, such Indebtedness to become due prior to its stated maturity; and (iii) an Event of Default shall occur under the Note and Warrant Purchase Agreement Documents; or

 

7.7 Bankruptcy.  Any Loan Party shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself
or of all or a substantial part of its property or assets, (ii) make a general assignment for the benefit of its creditors, (iii) commence a voluntary case under the United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic), (iv) file a petition seeking to take advantage of any bankruptcy, insolvency, moratorium, reorganization or other similar law affecting the enforcement of creditors’ rights generally, (v) acquiesce in writing
to any petition filed against it in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic), (vi) issue a notice of bankruptcy or winding down of its operations or issue a press release regarding same, or (vii) take any action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing; or

 

7.8 Involuntary Bankruptcy.  A proceeding or case shall be commenced in respect of any Loan Party, without its application or consent, in any court of competent jurisdiction,
seeking (i) the liquidation, reorganization, moratorium, dissolution, winding up, or composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of any Loan Party or of all or any substantial part of such Loan Party’s assets or (iii) similar relief in respect of it under any law providing for the relief of debtors, and such proceeding or case described in clause (i), (ii) or (iii) shall continue undismissed, or unstayed and in effect, for a period
of thirty (30) days or any order for relief shall be entered in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic) against any Loan Party or action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing shall be taken with respect to such Loan Party and shall continue undismissed, or unstayed and in effect for a period of sixty (60) days; or

 

 

 

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7.9 Adverse Judgments; Litigation.  A judgment or judgments in the aggregate amount exceeding $50,000 is/are entered against any Loan Party and not dismissed or discharged
within twenty (20) days following the entry thereof; or

 

7.10 Perfection.  Lender shall for any reason cease to have a valid and perfected first priority security interest in any portion of the Collateral; or

 

7.11 Denial of Obligations.  Any Loan Party, or any other party to any Transaction Document denies or disaffirms or contests the validity or enforceability of any Transaction
Document; or

 

7.12 Transaction Documents. Any Transaction Document shall cease to be in full force and effect or any Loan Party, or any other party to any Transaction Document shall assert in
writing the invalidity of any Transaction Document or any obligation thereunder; or

 

7.13 Change of Control. A Change of Control shall occur; or

 

7.14 Business Operation.  The Borrower or any Guarantor shall cease to actively conduct its business operations for a period of five (5) consecutive Business Days; or

 

7.15 Seizure.  Any material portion of the properties or assets of any Loan Party is seized by any governmental authority; or

 

7.16 Criminal Activity.  Any Loan Party is indicted for the commission of any criminal activity.

 

ARTICLE VIII

 

 

RIGHTS AND REMEDIES.

 

8.1 Remedies.  Upon and after the occurrence of an Event of Default, Lender may, in addition to all remedies then available under the Transaction Documents, do any one
or more of the following without notice of any kind: (a) declare the entire unpaid principal balance of the Obligations, or any part thereof, together with all interest accrued thereon, plus fees and expenses, immediately due and payable, and thereupon, the same shall be accelerated and so due and payable, without presentment, demand, protest, or notice, all of which are hereby expressly unconditionally and irrevocably waived by each Loan Party; provided, however,
that upon the occurrence of an Event of Default described in Sections 7.7 or 7.8 above, the outstanding principal balance of the Obligations and accrued interest thereunder, plus fees and expenses, shall be immediately and automatically due and payable, and/or (b) exercise or otherwise enforce any one or more of the Lender’s Rights, powers, privileges, remedies and interests
(including, without limitation, any rights of offset, the right to foreclose and or all Liens held by Lender or otherwise realize upon any and all of the Rights Lender may have in and to the Collateral, or any part thereof or any other legal of equitable Rights) under this Agreement, the Security Agreement or other Transaction Document or Applicable Law.  No course of delay on the part of the Lender shall operate as a waiver thereof or otherwise prejudice the right of Lender.  No remedy conferred
hereby shall be exclusive of any other remedy referred to herein or now or hereafter available at law, in equity, by statute or otherwise.  Upon and after an Event of Default

 

 

 

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of the type described in Sections 7.1, 7.7 or 7.8, this Note shall bear interest at the default rate set forth in Section 2.5(e) hereof.  Upon and after the occurrence
of a Default, Lender may, in addition to all remedies then available under the Transaction Documents, cease making Advances.

