UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of report (Date of earliest event reported)  May 25, 2012  

Precision Aerospace Components, Inc.
(Exact Name of Registrant as Specified in its Charter)
 
Delaware   000-30185   20-4763096
(State or Other Jurisdiction    (Commission    (IRS Employer
of Incorporation)   File Number)   Identification No.)
 
2200 Arthur Kill Road Staten Island, NY
  10309-1202
(Address of Principal Executive Offices)   (Zip Code)
 
Registrant’s telephone number, including area code (718) 356-1500

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

o       Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o       Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o       Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o       Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
ITEM 1.01  ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
 
 
On May 25, 2012, Precision Aerospace Components, Inc. (the “Company”) acquired the assets of Fastener Distribution and Marketing Company, Inc., which included its Aero-Missile Components, Inc. and Creative Assembly Systems, Inc. subsidiaries for $9,286,389.05.  The Company completed the acquisition by entering into an Asset Purchase Agreement (the “Purchase Agreement”), dated as of the 25th day of May, 2012, by and among Fastener Distribution and Marketing Company, Inc., Aero-Missile Components, Inc. . , Creative Assembly Systems, Inc., Precision Aerospace Components, Inc., APACE Acquisition I, Inc., and Apace Acquisition II, Inc., and by entering into appropriate bills of sale, and other agreements to support the transaction. The Company recapitalized its existing debt and paid for the acquisition with a new credit facility consisting of a $2.5 million term loan and a $10 million revolving loan.  The Company established the new credit facility by entering into a Loan and Security Agreement (the “Credit Agreement”) among Precision Aerospace Components, Inc., Freundlich Supply Company, Inc. (“Freundlich”), Tiger-Tight Corp., APACE Acquisition I, Inc. , and Apace Acquisition II, Inc., the lenders from time to time party to the Agreement  and Newstar Business Credit, LLC, as administrative agent, dated as of May 25,2012,  pursuant to which the Lenders: (i) made a term loan in the original principal amount of $2,500,000 to the Company (the “Term Loan”) and (ii) established a revolving credit facility in an aggregate principal amount of up to $10,000,000 in favor of the Company, all as more fully described in the Credit Agreement.

On May 25, 2012, the Company used the proceeds of the Term Loan and an initial $6,346,843.54 advance under the Revolving Loan to (i) fund the acquisition of the assets of the Sellers and other amounts owing pursuant to the Purchase Agreement or in connection with the acquisition of the assets of the Sellers; (ii) pay off the outstanding obligations of Freundlich and Guaranteed by the Company under that certain Line of Credit Letter and Demand Promissory Note, each dated June 9, 2011, as amended, by and among Freundlich the Company, and Israel Discount Bank and Guaranteed by the Company; and (iii) pay certain transaction fees and expenses in connection with the acquisition of the assets and the Loan and Security Agreement.  Borrowings under the revolving loan may also be used to finance capital expenditures and for working capital and other general corporate purposes.

Borrowings under the Credit Agreement bear interest, at the Company’s election, at a rate tied to one of the following rates, in each case plus a specified margin: (i) the prime lending rate, but not less than 3.25%, or (ii) adjusted one-month LIBOR plus 1.5%.  The interest margin for each such type of borrowing varies from 1.50% to 7.60%, depending on the Company’s Fixed Charge Coverage Ratio.

The principal amount of the Term Loan will be due and payable in 24 monthly installments of $104,166.67, beginning on June 1, 2013, subject to acceleration upon an event of default. The outstanding principal amount of any borrowings under the Revolving Loan will be due and payable on May 25, 2016, subject to an earlier maturity date upon an event of default.

The Credit Agreement contains usual and customary covenants for financings of this type, including, among other things: (i) requirements to deliver financial statements, other reports and notices; (ii) restrictions on indebtedness; (iii) restrictions on dividends, distributions and redemptions of equity and repayment of subordinated indebtedness; (iv) restrictions on liens; (v) restrictions on making certain payments; (vi) restrictions on investments; (vii) restrictions on asset dispositions and other fundamental changes; and (viii) restrictions on transactions with affiliates.

The Credit Agreement contains certain financial covenants, including, among other things: (i) a maximum leverage ratio; (ii) a minimum fixed charge coverage ratio; and (iii) a required minimum consolidated adjusted EBITDA.

The obligations of the Company and its subsidiaries under the Credit Agreement are secured by liens on and security interests in all or substantially all assets of the Company and its subsidiaries, including a pledge of 100% of the subsidiaries of the Company.

The foregoing descriptions of the Asset Purchase Agreement, and the Loan and Security Agreement, do not purport to be complete and are subject to, and qualified in their entirety by reference to, the full text of such documents, which are attached as Exhibit 10.1, and Exhibit 10.2 respectively, to this Current Report on Form 8-K and are incorporated herein by reference.
 
 
2
 
 
ITEM 1.02 TERMINATION OF A MATERIAL DEFINITIVE AGREEMENT.
 

On May 25, 2012, the Company paid off the outstanding obligations of Freundlich and Guaranteed by the Company under that certain Line of Credit Letter and Demand Promissory Note, each dated June 9, 2011, as amended, by and among Freundlich the Company, and Israel Discount Bank and Guaranteed by the Company.  Line of Credit Letter and Demand Promissory Note were filed with the Company’s 10Q for the quarter ended June 30, 2011, filed on Aug 15, 2011.
 

ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
 

See the information set forth in Item 1.01 to this Current Report on Form 8-K.
 

ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
 

See the information set forth in Item 1.01 to this Current Report on Form 8-K.
 

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

 
(a)
Financial statements of businesses acquired .

The Company will amend this Current Report on Form 8-K not later than 71 calendar days after the date that this Current Report on Form 8-K to provide the required financial statements.

 
(d)
Exhibits .
 
Exhibit
   
Number
 
Description
     
10.1
 
     
10.2
 
 
 
3
 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
  Precision Aerospace Components, Inc.  
       
Date: May 30, 2012
By:
/s/ Andrew S. Prince  
    Andrew S. Prince  
   
President and Chief Executive Officer
 
 
 
4
 
 
EXHIBIT INDEX
 
Exhibit
Number
 
Description
     
10.1
 
     
10.2
 
 
 
5
 
 

EXHIBIT 10.1

 

 

 

 

ASSET PURCHASE AGREEMENT

 

By and among

 

 

Fastener Distribution and Marketing Company, Inc.,

 

 

Aero-Missile Components, Inc.,

 

 

Creative Assembly Systems, Inc.,

 

 

Precision Aerospace Components, Inc.,

 

 

Apace Acquisition I, Inc.,

 

 

and

 

 

Apace Acquisition II, Inc.

 

 

dated as of

 

 

May 25, 2012

 

 

TABLE OF CONTENTS
 
       
Article I Definitions
    4  
Article II Purchase and Sale
    12  
Section 2.01 Purchase and Sale of Assets.
    12  
Section 2.02 Excluded Assets.
    13  
Section 2.03 Assumed Liabilities.
    14  
Section 2.04 Excluded Liabilities.
    14  
Section 2.05 Aggregate Purchase Price.
    16  
Section 2.06 Intentionally Omitted.
    17  
Section 2.07 Allocation of Aggregate Purchase Price.
    17  
Section 2.09 Third Party Consents.
    17  
Article III Closing
    18  
Section 3.01 Closing.
    18  
Section 3.02 Closing Deliverables.
    18  
Article IV Representations and warranties of Sellers
    20  
Section 4.01 Organization and Qualification of Sellers.
    20  
Section 4.02 Authority of Sellers.
    20  
Section 4.03 No Conflicts; Consents.
    20  
Section 4.04 Financial Statements.
    21  
Section 4.05 Undisclosed Liabilities.
    21  
Section 4.06 Absence of Certain Changes, Events and Conditions.
    21  
Section 4.07 Material Contracts.
    23  
Section 4.08 Government Contracts.
    24  
Section 4.09 Title to Purchased Assets.
    25  
Section 4.10 Condition and Sufficiency of Assets.
    26  
Section 4.11 Real Property
    26  
Section 4.12 Intellectual Property.
    27  
Section 4.13 Inventory.
    27  
Section 4.14 Accounts Receivable.
    27  
Section 4.15 Customers and Suppliers.
    28  
Section 4.16 Insurance.
    28  
Section 4.17 Legal Proceedings; Governmental Orders.
    28  
Section 4.18 Compliance With Laws; Permits.
    28  
Section 4.19 Environmental Matters.
    28  
Section 4.20 Employee Benefit Matters.
    30  
Section 4.21 Employment Matters.
    31  
Section 4.22 Taxes.
    32  
Section 4.23 Brokers.
    32  
Section 4.24 Full Disclosure.
    32  
Article V Representations and warranties of buyer Group
    33  
Section 5.01 Organization of Buyer Group.
    33  
Section 5.02 Authority of Buyer Group.
    33  
Section 5.03 No Conflicts; Consents.
    33  
Section 5.04 Brokers.
    34  
Section 5.05 Legal Proceedings.
    34  
 
 
1
 
 
Section 5.06 Full Disclosure.
    34  
Article VI Covenants
    34  
Section 6.01 Conduct of Business Prior to the Closing.
    34  
Section 6.02 Access to Information.
    35  
Section 6.03 No Solicitation of Other Bids.
    35  
Section 6.04 Notice of Certain Events.
    35  
Section 6.05 Employees and Employee Benefits.
    35  
Section 6.06 Confidentiality.
    36  
Section 6.07 Governmental Approvals and Consents
    36  
Section 6.08 Closing Conditions
    36  
Section 6.09 Public Announcements.
    36  
Section 6.10 Bulk Sales Laws.
    36  
Section 6.11 Receivables.
    37  
Section 6.12 Transfer Taxes.
    37  
Section 6.13 Tax Clearance Certificates.
    37  
Section 6.14 Further Assurances.
    37  
Article VII Conditions to closing
    37  
Section 7.01 Conditions to Obligations of All Parties.
    37  
Section 7.02 Conditions to Obligations of Buyer Group.
    37  
Section 7.03 Conditions to Obligations of Sellers.
    39  
Article VIII Indemnification
    40  
Section 8.01 Survival.
    40  
Section 8.02 Indemnification By Sellers.
    40  
Section 8.03 Indemnification By Buyer Group.
    40  
Section 8.04 Certain Limitations.
    41  
Section 8.05 Indemnification Procedures.
    41  
Section 8.06 Payments.
    42  
Section 8.07 Tax Treatment of Indemnification Payments.
    42  
Section 8.08 Effect of Investigation.
    42  
Section 8.09 Exclusive Remedies.
    42  
Article IX Termination
    4 2  
Section 9.01 Termination.
     43  
Article X Miscellaneous
     44  
Section 10.01 Expenses.
     44  
Section 10.02 Notices.
     44  
Section 10.03 Interpretation.
     44  
Section 10.04 Headings.
    45   
Section 10.05 Severability.
    45   
Section 10.06 Entire Agreement.
    45   
Section 10.07 Successors and Assigns.
    45   
Section 10.08 No Third-party Beneficiaries.
    45   
Section 10.09 Amendment and Modification; Waiver.
    45   
Section 10.10 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
    46   
Section 10.11 Specific Performance.
    46   
Section 10.12 Counterparts.
    46   

 
2
 
 
ASSET PURCHASE AGREEMENT
 
This Asset Purchase Agreement (this “ Agreement ”), dated as of the ___ day of May, 2012, is entered into by and among FASTENER DISTRIBUTION AND MARKETING COMPANY, INC. , a Delaware corporation with an address located at 351 Camer Drive Bensalem, PA 19020 (“ FD&M ”), AERO-MISSILE COMPONENTS, INC. , a Pennsylvania corporation with an address located at 351 Camer Drive Bensalem, PA 19020 (“ Aero ”), CREATIVE ASSEMBLY SYSTEMS, INC. , an Ohio corporation with an address located at 6002 Groveport Road, Groverport, Ohio (“ CAS ,” and together with FD&M and Aero, each a “ Seller ” and, collectively, the “ Sellers ”), PRECISION AEROSPACE COMPONENTS, INC. ,  a Delaware corporation with an address located at 2200 Arthur Kill Road, Staten Island, New York 10309 (“ Buyer Parent ”), APACE ACQUISITION I, INC. , a Delaware corporation with an address located at 2200 Arthur Kill Road, Staten Island, New York 10309 (“ Sub 1 ”), and APACE ACQUISITION II, INC. , a Delaware corporation with an address located at 2200 Arthur Kill Road, Staten Island, New York 10309 (“ Sub 2 ” and, together with “ Sub 1 ” and " Buyer Parent ", the “ Buyer Group ”).
 
RECITALS
 
WHEREAS, the Sellers are engaged (a) in the business of the distribution of fasteners focusing on distribution to the military and aerospace fastener field (“ Business 1 ”); and (b) in the business of distributing proprietary and specialty fasteners focusing on the production segment and primarily serving the heavy truck, automotive, appliance, and material handling industries (“ Business 2 ” and, together with Business 1, collectively, the “ Business ”);
 
WHEREAS, the Business represents all of the businesses currently conducted by the Sellers; and
 
WHEREAS, Sellers desire to sell and assign to the members of the Buyer Group, and Buyer Group desires to purchase and assume from Sellers, substantially all of the Sellers’ assets, and certain specified liabilities, in each case, as more particularly described in this Agreement, including, without limitation, those assets that relate to the Business, subject to the terms and conditions set forth herein;
 
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
 
 
3
 
 
ARTICLE I
Definitions
 
The following terms have the meanings specified or referred to in this Article I :
 
“ Accounts Receivable ” has the meaning set forth in Section 2.01(b) .
 
 “ Action ” means any claim, action, cause of action, demand, lawsuit, arbitration, inquiry, audit, notice of violation, proceeding, litigation, citation, summons, subpoena or investigation of any nature, civil, criminal, administrative, regulatory or otherwise, whether at law or in equity.
 
“ Adjustment Amount ” means: (a) the sum of the Bank Payoff Amount and the Trade Payables Amount; less (b) Six Million Eight Hundred Eight-Two Thousand Three Hundred Sixty-Four Dollars ($6,882,364).
 
“Aero” has the meaning set forth in the preamble.
 
“ Affiliate ” of a Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
 
“ Aggregate Purchase Price ” has the meaning set forth in Section 2.05 .
 
“ Agreement ” has the meaning set forth in the preamble.
 
“ Allocation Schedule ” has the meaning set forth in Section 2.07 .
 
“ Assigned Contracts ” has the meaning set forth in Section 2.01(d) .
 
“ Assignment and Assumption Agreements ” has the meaning set forth in Section 3.02(a)(iii) .
 
“ Assignment and Assumption of Lease ” has the meaning set forth in Section 3.02(a)(v) .
 
“ Assumed Liabilities ” has the meaning set forth in Section 2.03 .
 
“ Audited Financial Statements ” has the meaning set forth in Section 4.04 .
 
“ Balance Sheet ” has the meaning set forth in Section 4.04 .
 
“ Balance Sheet Date ” has the meaning set forth in Section 4.04 .
 
“Bank Payoff Amount” means the amount listed on the payoff statement from PNC Bank, which amount shall: (a) represent all amounts owed to PNC Bank as of the Closing Date; and (b) be an amount sufficient to repay all obligations owed to PNC Bank and satisfy any Encumbrances on the Purchased Assets, in each case, as of the Closing Date.
 
 
4
 
 
“ Benefit Plan ” has the meaning set forth in Section 4.20(a) .
 
“ Bid ” has the meaning set forth in Section 4.08(a) .
 
“ Bills of Sale ” has the meaning set forth in Section 3.02(a)(ii) .
 
“ Books and Records ” has the meaning set forth in Section 2.01(m) .
 
“ Business ” has the meaning set forth in the recitals.
 
“ Business Day ” means any day except Saturday, Sunday or any other day on which commercial banks located in New York are authorized or required by Law to be closed for business.
 
“Business 1” has the meaning set forth in the recitals.
 
“Business 2” has the meaning set forth in the recitals.
 
“ Buyer Group ” has the meaning set forth in the preamble.
 
“ Buyer Group Basket Exclusions ” has the meaning set forth in Section 8.04(a) .
 
“ Buyer Group Closing Certificate ” has the meaning set forth in Section 7.03(h) .
 
“ Buyer Group Indemnitees ” has the meaning set forth in Section 8.02 .
 
“ Buyer Parent ” has the meaning set forth in the preamble.
 
“CAS” has the meaning set forth in the preamble.
 
“ CERCLA ” means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.
 
“ Closing ” has the meaning set forth in Section 3.01 .
 
“ Closing Date ” has the meaning set forth in Section 3.01 .
 
“ Code ” means the Internal Revenue Code of 1986, as amended.
 
“ Contracts ” means all contracts, leases, deeds, mortgages, licenses, instruments, notes, commitments, undertakings, indentures, joint ventures and all other agreements, commitments and legally binding arrangements (including, without limitation, outstanding bids, proposals, and quotations), whether written or oral.
 
 “ Direct Claim ” has the meaning set forth in Section 8.05(c) .
 
 
5
 
 
“ Disclosure Schedules ” means the Disclosure Schedules delivered by Sellers and Buyer Group concurrently with the execution and delivery of this Agreement.
 
 “ Dollars or $ ” means the lawful currency of the United States.
 
“ Encumbrance ” means any charge, claim, community property interest, pledge, condition, equitable interest, lien (statutory or other), option, security interest, mortgage, easement, encroachment, right of way, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership.
 
“ Environmental Claim ” means any Action, Governmental Order, lien, fine, penalty, or, as to each, any settlement or judgment arising therefrom, by or from any Person alleging liability of whatever kind or nature (including liability or responsibility for the costs of enforcement proceedings, investigations, cleanup, governmental response, removal or remediation, natural resources damages, property damages, personal injuries, medical monitoring, penalties, contribution, indemnification and injunctive relief) arising out of, based on or resulting from: (a) the presence, Release of, or exposure to, any Hazardous Materials; or (b) any actual or alleged non-compliance with any Environmental Law or term or condition of any Environmental Permit.
 
“ Environmental Law ” means any applicable Law, and any Governmental Order or binding agreement with any Governmental Authority: (a) relating to pollution (or the cleanup thereof) or the protection of natural resources, endangered or threatened species, human health or safety, or the environment (including ambient air, soil, surface water or groundwater, or subsurface strata); or (b) concerning the presence of, exposure to, or the management, manufacture, use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal or remediation of any Hazardous Materials. The term “Environmental Law” includes, without limitation, the following (including their implementing regulations and any state analogs): the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§ 6901 et seq.; the Federal Water Pollution Control Act of 1972, as amended by the Clean Water Act of 1977, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act of 1976, as amended, 15 U.S.C. §§ 2601 et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq.; the Clean Air Act of 1966, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C. §§ 7401 et seq.; and the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §§ 651 et seq.
 
“ Environmental Notice ” means any written directive, notice of violation or infraction, or notice respecting any Environmental Claim relating to actual or alleged non-compliance with any Environmental Law or any term or condition of any Environmental Permit.
 
 
6
 
 
“ Environmental Permit ” means any Permit, letter, clearance, consent, waiver, closure, exemption, decision or other action required under or issued, granted, given, authorized by or made pursuant to Environmental Law.
 
“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.
 
“ ERISA Affiliate ” means, with respect to any Person, any other Person that, together with such first Person, would be treated as a single employer within the meaning of Section 414(b), (c), (m) or (o) of the Code.
 
“ Escrow Agent ” means the entity designated to serve as escrow agent under the Escrow Agreement.
 
“ Escrow Agreement ” means the Escrow Agreement among Buyer Group, Sellers and the Escrow Agent, to be executed and delivered at the Closing in the form attached hereto as Exhibit A .
 
“ Escrow Amount ” means the sum of Five Hundred Thousand Dollars ($500,000) to be deposited with the Escrow Agent and held in escrow pursuant to the Escrow Agreement, provided that, upon the earlier of the (i) Sellers’ delivery of the Tax Clearance Certificates required pursuant to Section 6.13 or (ii) the eighteen-month anniversary of the Closing Date, the Escrow Agent shall release the sum of Two Hundred Thousand Dollars ($200,000) directly to the Sellers in accordance with terms contained in the Escrow Agreement (except to the extent that the Escrow Agreement requires any such amounts to continue to be held in escrow).
 
“ Excluded Assets ” has the meaning set forth in Section 2.02 .
 
“ Excluded Contracts ” has the meaning set forth in Section 2.02(a) .
 
“ Excluded Liabilities ” has the meaning set forth in Section 2.04 .
 
“FD&M” has the meaning set forth in the preamble.
 
“ Financial Statements ” has the meaning set forth in Section 4.04 .
 
 “ GAAP ” means United States generally accepted accounting principles in effect from time to time.
 
“ Governmental Authority ” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of Law), or any arbitrator, court or tribunal of competent jurisdiction.
 
 
7
 
 
“ Governmental Order ” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.
 
“ Hazardous Materials ” means: (a) any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral or gas, in each case, whether naturally occurring or manmade, that is hazardous, acutely hazardous, toxic, or words of similar import or regulatory effect under Environmental Laws; and (b) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead-containing materials, urea formaldehyde foam insulation and polychlorinated biphenyls.
 
“ Indemnified Party ” has the meaning set forth in Section 8.05 .
 
“ Indemnifying Party ” has the meaning set forth in Section 8.05 .
 
 “ Insurance Policies ” has the meaning set forth in Section 4.16 .
 
“ Intellectual Property ” means all of the following and similar intangible property and related proprietary rights, interests and protections, however arising, pursuant to the Laws of any jurisdiction throughout the world: (a) trademarks, service marks, trade names, fictitious names, name registrations, corporate names used by the Sellers, brand names, logos, trade dress and other proprietary indicia of goods and services, whether registered, unregistered or arising by Law, and all registrations and applications for registration of such trademarks, including intent-to-use applications, and all issuances, extensions and renewals of such registrations and applications; (b) internet domain names, whether or not trademarks, registered in any generic top level domain by any authorized private registrar or Governmental Authority; (c) original works of authorship in any medium of expression, whether or not published, all copyrights (whether registered, unregistered or arising by Law), all registrations and applications for registration of such copyrights, and all issuances, extensions and renewals of such registrations and applications; (d) confidential information, formulas, designs, devices, technology, know-how, research and development, inventions, methods, processes, compositions and other trade secrets, whether or not patentable; and (e) patented and patentable designs and inventions, all design, plant and utility patents, letters patent, utility models, pending patent applications and provisional applications and all issuances, divisions, continuations, continuations-in-part, reissues, extensions, reexaminations and renewals of such patents and applications.
 
“ Intellectual Property Assets ” means all Intellectual Property that is owned by Sellers including, without limitation, all Intellectual Property used in or necessary for the conduct of the Business as currently conducted.
 
“ Intellectual Property Assignments ” has the meaning set forth in Section 3.02(a)(iv) .
 
“ Intellectual Property Licenses ” means all licenses, sublicenses and other agreements by or through which other Persons, including Sellers’ Affiliates, grant any of Sellers the exclusive or non-exclusive rights or interests in or to any Intellectual Property that is used in or necessary for the conduct of the Business as currently conducted.
 
 
8
 
 
“ Intellectual Property Registrations ” means all Intellectual Property Assets that are subject to any issuance, registration, application or other filing by, to or with any Governmental Authority or authorized private registrar in any jurisdiction, including registered trademarks, domain names and copyrights, issued and reissued patents and pending applications for any of the foregoing.
 
“ Interim Balance Sheet ” has the meaning set forth in Section 4.04 .
 
“ Interim Balance Sheet Date ” has the meaning set forth in Section 4.04 .
 
“ Interim Financial Statements ” has the meaning set forth in Section 4.04 .
 
“ Inventory ” has the meaning set forth in Section 2.01(c) .
 
“ Knowledge of the Buyer Group or Buyer Group's Knowledge ” or any other similar knowledge qualification, means the actual knowledge of Andrew Prince.
 
“ Knowledge of Sellers or Sellers’ Knowledge ” or any other similar knowledge qualification, means the actual knowledge of Rich McVaugh, Penny Griffith, Brain Corcoran  and Frank Shields.
 
“ Law ” means any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, other requirement or rule of law of any Governmental Authority.
 
“ Leased Real Property ” has the meaning set forth in Section 4.11(b) .
 
“ Leases ” has the meaning set forth in Section 4.11(b) .
 
“ Liabilities ” means liabilities, obligations or commitments of any nature whatsoever, asserted or unasserted, known or unknown, absolute or contingent, accrued or unaccrued, matured or unmatured or otherwise.
 
“ Losses ” means losses, damages, liabilities, deficiencies, Actions, judgments, interest, awards, penalties, fines, costs or expenses of whatever kind, including reasonable attorneys' fees and the cost of enforcing any right to indemnification hereunder and the cost of pursuing any insurance providers; provided, however , that “Losses” shall not include punitive, special, incidental  or consequential damages, except in the case of fraud or to the extent actually awarded to a Governmental Authority or other third party.
 
“ Material Adverse Effect ” means any event, occurrence, fact, condition or change that is, or could reasonably be expected to become, individually or in the aggregate, materially adverse to (a) the business, results of operations, condition (financial or otherwise) or assets of the Business, taken as a whole, (b) the value of the Purchased Assets, taken as a whole, or (c) the ability of Sellers to consummate the transactions contemplated hereby on a timely basis; provided, however, that “Material Adverse Effect” shall not include any event, occurrence, fact, condition, or change, directly or indirectly, arising out of or attributable to: (i) any changes, conditions or effects in the United States economies or securities or financial markets in general; (ii) changes, conditions or effects that generally affect the industries in which the Business operates; (iii) any change, effect or circumstance resulting from an action required or permitted by this Agreement, except pursuant to Section 4.03 and Section 6.07 ; or (iv) conditions caused by acts of terrorism or war (whether or not declared); provided further, however, that any event, occurrence, fact, condition, or change referred to in clauses (i), (ii) or (iv) immediately above shall be taken into account in determining whether a Material Adverse Effect has occurred or could reasonably be expected to occur to the extent that such event, occurrence, fact, condition, or change has a disproportionate effect on the Business compared to other participants in the industries in which the Business operates.
 
 
9
 
 
“ Material Contracts ” has the meaning set forth in Section 4.07(a) .
 
“ Material Customers ” has the meaning set forth in Section 4.15(a) .
 
“ Material Suppliers ” has the meaning set forth in Section 4.15(b) .
 
“ McVaugh Employment Agreement ” has the meaning set forth in   Section 3.02(a)(vi) .
 
“ Multi-employer Plan ” has the meaning set forth in Section 4.20(c) .
 
“ Permits ” means all permits, licenses, franchises, approvals, authorizations, registrations, certificates, variances and similar rights obtained, or required to be obtained, from Governmental Authorities.
 
“ Permitted Encumbrances ” has the meaning set forth in Section 4.09 .
 
“ Person ” means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.
 
“ Post-Closing Tax Period ” means any taxable period beginning on or after the Closing Date and, with respect to any taxable period beginning before and ending after the Closing Date, the portion of such taxable period beginning after the Closing Date.
 
“ Pre-Closing Tax Period ” means any taxable period ending before the Closing Date and, with respect to any taxable period beginning before and ending after the Closing Date, the portion of such taxable period ending on and including the Closing Date.
 
 “ Purchased Assets ” has the meaning set forth in Section 2.01 .
 
 
10
 
 
“ Qualified Benefit Plan ” has the meaning set forth in Section 4.20(c) .
 
 “ Release ” means any actual or threatened release, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, abandonment, disposing or allowing to escape or migrate into or through the environment (including, without limitation, ambient air (indoor or outdoor), surface water, groundwater, land surface or subsurface strata or within any building, structure, facility or fixture).
 
“ Representative ” means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person.
 
“ Sellers ” has the meaning set forth in the preamble.
 
“ Seller Basket Exclusions ” has the meaning set forth in Section 8.04(b)
 
“ Seller Government Contract ” has the meaning set forth in Section 4.08(a) .
 
“ Seller Government Subcontract ” has the meaning set forth in Section 4.08(a) .
 
“ Seller Indemnitees ” has the meaning set forth in Section 8.03 .
 
“ Sellers’ Closing Certificate ” has the meaning set forth in Section 7.02(i) .
 
“Sub 1” has the meaning set forth in the Preamble.
 
“Sub 2” has the meaning set forth in the Preamble.
 
“ Tangible Personal Property ” has the meaning set forth in Section 2.01(f) .
 