 

8.2 Performance by Lender.  If any covenant, duty or agreement of any Loan Party is not performed in accordance with the terms of the Transaction Documents, Lender may
perform or attempt to perform, such covenant, duty or agreement on behalf of such Loan Party.  In such event, any amount expended by Lender in such performance or attempted performance shall be payable by the Loan Parties to Lender on demand, shall become part of the Obligations and shall bear interest at the Default Rate from the date of such expenditure by Lender until paid.  Notwithstanding the foregoing, it is expressly understood that Lender does not assume nor shall have any liability
or responsibility for the performance of any covenant, duty or agreement of any Loan Party.

 

8.3 Delegation of Duties and Rights.  Lender may perform any of its duties or exercise any of its Rights under the Transaction Documents by or through its affiliates, officers,
directors, employees, attorneys, agents or other representatives.

 

8.4 Expenditures by Lender.  Borrower shall indemnify Lender for all court costs, documented attorneys’ fees, other documented costs and expenses of collection and
other sums spent by Lender pursuant to the exercise of any Right provided herein (including, without limitation, any effort to collect or enforce the Note), and all such amounts shall be payable to Lender on demand, shall become part of the Obligations and shall bear interest at the Default Rate from the date spent until the date repaid.  For the avoidance of doubt, Borrower’s obligations under this Section 8.4 shall not be limited
by any provision of Section 5.1(ff).

 

8.5 Saving.  Lender shall not be under any obligation to any Loan Party or any other Person to realize on any Collateral, enforce Lender’s security interest or any
part thereof or to require the enforcement by Loan Parties, or any of them, of its rights in the Collateral or any part thereof or to allow any of such Collateral to be sold, dealt with or otherwise disposed of.  Lender shall not be responsible or liable to any Loan Party or any other Person for any loss or damage upon the realization or enforcement of, the failure to realize or enforce such Collateral or any part thereof or the failure to allow any such Collateral to be sold, dealt with or otherwise
disposed of or for any act or omission on its part or on the part of any director, officer, agent, servant or adviser in connection with any of the foregoing.

 

8.6 Set-off or Compensation.  In addition to and not in limitation of any rights now or hereafter granted under Applicable Law, at any time after an Event of Default has
occurred and is continuing, Lender may at any time and from time to time without notice to any Loan Party or any other Person, any notice being expressly waived by the Loan Parties, set-off and compensate and apply any and all deposits, general or special, time or demand, provisional or final, matured or unmatured, and any other indebtedness at any time owing by Lender to or for the credit of or the account of any Loan Party, against and on account of the Obligations hereunder notwithstanding that any of them
are contingent or unmatured.

 

 

 

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ARTICLE IX

 

MISCELLANEOUS.

 

9.1 Notices.  Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon
hand delivery by telecopy or facsimile at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur.  The addresses for such communications shall be:

 

	
If to any Loan Party:
	
Implant Sciences Corporation

600 Research Drive

Wilmington, Massachusetts 01887

Tel: (781) 752-1700

Fax: (781) 752-1711

Attn: Glenn Bolduc, President

	  	  
	
with copies (which copies

shall not constitute notice

to the Loan Parties) to:
	
Morse, Barnes-Brown & Pendleton, P.C.

Reservoir Place

1601 Trapelo Road

Waltham, Massachusetts 02451

Tel:  (781) 622-5930

Fax:  (781) 622-5933

Attn:  Carl F. Barnes, Esq.

	  	  
	
If to the Lender:
	
DMRJ Group, LLC

c/o Platinum Partners Value Arbitrage Fund, L.P.

152 West 57th Street, 4th Floor

New York, NY 10019

Tel: (212) 582-0500

Fax: (212) 582-2424

Attention: Daniel I. Small

	  	  
	
with copies (which copies

shall not constitute notice

to the Lender) to:
	
Blank Rome LLP

405 Lexington Avenue

New York, NY 10174

Tel: (212) 885-5431

Fax: (917) 332-3065

Attention: Eliezer M. Helfgott, Esq.

	  	  

Any party hereto may from time to time change its address for notices by giving written notice of such changed address to the other party hereto.

 

 

 

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9.2 Entire Agreement; Amendments; Waiver.  This Agreement and the Transaction Documents contain the entire understanding and agreement of the parties with respect to the
matters covered hereby and, except as specifically set forth herein or in the other Transaction Documents, no Loan Party nor the Lender make any representation, warranty, covenant or undertaking with respect to such matters, and they supersede all prior understandings and agreements with respect to said subject matter, all of which are merged herein.  No provision of this Agreement may be waived or amended other than by a written instrument signed by the Borrower and the Lender.  Any amendment
or waiver effected in accordance with this Section 9.2 shall be binding upon the Lender (and its assigns) and the Loan Parties; provided that any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

 

9.3 No Waiver; Remedies Cumulative.  No waiver by either party of any default with respect to any provision, condition or requirement of this Agreement shall be deemed
to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter, nor shall any single or partial exercise of any Right hereunder preclude any other or further exercise thereof or the exercise of any other Right hereunder.  The Rights herein expressly provided are cumulative and not exclusive of any Rights
which Lender would otherwise have.

 

9.4 Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns.  After the Closing
Date, the assignment by a party to this Agreement of any rights hereunder shall not affect the obligations of such party under this Agreement.  The Lender may assign the Note and its rights under this Agreement and the other Transaction Documents and any other rights hereto and thereto without the consent of the Loan Parties.  No Loan Party may assign or transfer any of its rights or obligations hereunder.  Any purported assignment in violation of the foregoing shall be null and
void.

 

9.5 Construction.  Whenever in any Transaction Document the singular number is used, the same shall include the plural where appropriate, and vice versa; and words of any
gender in any Transaction Document shall include each other gender where appropriate.  The words “herein,” “hereof,” and “hereunder,” and other words of similar import refer to the relevant Transaction Document as a whole and not to any particular part or subdivision thereof.  The terms “includes” and “including” are not limiting, and the term “or” has, except where otherwise indicated, the inclusive meaning represented
by the phrase “and/or.”  Any reference in this Agreement or in any other Transaction Document to any agreement, instrument, or document shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein
or in the other Transaction Documents).  Any reference herein or in any other Transaction Document to the satisfaction or repayment in full of the Obligations shall mean the repayment in full in cash of all Obligations.  Any reference herein to any Person shall be construed to include such Person’s successors and assigns (subject to any restrictions on assignment set forth herein or in the other Transaction Documents).

 

 

 

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9.6 Headings.  The article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other purpose
and shall not be deemed to limit or affect any of the provisions hereof or of the Transaction Documents.

 

9.7 Exhibits and Schedules.  If any Exhibit or Schedule, which is to be executed and delivered, contains blanks, the same shall be completed correctly and in accordance
with the terms and provisions contained and as contemplated herein prior to, at the time of, or after the execution and delivery thereof.  Each of the Exhibits and Schedules are incorporated herein by this reference.

 

9.8 Form and Number of Documents.  Each agreement, document, instrument, or other writing to be furnished to Lender under any provision of this Agreement must be in form
and substance and in such number of counterparts as may be satisfactory to Lender.

 

9.9 Conflicts.  Except as otherwise provided in this Agreement and except as otherwise provided in the other Transaction Documents by specific reference to the applicable
provisions of this Agreement, if any provision contained in this Agreement is in conflict with or is inconsistent with any provision in the other Transaction Documents, the provision contained in this Agreement shall govern and control.

 

9.10 WAIVERS BY LOAN PARTIES.  

 

(a) Except as otherwise specifically provided herein, the Loan Parties and all others that may become liable for all or any part of the Obligations, hereby waive presentment, demand, notice of nonpayment, protest and all other demands’
and notices in connection with the delivery, acceptance, performance, acceleration and enforcement of the Obligations, and do hereby consent to any number of renewals of extensions of the time or payment hereof and agree that any such renewals or extensions may be made without notice to any such persons and without affecting their liability herein and do further consent to the release of any person liable hereon, all without affecting the liability of the other persons, firms or Loan Party liable for the payment
of the Obligations, AND DO HEREBY WAIVE TRIAL BY JURY.