“ Tax Clearance Certificate(s) ” has the meaning set forth in Section 6.13
 
“ Taxes ” means all federal, state, local, foreign and other income, gross receipts, sales, use, production, ad valorem, transfer, documentary, franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, estimated, excise, severance, environmental, stamp, occupation, premium, property (real or personal), real property gains, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties.
 
“ Tax Return ” means any return, declaration, report, claim for refund, information return or statement or other document relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
 
 “ Third Party Claim ” has the meaning set forth in Section 8.05(a) .
 
“ Third Party Expenses ” has the meaning set forth in Section 2.04(a) .
 
 
11
 
 
“ Trade Payables Amount ” has the meaning set forth in Section 2.03(a) .
 
“ Trade Payables Schedule ” has the meaning set forth in Section 2.03(a) .
 
“ Transaction Documents ” means this Agreement, the Escrow Agreement, the Bills of Sale, the Assignment and Assumption Agreements, Intellectual Property Assignments, Assignment and Assumption of Leases, and the other agreements, instruments and documents required to be delivered at the Closing.
 
“ Union ” has the meaning set forth in Section 4.21(b) .
 
“ Unpaid Third Party Expenses Amount ” has the meaning set forth in   Section 2.05 .
 
“ WARN Act ” means the federal Worker Adjustment and Retraining Notification Act of 1988, and similar state, local and foreign laws related to plant closings, relocations, mass layoffs and employment losses.
 
ARTICLE II
Purchase and Sale
 
Section 2.01   Purchase and Sale of Assets. Subject to the terms and conditions set forth herein, at the Closing, Sellers shall sell, assign, transfer, convey and deliver to Buyer Group, and Buyer Group shall purchase from Sellers, free and clear of any Encumbrances other than Permitted Encumbrances, all of Sellers’ right, title and interest in, to and under all of the Sellers’ assets, properties and rights of every kind and nature and in whatever form, whether real, personal or mixed, tangible or intangible (including goodwill), wherever located and whether now existing or hereafter acquired (other than the Excluded Assets) (collectively, the “ Purchased Assets ”), including, without limitation, the following:
 
(a)   cash and cash equivalents;
 
(b)   all accounts or notes receivable held by Sellers, and any security, claim, remedy or other right related to any of the foregoing (“ Accounts Receivable ”);
 
(c)   all inventory, finished goods, raw materials, work in progress, packaging, supplies, parts and other inventories (“ Inventory ”);
 
(d)   all Contracts, including, without limitation all Intellectual Property Licenses and those Contracts set forth in Section 2.01(d)   of the Disclosure Schedules (the “ Assigned Contracts ”);
 
(e)   all Intellectual Property Assets;
 
(f)   all furniture, fixtures, equipment, machinery, tools, vehicles, office equipment, supplies, computers, telephones and other tangible personal property (the “ Tangible Personal Property ”);
 
(g)   all Leased Real Property;
 
 
12
 
 
(h)   all Permits, including Environmental Permits, which are held by any of Sellers and required for the conduct of the Business as currently conducted or for the ownership and use of the Purchased Assets to the extent assignable to Buyer Group, including, without limitation, those listed on Section 4.18(b) and Section 4.19(b) of the Disclosure Schedules;
 
(i)   all rights to any Actions of any nature available to Sellers to the extent related to the Business, the Purchased Assets or the Assumed Liabilities, whether arising by way of counterclaim or otherwise, except for those Actions related to the Excluded Assets;
 
(j)   all prepaid expenses, credits, advance payments, claims, security, refunds, rights of recovery, rights of set-off, rights of recoupment, deposits, charges, sums and fees (including any such item relating to the payment of Taxes);
 
(k)   all of Sellers’ rights under warranties, indemnities and all similar rights against third parties to the extent related to any Purchased Assets;
 
(l)   all insurance benefits, including rights and proceeds, arising from or relating to the Business, the Purchased Assets or the Assumed Liabilities, except for those benefits related to the Excluded Assets;
 
(m)   originals, or where not available, copies, of all books and records, including, but not limited to, books of account, ledgers and general, tax, financial and accounting records, machinery and equipment maintenance files, customer lists, customer purchasing histories, price lists, distribution lists, supplier lists, production data, quality control records and procedures, customer complaints and inquiry files, research and development files, records and data (including all correspondence with any Governmental Authority), sales material and records (including pricing history, total sales, terms and conditions of sale, sales and pricing policies and practices), strategic plans, internal financial statements, marketing and promotional surveys, and research and intellectual property files relating to the Intellectual Property Assets and the Intellectual Property Licenses (“ Books and Records ”);
 
(n)   any Benefit Plans that provide health care coverage to the extent such coverage relates to periods after the Closing; and
 
(o)   all goodwill and the going concern value of the Business.
 
Notwithstanding the foregoing, the transfer of the Purchased Assets pursuant to this Agreement shall not include the assumption of any Liabilities relating to the Purchased Assets unless one of the members of the Buyer Group expressly assumes such Liabilities pursuant to Section 2.03 .
 
Section 2.02   Excluded Assets. Notwithstanding the foregoing, the Purchased Assets shall not include the following assets (collectively, the “ Excluded Assets ”):
 
(a)   those Contracts, if any, that are set forth in Section 2.02 (a)   of the Disclosure Schedules (the “ Excluded Contracts ”);
 
 
13
 
 
(b)   the corporate seals, organizational documents, minute books, stock books, Tax Returns, books of account or other records having to do with the corporate organization of Sellers;
 
(c)   all Benefit Plans (other than any health care plans to the extent such coverage relates to periods after the Closing) and assets attributable thereto;
 
(d)   the assets, properties and rights specifically set forth on Section 2.02(d) of the Disclosure Schedules;
 
(e)   all rights to any Actions of any nature available to Sellers to the extent currently related to the Excluded Assets, whether arising by way of counterclaim or otherwise;
 
(f)   all insurance benefits, including rights and proceeds, arising from or relating to benefits related to the Excluded Assets or Excluded Liabilites;
 
(g)   the rights which accrue or will accrue to Sellers under the Transaction Documents.
 
Section 2.03   Assumed Liabilities. Subject to the terms and conditions set forth herein, the applicable members of the Buyer Group, on a joint and several basis, shall assume and agree to pay, perform and discharge only the following Liabilities of Sellers (collectively, the “ Assumed Liabilities ”), and no other Liabilities:
 
(a)   all trade accounts payable of Sellers to third parties (but not any overage payables) in connection with the Business that remain unpaid, are not more than sixty (60) days from the invoice date as of the Closing Date, and that either are reflected on the Interim Balance Sheet Date or arose in the ordinary course of business consistent with past practice since the Interim Balance Sheet Date, provided that under no circumstances shall such trade payables assumed include debt, loans, or credit facilities of the Seller or the Business, in each case that are owing to financial institutions and further provided that the name of the payee and the amount of such trade payables (such amount, the “ Trade Payables Amount ”), in each case as of the Closing, are listed on Section 2.03(a) of the Disclosure Schedules (the “ Trade Payables Schedule ”);
 
(b)   all Liabilities in respect of the Assigned Contracts but only to the extent that such Liabilities thereunder are required to be performed after the Closing Date, were incurred in the ordinary course of business and do not relate to any failure to perform, improper performance, breach of warranty or other breach, default or violation by Sellers on or prior to the Closing under the Assigned Contracts; and
 
(c)   customer deposits relating to current work in process or the purchase of current inventory as set forth on Schedule 2.03(c) of the Disclosure Schedules.
 
Section 2.04   Excluded Liabilities. Notwithstanding the provisions of Section 2.03 or any other provision in this Agreement to the contrary, no member of the Buyer Group shall assume nor shall any one of them be responsible to pay, perform or discharge any Liabilities of Sellers or any of their Affiliates of any kind or nature whatsoever other than the Assumed Liabilities (the “ Excluded Liabilities ”). Sellers shall, and shall cause each of their Affiliates to, pay and satisfy in due course all Excluded Liabilities which they are obligated to pay and satisfy. Without limiting the generality of the foregoing, the Excluded Liabilities shall include, but not be limited to, the following:
 
 
14
 
 
(a)   any Liabilities of Sellers arising or incurred in connection with the negotiation, preparation, investigation and performance of this Agreement, the other Transaction Documents and the transactions contemplated hereby and thereby, including, without limitation, fees and expenses of counsel, accountants, consultants, advisers and others (collectively, “ Third Party Expenses ”);
 
(b)   any Liability for (i) Taxes of Sellers (or any stockholder or Affiliate of Sellers) or relating to the Business, the Purchased Assets or the Assumed Liabilities for any Pre-Closing Tax Period; (ii) Taxes that arise out of the consummation of the transactions contemplated hereby or that are the responsibility of Sellers pursuant to Section 6.12 ; or (iii) other Taxes of Sellers (or any stockholder or Affiliate of Sellers) of any kind or description (including any Liability for Taxes of Sellers (or any stockholder or Affiliate of Sellers) that becomes a Liability of one of the members of the Buyer Group under any common law doctrine of de facto merger or transferee or successor liability or otherwise by operation of contract or Law);
 
(c)   any Liabilities relating to or arising out of the Excluded Assets;
 
(d)   any Liabilities in respect of any pending Action, or to Sellers’ Knowledge in respect of any threatened Action, in each case arising out of, relating to or otherwise in respect of the operation of the Business or the Purchased Assets to the extent such Action relates to such operation on or prior to the Closing Date;
 
(e)   any product Liability or similar claim for injury to a Person or property which arises out of or is based upon any express or implied representation, warranty, agreement or guaranty made by Sellers, or by reason of the improper performance or malfunctioning of a product, improper design or manufacture, failure to adequately package, label or warn of hazards or other related product defects of any products at any time manufactured or sold or any service performed by Sellers, provided that such claim arises out of or relates to the operation of the Business or the Purchased Assets on or prior to the Closing Date;
 
(f)   any recall, design defect or similar claims of any products manufactured or sold or any service performed by Sellers, provided that such claim arises out of or relates to the operation of the Business or the Purchased Assets on or prior to the Closing Date;
 
(g)   any Liabilities of Sellers arising under or in connection with any Benefit Plan providing benefits to any present or former employee of Sellers, except for any Liabilities relating to periods after the Closing with respect to any Benefit Plans providing health care benefits;
 
(h)   any Liabilities of Sellers for any present or former employees, officers, directors, retirees, independent contractors or consultants of Sellers, including, without limitation, any Liabilities associated with any claims for wages or other benefits, bonuses, accrued vacation, workers' compensation, severance, retention, termination or other payments;
 
 
15
 
 
(i)   any Environmental Claims, or Liabilities under Environmental Laws, to the extent arising out of or relating to facts, circumstances or conditions existing on or prior to the Closing or otherwise to the extent arising out of any actions or omissions of Sellers;
 
(j)   any trade accounts payable of Sellers to third parties not expressly assumed pursuant to Section 2.03(a) ;
 
(k)   any Liabilities to indemnify, reimburse or advance amounts to any present or former officer, director, employee or agent of Sellers (including with respect to any breach of fiduciary obligations by same), except for indemnification of same pursuant to Section 8.03 as Seller Indemnitees;
 
(l)   any Liabilities under the Excluded Contracts;
 
(m)   any Liabilities associated with debt, loans or credit facilities of Sellers and/or the Business owing to financial institutions; and
 
(n)   any Liabilities arising out of, in respect of or in connection with the failure by Sellers or any of their Affiliates to comply with any Law or Governmental Order.
 
Section 2.05   Aggregate Purchase Price. The aggregate purchase price (the “ Aggregate Purchase Price ”) for the Purchased Assets shall be Nine Million Eight Hundred Fourteen Thousand Dollars (9,814,000); provided that , (i) in the event that the Adjustment Amount is greater than zero, the Aggregate Purchase Price shall be increased by the Adjustment Amount and (ii) in the event that the Adjustment Amount is less than zero, the Aggregate Purchase Price shall be decreased by the Adjustment Amount.  The Aggregate Purchase Price shall be paid as follows:
 
(a)   The Buyer Group shall pay on behalf of the Sellers, via wire transfer or other immediately available funds, the Bank Payoff Amount;
 
(b)   The Buyer Group shall, at the Closing, assume the Trade Payables Amount in accordance with the terms and conditions set forth in the Assignment and Assumption Agreements;
 
(c)   The Buyer Group shall pay on behalf of the Sellers, via wire transfer or other immediately available funds, the total Third Party Expenses set forth on Section 2.05 of the Disclosure Schedules (the “ Unpaid Third Party Expenses Amount ”) (which Schedule shall list all Third Party Expenses and shall specifically confirm that no Third Party Expenses have been paid by Sellers prior to the Closing);
 
(d)   The Buyer Group shall deposit the Escrow Amount via wire transfer or other immediately available funds into an account designated by the Escrow Agent, which Escrow Amount shall be held and distributed in accordance with the terms of the Escrow Agreement to satisfy any and all claims made by any members of the Buyer Group or any other Buyer Indemnitee against Sellers pursuant to Article VIII ; and
 
 
16
 
 
(e)   The Buyer Group shall pay the balance of the Aggregate Purchase Price to the Sellers at the Closing, via wire transfer of immediately available funds to an account or to the accounts designated in writing by Sellers to Buyer Group no later than two (2) Business Days prior to the Closing Date.
 
For avoidance of any doubt, the Aggregate Purchase Price shall be paid by the Buyer Group by virtue of the Buyer Group paying, or assuming, as applicable, the amounts set forth in Sections 2.05(a-e) above.
 
Section 2.06   Intentionally Omitted
 
Section 2.07   Allocation of Aggregate Purchase Price. Sellers and Buyer Group agree that the Aggregate Purchase Price and the Assumed Liabilities (plus other relevant items) shall be allocated among the Purchased Assets for all purposes (including Tax and financial accounting) in a manner consistent with the form of allocation schedule prepared by the Buyer Group, which has been approved and accepted by the Sellers and is attached hereto as Exhibit B (the “ Allocation Schedule ”).  The parties hereto agree that the allocation of the Purchase Price is intended to comply with the allocation method required by Section 1060 of the Code.  Within thirty (30) days following the Closing Date, the Buyer Group shall deliver an updated Allocation Schedule, prepared in a manner consistent with Exhibit B .  The Sellers may dispute the updated Allocation Schedule within fifteen (15) days after Buyer Group delivers the updated Allocation Schedule to the Sellers by delivering written notice to the Buyer Group that the Sellers do not agree with the updated Allocation Schedule because it is inconsistent with the form of Allocation Schedule attached as Exhibit B .  If the Sellers do not dispute, in writing, the updated Allocation Schedule within such time period, then the updated Allocation Schedule shall be deemed to be accepted by the Sellers and shall be binding on all parties.  Any dispute by the Sellers as to the correctness of the Allocation Schedule (in accordance with the foregoing dispute procedure) shall be resolved by independent nationally recognized accountants mutually agreeable to the parties.  To the extent the allocation proposed by Seller is closer to the final allocation determined by the independent accountant, the fees of the independent accountant shall be paid 100% by Buyer Group, and to the extent the allocation proposed by Buyer Group is closer to the final allocation determined by the independent accountant, the fees of the independent accountant shall be paid 100% by Sellers.  Sellers shall file all Tax Returns (including amended returns and claims for refund) and information reports in a manner consistent with the Allocation Schedule. Any adjustments to the Aggregate Purchase Price made pursuant to this Agreement shall be allocated in a manner consistent with the Allocation Schedule.
 
Section 2.08   Third Party Consents. To the extent that Sellers’ rights under any Contract or Permit constituting a Purchased Asset, or any other Purchased Asset, may not be assigned to the applicable member of the Buyer Group without the consent of another Person which has not been obtained, this Agreement shall not constitute an agreement to assign the same if an attempted assignment would constitute a breach thereof or be unlawful, and Sellers, at their expense, shall use their reasonable best efforts to obtain any such required consent(s) as promptly as possible. If any such consent shall not be obtained or if any attempted assignment would be ineffective or would impair the applicable member of Buyer Group's rights under the Purchased Asset in question so that the applicable member of Buyer Group would not in effect acquire the benefit of all such rights, Sellers, to the maximum extent permitted by law and the Purchased Asset, shall act after the Closing as Buyer Group's agent in order to obtain for it the benefits thereunder and shall cooperate, to the maximum extent permitted by Law and the Purchased Asset, with Buyer Group in any other reasonable arrangement designed to provide such benefits to Buyer Group. Notwithstanding any provision in this Section 2.08 to the contrary, Buyer Group shall not be deemed to have waived its rights under Section 7.02(d) hereof unless and until Buyer Group either provides written waivers thereof or elects to proceed to consummate the transactions contemplated by this Agreement at Closing.
 
 
17
 
 
ARTICLE III
Closing
 
Section 3.01   Closing. Subject to the terms and conditions of this Agreement, the consummation of the transactions contemplated by this Agreement (the “ Closing ”) shall take place at the offices of LeClairRyan, 1037 Raymond Boulevard, Sixteenth Floor at 10:00 am, Eastern Standard Time, on the second Business Day after all of the conditions to Closing set forth in Article VII are either satisfied or waived (other than conditions which, by their nature, are to be satisfied on the Closing Date) but not earlier than May 24, 2012, or at such other time, date or place as Sellers and Buyer Group may mutually agree upon in writing.  The date on which the Closing is to occur is herein referred to as the “ Closing Date .”  The Closing shall be effective as of 12:00 am on the date of the Closing.
 
Section 3.02   Closing Deliverables.
 
(a)   At the Closing, Sellers shall deliver to Buyer Group the following:
 
(i)   the Escrow Agreement duly executed by Sellers;
 
(ii)   (A) a bill of sale transferring to Sub 1 all Tangible Personal Property, as it relates to Business 1, (B) a bill of sale transferring to Sub 2 all Tangible Personal Property as it relates to Business 2; and (C) one or more other bills of sale transferring all other Purchased Assets that are Tangible Personal Property to Buyer Parent or any other entity designated by Buyer Parent (collectively, the “ Bills of Sale ”), in each case in form and substance satisfactory to Buyer Group and duly executed by Sellers;
 
(iii)   (A) an assignment and assumption agreement assigning to Sub 1 all Purchased Assets (with Sub 1 assuming all Assumed Liabilities) as they relate to Business 1; (B) an assignment and assumption agreement assigning to Sub 2 all Purchased Assets (with Sub 2 assuming all Assumed Liabilities) as they relate to Business 2; and (C) (A) an assignment and assumption agreement assigning to Buyer Parent or any other entity designated by Buyer Parent all other Purchased Assets (with Buyer Parent or its designee assuming all other Assumed Liabilities) (collectively, the “ Assignment and Assumption Agreements ”), in each case in form and substance satisfactory to Buyer Group and duly executed by Sellers;
 
(iv)   assignments in form and substance satisfactory to Buyer Group (the “ Intellectual Property Assignments ”) and duly executed by Sellers, transferring all of Sellers’ right, title and interest in and to the Intellectual Property Assets and the Intellectual Property Licenses, (A) to Sub 1, as it relates to Business 1; (B) to Sub 2, as it relates to Business 2; and (C) to Buyer Parent or to any other entity designated by Buyer Parent as it relates to any other Intellectual Property Assets and any other Intellectual Property Licenses;
 
(v)   with respect to each Lease, an Assignment and Assumption of Lease in form and substance satisfactory to Buyer Parent (each, an “ Assignment and Assumption of Lease ”) and duly executed by Sellers;
 
(vi)   an employment agreement executed by Rich McVaugh, relating to his employment with Buyer Group after the Closing in form and substance acceptable to Buyer Group (the “ McVaugh Employment Agreement ”);
 
(vii)   the Sellers’ Closing Certificate;
 
(viii)   the certificate(s) of the Secretary or Assistant Secretary of Sellers required by Section 7.02(j) ;
 
(ix)   evidence that the Sellers’ domain names have been assigned and transferred to the applicable members of the Buyer Group;
 
(x)   evidence that the Sellers have changed their corporate names to other names that are not confusingly similar, in Buyer Group’s sole and absolute discretion, with the corporate names that the Buyer Group is purchasing as part of the Intellectual Property Assets;
 
(xi)   the Disclosure Schedule required pursuant to Section 2.03(a)   of this Agreement listing the trade payables being assumed as part of the Assumed Liabilities and the amounts owed on such trade payables as of the Closing;
 
 
18
 
 
(xii)   a payoff letter from the Sellers’ lending institution evidencing the Bank Payoff Amount;
 
(xiii)   the Disclosure Schedule required pursuant to Section 2.05 of this Agreement; and
 
(xiv)   such other customary instruments of transfer, assumption, filings or documents, in form and substance reasonably satisfactory to Buyer Group, as may be required to give effect to this Agreement.
 
(b)   At the Closing, Buyer Group shall deliver to Sellers the following:
 
(i)   the Aggregate Purchase Price less the Bank Payoff Amount, the Trade Payables Amount, the Unpaid Third Party Expenses Amount and the Escrow Amount, delivered by wire transfer to an account specified by the Sellers at least three (3) days prior to the Closing Date;
 
(ii)   the Escrow Agreement duly executed by Buyer Group;
 
(iii)   the Assignment and Assumption Agreements duly executed by the applicable members of the Buyer Group;
 
(iv)   with respect to each Lease, an Assignment and Assumption of Lease duly executed by the applicable member of the Buyer Group;
 
(v)   the McVaugh Employment Agreement duly executed by the applicable members of the Buyer Group
 
(vi)   the Buyer Group Closing Certificate;
 
(vii)   the certificate(s) of the Secretary or Assistant Secretary of each member of the Buyer Group required by Section 7.03(h) and Section 7.03(i) .
 
(c)   At the Closing, Buyer Group shall deliver the Escrow Amount to the Escrow Agent pursuant to the Escrow Agreement.
 
(d)   At the Closing, Buyer Group shall pay the Bank Payoff Amount and the Unpaid Third Party Expenses Amount in accordance with Section 2.05 .
 
 
19
 
 
ARTICLE IV
Representations and warranties of Sellers
 
Except as set forth in the Disclosure Schedules (any information disclosed under any subsection number of the Disclosure Schedules shall be deemed to be disclosed and incorporated in any other subsection of the Disclosure Schedules where such disclosure would be reasonably appropriate (whether or not specific cross-references are made)), Sellers, jointly and severally, represent and warrant to Buyer Group that the statements contained in this Article IV are true and correct as of the date hereof.
 
Section 4.01   Organization and Qualification of Sellers. Each Seller is a corporation duly organized, validly existing and in good standing under the Laws of the state of incorporation for such Seller set forth in the preamble to this Agreement and each Seller has full corporate power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on the Business as currently conducted by each such Seller. Section 4.01 of the Disclosure Schedules sets forth each jurisdiction in which each Seller is licensed or qualified to do business, and each Seller is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the ownership of the Purchased Assets or the operation of the Business, as currently conducted and as it relates to such Seller, makes such licensing or qualification necessary, except where such failure to qualify or become licensed would not reasonably be expected to have a Material Adverse Effect.
 
Section 4.02   Authority of Sellers. Each Seller has full corporate power and authority to enter into this Agreement and the other Transaction Documents to which each such Seller is a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by each Seller of this Agreement and any other Transaction Document to which each such Seller is a party, the performance by each Seller of its obligations hereunder and thereunder and the consummation by each Seller of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of each Seller. This Agreement has been duly executed and delivered by each Seller, and (assuming due authorization, execution and delivery by Buyer Group) this Agreement constitutes a legal, valid and binding obligation of each Seller enforceable against each Seller in accordance with its terms, except as the enforceability thereof may be limited by any applicable bankruptcy, reorganization, insolvency or other laws affecting creditors’ rights generally or by general principles of equity. When each other Transaction Document to which each Seller is or will be a party has been duly executed and delivered by the applicable Sellers (assuming due authorization, execution and delivery by each other party (other than the Sellers) thereto), such Transaction Document will constitute a legal and binding obligation of the applicable Sellers enforceable against them in accordance with its terms, except as the enforceability thereof may be limited by any applicable bankruptcy, reorganization, insolvency or other laws affecting creditors’ rights generally or by general principles of equity.
 
Section 4.03   No Conflicts; Consents. The execution, delivery and performance by each Seller of this Agreement and the other Transaction Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (a) conflict with or result in a violation or breach of, or default under, any provision of the certificate of incorporation, by-laws or other organizational documents of each such Seller; (b) conflict with or result in a violation or breach of any provision of any Law or Governmental Order applicable to each such Seller, the Business or the Purchased Assets; (c) except as set forth in Section 4.03 of the Disclosure Schedules and except for non-material Permits, require the consent, notice or other action by any Person under, conflict with, result in a violation or breach of, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under, result in the acceleration of or create in any party the right to accelerate, terminate, modify or cancel any Contract or Permit to which any of Sellers is a party or by which any of Sellers or the Business is bound or to which any of the Purchased Assets are subject (including any Assigned Contract); or (d) result in the creation or imposition of any Encumbrance other than Permitted Encumbrances on the Purchased Assets. No material consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to each Seller in connection with the execution and delivery of this Agreement or any of the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby, except as set forth in Section 4.03 of the Disclosure Schedules.
 
 
20
 
 
Section 4.04   Financial Statements. Complete copies of the audited financial statements consisting of the balance sheet of the Business as at June 30 in each of the years 2009, 2010, and 2011 and the related statements of income and retained earnings, stockholders' equity and cash flow for the years then ended (the “ Audited Financial Statements ”), and unaudited financial statements consisting of the balance sheet of the Business as at April 30, 2012 and the related statements of income and retained earnings, stockholders' equity and cash flow for the eight month period then ended (the “ Interim Financial Statements ” and together with the Audited Financial Statements, the “ Financial Statements ”) are included in the Disclosure Schedules. The Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved, subject, in the case of the Interim Financial Statements, to normal and recurring year-end adjustments (the effect of which will not be materially adverse) and the absence of notes (that, if presented, would not differ materially from those presented in the Audited Financial Statements). The Financial Statements are based on the books and records of the Business, and fairly present in all material respects the financial condition of the Business as of the respective dates they were prepared and the results of the operations of the Business for the periods indicated. The balance sheet of the Business as of June 30, 2011 is referred to herein as the “ Balance Sheet ” and the date thereof as the “ Balance Sheet Date ” and the balance sheet of the Business as of April, 30, 2012 is referred to herein as the “ Interim Balance Sheet ” and the date thereof as the “ Interim Balance Sheet Date .” Each Seller maintains a standard system of accounting for the Business established and administered in accordance with GAAP.
 
Section 4.05   [Intentionally Omitted].
 
Section 4.06   Absence of Certain Changes, Events and Conditions. Except as set forth in Section 4.06 of the Disclosure Schedules, since the Balance Sheet Date, and other than in the ordinary course of business consistent with past practice, there has not been any:
 
(a)   event, occurrence or development that has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;
 
(b)   material change in any method of accounting or accounting practice for the Business, except as required by GAAP or as disclosed in the notes to the Financial Statements;
 
(c)   material change in practices and procedures with respect to collection of Accounts Receivable, establishment of reserves for uncollectible Accounts Receivable, accrual of Accounts Receivable, inventory control, prepayment of expenses, payment of trade accounts payable, accrual of other expenses, deferral of revenue and acceptance of customer deposits;
 
(d)   entry into any Contract that would constitute a Material Contract;
 
(e)   transfer, assignment, sale or other disposition of any of the Purchased Assets shown or reflected in the Balance Sheet, except for the sale of Inventory in the ordinary course of business;
 
(f)   cancellation of any debts or claims or amendment, termination or waiver of any rights constituting Purchased Assets;
 
 
21
 
 
(g)   transfer, assignment or grant of any license or sublicense of any material rights under or with respect to any Intellectual Property Assets or Intellectual Property Licenses;
 
(h)   material damage, destruction or loss, or any material interruption in use, of any Purchased Assets, whether or not covered by insurance;
 
(i)   acceleration, termination, material modification to or cancellation of any Assigned Contract or Permit;
 
(j)   material capital expenditures which would constitute an Assumed Liability;
 
(k)   imposition of any Encumbrance upon any of the Purchased Assets;
 
(l)   (i) grant of any bonuses, whether monetary or otherwise, or increase in any wages, salary, severance, pension or other compensation or benefits in respect of any employees, officers, directors, independent contractors or consultants of the Business, other than as provided for in any written agreements or required by applicable Law, (ii) change in the terms of employment for any employee of the Business or any termination of any employees for which the aggregate costs and expenses exceed $10,000, or (iii) action to accelerate the vesting or payment of any compensation or benefit for any employee, officer, director, consultant or independent contractor of the Business;
 
(m)   adoption, modification or termination of any: (i) employment, severance, retention or other agreement with any current or former employee, officer, director, independent contractor or consultant of the Business, (ii) Benefit Plan, or (iii) collective bargaining or other agreement with a Union, in each case whether written or oral;
 
(n)   any loan to (or forgiveness of any loan to), or entry into any other transaction with, any directors, officers or employees of the Business;
 
(o)   adoption of any plan of merger, consolidation, reorganization, liquidation or dissolution or filing of a petition in bankruptcy under any provisions of federal or state bankruptcy Law or consent to the filing of any bankruptcy petition against it under any similar Law;
 
(p)   purchase, lease or other acquisition of the right to own, use or lease any property or assets in connection with the Business for an amount in excess of $10,000, individually (in the case of a lease, per annum) or $50,000 in the aggregate (in the case of a lease, for the entire term of the lease, not including any option term), except for purchases of Inventory or supplies in the ordinary course of business consistent with past practice;
 
(q)   any Contract to do any of the foregoing, or any action or omission that would result in any of the foregoing.
 
 
22
 
 
Section 4.07   Material Contracts.
 
(a)   Section 4.07(a) of the Disclosure Schedules lists each of the following Contracts (x) by which any of the Purchased Assets are bound or affected or (y) to which each Seller is a party or by which it is bound in connection with the Business or the Purchased Assets, except for any Excluded Contracts (such Contracts, together with all Contracts concerning the occupancy, management or operation of any Leased Real Property (including without limitation, brokerage contracts) listed or otherwise disclosed in Section 4.11(a) of the Disclosure Schedules and all Contracts relating to Intellectual Property set forth in Section 4.12(c) and Section 4.12(e) of the Disclosure Schedules, being “ Material Contracts ”):
 
(i)   all Contracts involving aggregate consideration in excess of $50,000 and which, in each case, cannot be cancelled without penalty or without more than ninety (90) days' notice;
 
(ii)   all Contracts that require one or more of the Sellers to purchase or sell a stated portion of the requirements or outputs of the Business or that contain “take or pay” provisions;
 
(iii)   all Contracts that provide for the indemnification of any Person or the assumption of any Tax, environmental or other Liability of any Person;
 
(iv)   all Contracts that relate to the acquisition or disposition of any business, a material amount of stock or assets of any other Person or any real property (whether by merger, sale of stock, sale of assets or otherwise);
 
(v)   all broker, distributor, dealer, manufacturer's representative, franchise, agency, sales promotion, market research, marketing consulting and advertising Contracts;
 
(vi)   all employment agreements and Contracts with independent contractors or consultants (or similar arrangements) and which are not cancellable without material penalty or without more than ninety (90) days' notice;
 
(vii)   except for Contracts relating to trade receivables, all Contracts relating to indebtedness (including, without limitation, guarantees);
 
(viii)   all Contracts with any Governmental Authority;
 
(ix)   all Contracts that limit or purport to limit the ability of any of the Sellers to compete in any line of business or with any Person or in any geographic area or during any period of time;
 
(x)   all joint venture, partnership or similar Contracts;
 
(xi)   all Contracts for the sale of any of the Purchased Assets or for the grant to any Person of any option, right of first refusal or preferential or similar right to purchase any of the Purchased Assets (except for purchase orders entered into in the ordinary course of the Business as reflected in the books and records of the Sellers);
 
(xii)   all powers of attorney with respect to the Business or any Purchased Asset;
 
(xiii)   all collective bargaining agreements or Contracts with any Union; and
 
(xiv)   all other Contracts (other than the Excluded Contracts) that are material to the Purchased Assets or the operation of the Business and not previously disclosed pursuant to this Section 4.07 .
 
 
23
 
 
(b)   Each Material Contract is valid and binding on the respective Seller (or Sellers, as applicable) in accordance with its terms and is in full force and effect. None of Sellers or, to Sellers’ Knowledge, any other party thereto is in breach of or default under (or is alleged to be in breach of or default under) in any material respect, or has provided or received any notice of any intention to terminate, any Material Contract. To Sellers' Knowledge, no event or circumstance has occurred that, with notice or lapse of time or both, would constitute an event of default under any Material Contract or result in a termination thereof or would cause or permit the acceleration or other changes of any right or obligation or the loss of any benefit thereunder. Complete and correct copies of each Material Contract (including all modifications, amendments and supplements thereto and waivers thereunder) have been made available to Buyer Parent.  There are no material disputes pending or, to the Sellers’ Knowledge threatened in writing, under any Contract included in the Purchased Assets.
 
Section 4.08   Government Contracts.
 
(a)   With respect to each (i) current Contract between Seller, on the one hand, and any Governmental Authority, on the other hand, and (ii) each outstanding bid, quotation or proposal by Seller (each, a “ Bid ”) that if accepted or awarded would reasonably be expected to lead to a Contract between Seller, on the one hand, and any Governmental Authority, on the other hand, including any facilities Contract for the use of government-owned facilities (each such Contract or Bid, a “ Seller Government Contract ”) and each Contract between Seller, on the one hand, and any prime contractor or upper-tier subcontractor, on the other hand, relating to a Contract between such person and any Governmental Authority, and each outstanding Bid that if accepted or awarded could lead to a Contract between Seller, on the one hand, and a prime contractor or upper-tier subcontractor, on the other hand, relating to a Contract between such person and any Governmental Authority (each such Contract or Bid, a “ Seller Government Subcontract ”):
 
(i)   each such Seller Government Contract or Seller Government Subcontract was legally awarded and is binding on the parties thereto, and is in full force and effect except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights generally and by general equitable principles regardless of whether enforcement is sought in a proceeding at law or in equity; provided that for purposes of this Section 4.08(a)(i) , the terms Seller Government Contract and Seller Government Subcontract shall not include any Bids;
 
(ii)   no reasonable basis exists to give rise to (1) a material claim for fraud (as such concept is defined under the state or federal Laws of the United States) in connection with any Seller Government Contract or Seller Government Subcontract or under the United States False Claims Act or the United States Procurement Integrity Act, or (2) a claim under the United States Truth in Negotiations Act;
 
(iii)   since January 1, 2007, neither the United States government nor any prime contractor, subcontractor or other person or entity has notified Seller, in writing, that Seller has, or may have, breached or violated in any material respect any Law, certification, representation, clause, provision or requirement pertaining to such Seller Government Contract or Seller Government Subcontract, and all facts set forth or acknowledged by any representations, claims or certifications submitted by or on behalf of Seller in connection with such Seller Government Contract or Seller Government Subcontract were current, accurate and complete in all material respects on the date of submission;
 
(iv)   since January 1, 2007, Seller has not received any notice of termination for convenience, notice of termination for default, cure notice or show cause notice (or, in the case of Contracts governed by Laws other than the state or federal Laws of the United States, the functional equivalents thereof, if any) pertaining to such Seller Government Contract or Seller Government Subcontract, and Seller is not aware of any basis for any such notice, except any notice that, individually or in the aggregate, is not reasonably likely to be material to the Business;
 
(v)   since January 1, 2007, no cost incurred by Seller pertaining to such Seller Government Contract or Seller Government Subcontract has been questioned or challenged, is the subject of any audit or, to the Knowledge of Sellers, investigation or has been disallowed by any Government Entity, except any investigation, audit or disallowance (or, in the case of Contracts governed by Laws other than the state or federal Laws of the United States, the functional equivalents thereof, if any) that, individually or in the aggregate, is not reasonably likely to be material to the Business
 
(vi)   since January 1, 2007, no material payment due to Seller pertaining to such Seller Government Contract or Seller Government Subcontract has been withheld or set off, and Seller is entitled to all progress or other payments received to date with respect thereto; and
 
 
24
 
 
(vii)   Seller has complied in all material respects with all requirements of such Seller Government Contract or Seller Government Subcontract and any Law relating to the safeguarding of, and access to, classified information (or, in the case of Contracts governed by Laws other than the state or federal Laws of the United States, the functional equivalent thereof, if any).
 
(b)   Neither Seller, nor any of the respective directors, officers, employees, consultants or agents of Seller, is, or within the past three (3) years has been, to the Sellers’ Knowledge (i) under any material administrative, civil or criminal investigation, audit, indictment or information by any Governmental Authority, (ii) the subject of any material audit or investigation by Seller, in each case, with respect to any alleged violation of Law or Contract arising under or relating to any Seller Government Contract or Seller Government Subcontract, or (iii) debarred or suspended, or proposed for debarment or suspension, or received notice of actual or proposed debarment or suspension (or for purposes of this clause (iii), in the case of Contracts governed by Laws other than the state or federal Laws of the United States, the functional equivalents thereof, if any), from participation in the award of any Contract with any Governmental Authority. There exist no facts or circumstances that, to the Sellers’ Knowledge, would warrant the institution of suspension or debarment proceedings or a finding of nonresponsibility or ineligibility with respect to Seller, or any of its respective directors, officers or managers, in any such case, for purposes of doing business with any Governmental Authority.
 
(c)   Since January 1, 2007, Seller has not received written notice of any (i) outstanding material claims (including claims relating to bid or award protest proceedings (or, in the case of Seller Government Contracts or Seller Government Subcontract governed by Laws other than the state or federal Laws of the United States, the functional equivalents thereof, if any)) against Seller, either by any Governmental Authority or by any prime contractor, subcontractor, vendor or other person, arising under or relating to any Seller Government Contract or Seller Government Subcontract, or (ii) outstanding material claims or requests for equitable adjustment (or, in the case of Seller Government Contracts or Seller Government Subcontract governed by Laws other than the state or federal Laws of the United States, the functional equivalent thereof, if any) or disputes (including claims, requests and formal disputes relating to bid or award protest proceedings) between Seller, on the one hand, and the United States government, on the other hand, under the United States Contract Disputes Act, as amended, or any other Law or between Seller, on the one hand, and any prime contractor, subcontractor, vendor or other person, on the other hand, arising under or relating to any Seller Government Contract or Seller Government Subcontract.  Since January 1, 2007, Seller has not received any written adverse or negative past performance evaluations or ratings in connection with any Seller Government Contract, Seller Government Subcontract or other Contract with a Governmental Authority, except any evaluation or rating that, individually or in the aggregate, is not reasonably likely to materially impact the Business. Seller does not have (i) any interest in any pending claim against any Governmental Authority, or (ii) any interest in any pending claim against any prime contractor, subcontractor, vendor or other person in each case arising under or relating to any Seller Government Contract or Seller Government Subcontract.
 
(d)   Seller is not aware of any facts that are reasonably likely to give rise to the revocation of any security clearance of Seller, or any employee of Seller.
 
Section 4.09   Title to Purchased Assets. The Sellers have good and valid title to, or a valid leasehold interest in, all of the Purchased Assets. All such Purchased Assets (including leasehold interests) are free and clear of Encumbrances except for the following (collectively referred to as “ Permitted Encumbrances ”):
 
(a)   those items set forth in Section 4.09 of the Disclosure Schedules;
 
(b)   liens for Taxes not yet due and payable or being contested in good faith by appropriate procedures and for which there are adequate accruals or reserves on the Balance Sheet;
 
(c)   mechanics', carriers', workmen's, repairmen's or other like liens arising or incurred in the ordinary course of business consistent with past practice or amounts that are not delinquent and which are not, individually or in the aggregate, material to the Business or the Purchased Assets;
 
 
25
 
 
(d)   easements, rights of way, zoning ordinances and other similar encumbrances affecting the Leased Real Property which are not, individually or in the aggregate, material to the Business or the Purchased Assets, which do not prohibit or interfere with the current operation of any Leased Real Property and which do not render title to any Leased Real Property unmarketable; or
 
(e)   other imperfections of title or Encumbrances, if any, that individually or in the aggregate, have not had and would not have a Material Adverse Effect.
 
Section 4.10   Condition and Sufficiency of Assets. The buildings, plants, structures, furniture, fixtures, machinery, equipment, vehicles and other items of tangible personal property included in the Purchased Assets are structurally sound, are in good operating condition and repair, and are adequate for the uses to which they are being put, and none of such buildings, plants, structures, furniture, fixtures, machinery, equipment, vehicles and other items of tangible personal property is in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost. The Purchased Assets are sufficient for the continued conduct of the Business after the Closing in substantially the same manner as conducted prior to the Closing.
 
Section 4.11   Real Property
 
(a)   Sellers do not have any ownership interest in fee in any parcel of real property.
 
(b)   Section 4.11(b) of the Disclosure Schedules sets forth each parcel of real property leased by Sellers and used in or necessary for the conduct of the Business as currently conducted (together with all rights, title and interest of Sellers in and to leasehold improvements relating thereto, including, but not limited to, security deposits, reserves or prepaid rents paid in connection therewith, collectively, the “ Leased Real Property ”), and a true and complete list of all leases, subleases, licenses, concessions and other agreements (whether written or oral), including all amendments, extensions renewals, guaranties and other agreements with respect thereto, pursuant to which Sellers hold any Leased Real Property (collectively, the “ Leases ”). Sellers have delivered to Buyer Parent a true and complete copy of each Lease. With respect to each Lease:
 
(i)   such Lease is valid, binding, enforceable and in full force and effect, and Sellers enjoy peaceful and undisturbed possession of the Leased Real Property;
 
(ii)   Sellers are not in breach or default under such Lease (except for any such breach or default which would not be reasonably expected to result in a Material Adverse Effect), and, to Sellers' Knowledge, no event has occurred or circumstance exists which, with the delivery of notice, passage of time or both, would constitute such a breach or default, and Sellers have paid all rent due and payable under such Lease;
 
(iii)   Sellers have not received nor given any written notice of any default or event that with notice or lapse of time, or both, would constitute a default by Sellers under any of the Leases and, to the Knowledge of Sellers, no other party is in default thereof, and no party to any Lease has exercised any termination rights with respect thereto; and
 
(iv)   Sellers have not subleased, assigned or otherwise granted to any Person the right to use or occupy such Leased Real Property or any portion thereof.
 
(c)   Since January 1, 2007, Sellers have not received any written notice of (i) material violations of building codes and/or zoning ordinances or other governmental or regulatory Laws affecting the Leased Real Property, (ii) existing, pending or threatened in writing condemnation proceedings affecting the Leased Real Property, or (iii) existing, pending or threatened in writing zoning, building code or other moratorium proceedings, or similar matters which could reasonably be expected to materially and adversely affect the ability to operate the Leased Real Property as currently operated. Neither the whole nor any material portion of any Leased Real Property has been damaged or destroyed by fire or other casualty.
 
 
26
 
 
Section 4.12   Intellectual Property.
 
(a)   Section 4.12(a) of the Disclosure Schedules lists all (i) Intellectual Property Registrations and (ii) Intellectual Property Assets that are not registered but that are material to the operation of the Business. All required filings and fees related to the Intellectual Property Registrations have been timely filed with and paid to the relevant Governmental Authorities and authorized registrars, and all Intellectual Property Registrations are otherwise in good standing. Sellers have provided Buyer Parent with true and complete copies of file histories, documents, certificates, office actions, correspondence and other materials related to all Intellectual Property Registrations.
 
(b)   Sellers own, exclusively or jointly with other Persons, all right, title and interest in and to the Intellectual Property Assets, free and clear of Encumbrances. None of the Sellers' employees have executed any confidentiality and invention assignment agreements in favor of the Sellers.  Sellers are in full compliance with all legal requirements applicable to the Intellectual Property Assets and Sellers’ ownership and use thereof, except where such non-compliance would not reasonably be expected to result in a Material Adverse Effect.
 
(c)   Section 4.12(c) of the Disclosure Schedules lists all Intellectual Property Licenses. Sellers have provided Buyer Parent with true and complete copies of all such Intellectual Property Licenses. All such Intellectual Property Licenses are valid, binding and enforceable between the applicable Sellers and, to Sellers' Knowledge, the other parties thereto, and Sellers and, to Sellers' Knowledge, such other parties are in full compliance with the terms and conditions of such Intellectual Property Licenses.
 
(d)   The Intellectual Property Assets and, to Sellers' Knowledge the Intellectual Property Licenses, in each case as currently or formerly owned, licensed or used by Sellers, and the conduct of the Business as currently and formerly conducted by Sellers have not, do not, and will not, infringe, violate or misappropriate the Intellectual Property of any Person. Seller has not received any communication, and to Sellers’ Knowledge, no Action has been instituted, settled or to the Sellers’ Knowledge threatened in writing that alleges any such infringement, violation or misappropriation, and none of the Intellectual Property are subject to any outstanding Governmental Order.
 
(e)   Section 4.12(e) of the Disclosure Schedules lists all licenses, sublicenses and other agreements pursuant to which any of the Sellers grants rights or authority to any Person with respect to any Intellectual Property Assets or Intellectual Property Licenses. Sellers have provided Buyer Parent with true and complete copies of all such agreements. All such agreements are valid, binding and enforceable between the applicable Sellers and, to Sellers’ Knowledge, the other parties thereto, and Sellers and, to Sellers’ Knowledge, such other parties are in full compliance with the terms and conditions of such agreements. To Sellers’ Knowledge, no Person has infringed, violated or misappropriated, or is infringing, violating or misappropriating, any Intellectual Property Assets.
 
Section 4.13   Inventory. All Inventory, whether or not reflected in the Balance Sheet, consists of a quality and quantity usable and saleable in the ordinary course of business consistent with past practice, except for obsolete, damaged, defective or slow-moving items that have been written off or written down to fair market value or for which adequate reserves have been established. All Inventory is owned by Sellers free and clear of all Encumbrances, and no Inventory is held on a consignment basis.
 
Section 4.14   Accounts Receivable. The Accounts Receivable reflected on the Interim Balance Sheet and the Accounts Receivable arising after the date thereof (a) have arisen from bona fide transactions entered into by the applicable Sellers involving the sale of goods or the rendering of services in the ordinary course of business consistent with past practice; and (b) to the Sellers’ Knowledge, constitute only valid, undisputed claims of Sellers not subject to claims of set-off or other defenses or counterclaims other than normal cash discounts accrued in the ordinary course of business consistent with past practice.
 
 
27
 
 
Section 4.15   Customers and Suppliers.
 
(a)   Section 4.15(a) of the Disclosure Schedules sets forth with respect to the Business (i) each customer who has paid aggregate consideration to Sellers for goods or services rendered in an amount greater than or equal to $50,000 in either of the two (2) most recent calendar years (collectively, the “ Material Customers ”); and (ii) the amount of consideration paid by each Material Customer during such periods.  Except as set forth in Section 4.15(a) of the Disclosure Schedules, Sellers have not received any notice that any of the Material Customers intends to terminate or materially reduce its relationship with the Business.
 
(b)   Section 4.15(b) of the Disclosure Schedules sets forth with respect to the Business (i) each supplier to whom Sellers have paid consideration for goods or services rendered in an amount greater than or equal to $50,000 in either of the two (2) most recent calendar years (collectively, the “ Material Suppliers ”); and (ii) the amount of purchases from each Material Supplier during such periods.  Except as set forth in Section 4.15(b) of the Disclosure Schedules, Sellers have not received any notice that any of the Material Suppliers intends to terminate or materially reduce its relationship with the Business.
 
Section 4.16   Insurance. Section 4.16 of the Disclosure Schedules sets forth (a) a true and complete list of all current policies or binders of fire, liability, product liability, umbrella liability, real and personal property, workers' compensation, vehicular, fiduciary liability and other casualty and property insurance maintained by Sellers or their Affiliates and relating to the Business, the Purchased Assets or the Assumed Liabilities (collectively, the “ Insurance Policies ”); and (b) with respect to the Business, the Purchased Assets or the Assumed Liabilities, a list of all pending claims and the claims history for Sellers since January 1, 2006.  None of the Sellers nor any of their Affiliates has received any written notice of cancellation of, premium increase with respect to, or alteration of coverage under, any of such Insurance Policies. All premiums due on such Insurance Policies have either been paid or, if not yet due, accrued.  True and complete copies of the Insurance Policies have been made available to Buyer Parent.
 
Section 4.17   Legal Proceedings; Governmental Orders.
 
(a)   Except as set forth in Section 4.17 of the Disclosure Schedules, there are no Actions pending or, to Sellers’ Knowledge, threatened in writing against or by any of Sellers (a) relating to or affecting the Business, the Purchased Assets or the Assumed Liabilities; or (b) that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement.
 
(b)   There are no outstanding Governmental Orders and no unsatisfied judgments, penalties or awards against, relating to or affecting the Business.
 
Section 4.18   Compliance With Laws; Permits.
 
(a)   Each of Sellers is in material compliance with all Laws applicable to the conduct of the Business as currently conducted or the ownership and use of the Purchased Assets.
 
(b)   All material Permits required for Sellers to conduct the Business as currently conducted or for the ownership and use of the Purchased Assets have been obtained by the applicable Sellers and are valid and in full force and effect. All fees and charges with respect to such material Permits as of the date hereof have been paid in full. Section 4.18(b) of the Disclosure Schedules lists all current material Permits issued to Sellers which are related to the conduct of the Business as currently conducted or the ownership and use of the Purchased Assets, including the names of the material Permits and their respective dates of issuance and expiration. To Sellers' Knowledge, no event has occurred that, with or without notice or lapse of time or both, would reasonably be expected to result in the revocation, suspension, lapse or limitation of any material Permit set forth in Section 4.18(b) of the Disclosure Schedules.
 
Section 4.19   Environmental Matters.
 
(a)   The operations of Sellers with respect to the Business and the Purchased Assets are currently and have been in compliance with all Environmental Laws. Seller has not received from any Person, with respect to the Business or the Purchased Assets, any: (i) Environmental Notice or Environmental Claim; or (ii) written request for information pursuant to Environmental Law, which, in each case, either remains pending or unresolved, or is the source of ongoing obligations or requirements as of the Closing Date.
 
 
28
 
 
(b)   Seller has obtained and is in material compliance with all Environmental Permits (each of which is disclosed in Section 4.19(b) of the Disclosure Schedules) necessary for the conduct of the Business as currently conducted or the ownership, lease, operation or use of the Purchased Assets and all such Environmental Permits are in full force and effect and shall be maintained in full force and effect by Seller through the Closing Date in accordance with Environmental Law, and Seller is not aware of any condition, event or circumstance that might prevent or impede, after the Closing Date, the conduct of the Business as currently conducted or the ownership, lease, operation or use of the Purchased Assets. With respect to any such Environmental Permits, Seller has undertaken, or will undertake prior to the Closing Date, all measures necessary to facilitate transferability of the same, and Seller is not aware of any condition, event or circumstance that might prevent or impede the transferability of the same, and has not received any Environmental Notice or written communication regarding any material adverse change in the status or terms and conditions of the same.
 
(c)   None of the Business or the Purchased Assets is listed on, or has been proposed for listing on, the National Priorities List (or CERCLIS) under CERCLA, or any similar state list.
 
(d)   There has been no Release of Hazardous Materials in contravention of Environmental Law with respect to the Business or the Purchased Assets, and Sellers have not received an Environmental Notice that any of the Business or the Purchased Assets (including soils, groundwater, surface water, buildings and other structure located thereon) has been contaminated with any Hazardous Material which could reasonably be expected to result in an Environmental Claim against, or a violation of Environmental Law or term of any Environmental Permit by, Sellers.
 
(e)   Section 4.19(e) of the Disclosure Schedules contains a complete and accurate list of all active or abandoned aboveground or underground storage tanks owned or operated by Sellers in connection with the Business or the Purchased Assets.
 
(f)   Section 4.19(f) of the Disclosure Schedules contains a complete and accurate list of all off-site Hazardous Materials treatment, storage, or disposal facilities or locations used by Sellers and any predecessors in connection with the Business or the Purchased Assets as to which Sellers may retain liability, and none of these facilities or locations has been placed or proposed for placement on the National Priorities List (or CERCLIS) under CERCLA, or any similar state list, and Sellers have not received any Environmental Notice regarding potential liabilities with respect to such off-site Hazardous Materials treatment, storage, or disposal facilities or locations used by any of Sellers.
 
(g)   Seller has provided or otherwise made available to Buyer Parent and listed in Section 4.19(g) of the Disclosure Schedules: (i) any and all environmental reports, studies, audits, records, sampling data, site assessments, risk assessments, economic models and other similar documents with respect to the Business or the Purchased Assets which are in the possession or control of Sellers related to compliance with Environmental Laws, Environmental Claims or an Environmental Notice or the Release of Hazardous Materials; and (ii) any and all material documents concerning planned or anticipated capital expenditures required to reduce, offset, limit or otherwise control pollution and/or emissions, manage waste or otherwise ensure compliance with current or future Environmental Laws (including, without limitation, costs of remediation, pollution control equipment and operational changes).
 
(h)   Sellers are not aware of, as of the Closing Date, any condition, event or circumstance concerning the Release or regulation of Hazardous Materials that might, after the Closing Date, prevent, impede or materially increase the costs associated with the ownership, lease, operation, performance or use of the Business or the Purchased Assets as currently carried out.
 
 
29
 
 
Section 4.20   Employee Benefit Matters.
 
(a)   Section 4.20(a) of the Disclosure Schedules contains a true and complete list of each pension, benefit, retirement, compensation, profit-sharing, deferred compensation, incentive, performance award, phantom equity, stock or stock-based, change in control, retention, severance, vacation, paid time off, fringe-benefit and other similar agreement, plan, policy, program or arrangement (and any amendments thereto), in each case whether or not reduced to writing and whether funded or unfunded, including each “employee benefit plan” within the meaning of Section 3(3) of ERISA, whether or not tax-qualified and whether or not subject to ERISA, which is or has been maintained, sponsored, contributed to, or required to be contributed to by any of Sellers for the benefit of any current or former employee, officer, director, retiree, independent contractor or consultant of the Business or any spouse or dependent of such individual, or under which any of Sellers has or may have any Liability, or with respect to which Buyer Group or any of its Affiliates would reasonably be expected to have any Liability, contingent or otherwise (as listed on Section 4.20(a) of the Disclosure Schedules, each, a “ Benefit Plan ”).
 
(b)   With respect to each Benefit Plan, Sellers have made available to Buyer Parent accurate, current and complete copies of each of the following: (i) where the Benefit Plan has been reduced to writing, the plan document together with all amendments; (ii) where the Benefit Plan has not been reduced to writing, a written summary of all material plan terms; (iii) where applicable, copies of any trust agreements or other funding arrangements, custodial agreements, insurance policies and contracts, administration agreements and similar agreements, and investment management or investment advisory agreements, now in effect or required in the future as a result of the transactions contemplated by this Agreement or otherwise; (iv) copies of any summary plan descriptions, summaries of material modifications, employee handbooks and any other written communications (or a description of any oral communications) relating to any Benefit Plan; (v) in the case of any Benefit Plan that is intended to be qualified under Section 401(a) of the Code, a copy of the most recent determination, opinion or advisory letter from the Internal Revenue Service; (vi) in the case of any Benefit Plan for which a Form 5500 is required to be filed, a copy of the most recently filed Form 5500, with schedules attached; (vii) actuarial valuations and reports related to any Benefit Plans with respect to the most recently completed plan years; and (viii) copies of material notices, letters or other correspondence from the Internal Revenue Service, Department of Labor or Pension Benefit Guaranty Corporation relating to the Benefit Plan.
 
(c)   Each Benefit Plan (other than any multi-employer plan within the meaning of Section 3(37) of ERISA (each a “ Multi-employer Plan ”)) has been established, administered and maintained in accordance with its terms and in compliance with all applicable Laws (including ERISA and the Code). Each Benefit Plan that is intended to be qualified under Section 401(a) of the Code (a “ Qualified Benefit Plan ”) is so qualified and has received a favorable and current determination letter from the Internal Revenue Service, or with respect to a prototype plan, can rely on an opinion letter from the Internal Revenue Service to the prototype plan sponsor, to the effect that such Qualified Benefit Plan is so qualified and that the plan and the trust related thereto are exempt from federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, and nothing has occurred that could reasonably be expected to cause the revocation of such determination letter from the Internal Revenue Service or the unavailability of reliance on such opinion letter from the Internal Revenue Service, as applicable, nor has such revocation or unavailability been threatened in writing. Nothing has occurred with respect to any Benefit Plan that has subjected or could reasonably be expected to subject any of Sellers or, with respect to any period on or after the Closing Date, Buyer Group or any of its Affiliates, to a penalty under Section 502 of ERISA or to tax or penalty under Section 4975 of the Code. All benefits, contributions and premiums relating to each Benefit Plan have been timely paid in accordance with the terms of such Benefit Plan and all applicable Laws and accounting principles, and all benefits accrued under any unfunded Benefit Plan have been paid, accrued or otherwise adequately reserved to the extent required by, and in accordance with GAAP.
 