 

(b) No delay or omission on the part of Lender in exercising its rights under this Agreement or any other Transaction Document, or course of conduct relating hereto, shall operate as a waiver of such rights or any other right of Lender,
nor shall any waiver by Lender of any such right or rights on any one occasion be deemed a waiver of the same right or rights on any future occasion.

 

(c) EACH LOAN PARTY ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS AGREEMENT AND EACH TRANSACTION DOCUMENT IS A PART IS A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE LAW, HEREBY WAIVES ITS RIGHT TO NOTICE AND HEARING
WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH LENDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.

 

(d) Each Loan Party acknowledges that it has been advised by counsel with respect to this Agreement and the transactions evidenced by this Agreement.

 

 

 

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9.11 Fees and Expenses.  The Borrower shall pay the costs, fees and expenses of Lender incurred in connection with the transactions contemplated by the Transaction Documents,
including reasonable diligence and legal fees and expenses.  In addition, the Borrower shall pay all costs and expenses incurred by Lender from time to time with respect to any modification, consent or waiver of the provisions of this Agreement and the Transaction Documents and in connection with the enforcement of this Agreement or any of the other Transaction Documents, including, without limitation, all reasonable attorneys’ fees and expenses.

 

9.12 GAAP.  All accounting and financial terms used in any of the Transaction Documents and the compliance with each covenant contained in the Transaction Documents which
relates to financial matters shall be determined in accordance with GAAP, except to the extent that a deviation therefrom is expressly stated in such Transaction Documents.

 

9.13 Exceptions to Covenants.  No Loan Party shall take any action or fail to take any action that is permitted as an exception to any of the covenants contained in any
of the Transaction Documents if such action or omission would result in the breach of any other covenant contained in any of the Transaction Documents.

 

9.14 Survival.  All covenants, agreements, undertakings, representations, and warranties made in any of the Transaction Documents shall survive all closings under the Transaction
Documents and, except as otherwise indicated, shall not be affected by any investigation made by any party.  Loan Parties’ obligations under Sections 5.1(ff), Article VI and Sections 9.11 and 9.23 hereof shall remain operative and in full
force and effect regardless of the termination of this Agreement, the repayment of the Obligations, or the existence of any investigation made on behalf of Lender regarding the representations and warranties made by Loan Parties, or any of them, in connection with the Transaction Documents.

 

9.15 Governing Law.  This Agreement and each of the Transaction Documents shall be governed by and construed in accordance with the internal laws of the State of New York,
without giving effect to any of the conflicts of law principles which would result in the application of the substantive law of another jurisdiction.  This Agreement and each of the Transactions Documents shall not be interpreted or construed with any presumption against the party causing this Agreement or such Transaction Document to be drafted.

 

9.16 Maximum Interest Rate.  It is the intention of the parties hereto to comply with applicable usury laws (now or hereafter enacted); accordingly, notwithstanding any
provision to the contrary in this Agreement, the Note, the other Transaction Documents, or any other document relating hereto, in no event shall this Agreement or any such other document require the payment or permit the collection of interest in excess of the maximum amount permitted by such laws.  If from any circumstances whatsoever, fulfillment of any provision of this Agreement or of any other document pertaining hereto or thereto, shall involve transcending the limit of validity prescribed by
law for the collection or charging of interest, then, ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity, and if from any such circumstances Lender shall ever receive anything of value as interest or deemed interest by Applicable Law under this Agreement, the Note, the other Transaction Documents, or any other document pertaining hereto or otherwise an amount that would exceed the highest lawful rate, such
amount that would be excessive interest shall be applied to the reduction of the obligations

 

 

 

51

 

 

or on account of any other Indebtedness of Borrower to Lender, and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal of such indebtedness, such excess shall be refunded to Borrower.

 

9.17 Severability.  The provisions of this Agreement are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the
provisions or part of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement and this Agreement shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of such provision, had never been contained herein, so that such provisions would be valid, legal and enforceable to the
maximum extent possible.