(d)   None of Sellers nor any of their ERISA Affiliates has (i) incurred or reasonably expects to incur, either directly or indirectly, any material Liability under Title I or Title IV of ERISA or related provisions of the Code or foreign Law relating to employee benefit plans; (ii) failed to timely pay premiums to the Pension Benefit Guaranty Corporation; (iii) withdrawn from any Benefit Plan; or (iv) engaged in any transaction which would give rise to liability under Section 4069 or Section 4212(c) of ERISA.
 
 
30
 
 
(e)   With respect to each Benefit Plan (i() no such plan is a “multiple employer plan” within the meaning of Section 413(c) of the Code or a “multiple employer welfare arrangement” (as defined in Section 3(40) of ERISA); (ii) no Action has been initiated by the Pension Benefit Guaranty Corporation to terminate any such plan or to appoint a trustee for any such plan.
 
(f)   Except as set forth in Section 4.20(f) of the Disclosure Schedules and other than as required under Section 601 et. seq. of ERISA or other applicable Law, no Benefit Plan or other arrangement provides post-termination or retiree welfare benefits to any individual for any reason.
 
(g)   There is no pending or, to Sellers’ Knowledge, threatened Action in writing relating to a Benefit Plan (other than routine claims for benefits), and no Benefit Plan has within the three (3) years prior to the date hereof been the subject of an examination or audit by a Governmental Authority or the subject of an application or filing under, or is a participant in, an amnesty, voluntary compliance, self-correction or similar program sponsored by any Governmental Authority.
 
(h)   There has been no amendment to, announcement by Sellers or any of their Affiliates relating to, or change in employee participation or coverage under, any Benefit Plan or collective bargaining agreement that would increase the annual expense of maintaining such plan above the level of the expense incurred for the most recently completed fiscal year with respect to any director, officer, employee, consultant or independent contractor of the Business, as applicable. Neither Sellers nor any of their Affiliates has any commitment or obligation or has made any representations to any director, officer, employee, consultant or independent contractor of the Business, whether or not legally binding, to adopt, amend or modify any Benefit Plan or any collective bargaining agreement.
 
(i)   Each Benefit Plan that is subject to Section 409A of the Code has been operated in compliance with such section and all applicable regulatory guidance (including, notices, rulings and proposed and final regulations).
 
(j)   Neither the execution of this Agreement nor any of the transactions contemplated by this Agreement will (either alone or upon the occurrence of any additional or subsequent events): (i) entitle any current or former director, officer, employee, independent contractor or consultant of the Business to severance pay or any other payment; (ii) accelerate the time of payment, funding or vesting, or increase the amount of compensation due to any such individual; (iii) increase the amount payable under or result in any other material obligation pursuant to any Benefit Plan; or (iv) result in “excess parachute payments” within the meaning of Section 280G(b) of the Code.
 
Section 4.21   Employment Matters.
 
(a)   Section 4.21(a) of the Disclosure Schedules contains a list of all persons who are employees, independent contractors or consultants of the Business as of the date hereof, and sets forth for each such individual the following: (i) name; (ii) title or position (including whether full or part time); (iii) hire date; (iv) current annual base compensation rate; (v) commission, bonus or other incentive-based compensation; and (vi) a description of the fringe benefits provided to each such individual as of the date hereof. Except as set forth in Section 4.21(a) of the Disclosure Schedules, as of the date hereof, all compensation, including wages, commissions and bonuses payable to employees, independent contractors or consultants of the Business for services performed on or prior to the date hereof have been paid in full and there are no outstanding agreements, understandings or commitments of Sellers with respect to any compensation, commissions or bonuses.
 
(b)   None of Sellers is, nor have any of them been, for the past five (5) years, a party to, bound by, or negotiating any collective bargaining agreement or other Contract with a union, works council or labor organization (collectively, “ Union ”), and there is not, and has not been for the past five (5) years, any Union representing or purporting to represent any employee of any of Sellers, and, to Sellers’ Knowledge, no Union or group of employees is seeking or has sought to organize employees for the purpose of collective bargaining. To Sellers' Knowledge, there has never been, nor has there been any threat of, any strike, slowdown, work stoppage, lockout, concerted refusal to work overtime or other similar labor disruption or dispute affecting Sellers or any employees of the Business. None of Sellers has any duty to bargain with any Union.
 
(c)   Each of the Sellers is and has been in compliance in all material respects with all applicable Laws pertaining to employment and employment practices to the extent they relate to employees of the Business, including all Laws relating to labor relations, equal employment opportunities, fair employment practices, employment discrimination, harassment, retaliation, reasonable accommodation, disability rights or benefits, immigration, wages, hours, overtime compensation, child labor, hiring, promotion and termination of employees, working conditions, meal and break periods, privacy, health and safety, workers' compensation, leaves of absence and unemployment insurance. All individuals characterized and treated by Sellers as consultants or independent contractors of the Business are properly treated as independent contractors under all applicable Laws. All employees of the Business classified as exempt under the Fair Labor Standards Act and state and local wage and hour laws are properly classified. There are no Actions against any of the Sellers pending, or to the Sellers’ Knowledge, threatened in writing to be brought or filed, by or with any Governmental Authority or arbitrator in connection with the employment of any current or former applicant, employee, consultant, or independent contractor of the Business, including, without limitation, any claim relating to unfair labor practices, employment discrimination, harassment, retaliation, equal pay, wages and hours or any other employment related matter arising under applicable Laws.
 
 
31
 
 
 
Section 4.22   Taxes.
 
(a)   All Tax Returns required to be filed by Sellers for any Pre-Closing Tax Period have been, or will be, timely filed. Such Tax Returns are, or will be, true, complete and correct in all material respects. All Taxes due and owing by Sellers (whether or not shown on any Tax Return) have been, or will be, timely paid (except for any Taxes subject to a good faith contest with any taxing authority provided that appropriate reserves are maintained by the Sellers for any such Taxes).
 
(b)   Each Seller has withheld and paid each Tax required to have been withheld and paid in connection with amounts paid or owing to any Employee, independent contractor, creditor, customer, shareholder or other party, and complied with all information reporting and backup withholding provisions of applicable Law.
 
(c)   No extensions or waivers of statutes of limitations have been given or requested with respect to any Taxes of any of Sellers.
 
(d)   All deficiencies asserted, or assessments made, against Sellers as a result of any examinations by any taxing authority have been fully paid.
 
(e)   Sellers are not a party to any Action by any taxing authority. There are no pending or, to Sellers' Knowledge, threatened Actions in writing by any taxing authority.
 
(f)   There are no Encumbrances for Taxes upon any of the Purchased Assets nor, to Sellers’ Knowledge, is any taxing authority in the process of imposing any Encumbrances for Taxes on any of the Purchased Assets (other than for current Taxes not yet due and payable).
 
(g)   None of Sellers is a “foreign person” as that term is used in Treasury Regulations Section 1.1445-2.
 
(h)   None of Sellers is, and none of Sellers has been, a party to, or a promoter of, a “reportable transaction” within the meaning of Section 6707A(c)(1) of the Code and Treasury Regulations Section 1.6011 4(b).
 
Section 4.23   Brokers. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement or any other Transaction Document based upon arrangements made by or on behalf of Sellers.
 
Section 4.24   Full Disclosure. No representation or warranty by any of Sellers in this Agreement and no statement contained in the Disclosure Schedules to this Agreement or any certificate or other document furnished or to be furnished to any member of the Buyer Group pursuant to this Agreement contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances in which they are made, not misleading.
 
 
32
 
 
ARTICLE V
Representations and warranties of buyer Group
 
Except as set forth in the Disclosure Schedules (any information disclosed under any subsection number of the Disclosure Schedules shall be deemed to be disclosed and incorporated in any other subsection of the Disclosure Schedules where such disclosure would be reasonably appropriate (whether or not specific cross-references are made)), Buyer Group, jointly and severally, represents and warrants to Sellers that the statements contained in this Article V are true and correct as of the date hereof.
 
Section 5.01   Organization of Buyer Group. Each member of the Buyer Group is a corporation duly organized, validly existing and in good standing under the Laws of the state of Delaware and each member of the Buyer Group has full corporate power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on its business as currently conducted by each such member of the Buyer Group.
 
Section 5.02   Authority of Buyer Group. Each member of the Buyer Group has full corporate power and authority to enter into this Agreement and the other Transaction Documents to which each such member of the Buyer Group is a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by each member of the Buyer Group of this Agreement and any other Transaction Document to which such member of the Buyer Group is a party, the performance by such member of the Buyer Group of its obligations hereunder and thereunder and the consummation by such member of the Buyer Group of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of such member of the Buyer Group. This Agreement has been duly executed and delivered by each member of the Buyer Group, and (assuming due authorization, execution and delivery by Sellers) this Agreement constitutes a legal, valid and binding obligation of each member of the Buyer Group enforceable against each member of the Buyer Group in accordance with its terms, except as the enforceability thereof may be limited by any applicable bankruptcy, reorganization, insolvency or other laws affecting creditors’ rights generally or by general principles of equity. When each other Transaction Document to which each member of the Buyer Group is or will be a party has been duly executed and delivered by the applicable members of the Buyer Group (assuming due authorization, execution and delivery by each other party (other than the members of the Buyer Group) thereto), such Transaction Document will constitute a legal and binding obligation of the applicable members of the Buyer Group enforceable against it or them in accordance with its terms, except as the enforceability thereof may be limited by any applicable bankruptcy, reorganization, insolvency or other laws affecting creditors’ rights generally or by general principles of equity.
 
Section 5.03   No Conflicts; Consents. The execution, delivery and performance by each member of the Buyer Group of this Agreement and the other Transaction Documents to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (a) conflict with or result in a violation or breach of, or default under, any provision of the certificate of incorporation, by-laws or other organizational documents of any member of the Buyer Group; (b) conflict with or result in a violation or breach of any provision of any Law or Governmental Order applicable to any member of the Buyer Group; or (c) require the consent, notice or other action by any Person under any Contract to which any member of the Buyer Group is a party (except for such consents, notices or other actions which, in the aggregate, would not have a material adverse effect on the Buyer Group’s ability to perform its obligations under this Agreement and the other Transactions Documents to which any member of the Buyer Group is a party). No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to any member of the Buyer Group in connection with the execution and delivery of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby except for such consents, approvals, Permits, Governmental Orders, declarations, filings or notices which, in the aggregate, would not have a material adverse effect on the Buyer Group’s ability to perform its obligations under this Agreement and the other Transactions Documents to which any member of the Buyer Group is a party.
 
 
33
 
 
Section 5.04   Brokers. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement or any other Transaction Document based upon arrangements made by or on behalf of any member of the Buyer Group.
 
Section 5.05   Legal Proceedings. There are no Actions pending or, to Buyer Group's Knowledge, threatened in writing against or by any member of the Buyer Group or any Affiliate of any member of the Buyer Group that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement.
 
Section 5.06   Full Disclosure. No representation or warranty by any of Buyer Group in this Agreement and no statement applicable to Buyer Group contained in the Disclosure Schedules to this Agreement or any certificate or other document furnished or to be furnished to Sellers pursuant to this Agreement contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances in which they are made, not misleading.
 
ARTICLE VI
Covenants
 
Section 6.01   Conduct of Business Prior to the Closing. From the date hereof until the Closing, except as otherwise provided in this Agreement or consented to in writing by Buyer Group (which consent shall not be unreasonably withheld or delayed), Sellers shall (x) conduct the Business in the ordinary course of business consistent with past practice; and (y) use reasonable best efforts to maintain and preserve intact its current Business organization, operations and franchise and to preserve the rights, franchises, goodwill and relationships of its employees, customers, lenders, suppliers, regulators and others having relationships with the Business. Without limiting the foregoing, from the date hereof until the Closing Date, each of Sellers shall:
 
(a)   preserve and maintain all Permits required for the conduct of the Business as currently conducted or the ownership and use of the Purchased Assets;
 
(b)   pay the debts, Taxes and other obligations of the Business when due;
 
(c)   continue to collect Accounts Receivable in a manner consistent with past practice, without discounting such Accounts Receivable;
 
(d)   maintain the properties and assets included in the Purchased Assets in the same condition as they were on the date of this Agreement, subject to reasonable wear and tear;
 
(e)   continue in full force and effect without modification all Insurance Policies, except as required by applicable Law;
 
(f)   defend and protect the properties and assets included in the Purchased Assets from infringement or usurpation;
 
(g)   perform all of its obligations under all Assigned Contracts;
 
(h)   maintain the Books and Records in accordance with past practice;
 
(i)   comply in all material respects with all Laws applicable to the conduct of the Business or the ownership and use of the Purchased Assets; and
 
 
34
 
 
(j)   not take or permit any action that would cause any of the changes, events or conditions described in Section 4.06 to occur.
 
Section 6.02   Access to Information. From the date hereof until the Closing, Sellers shall (a) afford Buyer Group and its Representatives full and free access to and the right to inspect all of the Leased Real Property, properties, assets, premises, Books and Records, Contracts and other documents and data related to the Business upon reasonable advance notice to Sellers; (b) furnish Buyer Group and its Representatives with such financial, operating and other data and information related to the Business as Buyer Group or any of its Representatives may reasonably request; and (c) instruct the Representatives of Sellers to cooperate with Buyer Group in its investigation of the Business.  Any investigation pursuant to this Section 6.02 shall be conducted in such manner as not to interfere unreasonably with the conduct of the Business or any other businesses of Sellers. No investigation by Buyer Group or other information received by Buyer Group shall operate as a waiver or otherwise affect any representation, warranty or agreement given or made by Sellers in this Agreement.
 
Section 6.03   Intentionally Omitted.
 
Section 6.04   Notice of Certain Events.
 
(a)   From the date hereof until the Closing, Sellers shall promptly notify Buyer Group in writing of:
 
(i)   any fact, circumstance, event or action the existence, occurrence or taking of which (A) has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (B) has resulted in, or could reasonably be expected to result in, any representation or warranty made by any of Sellers hereunder not being true and correct or (C) has resulted in, or could reasonably be expected to result in, the failure of any of the conditions set forth in Section 7.02 to be satisfied;
 
(ii)   any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement;
 
(iii)   any notice or other communication from any Governmental Authority in connection with the transactions contemplated by this Agreement; and
 
(iv)   any Actions commenced or, to Sellers’ Knowledge, threatened in writing against, relating to or involving or otherwise affecting the Business, the Purchased Assets or the Assumed Liabilities that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 4.17 or that relates to the consummation of the transactions contemplated by this Agreement.
 
(b)   Buyer Group's receipt of information pursuant to this Section 6.04 shall not operate as a waiver or otherwise affect any representation, warranty or agreement given or made by Sellers in this Agreement (including Section 8.02 and Section 9.01(b) ) and shall not be deemed to amend or supplement the Disclosure Schedules.
 
Section 6.05   Employees and Employee Benefits.
 
(a)   Upon the Closing Date, Sellers shall terminate those employees of the Business that Buyer Group gives notice to Sellers of its intent to hire at Closing, so that, at Buyer Group's sole discretion, the members of the Buyer Group may offer employment, on an “at will” basis, to any or all of such employees.
 
(b)   Sellers shall be solely responsible, and none of the members of the Buyer Group shall have any obligations whatsoever for, any compensation or other amounts payable to any current or former employee, officer, director, independent contractor or consultant of the Business, including, without limitation, hourly pay, commission, bonus, salary, accrued vacation, fringe, pension or profit sharing benefits or severance pay for any period relating to the service with any of Sellers at any time on or prior to the Closing Date.
 
 
35
 
 
(c)   Sellers shall remain solely responsible for the satisfaction of all claims for medical, dental, life insurance, health accident or disability benefits brought by or in respect of current or former employees, officers, directors, independent contractors or consultants of the Business or the spouses, dependents or beneficiaries thereof, which claims relate to events occurring on or prior to the Closing Date. Sellers also shall remain solely responsible for all worker's compensation claims of any current or former employees, officers, directors, independent contractors or consultants of the Business which relate to events occurring on or prior to the Closing Date.  Sellers shall pay, or cause to be paid, all such amounts to the appropriate person as and when due.
 
(d)   Each employee of the Business who becomes employed by a member of the Buyer Group in connection with the transaction shall be given service credit for the purpose of eligibility under the group health plan and eligibility only under the defined contribution retirement plan for his or her period of service with the Sellers prior to the Closing Date; provided, however , that (i) such credit shall be given pursuant to payroll or plan records, at the election of Buyer Group, in its sole and absolute discretion; and (ii) such service crediting shall be permitted under, and consistent with, Buyer Group's defined contribution retirement plan.
 
Section 6.06   Confidentiality. From and after the Closing, Sellers shall, and shall cause their Affiliates to, hold, and shall use its reasonable best efforts to cause its or their respective Representatives to hold, in confidence any and all information, whether written or oral, concerning the Business, except to the extent that Sellers can show that such information (a) is generally available to and known by the public through no fault of Sellers, any of their Affiliates or their respective Representatives; or (b) is lawfully acquired by Sellers, any of their Affiliates or their respective Representatives from and after the Closing from sources which are not prohibited from disclosing such information by a legal, contractual or fiduciary obligation. If Sellers or any of their Affiliates or their respective Representatives are compelled to disclose any information by judicial or administrative process or by other requirements of Law, Sellers shall promptly notify Buyer Group in writing and shall disclose only that portion of such information which Sellers are advised by its counsel in writing is legally required to be disclosed, provided that Sellers shall use reasonable best efforts to obtain an appropriate protective order or other reasonable assurance that confidential treatment will be accorded such information.
 
Section 6.07   Governmental Approvals and Consents
 
(a)   Sellers and Buyer Group shall use reasonable best efforts to give all notices to, and obtain all consents from, (i) all third parties that are described in Section 4.03 of the Disclosure Schedules; and (ii) all Governmental Authorities that are described in Section 6.07 of the Disclosure Schedules.
 
Section 6.08   Closing Conditions From the date hereof until the Closing, each party hereto shall use reasonable best efforts to take such actions as are necessary to expeditiously satisfy the closing conditions set forth in Article VII hereof.
 
Section 6.09   Public Announcements. Unless otherwise required by applicable Law (based upon the reasonable advice of counsel), no party to this Agreement shall make any public announcements in respect of this Agreement or the transactions contemplated hereby or otherwise communicate with any news media without the prior written consent of the other party (which consent shall not be unreasonably withheld or delayed), and the parties shall cooperate as to the timing and contents of any such announcement.
 
Section 6.10   Bulk Sales Laws. The parties hereby waive compliance with the provisions of any bulk sales, bulk transfer or similar Laws of any jurisdiction that may otherwise be applicable with respect to the sale of any or all of the Purchased Assets to Buyer Group; it being understood that any Liabilities arising out of the failure of Sellers to comply with the requirements and provisions of any bulk sales, bulk transfer or similar Laws of any jurisdiction which would not otherwise constitute Assumed Liabilities shall be treated as Excluded Liabilities.
 
 
36
 
 
Section 6.11   Receivables. From and after the Closing, if Sellers or any of their Affiliates receives or collects any funds relating to any Accounts Receivable or any other Purchased Asset, Sellers or their Affiliates, as applicable, shall remit such funds to Buyer Group within five (5) Business Days after its receipt thereof (provided that Sellers shall not have any obligation to pursue the collection of any Accounts Receivable or other similar accounts). From and after the Closing, if Buyer Group or its Affiliates receive or collect any funds relating to any Excluded Asset, Buyer Group or its Affiliates shall remit any such funds to Sellers within five (5) Business Days after its receipt thereof.
 
Section 6.12   Transfer Taxes. All transfer, documentary, sales, use, stamp, registration, value added and other such Taxes and fees (including any penalties and interest) incurred in connection with this Agreement and the other Transaction Documents (including any real property transfer Tax and any other similar Tax) shall be borne and paid by the party responsible for such Taxes and fees under applicable Laws. Each Party shall, at their own expense, timely file any Tax Return or other document with respect to such Taxes or fees (and the other party shall cooperate with respect thereto as necessary).
 
Section 6.13   Tax Clearance Certificates. Sellers shall notify all of the taxing authorities in the jurisdictions that impose Taxes on Sellers or where Sellers have a duty to file Tax Returns of the transactions contemplated by this Agreement in the form and manner required by such taxing authorities, if the failure to make such notifications or receive any available tax clearance certificate (each a “ Tax Clearance Certificate ” and collectively, the “ Tax Clearance Certificates ”) could subject any member of the Buyer Group to any Taxes of Sellers.  If any taxing authority asserts that any of Sellers is liable for any Tax, Sellers shall promptly pay any and all such amounts and shall provide evidence to the Buyer Group that such liabilities have been paid in full or otherwise satisfied.
 
Section 6.14   Further Assurances. Following the Closing, each of the parties hereto shall, and shall cause their respective Affiliates to, execute and deliver such additional documents, instruments, conveyances and assurances and take such further actions as may be reasonably required to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement and the other Transaction Documents.
 
ARTICLE VII
Conditions to closing
 
Section 7.01   Conditions to Obligations of All Parties. The obligations of each party to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions:
 
(a)   No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Governmental Order which is in effect and has the effect of making the transactions contemplated by this Agreement illegal, otherwise restraining or prohibiting consummation of such transactions or causing any of the transactions contemplated hereunder to be rescinded following completion thereof.
 
(b)   Sellers shall have received all consents, authorizations, orders and approvals from the Governmental Authorities referred to in Section 4.03 , in form and substance reasonably satisfactory to Buyer Group, and no such consent, authorization, order and approval shall have been revoked.
 
Section 7.02   Conditions to Obligations of Buyer Group. The obligations of Buyer Group to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or Buyer Group's waiver, at or prior to the Closing, of each of the following conditions:
 
(a)   Other than the representations and warranties of Sellers contained in Section 4.01 , Section 4.02 , and Section 4.23 , the representations and warranties of Sellers contained in this Agreement, the other Transaction Documents and any certificate or other writing delivered pursuant hereto shall be true and correct in all respects (in the case of any representation or warranty qualified by materiality or Material Adverse Effect) or in all material respects (in the case of any representation or warranty not qualified by materiality or Material Adverse Effect) on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects). The representations and warranties of Sellers contained in Section 4.01 , Section 4.02 , and Section 4.23 shall be true and correct in all respects on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects).
 
 
37
 
 
(b)   Sellers shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement and each of the other Transaction Documents to be performed or complied with by it prior to or on the Closing Date; provided, that , with respect to agreements, covenants and conditions that are qualified by materiality, Sellers shall have performed such agreements, covenants and conditions, as so qualified, in all respects.
 
(c)   No Action shall have been commenced against Buyer Group or Sellers, which would prevent the Closing. No injunction or restraining order shall have been issued by any Governmental Authority, and be in effect, which restrains or prohibits any transaction contemplated hereby.
 
(d)   All approvals, consents and waivers that are listed on Section 7.02 (d) of the Disclosure Schedules shall have been received, and executed counterparts thereof shall have been delivered to Buyer Group at or prior to the Closing.
 
(e)   From the date of this Agreement, there shall not have occurred any Material Adverse Effect, nor shall any event or events have occurred that, individually or in the aggregate, with or without the lapse of time, could reasonably be expected to result in a Material Adverse Effect.
 
(f)   Sellers shall have delivered to Buyer Group duly executed counterparts to the Transaction Documents (other than this Agreement) and such other documents and deliveries set forth in Section 3.02(a) .
 
(g)   Buyer Group shall have received all Permits that are necessary for it to conduct the Business as conducted by Sellers as of the Closing Date.
 
(h)   All Encumbrances relating to the Purchased Assets shall have been released in full, other than Permitted Encumbrances, and Sellers shall have delivered to Buyer Group written evidence, in form satisfactory to Buyer Group in its sole discretion, of the release of such Encumbrances.
 
(i)   Buyer Group shall have received a certificate, dated the Closing Date and signed by a duly authorized officer of each of Sellers, that each of the conditions set forth in Section 7.02(a) and Section 7.02(b) have been satisfied (the “ Sellers’ Closing Certificate ”).
 
(j)   Buyer Group shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of each of Sellers certifying: (i) that attached thereto are true and complete copies of all resolutions adopted by the board of directors and shareholders of Sellers authorizing the execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby and thereby; and (ii) the names and signatures of the officers of Sellers authorized to sign this Agreement, the Transaction Documents and the other documents to be delivered hereunder and thereunder.
 
(k)   Sellers shall have delivered to Buyer Group evidence that all outstanding payroll obligations of Sellers have been paid and satisfied as of the Closing.
 
(l)   Sellers shall have delivered to Buyer Group evidence that all accrued employee personal time off of Sellers’ employees (e.g. sick days, vacation days, paid time off days, and the like) have been utilized as of the Closing.
 
(m)   Sellers shall have delivered to Buyer Group audited financials for the Sellers for the fiscal year ending June 30, 2011.
 
(n)   Sellers shall have delivered to Buyer Group such other documents or instruments as Buyer Group reasonably requests and are reasonably necessary to consummate the transactions contemplated by this Agreement.
 
 
38
 
 
 
Section 7.03   Conditions to Obligations of Sellers. The obligations of Sellers to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or Sellers’ waiver, at or prior to the Closing, of each of the following conditions:
 
(a)   Other than the representations and warranties of  Group contained in Section 5.01 , Section 5.02 and Section 5.04 , the representations and warranties of Buyer Group contained in this Agreement, the other Transaction Documents and any certificate or other writing delivered pursuant hereto shall be true and correct in all respects (in the case of any representation or warranty qualified by materiality or Material Adverse Effect) or in all material respects (in the case of any representation or warranty not qualified by materiality or Material Adverse Effect) on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects). The representations and warranties of Buyer Group contained in Section 5.01 , Section 5.02 and Section 5.04 shall be true and correct in all respects on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date.
 
(b)   Buyer Group shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement and each of the other Transaction Documents to be performed or complied with by it prior to or on the Closing Date; provided, that , with respect to agreements, covenants and conditions that are qualified by materiality, Buyer Group shall have performed such agreements, covenants and conditions, as so qualified, in all respects.
 
(c)   No injunction or restraining order shall have been issued by any Governmental Authority, and be in effect, which restrains or prohibits any material transaction contemplated hereby.
 
(d)   Buyer Group shall have delivered to Sellers duly executed counterparts to the Transaction Documents (other than this Agreement) and such other documents and deliveries set forth in Section 3.02(b) .
 
(e)   Buyer Group shall have delivered the Escrow Amount to the Escrow Agent pursuant to Section 3.02(c) .
 
(f)   Buyer Group shall have delivered to the Sellers the Purchase Price pursuant to Section 2.05 .
 
(g)   Buyer Group shall have delivered to the applicable lending institutions the Bank Payoff Amount pursuant to Section 2.05
 
(h)   Sellers shall have received a certificate, dated the Closing Date and signed by a duly authorized officer of each member of Buyer Group, that each of the conditions set forth in Section 7.03(a) and Section 7.03(b) have been satisfied (the “ Buyer Group Closing Certificate ”).
 
(i)   Sellers shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of each member of Buyer Group certifying: (i) that attached thereto are true and complete copies of all resolutions adopted by the board of directors of Buyer Group authorizing the execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby and thereby; and (ii) the names and signatures of the officers of Buyer Group authorized to sign this Agreement, the Transaction Documents and the other documents to be delivered hereunder and thereunder.
 
(j)   Buyer Group shall have delivered to Sellers such other documents or instruments as Sellers reasonably request and are reasonably necessary to consummate the transactions contemplated by this Agreement.
 
 
39
 
 
ARTICLE VIII
Indemnification
 
Section 8.01   Survival. Subject to the limitations and other provisions of this Agreement, the representations and warranties contained herein shall survive the Closing and shall remain in full force and effect until the date that is eighteen (18) months from the Closing Date; provided, that the representations and warranties in Section 4.01 , Section 4.02 , Section 4.09 , Section 4.19 , Section 4.23 , Section 5.01 , Section 5.02 and Section 5.04 shall survive indefinitely and the representations and warranties in Section 4.20 and Section 4.22 shall survive for the full period of all applicable statutes of limitations (giving effect to any waiver, mitigation or extension thereof) plus 60 days. All covenants and agreements of the parties contained herein shall survive the Closing indefinitely or for the period explicitly specified therein. Notwithstanding the foregoing, any claims asserted in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from the non-breaching party to the breaching party prior to the expiration date of the applicable survival period shall not thereafter be barred by the expiration of the relevant representation or warranty and such claims shall survive until finally resolved.
 