 

9.18 The Lender is not in Control.  None of the covenants or other provisions contained in this Agreement shall, or shall be deemed to, give Lender the Right or power to
exercise control over the affairs or management of any Loan Party, the power of Lender being limited to the Right to exercise the remedies provided in Article VIII.

 

9.19 Confidentiality.  Without the prior written consent of the Borrower, neither Lender nor any of its affiliates shall disclose any confidential information of the Borrower
or any of its Subsidiaries, which any of its officers, directors, employees, counsel, agents, investment bankers, or accountants, may now possess or may hereafter create or obtain relating to, without limitation, know-how, trade secrets, customer lists, supplier lists, referral source lists, costs, profits or margin information, markets, sales, pricing policies, operational methods, plans for future development, processes, products, software, the financial condition, results of operations, business, properties,
assets, liabilities, or future prospects and such information shall not be published, disclosed, or made accessible by any of them to any other person or entity or used by any of them; provided, however, that such party may disclose or use any such information (i) as has become generally available to the public other than through a breach of this Agreement by such party or any of its
affiliates and representatives, (ii) as becomes available to the Lender on a non-confidential basis from a source other than the Borrower or the Borrower’s affiliates or representatives, provided that such source is not known or reasonably believed by such party to be bound by a confidentiality agreement or other obligations of secrecy, (iii) as may be required in any report, statement or testimony required to be submitted to any governmental entity having or claiming to have jurisdiction over it, or as
may be otherwise required by applicable law, or as may be required in response to any summons or subpoena or in connection with any litigation, (iv) as may be required to obtain any governmental entity approval or consent required in order to consummate the transactions contemplated by this Agreement or (v) as may be necessary to establish or enforce the Lender’s rights and/or to exercise the Lender’s remedies under this Agreement and the Transaction Documents, including, without limitation, to third
parties in order to facilitate a sale or other disposition of the Borrower or its assets subject to the execution and delivery of a Non-Disclosure Agreement containing restrictions and limitations substantially similar to those contained in this Section 9.19; provided, further, that in the case of clauses (i), (ii), (iii), and (iv), Lender will promptly notify the Borrower and, to the extent practicable, provide the Borrower a reasonable opportunity
to prevent public disclosure of such information.  Lender acknowledges responsibility for disclosures caused by Lender and any of its affiliates and representatives.

 

 

 

52

 

 

9.20 Specific Performance.  The Loan Parties and Lender acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement
or the other Transaction Documents were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement or the other Transaction Documents and to enforce specifically the terms and provisions hereof or thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity.

 

9.21 Multiple Counterparts, etc.  This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument
and shall become effective when counterparts have been signed by each party and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart. For the purposes of this Section, the delivery of a facsimile or electronic copy of an executed counterpart of this Agreement shall be deemed to be valid execution and delivery of this Agreement, but the party delivering a facsimile or electronic copy shall deliver an original copy of this Agreement as soon as possible after
delivering the facsimile or electronic copy but the failure to deliver an original executed counterpart shall not affect the validity, enforceability and binding effect of this Agreement.  The foregoing shall apply to each other Transaction Document mutatis mutandis.

 

9.22 Submission to Jurisdiction.  The
parties agree that venue for any dispute arising under this Agreement will lie exclusively in the state or federal courts located in New York County, New York, and the parties irrevocably waive any right to raise forum non conveniens or any other argument that New York is not the proper venue.  The parties irrevocably consent to personal jurisdiction in the state and federal courts of the state of New York.  The Loan Parties and Lender
consent to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing in this Section 9.22 shall affect or limit any right to serve process in any other manner permitted by law.  The Loan Parties and Lender hereby
agree that the prevailing party in any suit, action or proceeding arising out of or relating to the Note, this Agreement or the other Transaction Documents, shall be entitled to reimbursement for reasonable legal fees from the non-prevailing party.