 
Section 8.02   Indemnification By Sellers. Subject to the other terms and conditions of this Article VIII , each of Sellers shall jointly and severally indemnify and defend each member of Buyer Group and its Affiliates and their respective Representatives (collectively, the “ Buyer Group Indemnitees ”) against, and shall hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all Losses incurred or sustained by, or imposed upon, the Buyer Group Indemnitees based upon, arising out of, with respect to or by reason of:
 
(a)   any inaccuracy in or breach of any of the representations or warranties of any of Sellers contained in this Agreement, the other Transaction Documents or in any certificate or instrument delivered by or on behalf of Sellers pursuant to this Agreement, as of the date such representation or warranty was made or as if such representation or warranty was made on and as of the Closing Date (except for representations and warranties that expressly relate to a specified date, the inaccuracy in or breach of which will be determined with reference to such specified date);
 
(b)   any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Sellers pursuant to this Agreement, the other Transaction Documents or any certificate or instrument delivered by or on behalf of Sellers pursuant to this Agreement;
 
(c)   any Excluded Asset or any Excluded Liability;
 
(d)   any Third Party Claim based upon, resulting from or arising out of the business, operations, properties, assets or obligations of Sellers or any of their Affiliates (other than the Purchased Assets or Assumed Liabilities) conducted, existing or arising on or prior to the Closing Date; or
 
(e)   the Bank Payoff Amount, and/or the Trade Payables Amount being greater than the amount or amounts set forth in this Agreement (including, without limitation, the applicable Disclosure Schedules to this Agreement).
 
Section 8.03   Indemnification By Buyer Group. Subject to the other terms and conditions of this Article VIII , Buyer Group shall jointly and severally indemnify and defend each of Sellers and their Affiliates and their respective Representatives (collectively, the “ Seller Indemnitees ”) against, and shall hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all Losses incurred or sustained by, or imposed upon, the Seller Indemnitees based upon, arising out of, with respect to or by reason of:
 
(a)   any inaccuracy in or breach of any of the representations or warranties of Buyer Group contained in this Agreement, the other Transaction Documents or in any certificate or instrument delivered by or on behalf of Buyer Group pursuant to this Agreement, as of the date such representation or warranty was made or as if such representation or warranty was made on and as of the Closing Date (except for representations and warranties that expressly relate to a specified date, the inaccuracy in or breach of which will be determined with reference to such specified date);
 
(b)   any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Buyer Group pursuant to this Agreement, the other Transaction Documents or any certificate or instrument delivered by or on behalf of Buyer Group pursuant to this Agreement; or
 
(c)   any Assumed Liability.
 
 
40
 
 
Section 8.04   Certain Limitations. The indemnification provided for in Section 8.02 and Section 8.03 shall be subject to the following limitations:
 
(a)   Sellers shall not be liable to the Buyer Group Indemnitees for indemnification under Section 8.02(a) (other than with respect to a claim for indemnification based upon, arising out of, with respect to or by reason of any Excluded Asset, any Excluded Liability or any inaccuracy in or breach of any representation or warranty in Section 4.01 , Section 4.02 , Section 4.09 ,   Section 4.19 , Section 4.20 , Section 4.22 and Section 4.23 (collectively, the “ Buyer Group Basket Exclusions ”)), until the aggregate amount of all Losses in respect of indemnification under Section 8.02(a) (other than those based upon, arising out of, with respect to or by reason of the Buyer Group Basket Exclusions) exceeds Fifty Thousand Dollars ($50,000), in which event Sellers shall be required to pay or be liable (on a joint and several basis) for all such Losses from the first dollar.
 
(b)   Buyer Group shall not be liable to the Seller Indemnitees for indemnification under Section 8.03(a) (other than with respect to a claim for indemnification based upon, arising out of, with respect to or by reason of any Assumed Liability or any inaccuracy in or breach of any representation or warranty in Section 5.01 , Section 5.02 and Section 5.04 (collectively, the “ Seller Basket Exclusions ”)) until the aggregate amount of all Losses in respect of indemnification under Section 8.03(a) (other than those based upon, arising out of, with respect to or by reason of the Seller Basket Exclusions) exceeds Fifty Thousand Dollars ($50,000), in which event Buyer Group shall be required to pay or be liable for all such Losses from the first dollar.
 
(c)   With respect to indemnification pursuant to Section 8.02(a) above, Sellers' maximum aggregate liability hereunder at any give time shall not exceed the outstanding amount held in escrow pursuant to the Escrow Agreement, and the Escrow Amount shall be the sole source for recovery hereunder (except for any claims based on fraud, claims pursuant to Section 8.02(b) or any claims for indemnification based upon, arising out of, with respect to or by reason of any Excluded Asset or Excluded Liability).  In addition, Sellers' maximum aggregate liability pursuant to this Agreement in any event at any give time shall not exceed the Aggregate Purchase Price.  With respect to indemnification pursuant to Section 8.03(a) above, Buyer Group's maximum aggregate liability hereunder at any given time shall not exceed the outstanding amount held in escrow pursuant to the Escrow Agreement (except for any claims based on fraud, claims pursuant to Section 8.03(b) or any claims for indemnification based upon, arising out of, with respect to or by reason of any Assumed Liability).  In addition, Buyer Group’s maximum aggregate liability pursuant to this Agreement in any event at any give time shall not exceed an amount equal to the Aggregate Purchase Price.
 
Section 8.05   Indemnification Procedures. The party making a claim under this Article VIII is referred to as the “ Indemnified Party ”, and the party against whom such claims are asserted under this Article VIII is referred to as the “ Indemnifying Party .”
 
(a)   Third Party Claims. If any Indemnified Party receives notice of the assertion or commencement of any Action made or brought by any Person who is not a party to this Agreement or an Affiliate of a party to this Agreement or a Representative of the foregoing (a “ Third Party Claim ”) against such Indemnified Party with respect to which the Indemnifying Party is obligated to provide indemnification under this Agreement, the Indemnified Party shall give the Indemnifying Party reasonably prompt written notice thereof, but in any event not later than thirty (30) calendar days after receipt of such notice of such Third Party Claim. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party forfeits rights or defenses by reason of such failure. Such notice by the Indemnified Party shall describe the Third Party Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Indemnified Party. The Indemnifying Party shall have the right to participate in, or by giving written notice to the Indemnified Party, to assume the defense of any Third Party Claim at the Indemnifying Party's expense and by the Indemnifying Party's own counsel, and the Indemnified Party shall cooperate in good faith in such defense; provided, that if the Indemnifying Party is one of the Sellers, such Indemnifying Party shall not have the right to defend or direct the defense of any such Third Party Claim that seeks an injunction or other equitable relief against the Indemnified Party. In the event that the Indemnifying Party assumes the defense of any Third Party Claim, subject to Section 8.05(b) , it shall have the right to take such action as it deems necessary to avoid, dispute, defend, appeal or make counterclaims pertaining to any such Third Party Claim in the name and on behalf of the Indemnified Party. The Indemnified Party shall have the right to participate in the defense of any Third Party Claim with counsel selected by it subject to the Indemnifying Party's right to control the defense thereof. The fees and disbursements of such counsel shall be at the expense of the Indemnified Party, provided, that if in the reasonable opinion of counsel mutually agreeable to the Indemnified Party and the Indemnifying Party, (A) there are legal defenses available to an Indemnified Party that are different from or additional to those available to the Indemnifying Party; or (B) there exists a conflict of interest between the Indemnifying Party and the Indemnified Party that cannot be waived, the Indemnifying Party shall be liable for the reasonable fees and expenses of counsel to the Indemnified Party in each jurisdiction for which the Indemnified Party reasonably determines counsel is required. If the Indemnifying Party elects not to compromise or defend such Third Party Claim, fails to promptly notify the Indemnified Party in writing of its election to defend as provided in this Agreement, or fails to diligently prosecute the defense of such Third Party Claim, the Indemnified Party may, subject to Section 8.05(b) , pay, compromise, defend such Third Party Claim and seek indemnification for any and all Losses based upon, arising from or relating to such Third Party Claim. Sellers and Buyer Group shall cooperate with each other in all reasonable respects in connection with the defense of any Third Party Claim, including making available (subject to the provisions of Section 6.06 ) records relating to such Third Party Claim and furnishing, without expense (other than reimbursement of actual out-of-pocket expenses) to the defending party, management employees of the non-defending party as may be reasonably necessary for the preparation of the defense of such Third Party Claim.
 
 
41
 
 
(b)   Settlement of Third Party Claims. Notwithstanding any other provision of this Agreement, the Indemnifying Party shall not enter into settlement of any Third Party Claim without the prior written consent of the Indemnified Party, except as provided in this Section 8.05(b) . If a firm offer is made to settle a Third Party Claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnified Party and provides, in customary form, for the unconditional release of each Indemnified Party from all liabilities and obligations in connection with such Third Party Claim, the Indemnifying Party may accept such settlement without any consent of the Indemnified Party.  If the Indemnified Party has assumed the defense pursuant to Section 8.05(a) , it shall not agree to any settlement without the written consent of the Indemnifying Party (which consent shall not be unreasonably withheld or delayed).
 
(c)   Direct Claims. Any Action by an Indemnified Party on account of a Loss which does not result from a Third Party Claim (a “ Direct Claim ”) shall be asserted by the Indemnified Party giving the Indemnifying Party reasonably prompt written notice thereof, but in any event not later than thirty (30) days after the Indemnified Party becomes aware of such Direct Claim. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party forfeits rights or defenses by reason of such failure. Such notice by the Indemnified Party shall describe the Direct Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Indemnified Party. The Indemnifying Party shall have thirty (30) days after its receipt of such notice to respond in writing to such Direct Claim. The Indemnified Party shall allow the Indemnifying Party and its professional advisors to investigate the matter or circumstance alleged to give rise to the Direct Claim, and whether and to what extent any amount is payable in respect of the Direct Claim and the Indemnified Party shall assist the Indemnifying Party's investigation by giving such information and assistance (including access to the Indemnified Party's premises and personnel and the right to examine and copy any accounts, documents or records) as the Indemnifying Party or any of its professional advisors may reasonably request. If the Indemnifying Party does not so respond within such thirty (30) day period, the Indemnifying Party shall be deemed to have rejected such claim, in which case the Indemnified Party shall be free to pursue such remedies as may be available to the Indemnified Party on the terms and subject to the provisions of this Agreement.
 
Section 8.06   Payments. Once a Loss is agreed to by the Indemnifying Party or finally adjudicated to be payable pursuant to this Article VIII , the Indemnifying Party shall satisfy its obligations within fifteen (15) Business Days of such final, non-appealable adjudication by a release of such amount from escrow under the Escrow Amount in favor of the Buyer Group with respect to claims indemnified by Sellers, and by wire transfer of immediately available funds to Sellers, with respect to claims indemnified by Buyer Group. The parties hereto agree that should an Indemnifying Party not make full payment of any such obligations within such fifteen (15) Business Day period, any amount payable shall accrue interest from and including the date of agreement of the Indemnifying Party or final, non-appealable adjudication to the date such payment has been made at a rate per annum equal to six percent (6%) per annum. Such interest shall be calculated daily on the basis of a 365 day year and the actual number of days elapsed.
 
Section 8.07   Tax Treatment of Indemnification Payments. All indemnification payments made under this Agreement shall be treated by the parties as an adjustment to the Aggregate Purchase Price for Tax purposes, unless otherwise required by Law.
 
Section 8.08   Effect of Investigation. Notwithstanding anything to the contrary contained in this Agreement (including without limitation the Sellers' failure to disclose any matter required to be disclosed on any Exhibit or Schedule hereto), Buyer Group agrees that no representation or warranty of the Sellers in this Agreement or in any agreement or instrument executed in connection herewith shall be deemed to be untrue or incorrect, and Sellers shall not be deemed to be in breach thereof, if Andrew Prince had actual knowledge on the date of this Agreement of any undisclosed matter that would constitute a breach of such representation or warranty or that any such representation or warranty was untrue or incorrect.
 
Section 8.09   Exclusive Remedies. Subject to Section 10.11 , the parties acknowledge and agree that their sole and exclusive remedy with respect to any and all claims (other than claims arising from fraud on the part of a party hereto in connection with the transactions contemplated by this Agreement) for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement, shall be pursuant to the indemnification provisions set forth in this Article VIII . In furtherance of the foregoing, each party hereby waives, to the fullest extent permitted under Law, any and all rights, claims and causes of action for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement it may have against the other parties hereto and their Affiliates and each of their respective Representatives arising under or based upon any Law, except pursuant to the indemnification provisions set forth in this Article VIII . Nothing in this Section 8.09 shall limit any Person's right to seek and obtain any equitable relief to which any Person shall be entitled or to seek any remedy on account of any Person's fraudulent conduct.
 
 
42
 
 
ARTICLE IX
Termination
 
Section 9.01   Termination. This Agreement may be terminated at any time prior to the Closing:
 
(a)   by the mutual written consent of Sellers and Buyer Group;
 
(b)   by Buyer Group by written notice to Sellers if:
 
(i)   Buyer Group is not then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by any of Sellers pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Article VII and such breach, inaccuracy or failure has not been cured by Sellers within ten (10) days of Sellers’ receipt of written notice of such breach from Buyer Group; or
 
(ii)   any of the conditions set forth in Section 7.01 or Section 7.02 shall not have been, or if it becomes apparent that any of such conditions will not be, fulfilled by May 31, 2012, unless such failure shall be due to the failure of any member of Buyer Group to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing;
 
(c)   by Sellers by written notice to Buyer Group if:
 
(i)   Each of Sellers is not then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Buyer Group pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Article VII and such breach, inaccuracy or failure has not been cured by Buyer Group within ten (10) days of Buyer Group's receipt of written notice of such breach from Sellers; or
 
(ii)   any of the conditions set forth in Section 7.01 or Section 7.03 shall not have been, or if it becomes apparent that any of such conditions will not be, fulfilled by May 31, 2012, unless such failure shall be due to the failure of any of Sellers to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by each of them prior to the Closing; or
 
(d)   by Buyer Group or Sellers in the event that (i) there shall be any Law that makes consummation of the transactions contemplated by this Agreement illegal or otherwise prohibited or (ii) any Governmental Authority shall have issued a Governmental Order restraining or enjoining the transactions contemplated by this Agreement, and such Governmental Order shall have become final and non-appealable.
 
 
43
 
 
ARTICLE X
Miscellaneous
 
Section 10.01   Expenses. Except as otherwise expressly provided herein, all costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses, whether or not the Closing shall have occurred.
 
Section 10.02   Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient or (d) on the third (3 rd ) day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 10.02 ):

If to Sellers:
c/o Richard McVaugh, President
351 Camer Drive
Bensalem, PA 19020
Facsimile:                      215-244-3398
E-mail: rmcvaugh@fdmcinc.com
 
with a copy to:
Buchanan Ingersoll & Rooney PC
One Oxford Centre, 20th Floor
301 Grant Street
Pittsburgh, PA 15219
 Facsimile:                      (412)562-1444
E-mail: david.monaghan@bipc.com
Attention:                      David A. Monaghan, Esq.
 
If to Buyer Group:
c/o Precision Aerospace Components, Inc.
2200 Arthur Kill Road
Staten Island, New York 10309
Facsimile:  347-258-9006
E-mail: aprince@precaeroinc.com
Attention:  Andrew S. Prince,
                  President and CEO
 
with a copy to:
LeClairRyan
One Riverfront Plaza
1037 Raymond Boulevard, 16 th Floor
Newark, New Jersey  07102
Facsimile:  973-491-3555
E-mail: john.oberdorf@leclairryan.com
Attention:  John J. Oberdorf, Jr., Esq.
 
 
44
 
 
Section 10.03   Interpretation. For purposes of this Agreement, (a) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”; (b) the word “or” is not exclusive; and (c) the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole. Unless the context otherwise requires, references herein: (x) to Articles, Sections, Disclosure Schedules and Exhibits mean the Articles and Sections of, and Disclosure Schedules and Exhibits attached to, this Agreement; (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and (z) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted. The Disclosure Schedules and Exhibits referred to herein shall be construed with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein.
 
Section 10.04   Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.
 
Section 10.05   Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
 
Section 10.06   Entire Agreement. This Agreement and the other Transaction Documents constitute the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein and therein, and supersede all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Agreement and those in the other Transaction Documents, the Exhibits and Disclosure Schedules (other than an exception expressly set forth as such in the Disclosure Schedules), the statements in the body of this Agreement will control.
 
Section 10.07   Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither party may assign its rights or obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed; provided, however , that prior to the Closing Date, Buyer Group may, without the prior written consent of Sellers, assign all or any portion of its rights under this Agreement to one or more of its direct or indirect wholly-owned subsidiaries. No assignment shall relieve the assigning party of any of its obligations hereunder.
 
Section 10.08   No Third-party Beneficiaries. Except as provided in Article VIII , this Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
 
Section 10.09   Amendment and Modification; Waiver. This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.
 
 
45
 
 
Section 10.10   Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
 
(a)   This Agreement shall be governed by and construed in accordance with the internal laws of the Commonwealth of Pennsylvania without giving effect to any choice or conflict of law provision or rule (whether of the Commonwealth of Pennsylvania or any other jurisdiction) that would cause the application of Laws of any jurisdiction other than those of the Commonwealth of Pennsylvania.
 
(b)   ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY MAY BE INSTITUTED IN THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA OR THE COURTS OF THE COMMONWEALTH OF PENNSYLVANIA IN EACH CASE LOCATED IN PHILADELPHIA, AND EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING. SERVICE OF PROCESS, SUMMONS, NOTICE OR OTHER DOCUMENT BY MAIL TO SUCH PARTY'S ADDRESS SET FORTH HEREIN SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT IN ANY SUCH COURT. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR ANY PROCEEDING IN SUCH COURTS AND IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
 
(c)   EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.10(c).
 
Section 10.11   Specific Performance. The parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy to which they are entitled at law or in equity.
 
Section 10.12   Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
 
[SIGNATURE PAGE FOLLOWS]
 
 
46
 
 
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

  SELLERS:  
     
 
FASTENER DISTRIBUTION AND MARKETING COMPANY, INC.
     
  By  
  Name:  
 
Title:
 

 
AERO-MISSILE COMPONENTS, INC.
     
  By  
  Name:  
 
Title:
 

 
CREATIVE ASSEMBLY SYSTEMS, INC.
     
  By  
  Name:  
 
Title:
 
 
  BUYERS:  
 
PRECISION AEROSPACE COMPONENTS, INC.
     
  By  
  Name:  
 
Title:
 

 
APACE ACQUISITION I, INC.
 
     
  By  
  Name:  
 
Title:
 

 
APACE ACQUISITION II, INC.
 
     
  By  
  Name:  
 
Title:
 

 
47
 
 
EXHIBIT 10.2

 
LOAN AND SECURITY AGREEMENT
 
by and between

PRECISION AEROSPACE COMPONENTS, INC.,
as Parent and an Obligor

FREUNDLICH SUPPLY COMPANY, INC.
TIGER-TIGHT CORP.
APACE ACQUISITION I, INC.
APACE ACQUISITION II, INC.,
as Borrowers,
 
NEWSTAR BUSINESS CREDIT, LLC,
as Administrative Agent,
 
and
 
THE LENDERS FROM TIME TO TIME PARTY HERETO
 
Dated as of May 25, 2012
 
 
i
 
 
Table of Contents
 
ARTICLE I  DEFINITIONS
    1  
Section 1.1. Definitions
     1  
Section 1.2. Interpretive Provisions
     15  
ARTICLE II  REVOLVING LOANS
    16  
Section 2.1. Revolving Loans
     16  
Section 2.2. Request for Revolving Loans.
     16  
Section 2.3. Deemed Request for Revolving Loans
     19  
Section 2.4. Protective Advances
     20  
Section 2.5. Settlement.
     20  
ARTICLE III  TERM LOAN
    21  
Section 3.1. Term Loans.
     21  
Section 3.2. Disbursement of Term Loans.
     21  
ARTICLE IV  INTEREST, FEES, REIMBURSEMENTS
     22  
Section 4.1. Interest.
     22  
Section 4.2. Designated Index
     22  
Section 4.3. Fees
     22  
Section 4.4. Increased Cost and Reduced Return
     23  
Section 4.5. Reserved.
     23  
Section 4.6. Reserved.
     23  
Section 4.7. Compensation
     23  
Section 4.8. Taxes.
     24  
Section 4.9. Maximum Interest; Controlling Limitation.
     25  
ARTICLE V  PAYMENT
     26  
Section 5.1. Interest
     26  
Section 5.2. Principal.
     26  
Section 5.3. Mandatory Payments on Termination Date
     27  
Section 5.4. Mandatory Prepayment in Respect of Certain Events
     27  
Section 5.5. Early Termination
     27  
Section 5.6. General Payment Provisions
     28  
Section 5.7. Application
     28  
Section 5.8. Reinstatement
     28  
Section 5.9. Account Stated
     29  
 
 
ii
 
 
ARTICLE VI  COLLATERAL
     29  
Section 6.1. Security Interest
     29  
Section 6.2. Perfection and Protection of Administrative Agent’s Security Interest
     29  
Section 6.3. Collateral Proceeds Management
     30  
Section 6.4. Examinations; Inspections; Verifications
     31  
Section 6.5. Appraisals
     31  
Section 6.6. Right to Cure
     31  
Section 6.7. Power of Attorney
     31  
Section 6.8. Preservation of Administrative Agent’s Rights
     32  
ARTICLE VII  CONDITIONS
     33  
Section 7.1. Conditions Precedent to Initial Loan
     33  
Section 7.2. Conditions Precedent to all Loans
     37  
ARTICLE VIII  REPRESENTATIONS AND WARRANTIES
     37  
Section 8.1. Fundamental Information
     37  
Section 8.2. Prior Transactions
    38  
Section 8.3. Subsidiaries
     38  
Section 8.4. Authorization, Validity and Enforceability
     38  
Section 8.5. Noncontravention
    38  
Section 8.6. Financial Statements and Projections
     38  
Section 8.7. Litigation
     38  
Section 8.8. ERISA and Employee Benefit Plans
     39  
Section 8.9. Compliance with Laws
     39  
Section 8.10. Taxes
     39  
Section 8.11. Location of Collateral and Books and Records
     39  
Section 8.12. Accounts
    39  
Section 8.13. Inventory
    40  
Section 8.14. Documents, Instruments, and Chattel Paper
     40  
Section 8.15. Proprietary Rights
     40  
Section 8.16. Investment Property
     40  
Section 8.17. Real Property; Leases
     40  
Section 8.18. Material Agreements
     40  
Section 8.19. Bank Accounts
     40  
Section 8.20. Title to Property
     40  
Section 8.21. Debt
     41  
Section 8.22. Liens
     41  
Section 8.23. Solvency
     41  
Section 8.24. Non-Regulated Entities
     41  
 
 
iii
 
 
Section 8.25. Governmental Authorization
     41  
Section 8.26. Investment Banking or Finder’s Fees
     41  
Section 8.27. Full Disclosure
     41  
Section 8.28. Commercial Tort Claims
     41  
Section 8.29. Other Obligations and Restrictions
     41  
Section 8.30. Force Majeure; and Labor Disputes
     42  
Section 8.31. Environmental and Other Laws
     42  
Section 8.32. Security Interests
     42  
Section 8.33. Acquisition
     42  
Section 8.34. Novation of Government Contracts
     43  
Section 8.35. Continuing Representations
     43  
ARTICLE IX  AFFIRMATIVE COVENANTS
     43  
Section 9.1. Existence and Good Standing
     43  
Section 9.2. Compliance with Agreements and Laws
     43  
Section 9.3. Books and Records
     44  
Section 9.4. Financial Reporting
     44  
Section 9.5. Collateral Reporting
     45  
Section 9.6. Compliance Certificate
     47  
Section 9.7. Notification to Administrative Agent
     47  
Section 9.8. Accounts
     48  
Section 9.9. Inventory.
     48  
Section 9.10. Equipment
     48  
Section 9.11. Control of Deposit Accounts
     49  
Section 9.12. Insurance
     49  
Section 9.13. Payment of Trade Liabilities, Taxes, Etc
     49  
Section 9.14. Performance on an Obligor’s Behalf
     49  
Section 9.15. Evidence of Compliance
     50  
Section 9.16. Environmental Matters; Environmental Reviews.
     50  
Section 9.17. Change of Name, Location, Jurisdiction of Incorporation or Organization, or Structure; Additional Filings
     50  
Section 9.18. Further Assurances
     51  
Section 9.19. Proprietary Rights
     51  
Section 9.20. Real Property
     51  
Section 9.21. Initial Funding Date Name Changes.
     51  
Section 9.22. Novation of Government Contracts
     52  
Section 9.23. Initial Funding Date Certificate
     52  
Section 9.24. Post Closing Covenant
     52  
 
 
iv
 
 
ARTICLE X  NEGATIVE COVENANTS
     52  
Section 10.1. Fundamental Changes
     52  
Section 10.2. Collateral Locations
     53  
Section 10.3. Use of Proceeds
     53  
Section 10.4. Business
     53  
Section 10.5. Debt
     53  
Section 10.6. Guaranties
     54  
Section 10.7. Liens
     54  
Section 10.8. Disposition of Property
     54  
Section 10.9. Sale and Leaseback
    54  
Section 10.10. Distributions; Capital Contribution; Redemption
     54  
Section 10.11. Restricted Investments
     55  
Section 10.12. Transactions with Affiliates
     55  
Section 10.13. New Subsidiaries
     55  
Section 10.14. Financial Covenants.
     55  
Section 10.15. Fiscal Year
     56  
Section 10.16. Impairment of Security Interest
     56  
Section 10.17. Prohibited Contracts
     56  
Section 10.18. Asset Purchase Agreement
     56  
ARTICLE XI  EVENT OF DEFAULT
    56  
Section 11.1. Event of Default
     56  
ARTICLE XII  REMEDIES
    59  
Section 12.1. Obligations.
     59  
Section 12.2. Collateral
     59  
Section 12.3. Injunctive Relief
     60  
Section 12.4. Setoff
     60  
ARTICLE XIII  TERMINATION
    60  
Section 13.1. Term and Termination
    60  
ARTICLE XIV  ADMINISTRATIVE AGENT
    60  
Section 14.1. Appointment and Authority
    60  
Section 14.2. Exculpatory Provisions
    61  
Section 14.3. Reliance by Administrative Agent
    61  
Section 14.4. Non-Reliance on Administrative Agent and other Lenders
     62  
Section 14.5. Rights as a Lender
     62  
Section 14.6. Sharing of Set-Offs and Other Payments
     62  
Section 14.7. Investments
     63  
Section 14.8. Resignation of Administrative Agent
     63  
Section 14.9. Delegation of Duties
     64  
Section 14.10. Collateral Matters.
     64  
Section 14.11. Agency for Perfection
     65  
Section 14.12. Concerning the Collateral and Related Loan Documents
     65  
 
 
v
 
 
ARTICLE XV  AFFILIATE ACCOMMODATIONS
     65  
Section 15.1. Purposes
     65  
Section 15.2. Affiliate Guaranty
     65  
Section 15.3. Affiliate Pledge
     66  
Section 15.4. Limitation
     66  
Section 15.5. Information
     66  
Section 15.6. Affiliate Accommodations Not Impaired
     67  
Section 15.7. Consent and Waiver.
     67  
Section 15.8. Affiliate Subordination
     68  
Section 15.9. Contribution and Indemnification
     69  
Section 15.10. Cumulative
     69  
ARTICLE XVI  BORROWER REPRESENTATIVE
    69  
Section 16.1. Appointment
    69  
Section 16.2. Notices
     69  
Section 16.3. Loan Documents
     70  
ARTICLE XVII  MISCELLANEOUS
    70  
Section 17.1. Waivers & Amendments
     70  
Section 17.2. Severability
     70  
Section 17.3. Governing Law; Venue.
     71  
Section 17.4. Waiver of Jury Trial
     71  
Section 17.5. Fees and Expenses
     72  
Section 17.6. Notices
     72  
Section 17.7. Waiver of Notices
     73  
Section 17.8. Binding Effect
     73  
Section 17.9. Indemnity of Lenders and Administrative Agent by Obligors
     73  
Section 17.10. Limitation of Liability
     74  
Section 17.11. Continuing Rights of Lenders in Respect of Obligations
     74  
Section 17.12. Assignments.
     74  
Section 17.13. Confidentiality
     75  
Section 17.14. Acceptance and Performance
     75  
Section 17.15. Schedules
     75  
Section 17.16. Counterparts
     75  
Section 17.17. Captions
     75  
 
 
vi
 
 
SCHEDULES
 
Schedule 1.1A - Lenders’ Commitments  
Schedule 1.1B - Commercial Tort Claims  
Schedule 1.1C - Designated Accounts  
Schedule 1.1D - Extended Term Exceptions  
Schedule 1.1E - Liens  
Schedule 8.1 - Fundamental Information  
Schedule 8.7 - Litigation  
Schedule 8.11 - Location of Collateral  
Schedule 8.15 - Proprietary Rights  
Schedule 8.16 - Investment Property  
Schedule 8.17 - Real Property; Leases  
Schedule 8.18 - Material Agreements  
Schedule 8.19 - Bank Accounts  
Schedule 8.21 - Debt  
Schedule 8.31 - Release of Hazardous Materials  

 
vii
 
 
LOAN AND SECURITY AGREEMENT
 
This Loan and Security Agreement is executed and entered into as of May 25, 2012, among PRECISION AEROSPACE COMPONENTS, INC., a Delaware corporation (“ Parent ”), FREUNDLICH SUPPLY COMPANY, INC., a Delaware corporation, TIGER-TIGHT CORP., a Delaware corporation, APACE ACQUISITION I, INC., a Delaware corporation and APACE ACQUISITION II, INC., a Delaware corporation (each a “ Borrower ” and together with Parent, each an “ Obligor ” and collectively “ Obligors ”), the lenders from time to time party to this Agreement (together with their respective successors and permitted assigns, each individually a “ Lender ” and collectively the “ Lenders ”) and NEWSTAR BUSINESS CREDIT, LLC, a Delaware limited liability company, as administrative agent (in such capacity, the “ Administrative Agent ”).

RECITALS
 
Administrative Agent, Lenders and Obligors desire to enter into certain financing arrangements according to the terms and provisions as set forth hereinbelow.  Therefore, for value received, the receipt and sufficiency of which is hereby acknowledged, together with the mutual benefits provided herein, Administrative Agent, Lenders and each Obligors hereby agree as follows:
 
ARTICLE I
DEFINITIONS
 
Section 1.1.   Definitions .  The following definitions shall apply throughout this Agreement:
 
“ Account ” has the meaning prescribed for such term as defined by the UCC, which definition is incorporated herein by reference, and includes, without limitation, a right to payment of a monetary obligation, whether or not earned by performance, for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, or for services rendered or to be rendered.
 
“ Account Debtor ” means a person obligated on an Account, Chattel Paper, or General Intangible.
 
“ Acquisition ” means the purchase of the Purchased Assets by Parent, Apace I, and Apace II from Sellers pursuant to the terms of the Asset Purchase Agreement as in effect on the Initial Funding Date.
 
“ Administrative Agent ” has the meaning given to such term in the preamble hereto.
 
“ Administrative Agent ’s Liens ” means Liens granted in favor of Administrative Agent, for the benefit of Lenders, pursuant to this Agreement or any of the other Loan Documents.
 
“ Affiliate ” means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person or which owns, directly or indirectly, five percent (5.0%) or more of the outstanding Equity Interest of such Person.  For this purpose, a Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract, or otherwise.
 
 
1
 
 
“ Affiliate Accommodations ” means, with respect to an Obligor and the Obligations owing by each other Obligor, the Affiliate Guaranty, the Affiliate Pledge and each other accommodation made by such Obligor for the benefit of a Borrower, pursuant to Article XV .
 
“ Affiliate Guaranty ” means, with respect to an Obligor and the Obligations owing by each other Obligor, the guaranty of payment by such Obligor, as provided by Section 15.2 .

“ Affiliate Pledge ” means, with respect to an Obligor and the Obligations owing by each other Obligor, the grant by such Obligor of a Lien in property of such Obligor to secure such Obligations, as provided by Section 15.3 .

“ Agreement ” means this Loan and Security Agreement and all schedules, exhibits and addenda hereto, as may be renewed, extended, amended, supplemented, restated or otherwise modified from time to time.

“ Agreement Date ” means the date as of which this Agreement is dated as specified in the preamble to this Agreement.

“ Aggregate Availability ” means, at any time, the aggregate Availability of all Borrowers.

“ Aggregate Borrowing Base ” means an amount, determined for all Borrowers, equal to the sum of the amount of the Borrowing Base for each Borrower.

“ Aggregate Borrowing Base Certificate ”  means a certificate signed by a Responsible Officer of the Borrower Representative, setting forth the calculation of the Aggregate Borrowing Base, including a calculation of each component thereof, for each Borrower, in form, presentation and detail satisfactory to Administrative Agent in its discretion.

“ Apace I ” means Apace Acquisition I, Inc., a Delaware corporation, and its successors.
 
“ Apace II ” means Apace Acquisition II, Inc., a Delaware corporation, and its successors.
 
“ Apace I Term Loan ” has the meaning prescribed by Section 3.1(a) .
 
“ Apace II Term Loan ” has the meaning prescribed by Section 3.1(b) .
 
“ Applicable Law ” means, as to a Person, any law (statutory or common), treaty, rule or regulation of a Governmental Authority or determination of a court or binding arbitrator, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject, including, without limitation, the Fair Labor Standards Act of 1938, the Occupational Safety and Health Act of 1970, all applicable laws (including programs, permits and guidance promulgated by regulatory agencies) relating to public health or the protection or pollution of the environment, including the Comprehensive Environmental Response Compensation and Liability Act (42 U.S.C. § 9601 et seq .), the Resource Conservation and Recovery Act (42 U.S.C. §§ 6991-6991i) and the Clean Water Act (33 U.S.C. § 1251 et seq .).
 
 
2
 
 
“ Applicable Margin ” means, with respect to Loans accruing interest in reference to a Designated Index, (a) on and after the Agreement Date and until the effective date of any adjustment as provided below, the applicable rate per annum shown with respect to such Designated Index for such Loans under the caption “Applicable Margin” with respect to Level III, as set forth in the table below and (b) thereafter, the applicable rate per annum shown with respect to such Designated Index for such Loans under the caption “Applicable Margin” with respect to the “Level” corresponding to the Fixed Charge Coverage Ratio for Parent and its Subsidiaries for the most recent four Fiscal Quarters, as set forth in the table below:
 
Level
Fixed Charge
Coverage Ratio
Applicable Margin
LIBOR Rate
Base Rate
Revolving Loans
Term Loans
Revolving Loans
Term Loans
I
> 2.50
3.00
7.10
1.50
5.60
II
≥ 2.00 ≤ 2.50
3.25
7.35
1.75
5.85
III
< 2.00
3.50
7.60
2.00
6.10

For purposes of clause (b) preceding, any adjustment to the Applicable Margin shall be determined based upon the Fixed Charge Coverage Ratio for Parent and its Subsidiaries as of the last day of each Fiscal Quarter beginning March 31, 2013 and continuing thereafter, in each case for the preceding twelve (12) Fiscal Months, based upon the financial statements for Parent and its Subsidiaries delivered pursuant to Section 9.4 , and any adjustment resulting from any such determination shall become effective on the first day of the calendar month next following the expiration of five (5) days after delivery to Administrative Agent of such financial statements and ending on the date immediately preceding the effective date of the next such change, if any, provided , that during the existence of any Event of Default, at the option of Administrative Agent and otherwise subject to the terms of this Agreement, the Applicable Margin shall be deemed to be the rate specified for Level III.
 
“ Asset Purchase Agreement ” means the certain Asset Purchase Agreement, dated on or before the Initial Funding Date, among Sellers, Parent, Apace I and Apace II, consistent with the terms of this Agreement, pursuant to which, concurrently with the funding of the initial Loans, each of Parent, Apace I and Apace II, respectively, will purchase and acquire all right, title and interest in and to the Purchased Assets to be purchased and acquired by Parent and each such Borrower, as applicable, as provided therein.
 
“ Availability ” means, with respect to a Borrower as of any date of determination, an amount equal to (a) the Borrowing Base of such Borrower less (b) the unpaid balance of Revolving Loans of such Borrower, in each case determined as of such day.
 
“ Bankruptcy Code ” means the United States Bankruptcy Code (11 U.S.C. § 101 et seq. ).
 
 
3
 
 
“ Base Rate ” means the greater of (a) 3.25% or (b) the rate per annum published from time to time in the “Money Rates” table of The Wall Street Journal (or such other presentation within The Wall Street Journal as may be adopted hereafter for such information) as the base or prime rate for corporate loans at the nation’s largest commercial banks (or if more than one such rate is published, the higher or highest of the rates so published), provided , that if such rate is no longer published by The Wall Street Journal , then the rate described in this clause (b) shall be equal to the highest per annum interest rate published by the Federal Reserve Board in Federal Reserve Statistical Release H.15(519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, any similar rate quoted therein or any similar release by the Federal Reserve Board, in each case as determined by Administrative Agent.

“ Borrower ” and “ Borrowers ” each has the meaning prescribed for such term as provided in the preamble paragraph of this Agreement, and in each case includes successors and permitted assigns.
 
“ Borrower Representative ” has the meaning prescribed for such term by Section 16.1 .
 
“ Borrowing Base ” means, with respect to a Borrower as of any day of determination, an amount equal to the sum of:
 
(a)           the lesser of
 
(i)            the sum of (A) eighty-five percent (85%) of the Net Amount of Eligible Accounts of such Borrower plus (B) eighty-five percent (85%) of NOLV of Eligible Inventory of such Borrower, provided , that the amount included in the Borrowing Base of such Borrower under this clause (a)(i)(B) , together with the aggregate amount included in the Borrowing Base of each other Borrower under this clause (a)(i)(B) is limited to, and shall not exceed, an amount equal to the lesser of (x) $6,500,000 or (y) an amount equal to 1.857 times the aggregate amount included in the Borrowing Base of all Borrowers under clause (a)(i)(A) ; or

(ii)            the Revolving Credit Limit, minus

(b)           the aggregate amount of reserves implemented by Administrative Agent pursuant to Section 2.1 with respect to such Borrower, in each case determined as of such day.

“ Borrowing Base Certificate ” means a certificate of a Borrower, signed by a Responsible Officer of such Borrower, setting forth the calculation of the Borrowing Base, including a calculation of each component thereof, all in form, presentation and detail satisfactory to Administrative Agent in its discretion.
 
“ Borrowing Notice ” means a request for a Loan in compliance with the requirements of this Agreement.
 
“ Business Day ” means any day that is not a Saturday, Sunday or a day on which commercial banks in Dallas, Texas are required or permitted to be closed.
 
 
4
 
 
“ Capital Expenditures ” has the meaning prescribed for such term by GAAP.
 
“ Capital Lease ” means any lease of property by an Obligor which, in accordance with GAAP, should be reflected as a capital lease on the balance sheet of such Obligor.
 
“ Chattel Paper ” has the meaning prescribed for such term as defined by the UCC, which definition is incorporated herein by reference, and includes, without limitation, a record or records that evidence both a monetary obligation and a security interest in specific goods, a security interest in specific goods and software used in the goods, a security interest in specific goods and license of software used in the goods, a lease of specific goods, or a lease of specific goods and license of software used in the goods.  “ Chattel Paper ” includes, without limitation, electronic chattel paper.
 
“ Collateral ” means, collectively, all property specified in Section 6.1 and Section 15.3 and all other property and interest in property of each Obligor in which each such Obligor grants a Lien to Administrative Agent pursuant to the Loan Documents.
 
“ Commercial Tort Claim ” has the meaning prescribed for such term as defined by the UCC, which definition is incorporated herein by reference, and includes, without limitation, in the case of an Obligor, any tort cause of action claimed by such Obligor, including those listed on Schedule 1.1B .
 
“ Commitment ” means, for each Lender, the obligation of such Lender to make Loans in an aggregate amount not exceeding the amount set forth opposite such Lender’s name on Schedule 1.1A , as such amount may be modified from time to time pursuant to the terms hereof; provided, that no Lender’s obligation to make Loans shall ever exceed such Lender’s Percentage Share of such Loans.
 
“ Compliance Certificate ” a certificate meeting the requirements of Section 9.6 and otherwise in form satisfactory to Administrative Agent.
 
“ Contracting Officer ” means, with respect to a Government Contract, the Person who is the responsible contracting officer (as such term is used in Federal Acquisition Regulation § 42.1204) of the United States or applicable agency thereof.
 
“ Control ”, with respect to a Deposit Account of an Obligor, has the meaning prescribed with respect thereto as prescribed by the UCC, evidenced by a control agreement in form and substance satisfactory to Administrative Agent, among such Obligor, Administrative Agent and a commercial bank satisfactory to Administrative Agent.
 
“ Debt ” means, with respect to a Person, (a) all obligations for borrowed money of such Person, (b) all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, interest rate swaps, or other financial products, (c) all obligations or liabilities of others secured by a Lien on any asset of such Person, irrespective of whether such obligation or liability is assumed, (d) all obligations of such Person for the deferred purchase price of assets, (e) any obligation of such Person guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation of any other Person, (f) asset securitizations and synthetic leases, (g) Capital Lease obligations, (h) all net indebtedness, liabilities and obligations under interest rate, credit, commodity, foreign exchange or similar transactions for the purpose of hedging such Person’s exposure to fluctuations in interest or exchange rates, currency valuations or commodity prices, and (i) all liabilities which would under GAAP be shown on such Person’s balance sheet as a liability.
 
 
5
 
 
“ Default ” means an event, condition or occurrence that, with the giving of notice, the passage of time, or both, would constitute an Event of Default.
 
“ Default Rate ” means with respect to the Obligations on any day, a rate per annum equal to the sum of (i) the rate of interest applicable to such Obligations on such day pursuant to Section 4.1 plus (ii) two percent (2.0%).
 
“ Defaulting Lender ” means any Lender that fails to make any advance (or other extension of credit) that it is required to make hereunder on the date that it is required to do so hereunder.
 
“ Defaulting Lender Rate ” means the interest rate then applicable to Revolving Loans.
 
“ Deposit Account ” has the meaning prescribed for such term as defined by the UCC, which definition is incorporated herein by reference, and includes, without limitation, a nonnegotiable certificate of deposit or a demand, time, savings, passbook, or similar account maintained with a bank.
 
“ Designated Account ” means, with respect to a Borrower, the Deposit Account designated for such Borrower in Schedule 1.1C .
 
“ Designated Index ” means, (a) on any day from the Agreement Date through August 31, 2012, the LIBOR Rate, and (b) on any day during a calendar quarter thereafter, the Index applicable for such calendar quarter as determined pursuant to Section 4.2 .

“ Distribution ” means, with respect to a Person, any dividend or other distribution, in respect of its Equity Interests, any repayment of Debt owing to a holder of Equity Interests (other than repayment of Debt solely with Equity Interests) or any payment on account of the purchase, redemption or other acquisition or retirement of its Equity Interests.
 
“ Document ” has the meaning prescribed for such term as defined by the UCC, which definition is incorporated herein by reference, and includes, without limitation, any bill of lading, dock warrant, dock receipt, warehouse receipt or order for the delivery of goods, or any other document which in the regular course of business or financing is treated as adequately evidencing that the person in possession of it is entitled to receive, hold and dispose of the document and the goods it covers, and which purports to be issued by or addressed to a bailee and purporting to cover goods in the bailee’s possession which are either identified or are fungible portions of an identified mass.
 
“ Dollars ” or “ $ ” refers to lawful money of the United States of America.
 
“ EBITDA ” means, with respect to a Person for any period, consolidated Net Income (excluding, to the extent included in Net Income, non-cash compensation solely in the form of Equity Interests, or warrants or options for Equity Interests, of such Person), minus extraordinary gains plus Interest Expense, income taxes, and depreciation and amortization for such period, as determined in accordance with GAAP, in each case determined for such Person for such period.
 
 
6
 
 
“ Eligible Account ” means an Account of a Borrower which is acceptable to Administrative Agent for purposes of determining the Borrowing Base and meets all criteria for inclusion in the Borrowing Base as determined and established by Administrative Agent from time to time in its discretion.  Without limiting the discretion of Administrative Agent to establish other criteria of ineligibility, unless otherwise agreed by Administrative Agent, Eligible Accounts shall not include any Account:  (a) which is not owned exclusively by such Borrower, (b) which is not subject to a first priority and perfected security interest in favor of Administrative Agent, (c) with respect to which (i)(A) in respect of any Account listed on Schedule 1.1D, more than 120 days have elapsed since the date of original invoice or (B) in respect of any other Account, more than 90   days have elapsed since the date of the original invoice or (ii) which is unpaid, in whole or in part, more than 60 days after its original due date, (d) if 25.0% or more of the aggregate Dollar amount of outstanding Accounts owed at such time by the Account Debtor thereon is classified as ineligible under clause (c) above, (e) owed by an Account Debtor to the extent (and only to the extent) the amount owing thereon, when added to the aggregate amount owing on all Accounts owed by such Account Debtor, would exceed (i) 40% of the aggregate amount of all Eligible Accounts of all Borrowers owed at such time by the United States or any agency thereof or (ii) 20% of the aggregate amount of all Eligible Accounts of all Borrowers owed at such time by all other Account Debtors, (f) which represents a sale on a bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment, or other repurchase or return basis or a progress billing under an agreement which requires further performance by such Borrower, (g) with respect to which the Account Debtor on such Account is an individual or with respect to which any of the following events has occurred as to the Account Debtor on such Account:  the filing of any petition for relief under the Bankruptcy Code or similar insolvency laws, a general assignment for the benefit of creditors, the appointment of a receiver or trustee, application or petition for dissolution, the sale or transfer of all or any material part of the assets or the cessation of the business as a going concern, (h) owed by an Account Debtor which does not maintain its chief executive office in the United States or is not organized under the laws of the United States or any state thereof, (i) owed by an Account Debtor which is an Affiliate or employee of a Borrower, (j) with respect to which either the perfection, enforceability, or validity of Administrative Agent’s Lien in such Account, or Administrative Agent’s right or ability to obtain direct payment to Administrative Agent of the proceeds of such Account, is governed by any federal, state, or local statutory requirements other than those of the UCC, unless the Account Debtor is the United States or any department, agency or instrumentality thereof and (i) except as provided otherwise by clause (ii) following, such Account has been assigned to Agent in compliance with the federal Assignment of Claims Act or (ii) if such Account arises under a contract that was assigned to such Borrower from the Sellers pursuant to the Acquisition and more than 45 days have passed since the date of such assignment, such assignment has been duly recorded with and accepted by such Account Debtor and such Account has been assigned to Agent in compliance with the federal Assignment of Claims Act, (k) owed by an Account Debtor to which a Borrower or any of its Subsidiaries is indebted in any way, or which is subject to any right of setoff or recoupment, or if the Account Debtor thereon has disputed liability or made any claim with respect to any other Account due from such Account Debtor, but in each such case only to the extent of such indebtedness, setoff, recoupment, dispute, or claim, (l) which is evidenced by a promissory note or other instrument or by chattel paper, (m) which relates to a sale not made in the ordinary course of such Borrower’s business, (n) with respect to which the goods giving rise to such Account have not been shipped and delivered to and accepted by the Account Debtor or the services giving rise to such Account have not been fully performed by such Borrower, and, if applicable, accepted by the Account Debtor, or with respect to which the Account Debtor has revoked its acceptance of any such goods or services, (o) which arises out of an enforceable contract or order which, by its terms, forbids, restricts or makes void or unenforceable the granting of a Lien by such Borrower to Administrative Agent with respect to such Account, (p) with respect to which Administrative Agent believes that the prospect of collection of such Account is impaired or that the Account may not be paid by reason of the Account Debtor’s financial inability to pay, or (q) owed by an Account Debtor, to the extent the amount owing thereon exceeds the credit limit extended to such Account Debtor by such Borrower.  The identification of specific exclusions from eligibility herein is not exclusive or exhaustive.  Administrative Agent reserves the right in its discretion to establish additional or different criteria for determining Eligible Accounts, at any time, without prior notice.

 
7
 
 
“ Eligible Inventory ” means Inventory of a Borrower which is acceptable to Administrative Agent for purposes of determining the Borrowing Base and meets all criteria for inclusion in the Borrowing Base as determined and established by Administrative Agent from time to time in its discretion.  Without limiting the discretion of Administrative Agent to establish other criteria of ineligibility, unless otherwise agreed by Administrative Agent, Eligible Inventory shall not include any Inventory (a) which is not owned exclusively by such Borrower, (b) which is not subject to a first priority and perfected security interest in favor of Administrative Agent and is subject to no other Lien, (c) other than finished goods, work-in-process and raw materials Inventory, (d) which is not in good condition, or is unmerchantable or does not meet all standards imposed by any Governmental Authority having regulatory authority over such goods or their use or sale, (e) which is not currently either usable or salable, at prices approximating at least cost, in the normal course of such Borrower’s business, (f) which is obsolete or returned or repossessed or used goods taken in trade, (g) which is located outside the United States or is in-transit from vendors or suppliers, (h) which is located in a public warehouse or is in possession of a bailee or in a facility leased by such Borrower unless (i) the warehouseman, bailee, or lessor, as the case may be, has delivered to Administrative Agent a waiver or subordination agreement in form and substance satisfactory to Administrative Agent or (ii) the leased facility is 2200 Arthur Kill Road, Staten Island, New York and no more than six months have passed since the Agreement Date, or (i) that contains or bears any Proprietary Rights licensed to such Borrower by another Person unless such Borrower has delivered to Administrative Agent a consent or sublicense agreement from such licensor in form and substance acceptable to Administrative Agent or Administrative Agent is otherwise satisfied that it may sell or otherwise dispose of such Inventory in accordance with Section 12.2 without infringing the rights of the licensor of such Proprietary Rights or violating any contract of such Borrower with such licensor (and without payment of any royalties other than any royalties due with respect to the sale or disposition of such Inventory pursuant to the existing license agreement).  The identification of specific exclusions from eligibility herein is not exclusive or exhaustive.  Administrative Agent reserves the right in its discretion to establish additional or different criteria for determining Eligible Inventory, at any time, without prior notice.
 
“ Environmental Laws ” means any and all Applicable Laws relating to the protection or conservation of the environment, including (a) those relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including ambient air, surface water, ground water, or land, and (b) those otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.
 
“ Equipment ” has the meaning prescribed for such term as defined by the UCC, which definition is incorporated herein by reference, and includes, without limitation, with respect to a Person, all personal property used or useable by such Person in its business.
 
“ Equity Interests ” means, with respect to a Person, shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such interest.
 
“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto.
 
“ ERISA Affiliate ” means (a) any Person subject to ERISA whose employees are treated as being employed by the same employer as the employees of an Obligor under IRC Section 414(b), (b) any trade or business subject to ERISA whose employees are treated as being employed by the same employer as the employees of an Obligor under IRC Section 414(c), (c) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any organization subject to ERISA that is a member of an affiliated service group of which an Obligor is a member under IRC Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any Person subject to ERISA that is a party to an arrangement with an Obligor and whose employees are aggregated with the employees of an Obligor under IRC Section 414(o).
 
“ ERISA Benefit Plan ” means any “employee benefit plan” (as defined in  3(3) of ERISA) for which an Obligor or any Subsidiary or ERISA Affiliate of an Obligor is, or at any time during the immediately preceding six (6) years has been, an “ employer ” as defined in  3(5) of ERISA.
 
 
8
 
 
“ Event of Default ” has the meaning prescribed by Section 11.1 .
 
“ Excess Cash Flow ” means, with respect to Parent and its Subsidiaries for a Fiscal Year, an amount equal to EBITDA, minus (a) all principal and interest paid, minus (b) taxes paid, minus (c) unfinanced Capital Expenditures, minus (d) changes to working capital as determined according to GAAP, in each case determined for such Fiscal Year according to Borrower’s audited financial statements delivered pursuant to Section 9.4(a) .

“ Fiscal Month ” means a calendar month.
 
“ Fiscal Quarter ” means one of four fiscal quarters of a Fiscal Year, each consisting of a period of three (3) consecutive Fiscal Months, with the first of such quarters beginning on the first day of a such Fiscal Year and the last of such quarters ending on the last day of such Fiscal Year.
 
“ Fiscal Year ” means the fiscal year for financial accounting purposes, applicable to Parent and its Subsidiaries beginning on January 1 and ending on December 31.
 
“ Fixed Charge Coverage Ratio ” means, for a Person as of the last day of a Fiscal Quarter, the ratio of (a) the rolling twelve month EBITDA ( provided , that for purposes of this clause (a) , EBITDA shall exclude expenses of a Borrower that are directly allocable, dollar for dollar, to new cash contributions received by such Borrower in respect of the sale of Equity Interests, as demonstrated by such Borrower in writing in form and substance satisfactory to Administrative Agent), to (b) (i) unfinanced Capital Expenditures, plus (ii) taxes paid by such Person, plus (iii) Interest Expense paid, plus (v) principal payments made or required to be made on any and all long term Debt, in each case determined for such Fiscal Quarter (A) on any date of determination prior to June 1, 2013, for the period from June 1, 2012 through such date of determination and (B) thereafter, for the preceding twelve Fiscal Months.
 
“ GAAP ” means generally accepted accounting principles as promulgated by the American Institute of Certified Public Accountants, consistently applied, as in effect on the Agreement Date.
 
“ General Intangibles ” has the meaning prescribed for such term as defined by the UCC, which definition is incorporated herein by reference, and in any event includes, without limitation, all intangible personal property of every kind and nature (other than Accounts, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Instruments, Investment Property, Letter of Credit Rights, letters of credit and money), including, without limitation, contract rights, business records, rights and claims against carriers and shippers, customer lists, registrations, licenses, franchises, tax refund claims, rights to indemnification, warranty or guaranty contract, claims for any damages arising out of or for breach or default under or in connection with any contract, rights to exercise or enforce remedies, powers and privileges under any contract and rights and claims to any amounts payable under any contract of insurance, including without limitation, business interruption, property, casualty, key employee life or any other insurance.
 
“ Government Contract ” means, with respect to a Person, a contract for the provision of goods or services by such Person, under which the Account Debtor is the United States or an agency thereof.

“ Governmental Authority ” means any federal, state or local government, any subdivision thereof, and any agency, entity, instrumentality or authority owned or controlled thereby.
 
“ Guaranty ” means, with respect to a Person, an obligation of, or agreement by, such Person which directly or indirectly guarantees or assures, or in effect guarantees or assures, the payment, performance or collection of any obligations of another Person or assures or in effect assures the holder thereof against loss in respect thereof.
 
 
9
 
 
“ Hazardous Materials ” means any substances regulated under any Environmental Law, whether as pollutants, contaminants, or chemicals, or as industrial, toxic or hazardous substances or wastes, or otherwise.
 
“ Indemnified Claims ” means any and all claims, demands, actions, causes of action, judgments, obligations, liabilities, losses, damages and consequential damages, penalties, fines, costs, fees, expenses, Lender Party Expenses and disbursements (including without limitation, fees and expenses of attorneys and other professional consultants and experts in connection with investigation or defense) of every kind, known or unknown, existing or hereafter arising, foreseeable or unforeseeable, which may be imposed upon, threatened or asserted against, or incurred or paid by, an Indemnified Person at any time and from time to time, because of, resulting from, in connection with, or arising out of any transaction, act, omission, event or circumstance in any way connected with the Collateral, the Loan Documents (including enforcement of Administrative Agent’s or Lenders’ rights thereunder or defense of Administrative Agent’s or Lenders’ actions thereunder), any Default or Event of Default or any acts or omissions taken by such Indemnified Person in connection with this Agreement or administration of the Loan Documents.
 
“ Indemnified Persons ” collectively means Administrative Agent, Swing Lender, each Lender and their Affiliates, Equity Interest owners, officers, directors, members, managers, employees, agents and representatives.
 
“ Index ” means the reference rate for determining the rate of interest to accrue on the Obligations, being either the LIBOR Rate or the Base Rate.
 
“ Initial Funding Date ” means the date, not later than the date that is five (5) Business Days after the Agreement Date, on which all conditions precedent specified in Article VII have been satisfied or waived.
 