 

9.23 Reinstatement.  If the incurrence or payment of the Obligations by any Loan Party or the transfer to Lender of any property should for any reason subsequently be declared
to be void or voidable under any state or federal law relating to creditors’ rights, including provisions of the Bankruptcy Code relating to fraudulent conveyances, preferences, or other voidable or recoverable payments of money or transfers of property (each, a “Voidable Transfer”), and if Lender is required to repay or restore, in whole or in part, any such Voidable Transfer, or elects to do so upon the reasonable advice of its counsel,
then, as to any such Voidable Transfer, or the amount thereof that Lender is required or elects to repay or restore, and as to all reasonable costs, expenses, and attorneys fees of Lender related thereto, the liability of the Loan Parties automatically shall be revived, reinstated, and restored and shall exist as though such Voidable Transfer had never been made.

 

 

 

53

 

 

9.24 No Third Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for
the benefit of, nor may any provision hereof be enforced by, any other person.

 

9.25 Survival.  The representations and warranties of the Loan Parties shall survive the execution and delivery hereof and the Closing Date until the third anniversary
of the Closing Date; the agreements and covenants set forth in Articles II, V, VI, VII and IX of this Agreement shall survive the execution and delivery hereof and the Closing Date.

 

9.26 Publicity.  Each of the Loan Parties agrees that it will not disclose, and will not include in any public announcement, the names of Lender without the consent of
Lender, which consent shall not be unreasonably withheld or delayed, or unless and until such disclosure is required by law, rule or applicable regulation and then only to the extent of such requirement.

 

9.27 Further Assurances.  From and after the date of this Agreement, upon the request of Lender or the Borrower, the Loan Parties and Lender shall execute and deliver such
instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement and the other Transaction Documents.

 

9.28 Note and Warrant Purchase Agreement Documents. 

 

(a) Each Loan Party acknowledges and agrees that (i) neither this Agreement nor any other agreement entered into in connection herewith or pursuant to the terms hereof shall be deemed or construed to be a compromise, satisfaction, reinstatement,
accord and satisfaction, novation or release of any of the Note and Warrant Purchase Agreement Documents, or any rights or obligations thereunder, or a waiver or other modification by Lender of any of its rights or remedies under the Note and Warrant Purchase Agreement Documents or at law or in equity and (ii) neither this Agreement nor any other agreement executed in connection herewith or pursuant to the terms hereof, nor any actions taken pursuant to this Agreement or such other agreement shall be deemed to
be a waiver by the Lender of any Events of Default or any other defaults or events of default under the Note and Warrant Purchase Agreement Documents, or of any rights or remedies in connection therewith or with respect thereto, it being the intention of the parties hereto that the obligations of Loan Parties with respect to the Note and Warrant Purchase Agreement Documents are and shall remain in full force and effect.

 

(b) Nothing contained in this Agreement or in the other Transaction Documents shall be deemed to impair, reduce or release in any manner whatsoever any of the obligations of Loan Parties or rights of Lender under the Note and Warrant
Purchase Agreement Documents other than as expressly set forth in this Agreement.

 

[SIGNATURE PAGE FOLLOWS]

 

{M0104990.1 }

130355.01002/11924525v.4

  

54

  

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above written.

 

	
LENDER:

 

DMRJ GROUP LLC

 

 

By:           /s/ David Levy_______________________

Name:           _David Levy________________________

Title:           __________________________________

 

	
BORROWER:

 

IMPLANT SCIENCES CORPORATION

 

 

By:           /s/ Glenn D. Bolduc                                                      

Name:                      Glenn D. Bolduc                                                      

Title:           President                                                      

 

	
GUARANTORS:

 

C ACQUISITION CORP.

 

 

By:           /s/ Glenn D. Bolduc                                                      

Name:                      Glenn D. Bolduc                                                      

Title:           President                                                      

 

ACCUREL SYSTEMS INTERNATIONAL CORPORATION

 

 

By:           /s/ Glenn D. Bolduc                                                      

Name:                      Glenn D. Bolduc                                                      

Title:           President                                                      

 

IMX ACQUISITION CORP.

 

 

By:           /s/ Glenn D. Bolduc                                                      

Name:                      Glenn D. Bolduc                                                      

Title:           President                                                      

 

{M0104990.1 }[SIGNATURE PAGE TO CREDIT AGREEMENT]

S-1

130355.01002/11924525v.4

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