“ Initial Funding Date Certificate ” means a certificate in form and substance satisfactory to Administrative Agent executed by a duly authorized officer of each Obligor, dated and delivered on the Initial Funding Date, certifying that, as of the Initial Funding Date (a) all conditions precedent as set forth in Section 7.1 have been fulfilled, (b) all of the representations and warranties made by Obligors in this Agreement are true and correct in all material respects as of the Initial Funding Date (except to the extent, if any, that any such representations and warranties relate solely to an earlier date, in which case any such representations and warranties are true and correct as of such date), (c) no Default or Event of Default has occurred and is continuing, (d) Aggregate Availability, after giving effect to the initial Revolving Loans and the Term Loans and application of the proceeds thereof, the payment of all taxes then due and payable by each Obligor, all fees then due and payable under Section 4.3 and all Lender Party Expenses then due and payable and provision for reducing trade Debt to within thirty (30) days of terms, is equal to or greater than $500,000, (e) all amounts required to effect the full payment of the aggregate cash amount of the purchase price payable by each Obligor under the Asset Purchase Agreement have been funded to the Seller or deposited with Administrative Agent for funding to the Seller, in either such case as required by the Asset Purchase Agreement and (f) attaching a true and correct copy of the final Asset Purchase Agreement, executed by Obligors and Sellers, and all related exhibits and schedules thereto, in form and substance substantially identical to the form of Asset Purchase Agreement attached to the closing certificate delivered by Obligors pursuant to Section 7.1(a)(xxiii) .
 
“ Instrument ” has the meaning prescribed for such term as defined by the UCC, which definition is incorporated herein by reference, and includes, without limitation, a negotiable instrument or any other writing that evidences a right to the payment of a monetary obligation, is not itself a security agreement or lease, and is of a type that in the ordinary course of business is transferred by delivery with any necessary indorsement or assignment.
 
“ Intangible Assets ” means assets that are treated as intangible pursuant to GAAP, including, without limitation:  (a) obligations owing by officers, directors, members, managers, employees, subsidiaries, Affiliates or any Person in which any such officer, director, member, manager, employee, subsidiary, or Affiliate owns any interest and (b) any asset which is intangible or lacks intrinsic or marketable value or collectibility, including, without limitation, goodwill, noncompetition agreements, patents, copyrights, trademarks, franchises, organization or research and development costs.
 
 
10
 
 
“ Interest Expense ” means, for a Person for a period, total interest expense for such Person for such period, as determined in accordance with GAAP.
 
“ Inventory ” has the meaning prescribed for such term as defined by the UCC, which definition is incorporated herein by reference, and includes, without limitation, with respect to a Person, goods (including goods in-transit) that (a) are held or to be held by such Person for sale or lease or to be furnished under a contract of service, (b) are leased or to be leased by such Person as lessor or (c) consist of raw materials, work in process, finished goods or materials used or consumed in such Person’s business.
 
“ Investment ” means any loan or advance made to a Person, or any investment made, directly or indirectly in a Person, whether by acquisition of shares of capital stock, indebtedness or other obligations or securities or by loan, guarantee, advance, capital contribution or otherwise and whether made in cash by the transfer of Property or otherwise.
 
“ Investment Property ” has the meaning prescribed for such term as defined by the UCC, which definition is incorporated herein by reference, and includes, without limitation, a security (whether certificated or uncertificated) security entitlement, securities account, commodity contract, or commodity account.
 
“ IRC ” means the Internal Revenue Code of 1986, as amended and in effect from time to time.
 
“ Lender ” and “ Lenders ” have the respective meanings set forth in the preamble hereto and shall include the Swing Lender and any other Person made a party to this Agreement in accordance with the provisions of Section 17.12 .
 
“ Lender Party Expenses ” has the meaning prescribed for such term by Section 17.5 .
 
“ Lender Parties ” means Administrative Agent, Swing Lender and each Lender.
 
“ Letter of Credit Rights ” has the meaning prescribed for such term as defined by the UCC, which definition is incorporated herein by reference, and includes, without limitation, a right to payment or performance under a letter of credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance.
 
“ Leverage Ratio ” means, for a Person as of the end of a Fiscal Month, the ratio of Total Senior Debt to Tangible Net Worth, determined for such Person as of the end of such Fiscal Month.
 
“ LIBOR Rate ” means the greater of (a) the rate per annum published on each Business Day in the “Money Rates” table of The Wall Street Journal (or such other presentation within The Wall Street Journal as may be adopted hereafter for such information) as the one-month LIBOR rate, and (b) 1.50%; provided , that if such rate is no longer published by The Wall Street Journal , then the rate described in this clause (b) shall be a rate per annum determined by Administrative Agent in its sole discretion.
 
“ Lien ” means any interest in property securing an obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute, or contract, and including a security interest, collateral assignment, charge, claim, or lien arising from a security agreement, mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, conditional sale, trust receipt, lease, consignment or bailment for security purposes or similar agreement, or any contingent or other agreement to provide any of the foregoing.
 
 
11
 
 
“ Loan ” means any loan or advance made by Lenders to a Borrower under this Agreement and includes Swing Loans made by Swing Lender, and each Term Loan, and “ Loans ” means, collectively, all such loans and advances.
 
“ Loan Documents ” means this Agreement, each mortgage or deed of trust on Real Property, all deposit account control agreements, and any other documents or agreements executed in connection with any of the foregoing, and any other agreements, instruments, and documents heretofore, now or hereafter evidencing, securing, guaranteeing or otherwise relating to the Obligations, the Collateral or any other aspect of the transactions contemplated by this Agreement, and in each case including any and all renewals, extensions, modifications or amendments of any of the foregoing.
 
“ Margin Stock ” means “ margin stock ” as such term is defined in Regulation T, U or X of the Federal Reserve Board.
 
“ Material Adverse Effect ” means a materially adverse change in, or effect on, the business, assets, operations, prospects or condition, financial or otherwise, of an Obligor, or a material impairment of the ability of an Obligor to perform any obligations under the Loan Documents or a material adverse effect upon the legality, validity, binding effect or enforceability of any Loan Document.
 
“ Maturity Date ” means May 25, 2016.
 
“ Maximum Rate ” means the greater of (a) the “ monthly ceiling ” as referred to and in effect from time to time under the provisions of  303.004 of the Texas Finance Code, or (b) the maximum rate of interest permitted from day to day by any other applicable state or federal law.
 
“ Net Amount ” means, with respect to Eligible Accounts of a Borrower at any time, the gross amount of such Eligible Accounts less sales, excise or similar taxes, and less returns, discounts, claims, credits and allowances of any nature at any time issued, owing, granted, outstanding, available or claimed of a Borrower, determined in a manner acceptable to Administrative Agent in its discretion.
 
“ Net Income ” means, with respect to a Person for any period, net income, after income tax, if any, payable for such period, determined for such Person in accordance with GAAP.
 
“ NOLV ” means, the net orderly liquidation value percentage as reflected in the most recent Inventory appraisal delivered to Administrative Agent pursuant to Section 6.5 .
 
“ Novation Agreement ” means, with respect to a Government Contract, a novation agreement as provided by Federal Acquisition Regulation § 42.1204.
 
“ Obligations ” means all obligations and indebtedness now or hereafter owing by Obligors or any Obligor under this Agreement or otherwise arising in connection with this Agreement or any of the other Loan Documents, including, without limitation, all loan repayment obligations in respect of the Revolving Loans and each Term Loan, accrued interest obligations, indemnity obligations and all obligations for payment or reimbursement for fees, costs and expenses as provided by this Agreement or any of the other Loan Documents, whether direct or indirect, primary or secondary, joint, several, or joint and several, fixed or contingent, including indebtedness and obligations, if any, which may be assigned to or acquired by any Lender Party, and any and all renewals and extensions of the foregoing or of any part thereof.
 
“ Obligor ” means each Parent, each Borrower, and each other direct or indirect Subsidiary of Parent.
 
“ Parent ” means Precision Aerospace Components, Inc., a Delaware corporation, and its successors.
 
 
12
 
 
“ PBGC ” means the Pension Benefit Guaranty Corporation.
 
“ Percentage Share ” means, with respect to any Lender, (a) unless otherwise specifically set forth therein, when used in Sections 2.1 , 2.2 , 2.5 or 3.1 or if and when no Loans are outstanding, the percentage set forth opposite such Lender’s name on Schedule 1.1A and (b) when used otherwise, the percentage obtained by dividing (i) the sum of the unpaid principal balance of such Lender’s Loans at the time in question by (ii) the sum of the aggregate unpaid principal balance of all Loans at such time.
 
“ Permitted Liens ” means (a) Administrative Agent’s Liens, (b) Liens for unpaid taxes that are not delinquent, (c) Liens, if any, described in Schedule 1.1E , (d) Liens which constitute purchase money Liens and secure Debt permitted under clause (e) , clause (f) or clause (g) of Section 10.5 , but only to the extent such Liens attach only to the property acquired by the incurrence of such purchase money secured Debt, (e) the interests of lessors under operating leases, (f) statutory Liens in favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers or suppliers, incurred in the ordinary course of business of a Borrower and not in connection with the borrowing of money, and which Liens are for sums not delinquent or (g) Liens arising from deposits made in connection with obtaining worker’s compensation or other unemployment insurance.
 
“ Permitted Purchased Real Estate ” means Real Property purchased by an Obligor (a) solely with cash proceeds of Equity Interests issued by Parent after the Agreement Date or (b) otherwise, solely with the prior written consent of Administrative Agent on terms satisfactory to Administrative Agent in its sole discretion.
 
“ Person ” means any individual, corporation, joint venture, general or limited partnership, trust, unincorporated organization or Governmental Authority.
 
“ Prohibited Transaction ” means a prohibited transaction as defined by ERISA.
 
“ Proprietary Rights ” means inventions, designs, blueprints, plans, specifications, licenses, permits, patents, patent rights, copyrights, works which are the subject matter of copyrights, trademarks, service marks, trade names, trade styles, patent, trademark and service mark applications, trade secrets, good will and all licenses and rights related to any of the foregoing, and all other rights under any of the foregoing, all extensions, renewals, reissues, divisions and continuations of any of the foregoing, and all rights to sue for past, present and future infringement of any of the foregoing.
 
“Protective Advances” means a Revolving Loan made pursuant to Section 2.4
 
“ Purchased Assets ” means the “Purchased Assets” as defined by the Asset Purchase Agreement as in effect on the Initial Funding Date.
 
“ Real Property ” means any estates or interests in real property now owned or hereafter acquired by any Obligor and the improvements thereto.
 
“ Reportable Event ” means a reportable event as defined by ERISA.
 
“ Required Lenders ” means (a) Administrative Agent and (b) Lenders whose aggregate Percentage Shares equal or exceed fifty-one percent (51%); provided , that at any time there are two (2) or more Lenders, Required Lenders must include at least two (2) Lenders.
 
“ Responsible Officer ” means, with respect to an Obligor, its chief executive officer or president and, in addition, with respect to a Compliance Certificate or a Borrowing Base Certificate, its chief financial officer or treasurer.
 
 
13
 
 
“ Restricted Investment ” means, with respect to an Obligor, any Investment other than (a) the purchase of Inventory by a Borrower in the ordinary course of business, (b) acquisition of a business or assets with the prior written consent of Administrative Agent, (c) direct obligations of the United States of America or any agency thereof, or obligations guaranteed by the United States of America, that mature within one year from the date of acquisition thereof, certificates of deposit maturing within one year from the date of acquisition, issued by a commercial bank organized under the laws of the United States of America or any state thereof having capital and surplus aggregating at least $100,000,000 and (d) travel and similar advances to employees made in the ordinary course of business.
 
“ Revolving Credit Limit ” means $10,000,000.
 
“ Revolving Loans ” has the meaning prescribed for such term in Section 2.1 .
 
“ Sellers ” means, collectively, Fastener Distribution & Marketing Company, Inc., a Delaware corporation, Aero-Missile Components, Inc., a Pennsylvania corporation, and Creative Assembly Systems, Inc., an Ohio corporation.
 
“ Settlement ” has the meaning prescribed for such term in Section 2.5(b)
 
“ Settlement Date ” has the meaning prescribed for such term in Section 2.5(b) .
 
“ Shareholder’s Equity ” means, as of any date, stockholder’s or member’s equity as determined in accordance with GAAP or, in the case of a partnership, a partner’s partnership interest.
 
“ Solvent ” means, when used with respect to a  Person at the time of determination:
 
(a)           the assets of such Person, at a fair valuation, are in excess of the total amount of its debts (including contingent liabilities); and
 
(b)           the present fair saleable value of its assets is greater than its probable liability on its existing debts as such debts become absolute and matured; and
 
(c)           it is then able and expects to be able to pay its debts (including contingent debts and other commitments) as they mature; and
 
(d)           it has capital sufficient to carry on its business as conducted and as proposed to be conducted.
 
For purposes of determining whether a Person is Solvent, the amount of any contingent liability shall be computed as the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.
 
“ Subordinated Affiliate Debt ” has the meaning prescribed for such term in Section 15.8 .
 
“ Subordinated Affiliate Liens ” has the meaning prescribed for such term in Section 15.8 .
 
“ Subordinated Debt ” means Debt that is subordinated to the Obligations pursuant to a Subordination Agreement.
 
 
14
 
 
“ Subordination Agreement ” means, with respect to a Person to whom Debt is owed by an Obligor, a subordination agreement among Administrative Agent, such Person and such Obligor, pursuant to which all such Debt now or hereafter owing by such Obligor to such Person is subordinated to the Obligations in right of payment and claim, in form and substance satisfactory to Administrative Agent, including, without limitation, subordination and postponement of payments to such Person and limitation on the exercise of remedies by such Person.
 
“ Subsidiary ” means, with respect to a Person, any other Person of which more than ten percent (10%) of the voting Equity Interests is owned or controlled directly or indirectly by such Person or one or more of its Subsidiaries, or a combination thereof.
 
“ Swing Lender ” means New Star Business Credit, LLC or any other Lender that, at the request of a Borrower and with the consent of Administrative Agent agrees, in such Lender’s sole discretion, to become the Swing Lender hereunder.
 
“ Swing Loan ” has the meaning prescribed for such term in Section 2.2(b) .
 
“ Tangible Net Worth ” means, with respect to a Person, as of any date, (a) Shareholder’s Equity plus (b) Subordinated Debt less (c) Intangible Assets, in each case determined for such Person as of such date.
 
 “ Taxes ” has the meaning prescribed for such term in Section 4.8 .
 
“ Term Loans ” means each of the Apace I Term Loan and the Apace II Term Loan, and “ Term Loans ” means both such Loans.
 
“ Term Loan Installment Payment Date ” means, with respect to  each of the Term Loans, the first day of each calendar month, commencing on June 1, 2013, and continuing thereafter until the earlier of the Termination Date or until such the Term Loan has been paid in full.
 
“ Term Loan Installment Payment ” means (a) with respect to the Apace I Term Loan, the amount of $47,187.50 and (b) with respect to the Apace II Term Loan, the amount of $56,979.17.
 
“ Termination Date ” means the earlier of (a) the Maturity Date or (b) the day on which the Obligations of Lender to make Loans hereunder have been terminated pursuant to Section 13.1 or the Obligations first become due and payable in full.
 
“ Total Senior Debt ” means total Debt other than Subordinated Debt.
 
“ UCC ” means the Uniform Commercial Code in effect in the State of Texas, as amended from time to time.
 
Section 1.2.   Interpretive Provisions .  Unless expressly provided otherwise, any term which is defined by the UCC, wherever used in this Agreement, shall have the same meaning as is prescribed by the UCC.  The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.  The words “hereof,” “herein,” “hereunder” and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement.  Unless the context indicates otherwise, references to “Section,” “Subsection,” “clause” “Schedule” and “Exhibit” are references to this Agreement.  The term “documents” (if not capitalized as a defined term) includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced.  The term “including” is not limiting and means “including without limitation.”  Unless the context requires otherwise, in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including,” the words “to” and “until” each mean “to but excluding” and the word “through” means “to and including.”  The term, “discretion,” when used in reference to a Person, means the sole and absolute discretion of such Person, honestly determined by such Person under the circumstances.  Unless otherwise expressly provided herein, references to agreements (including this Agreement) and other contractual documents shall be deemed to include all subsequent amendments, restatements and other modifications thereto, and references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation.  The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement.  This Agreement and the other Loan Documents are the result of negotiations among the parties, have been reviewed by counsel to each party and are the products of all parties, and in consideration thereof, it is agreed that they shall not be construed against either party solely because of such party’s involvement in their preparation.  Unless otherwise specified, any reference to time shall be deemed to mean Central Standard Time or Central Daylight Time, as applicable, as in effect in Dallas County, Texas.
 
 
15
 
 
ARTICLE II
REVOLVING LOANS
 
Section 2.1.   Revolving Loans .  Subject to the terms and conditions of this Agreement, each Lender agrees to make Revolving Loans (each a “ Revolving Loan ” and collectively, “ Revolving Loans ”) to each Borrower from time to time during the period from the date of this Agreement to the Termination Date in an aggregate amount not exceeding such Lender’s Percentage Share of all Revolving Loans.  The aggregate unpaid principal amount of Revolving Loans outstanding to any Borrower, as of any time of determination, shall not at any time exceed the Borrowing Base of such Borrower, and the aggregate unpaid principal amount of Revolving Loans outstanding to all Borrowers, as of any time of determination, shall not at any time exceed the lesser of (a) the Aggregate Borrowing Base and (b) the Revolving Credit Limit, in each case as of such time of determination.  Each Borrower may borrow and repay Revolving Loans of such Borrower from time to time, subject to the terms of this Agreement.  Administrative Agent shall have the continuing right to establish and maintain any additional reserves for purposes of calculating the Borrowing Base of any Borrower in such amounts and at such times and with respect to such matters and for such purposes as Administrative Agent deems appropriate, without prior notice to any Borrower, including reserves with respect to collection performance, slow moving or obsolete Inventory, contingencies, amounts such Borrower is or may be required to pay (such as taxes, freight and shipping charges, insurance premiums, amounts owing to landlords, warehousemen, carriers, mechanics, materialmen, laborers or suppliers, or ad valorem, excise, sales, or other taxes) or any other matter in Administrative Agent’s discretion.  Any such reserves are solely for purposes of calculating the Borrowing Base of a Borrower and do not constitute or represent cash funds.
 
Section 2.2.   Request for Revolving Loans .
 
(a)   A Borrower shall request a Revolving Loan by delivering to Administrative Agent a written notice, signed by a Responsible Officer of such Borrower, in form satisfactory to Administrative Agent, accompanied by a Borrowing Base Certificate complying with Section 9.6 reflecting sufficient Availability.  Unless otherwise agreed by Administrative Agent, each request for a Revolving Loan shall be irrevocable and, in order to be effective, must be received by Administrative Agent prior to 11:00 a.m. on the requested funding date, specifying the applicable Borrower, the amount of the requested Revolving Loan, and the requested funding date, which shall be a Business Day.
 
 
16
 
 
(b)   Making of Swing Loans .  In the case of a request for a Revolving Loan and so long as either (i) the aggregate amount of Swing Loans made since the last Settlement Date, minus the amount of Collections or payments applied to Swing Loans since the last Settlement Date, plus the amount of the requested Revolving Loans does not exceed $10,000,000, or (ii) Swing Lender, in its sole discretion, shall agree to make a Swing Loan notwithstanding the foregoing limitation, Swing Lender shall make Revolving Loans in the amount of such borrowing (any such advance made solely by Swing Lender pursuant to this Section 2.2(b) being referred to as a “ Swing Loan ” and such advances being referred to collectively as “ Swing Loans ”) on the requested funding date applicable thereto by transferring immediately available funds to the Designated Account for such Borrower; provided however, that upon the request from a Borrower, the Swing Lender may advance a Swing Loan to such Borrower on the same day as the request therefor is made so long as such request is received by Swing Lender prior to 10:00 a.m.  Each Swing Loan shall be deemed to be a Revolving Loan hereunder and shall be subject to all the terms and conditions applicable to other advances of Revolving Loans, except that all payments on any Swing Loan shall be payable to Swing Lender solely for its own account.  Subject to the provisions of Section 2.2(c)(ii) , Swing Lender shall not make and shall not be obligated to make any Swing Loan if Swing Lender reasonably believes that (i) one or more of the applicable conditions precedent set forth herein will not be satisfied on the requested funding date, or (ii) the requested borrowing would exceed the Availability of the requesting Borrower on such funding date.  Swing Lender shall not otherwise be required to determine whether the applicable conditions precedent set forth herein have been satisfied on the funding date applicable thereto prior to making any Swing Loan.  The Swing Loans shall be secured by the Administrative Agent’s Liens, constitute Obligations hereunder, and bear interest at the rate applicable from time to time to Revolving Loans.
 
(c)   Making of Loans :
 
(i)   In the event that Swing Lender is not obligated to make a Swing Loan, then promptly after receipt of a request for a borrowing pursuant to Section 2.2(a) , and in any event not later than 1:00 p.m. on the Business Day such borrowing request was received by Administrative Agent, Administrative Agent shall notify Lenders, by telecopy, telephone, or other similar form of transmission, of the requested borrowing.  Each Lender shall make the amount of such Lender’s Percentage Share of the requested borrowing available to Administrative Agent in immediately available funds, to an account designated by Administrative Agent, not later than 10:00 a.m. on the funding date applicable thereto.  After Administrative Agent’s receipt of the proceeds thereof, Administrative Agent shall make the proceeds thereof available to the requesting Borrower on the applicable funding date by transferring immediately available funds equal to such proceeds received by Administrative Agent to the Designated Account for such Borrower; provided however, that, subject to the provisions of Section 2.2(c)(ii) , Administrative Agent shall not request any Lender to make, and no Lender shall have the obligation to make, any advance if (1) one or more of the applicable conditions precedent set forth in Article VII will not be satisfied on the requested funding date for the applicable borrowing unless such condition has been waived, or (2) the requested borrowing would exceed the Availability of the requesting Borrower on such funding date.
 
 
17
 
 
(ii)   Unless Administrative Agent receives notice from a Lender prior to 9:00 a.m. on the date of a borrowing, that such Lender will not make available as and when required hereunder to Administrative Agent for the account of a requesting Borrower the amount of that Lender’s Percentage Share of the borrowing, Administrative Agent may assume that each Lender has made or will make such amount available to Administrative Agent in immediately available funds on the respective funding date and Administrative Agent may (but shall not be so required), in reliance upon such assumption, make available to such Borrower on such date a corresponding amount.  If any Lender shall not have made its full amount available to Administrative Agent in immediately available funds and if Administrative Agent in such circumstances has made available to such Borrower such amount, that Lender shall on the Business Day following such funding date make such amount available to Administrative Agent, together with interest at the Defaulting Lender Rate for each day during such period.  A notice submitted by Administrative Agent to any Lender with respect to amounts owing under this Section 2.2(c)(ii) shall be conclusive, absent manifest error.  If such amount is so made available, such payment to Administrative Agent shall constitute such Lender’s advance on the date of Borrowing for all purposes of this Agreement.  If such amount is not made available to Administrative Agent on the Business Day following the funding date, Administrative Agent will notify such Borrower of such failure to fund and, upon demand by Administrative Agent, such Borrower shall pay such amount to Administrative Agent for Administrative Agent’s account, together with interest thereon for each day elapsed since the date of such borrowing, at a rate per annum equal to the interest rate applicable at the time to the Revolving Loans composing such borrowing.  The failure of any Lender to make any advance on any funding date shall not relieve any other Lender of any obligation hereunder to make an advance on such funding date, but no Lender shall be responsible for the failure of any other Lender to make the advance to be made by such other Lender on any funding date.
 
 
18
 
 
(iii)   Administrative Agent shall not be obligated to transfer to a Defaulting Lender any payments made by a Borrower to Administrative Agent for the Defaulting Lender’s benefit, and, in the absence of such transfer to the Defaulting Lender, Administrative Agent shall transfer any such payments to each other non-Defaulting Lender ratably in accordance with their Commitments (but only to the extent that such Defaulting Lender’s advance was funded by the other Lender Parties) or, if so directed by such Borrower and if no Default or Event of Default has occurred and is continuing (and to the extent such Defaulting Lender’s advance was not funded by the Lender Parties), retain same to be re-advanced to such Borrower as if such Defaulting Lender had made advances to such Borrower.  Subject to the foregoing, Administrative Agent may hold and, in its permitted discretion, re-lend to such Borrower for the account of such Defaulting Lender the amount of all such payments received and retained by Administrative Agent for the account of such Defaulting Lender.  Solely for the purposes of voting or consenting to matters with respect to the Loan Documents, such Defaulting Lender shall be deemed not to be a “Lender” and such Lender’s Commitment shall be deemed to be zero.  This Section shall remain effective with respect to such Lender until (x) the Obligations under this Agreement shall have been declared or shall have become immediately due and payable, (y) the non-Defaulting Lenders, Administrative Agent, and Borrowers shall have waived such Defaulting Lender’s default in writing, or (z) the Defaulting Lender makes its Percentage Share of the applicable advance and pays to Administrative Agent all amounts owing by Defaulting Lender in respect thereof.  The operation of this Section shall not be construed to increase or otherwise affect the Commitment of any Lender, to relieve or excuse the performance by such Defaulting Lender or any other Lender of its duties and obligations hereunder, or to relieve or excuse the performance by such Borrower of its duties and obligations hereunder to Administrative Agent or to the Lenders other than such Defaulting Lender.  Any such failure to fund by any Defaulting Lender shall constitute a material breach by such Defaulting Lender of this Agreement and shall entitle such Borrower at its option, upon written notice to Administrative Agent, to arrange for a substitute Lender to assume the Commitment of such Defaulting Lender, such substitute Lender to be reasonably acceptable to Administrative Agent.  In connection with the arrangement of such a substitute Lender, the Defaulting Lender shall have no right to refuse to be replaced hereunder.
 
(d)    Unless otherwise agreed by Administrative Agent, all or that portion of the proceeds of the initial Revolving Loans that will be used by Apace I and Apace II, respectively, to finance the purchase of Purchased Assets pursuant to the Acquisition, when funded, shall be disbursed by Administrative Agent to the Sellers for the account of Apace I and Apace II, and otherwise, proceeds of Revolving Loans, when funded, shall be disbursed by Administrative Agent to the Designated Account.
 
Section 2.3.   Deemed Request for Revolving Loans .  Each Borrower irrevocably authorizes Administrative Agent, on behalf of each Lender, at its election and without necessity for request by any Borrower, to make a Revolving Loan to each Borrower in an amount equal to any amount chargeable to or required to be paid by each Borrower pursuant to the terms of this Agreement and the other Loan Documents, including, without limitation, payments of principal, interest, fees and reimbursable expenses, and apply the proceeds thereof in payment of such Obligations.  Any such Revolving Loans shall be secured by the Collateral and shall be included in the Obligations.
 
 
19
 
 
Section 2.4.   Protective Advances .  Administrative Agent is authorized to request, from time to time in its discretion (but without any obligation to do so), that Lenders make Revolving Loans to Borrowers or any Borrower which Administrative Agent deems necessary or appropriate to preserve or protect the Collateral, or any portion thereof.
 
Section 2.5.   Settlement .
 
(a)   It is agreed that each Lender’s funded portion of the Loans is intended by the Lenders to equal, at all times, such Lender’s Percentage Share of the outstanding Loans.  Such agreement notwithstanding, Administrative Agent, Swing Lender, and the other Lenders agree (which agreement shall not be for the benefit of any Borrower) that in order to facilitate the administration of this Agreement and the other Loan Documents, settlement among the Lenders as to the Revolving Loans and the Swing Loans shall take place on a periodic basis in accordance with the following provisions:
 
(b)   Administrative Agent shall request settlement (“ Settlement ”) with the Lenders on a weekly basis, or on a more frequent basis if so determined by Administrative Agent on behalf of Swing Lender, with respect to the outstanding Swing Loans, as to each by notifying the Lenders by telecopy, telephone, or other similar form of transmission, of such requested Settlement, no later than 2:00 p.m. on the Business Day immediately prior to the date of such requested Settlement (the date of such requested Settlement being the “ Settlement Date ”).  Such notice of a Settlement Date shall include a summary statement of the amount of outstanding advances and Swing Loans for the period since the prior Settlement Date.  Subject to the terms and conditions contained herein:  (y) if a Lender’s balance of the advances (including Swing Loans) exceeds such Lender’s Percentage Share of the Loans (including Swing Loans) as of a Settlement Date, then Administrative Agent shall, by no later than 12:00 p.m. on the Settlement Date, transfer in immediately available funds to a deposit account of such Lender (as such Lender may designate), an amount such that each such Lender shall, upon receipt of such amount, have as of the Settlement Date, its Percentage Share of the Loans (including Swing Loans), and (z) if a Lender’s balance of the advances (including Swing Loans) is less than such Lender’s Percentage Share of the Loans (including Swing Loans) as of a Settlement Date, such Lender shall no later than 12:00 p.m. on the Settlement Date transfer in immediately available funds to the account designated by Administrative Agent, an amount such that each such Lender shall, upon transfer of such amount, have as of the Settlement Date, its Percentage Share of the Loans (including Swing Loans).  Such amounts made available to Administrative Agent under clause (z) of the immediately preceding sentence shall be applied against the amounts of the applicable Swing Loans and, together with the portion of such Swing Loans representing Swing Lender’s Percentage Share thereof, shall constitute advances of such Lenders.  If any such amount is not made available to Administrative Agent by any Lender on the Settlement Date applicable thereto to the extent required by the terms hereof, Administrative Agent shall be entitled to recover for its account such amount on demand from such Lender together with interest thereon at the Defaulting Lender Rate.
 
 
20
 
 
(c)   In determining whether a Lender’s balance of the Loans (including Swing Loans) is less than, equal to, or greater than such Lender’s Percentage Share as of a Settlement Date, Administrative Agent shall, as part of the relevant Settlement, apply to such balance the portion of payments actually received in good funds by Administrative Agent with respect to principal, interest, fees payable by a Borrower and allocable to the Lenders hereunder, and proceeds of Collateral.
 
(d)   Between Settlement Dates, Administrative Agent, to the extent Swing Loans are outstanding, may pay over to Administrative Agent or Swing Lender, as applicable, any collections or payments received by Administrative Agent, that in accordance with the terms of this Agreement would be applied to the reduction of the Swing Loans.
 
ARTICLE III
TERM LOAN
 
Section 3.1.   Term Loans .
 
(a)   Subject to and on the terms and conditions of this Agreement, on the Initial Funding Date, each Lender agrees to make a term loan to Apace I in an aggregate amount equal to such Lender’s Percentage Share of the amount of $1,132,500.00 (such Loans in the aggregate, the “ Apace I Term Loan ”).  The obligation to repay the Apace I Term Loan, and accrued interest thereon, shall be evidenced by this Agreement.
 
(b)   Subject to and on the terms and conditions of this Agreement, on the Initial Funding Date, each Lender agrees to make a term loan to Apace II in an aggregate amount equal to such Lender’s Percentage Share of the amount of $1,367,500.00 (such Loans in the aggregate, the “ Apace II Term Loan ”).  The obligation to repay the Apace II Term Loan, and accrued interest thereon, shall be evidenced by this Agreement.
 
Section 3.2.   Disbursement of Term Loans .
 
(a)   Unless otherwise agreed by Administrative Agent, all or that portion of the proceeds of the Apace I Term Loan that will be used by Apace I to finance the purchase of Purchased Assets pursuant to the Acquisition, when funded, shall be disbursed by Administrative Agent to the Sellers for the account of Apace I, and otherwise, proceeds of the Apace I Term Loan, when funded, shall be disbursed by Administrative Agent to the Designated Account of Apace I.
 
(b)   Unless otherwise agreed by Administrative Agent, all or that portion of the proceeds of the Apace II Term Loan that will be used by Apace II to finance the purchase of Purchased Assets pursuant to the Acquisition, when funded, shall be disbursed by Administrative Agent to the Sellers for the account of Apace II, and otherwise, proceeds of the Apace II Term Loan, when funded, shall be disbursed by Administrative Agent to the Designated Account of Apace II.
 
 
21
 
 
ARTICLE IV
INTEREST, FEES, REIMBURSEMENTS
 
Section 4.1.   Interest .
 
(a)   All outstanding Obligations shall bear interest on the unpaid principal amount thereof (including, to the extent permitted by law, on accrued interest thereon not paid when due) from the date made until paid in full in cash at a fluctuating per annum rate equal to the lesser of (A) the Designated Index plus the Applicable Margin or (B) the Maximum Rate.  Each change in the Base Rate or the LIBOR Rate, as applicable, shall become effective as of the effective date of such change.
 
(b)   At any time when any Default or Event of Default has occurred and is continuing, upon written notice by Administrative Agent to Borrowers, effective as of any date on or after the occurrence of such Default or Event of Default and continuing for so long as any such Default or Event of Default is continuing, as may be specified in such notice, all Obligations shall bear interest at a rate per annum equal to the Default Rate.
 
(c)   Interest shall be payable in arrears on the first day of each calendar month and on the Termination Date.  Subject to Section 4.9 , interest shall be computed on the basis of a year of 360 days and actual days elapsed (which results in more interest being paid than if computed on the basis of a 365 day year).
 
Section 4.2.   Designated Index .  Subject to the terms of this Agreement, Borrowers shall have the option to elect the Index applicable to the Obligations, which option shall be exercised in the manner provided herein.  Not later than ten (10) days prior to the beginning of each calendar quarter, commencing with the calendar quarter beginning July 1, 2012 and continuing thereafter on a calendar quarter basis, the Borrower Representative may deliver a written notice to Administrative Agent, therein designating that the Obligations outstanding during such fiscal quarter will bear interest at an Index determined according to either the Base Rate or the LIBOR Rate.  The Index designated in such written notice shall become effective on the first (1 st ) day of the calendar quarter beginning after Administrative Agent’s timely receipt of such notice and shall continue in effect through and including the last day of such calendar quarter.  Any notice to Administrative Agent pursuant to this Section 4.2 shall be irrevocable and shall remain in effect until the effective date of any subsequent change in the Index effected as provided herein.  In the event the Borrower Representative does not designate an Index for a particular calendar quarter as provided herein, the Index in effect for the previous calendar quarter shall remain in effect until the effective date of any subsequent change in the Index effected as provided herein.
 
Section 4.3.   Fees .  Subject to the terms of this Agreement:
 
(a)   Commitment Fee .  Borrowers jointly and severally agree to pay to Administrative Agent for the account of each Administrative Agent, for the account of the Lenders, a commitment fee in an amount equal to $125,000, which amount shall be earned and payable on the Initial Funding Date.
 
 
22
 
 
(b)   Unused Line Fee .  Borrowers jointly and severally agree to pay to Administrative Agent for the account of each Lender an unused line fee determined on a daily basis, payable on the first day of each month and on the Termination Date, in an amount equal to one-half percent (0.50%) per annum multiplied by such Lender’s Percentage Share of the amount by which the Revolving Credit Limit exceeded the sum of the average daily outstanding amount of Revolving Loans during the immediately preceding calendar month, or shorter period if calculated on the Termination Date.  Such fee shall be computed on the basis of a 360-day year for the actual number of days elapsed.  All payments on the Loans received by Administrative Agent shall be deemed to be credited to the Revolving Loans immediately upon receipt for purposes of calculating the amount payable pursuant to this Section 4.3(b) .
 
(c)   Collateral Monitoring Fee .  Borrowers jointly and severally agree to pay to Administrative Agent, for the account of Administrative Agent, a monthly collateral monitoring fee in the amount of $1,250 for each calendar month, or portion thereof, during the term of this Agreement.  The collateral monitoring fee for each calendar month shall be due and payable in arrears on the first day of each calendar month and on the Termination Date, and shall be prorated for any partial calendar month.
 
Section 4.4.   Increased Cost and Reduced Return .  If, after the date hereof, the adoption or change of any Applicable Law, or the interpretation or administration thereof by any Governmental Authority or compliance by Administrative Agent or Lenders with any directive of any such Governmental Authority shall (i) subject Lenders to any tax, duty or other charge with respect to any Loan or Lenders’ obligation to make Loans, or change the basis of taxation of any amounts payable to Administrative Agent or Lenders under this Agreement in respect of any Loans (other than taxes imposed on the overall net income of Administrative Agent or Lenders), (ii) impose or modify any reserve, special deposit, assessment or similar requirement relating to any assets, liabilities or commitments of Administrative Agent or Lenders or (iii) impose on Administrative Agent or Lenders any condition affecting this Agreement or any extensions of credit or commitments hereunder, and the result of any of the foregoing is to increase the cost to Lenders of making or maintaining, any Loans or to reduce any amount received or receivable by Lenders under this Agreement with respect to any Loans, then Obligors jointly and severally agree to pay to Administrative Agent and/or Lenders on demand such amount or amounts as will compensate Administrative Agent and/or Lenders for such increased cost or reduction.
 
Section 4.5.   Reserved .
 
Section 4.6.   Reserved .
 
Section 4.7.   Compensation .  Upon the request of Administrative Agent, each Borrower shall pay to Administrative Agent, for the account of each Lender, such amount or amounts as shall be sufficient (in the reasonable opinion of Administrative Agent) to compensate Lenders for any loss, cost, or expense (including loss of anticipated profits) incurred by it as a result of any payment, or any failure by such Borrower for any reason (including Lenders’ refusal of a request for a Loan by reason of the failure of a condition precedent required by this Agreement) to borrow or prepay a Loan on the date designated for such borrowing or prepayment specified in the relevant Borrowing Notice.
 
 
23
 
 
Section 4.8.   Taxes .
 
(a)   Any and all payments by Borrowers to Administrative Agent and Lenders hereunder or under any other Loan Document shall be made free and clear of, and without deduction for, any and all present or future taxes, duties, levies, imposts, deductions, charges, or withholdings, and all liabilities with respect thereto, excluding taxes imposed on Administrative Agent or each Lender’s income, and franchise taxes imposed on it, by the jurisdiction under the laws of which Administrative Agent or Lenders (or their applicable lending office) is organized or any political subdivision thereof (all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings, and liabilities being hereinafter referred to as “ Taxes ”).  If any Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable under this Agreement or any other Loan Document to Administrative Agent or Lenders, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this ) Administrative Agent or Lenders, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions, (iii) such  Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with Applicable Law, and (iv) such Borrower shall furnish to Administrative Agent and Lenders the original or a certified copy of a receipt evidencing payment thereof.
 
(b)   In addition, Borrowers jointly and severally agree to pay any and all present or future stamp or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under this Agreement or any other Loan Document or from the execution or delivery of, or otherwise with respect to, this Agreement or any other Loan Document (hereinafter referred to as “ Other Taxes ”).
 
(c)   Borrowers jointly and severally agree to indemnify, defend and hold harmless Administrative Agent and Lenders for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 4.8 ) paid by Administrative Agent or Lenders and any liability (including penalties, interest, and expenses) arising therefrom or with respect thereto.
 
(d)   Within five (5) days after the date of any payment by a Borrower of Taxes or Other Taxes, such Borrower shall furnish to Administrative Agent the original or a certified copy of a receipt evidencing such payment.
 
(e)   Without prejudice to the survival of any other agreement of Borrowers hereunder, the agreements and obligations of Borrowers contained in this Agreement shall survive the termination of the Commitments and the payment in full of the Loans.
 
 
24
 
 
Section 4.9.   Maximum Interest; Controlling Limitation .
 
(a)   If the rate of interest on the Obligations, absent the limitations set forth in this Section 4.9 , would have exceeded the Maximum Rate, then the actual rate of interest shall be the Maximum Rate, and, if in the future, the interest rate would otherwise be less than the Maximum Rate, then the interest rate shall remain at the Maximum Rate until such time as the amount of interest paid hereunder equals the amount of interest which would have been paid if the same had not been limited by the Maximum Rate.  In the event that, upon payment in full of the Obligations, the total amount of interest paid or accrued under the terms of this Agreement is less than the total amount of interest which would, but for this Section 4.9 , have been paid or accrued if the interest rate otherwise provided by this Agreement had at all times been in effect, then Borrowers jointly and severally agree, to the extent permitted by Applicable Law, to pay to Administrative Agent an amount equal to the (a) the lesser of (i) the amount of interest which would have been paid or accrued if the Maximum Rate had, at all times, been in effect and (ii) the amount of interest which would have been paid or accrued had the interest rate otherwise set forth in this Agreement, at all times, been in effect, less (b) the amount of interest actually paid or accrued under this Agreement.
 
(b)   Administrative Agent, Lenders and each Borrower each acknowledges, agrees, and declares that it is its intention to expressly comply with all Applicable Law in respect of limitations on the amount or rate of interest that can legally be contracted for, charged or received under or in connection with the Loan Documents.  Notwithstanding anything to the contrary contained in any Loan Document (even if any such provision expressly declares that it controls all other provisions of the Loan Documents), in no contingency or event whatsoever shall the amount of interest (including the aggregate of all charges, fees, benefits, or other compensation which constitutes interest under any Applicable Law) under the Loan Documents paid by Borrowers or any Borrower, received by Administrative Agent, Lenders or Swing Lender agreed to be paid by Borrowers or any Borrower, or requested or demanded to be paid by Administrative Agent, Lenders or the Swing Lender, exceed the Maximum Rate, and all provisions of the Loan Documents in respect of the contracting for, charging, or receiving compensation for the use, forbearance, or detention of money shall be limited as provided by this Section 4.9 .  In the event any such interest is paid to Administrative Agent, Lenders or the Swing Lender by any Borrower in an amount or at a rate which would exceed the Maximum Rate, Administrative Agent, Lenders or the Swing Lender, then, notwithstanding any entry on Administrative Agent, Lenders’ or the Swing Lender’s books otherwise, such excess shall conclusively be deemed to be automatically applied to any unpaid amount of the Obligations other than interest, in inverse order of maturity, or if the amount of such excess exceeds said unpaid amount, such excess shall be refunded to such Borrower.  All interest paid, or agreed to be paid, by Borrowers or any Borrower, or taken, reserved, or received by Administrative Agent, Lenders or the Swing Lender shall be amortized, prorated, spread, and allocated in respect of the Obligations throughout the full term of this Agreement.  Notwithstanding any provision contained in any of the Loan Documents, or in any other related documents executed pursuant hereto, neither Administrative Agent, Lenders nor the Swing Lender shall ever be entitled to charge, receive, take, reserve, collect, or apply as interest any amount which, together with all other interest under the Loan Documents would result in a rate of interest under the Loan Documents in excess of the Maximum Rate.  Each Borrower, Administrative Agent, Lenders and the Swing Lender shall, to the maximum extent permitted under any Applicable Law, (i) characterize any non-principal payment as a standby fee, commitment fee, prepayment charge, delinquency charge, expense, or reimbursement for a third-party expense rather than as interest and (ii) exclude prepayments, acceleration, and the effect thereof.  Nothing in any Loan Document shall be construed or so operate as to require or obligate any Borrower to pay any interest, fees, costs, or charges greater than is permitted by any Applicable Law.  Subject to the foregoing, each Borrower hereby agrees that the actual effective rate of interest from time to time existing under the Loan Documents, including all amounts agreed to by any Borrower pursuant to and in accordance with the Loan Documents which may be deemed to be interest under any Applicable Law, shall be deemed to be a rate which is agreed to and stipulated by such Borrower and Lenders in accordance with Applicable Law.
 
 
25
 
 
ARTICLE V
PAYMENT
 
Section 5.1.   Interest .  Accrued interest on the Loans to each Borrower shall be due and payable in arrears on the first day of each calendar month and on the Termination Date.
 
Section 5.2.   Principal .
 
(a)   Subject to the terms of this Agreement, Borrowers may prepay Revolving Loans at any time.  Each Borrower promises to pay to Administrative Agent, for the account of the Lenders, on demand, the amount, if any, at any time, by which the unpaid balance of the Revolving Loans to such Borrower exceeds the Borrowing Base of such Borrower at such time.  Borrowers jointly and severally agree to pay to Administrative Agent, for the account of the Lenders, on demand, the amount, if any, at any time, by which the unpaid balance of the Revolving Loans to all Borrowers exceeds the lesser of the Revolving Credit Limit and the Aggregate Borrowing Base.
 
(b)   Apace I promises to make payments to Administrative Agent, for the account of the Lenders, in reduction of the principal of the Apace I Term Loan (i) on each Term Loan Installment Payment Date, in an amount equal to the Term Loan Installment Payment applicable to the Apace I Term Loan, and (ii) on the Termination Date, in an amount equal to all remaining principal on the Apace I Term Loan.  Subject to the terms of this Agreement, Apace I may prepay the principal of the Apace I Term Loan, in whole or in part, at any time and from time to time.  Any such voluntary prepayment of less than all of the outstanding principal of the Apace I Term Loan shall be applied to the installments of principal of the Apace I Term Loan in the inverse order of maturity.
 
(c)   Apace II promises to make payments to Administrative Agent, for the account of the Lenders, in reduction of the principal of the Apace II Term Loan (i) on each Term Loan Installment Payment Date, in an amount equal to the Term Loan Installment Payment applicable to the Apace II Term Loan, and (ii) on the Termination Date, in an amount equal to all remaining principal on the Apace II Term Loan.  Subject to the terms of this Agreement, Apace II may prepay the principal of the Apace II Term Loan, in whole or in part, at any time and from time to time.  Any such voluntary prepayment of less than all of the outstanding principal of the Apace II Term Loan shall be applied to the installments of principal of the Apace II Term Loan in the inverse order of maturity.
 
(d)   Concurrently with the delivery of financial statements pursuant to Section 9.4(a) (commencing with respect to Parent’s fiscal year ending December 31, 2012 and thereafter) but in any event no later than 90 days after the last day of each Fiscal Year, Obligors promise to cause the principal of the Term Loans to be prepaid in an aggregate amount equal to (i) 50.0% of aggregate Excess Cash Flow for Parent and its Subsidiaries for such Fiscal Year less (ii) aggregate prepayments, if any, made on the Term Loans (excluding payments pursuant to Section 5.4 ) during the period of 90 days preceding the date of delivery of such financial statements).  With respect to each such Fiscal Year, such payment shall be due and payable on or before the expiration of 60 days after Administrative Agent’s receipt of such financial statements for such Fiscal Year.  Any such prepayment shall be applied to the installments of principal of the Term Loan in the inverse order of maturity, ratably with respect to the Apace I Term Loan and the Apace II Term Loan in accordance with the respective outstanding principal amounts thereof outstanding as of the date of such application.
 
 
26
 
 
Section 5.3.   Mandatory Payments on Termination Date .  All Obligations are due and payable in full on the Termination Date.  On the Termination Date:
 
(a)   Each Borrower shall pay to Administrative Agent, for the account of Swing Lender, in full the outstanding principal balance of the Swing Loans owing by such Borrower plus all unpaid accrued interest thereon;
 
(b)   Each Borrower shall pay to Administrative Agent, for the account of the Lenders, in full the outstanding principal balance of the Revolving Loans owing by such Borrower plus all unpaid accrued interest thereon;
 
(c)   (i) Apace I promises to pay to Administrative Agent, for the account of the Lenders, in full, the outstanding principal balance of the Apace I Term Loan plus all unpaid accrued interest thereon, and (ii) Apace II promises to pay to Administrative Agent, for the account of the Lenders, in full, the outstanding principal balance of the Apace II Term Loan plus all unpaid accrued interest thereon;
 
(d)   If the Termination Date is prior to the Maturity Date,  Borrower promises to pay to Administrative Agent, for the account of Lender, the amount required by Section 5.5 ; and
 
(e)   Borrowers shall pay all unpaid costs and expenses and all other Obligations payable under the Loan Documents.
 
Section 5.4.   Mandatory Prepayment in Respect of Certain Events .  All proceeds or other cash payments received by a Borrower in respect of a Distribution to such Borrower or in respect of the sale, lease or other disposition by such Borrower of any asset, other than (i) the sale of Inventory in the ordinary course of business or (ii) proceeds from the sale of Equity Interests in Parent, shall be promptly paid to Administrative Agent, for the account of Lenders, for application to the Obligations owing by such Borrower in such manner as Administrative Agent may determine in its discretion.
 
Section 5.5.   Early Termination .  Borrowers acknowledge that occurrence of the Termination Date prior to the Maturity Date would result in the loss by Lenders of benefits under this Agreement and that the damages incurred by Lenders as a result thereof would be difficult and impractical to ascertain.  Subject to the terms of this Agreement, if for any reason the Termination Date occurs on any date prior to the Maturity Date, Obligors jointly and severally agree to pay to Administrative Agent, for the account of Lenders, in addition to all other amounts payable under the Loan Documents, an amount, calculated as the Termination Date, equal to the product of (a) the sum of the Revolving Credit Limit plus the aggregate unpaid principal balance of the Term Loans times (b) the following percentage, as applicable:  (i) if the Termination Date is on any day during the period from the Agreement Date through the day preceding the date that is the first anniversary of the Agreement Date, 3.0%, (ii) if the Termination Date is on any day during the period from and including the date that is the first anniversary of the Agreement Date through the day preceding the date that is the   second anniversary of the Agreement Date, 2.0% or (iii) if the Termination Date is on any day during the period from and including the date that is the second anniversary of the Agreement Date through the Maturity Date, 1.0%, which amount Borrowers and Lenders each acknowledges to be the best estimate of the amount necessary to fairly and reasonably compensate Lenders for their loss resulting from occurrence of the Termination Date prior to the Maturity Date.  Notwithstanding the foregoing, Obligors shall have no liability for payment under this Section 5.5 in the event the Termination Date occurs by reason of written notice of termination received by Administrative Agent from Obligors within 10 days following written notification by Administrative Agent declining a written request by Obligors for an increase in the amount of the Revolving Commitments, provided , that as of the time of such written notice of declination, (a) no Default or Event of Default has occurred and continues in existence and (b) the amount of the Aggregate Borrowing Base equals or exceeds 100% of the aggregate amount of Revolving Commitments.
 
 
27
 
 
Section 5.6.   General Payment Provisions .  All payments to be made by any Borrower under the Loan Documents shall be made without set-off, recoupment, or counterclaim.  Except as otherwise expressly provided herein, all payments by each Borrower shall be made in Dollars and in immediately available funds to Administrative Agent, for the account of Lenders, at its address set forth in Section 17.6 , no later than 2:00 p.m. on the date specified herein.  Any payment received by Administrative Agent later than 2:00 p.m. shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue.  Whenever any payment is due on a day other than a Business Day, such payment shall be due on the following Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be.
 
Section 5.7.   Application .  All payments not relating to amounts due on Loans or specific fees, and all proceeds of Accounts or other Collateral received by Administrative Agent pursuant to Section 6.3 , shall be applied to the Obligations in the following order, subject to the provisions of this Agreement: (a) at any time when no Default or Event of Default exists, first , to pay to Administrative Agent and/or Lenders any Lender Party Expenses then due; second , to interest due and payable in respect of any outstanding Swing Loans; third , to interest due and payable in respect of the remaining Obligations; fourth , to pay or prepay principal of the Revolving Loans (including the Swing Loans); fifth , to pay or prepay principal of the Term Loans (ratably with respect to the Apace I Term Loan and the Apace II Term Loan in accordance with the respective outstanding principal amounts thereof outstanding as of the date of such application); and sixth , to the payment of any other Obligations, in such manner and order as Administrative Agent determines in its discretion, and (b) at any time when any Default or Event of Default exists, in such order as Administrative Agent determines in its sole discretion.  Administrative Agent shall have the continuing right to apply and reverse and reapply any application, subject to the terms of this Agreement.
 
Section 5.8.   Reinstatement .  If after receipt and application for the account of Borrowers or any Borrower of any payment or proceeds any such application is invalidated, set aside, determined to be void or voidable for any reason, then the Obligations or part thereof intended to be satisfied by such application shall be revived and continued and this Agreement shall continue in full force as if such payment or proceeds had not been received by Administrative Agent and each of such Borrowers or Borrower shall be liable to pay to Administrative Agent, for the account of Lenders, and each such Borrower, as applicable, hereby does indemnify Lenders and Administrative Agent and defend and hold Lenders and Administrative Agent harmless in, an amount equal to the amount of such application.  The provisions of this Section 5.8 shall survive the termination of this Agreement.
 
 
28
 
 
Section 5.9.   Account Stated .  Administrative Agent will provide to the Borrower Representative a monthly statement of Loans, payments, and other transactions pursuant to this Agreement.  Such statement shall be deemed correct, accurate, and binding on each Borrower and an account stated, subject to reversals and reapplications made as provided in Section 5.8 and corrections of errors discovered by Administrative Agent, unless, as to any Borrower, such Borrower notifies Administrative Agent in writing to the contrary within thirty (30) days after such statement is rendered.  In the event a timely written notice of objections is given by such Borrower, only the items to which exception is expressly made will be considered to be disputed.
 
ARTICLE VI
COLLATERAL
 
Section 6.1.   Security Interest .  Each Obligor hereby grants to Administrative Agent, for the benefit of the Lender Parties, a continuing security interest and lien in, and collateral assignment of, all of such Obligor’s right, title and interest in and to all of the following, in each case both now owned and hereafter acquired, as security for the payment and performance of the Obligations owing by such Obligor: All Accounts, Inventory, Equipment, General Intangibles, Chattel Paper, Letter of Credit Rights, Proprietary Rights, Instruments, Documents and documents of title, Investment Property (including all Equity Interests of each Subsidiary of such Obligor), Deposit Accounts, Commercial Tort Claims, money, cash, cash equivalents, securities and other personal property of any kind at any time held directly or indirectly by such Obligor or any affiliate of such Obligor, all books and records, whether in tangible or intangible form, all  other assets, if any, and all accessions to, substitutions for and replacements, products and proceeds of any of the foregoing (including without limitation, in the case of Apace I, all of the Purchased Assets purchased by Apace I and in the case of Apace II, all of the Purchased Assets purchased by Apace II.  Administrative Agent’s Liens shall continue in full force and effect in all Collateral until all Obligations have been indefeasibly and fully paid and all commitments of the Lenders under this Agreement have been terminated.
 
Section 6.2.   Perfection and Protection of Administrative Agent’s Security Interest .  Administrative Agent’s Liens at all times shall be and remain first, prior and senior to any other interests in the Collateral, except for Permitted Liens, if any, that are otherwise allowed to be prior to Administrative Agent's Liens and as may be expressly agreed otherwise by Administrative Agent in writing.  Obligors shall take all action requested by Administrative Agent at any time to perfect, maintain, protect and enforce Administrative Agent’s Liens and to ensure that Administrative Agent’s Liens at all times are first, prior and senior to any other interests in the Collateral, except for Permitted Liens, if any, that are otherwise allowed to be prior to Administrative Agent's Liens and as may be expressly agreed otherwise by Administrative Agent in writing.  Without limiting the foregoing, unless Administrative Agent agrees otherwise in writing, Obligors will deliver to Administrative Agent the originals of all Instruments, Documents and Chattel Paper, duly endorsed or assigned to Administrative Agent without restriction, and all certificates of title covering any portion of the Collateral for which certificates of title have been issued, together with executed applications for corrected certificates of title and other such documentation as may be requested by Administrative Agent.  If at any time any Collateral constituting property of an Obligor is located on any leased premises not owned by such Obligor, then such Obligor shall, at the request of Administrative Agent, obtain written landlord lien waivers or subordinations with respect to such Collateral, in form and substance satisfactory to Administrative Agent.  If any Collateral constituting property of an Obligor is at any time in the possession or control of any warehouseman, bailee, processor or any other Person other than such Obligor, then such Obligor shall notify Administrative Agent thereof and shall, at the request of Administrative Agent, notify such Person (in form and substance satisfactory to Administrative Agent) of Administrative Agent’s Liens in such Collateral and instruct such Person to hold all such Collateral for the benefit of Administrative Agent subject to Administrative Agent’s instructions.
 
 
29
 
 
Section 6.3.   Collateral Proceeds Management .  All collections and proceeds of Collateral shall be subject to an express trust for the benefit of Administrative Agent, for the benefit of the Lender Parties, and shall be delivered to Administrative Agent for application to the Obligations as follows:
 
(a)   Each Borrower shall establish a lock-box service for collections of Accounts at a financial institution acceptable to Administrative Agent, and subject to a collection account agreement among such bank, Administrative Agent and such Borrower, establishing Control in favor of Administrative Agent and providing, among other things, that (i) all items of payment received in such lock-box are received by such bank for the Lender Parties, (ii) such bank has no rights of setoff or recoupment or any other claim against such items (other than for payment of its service fees and other charges directly related to the administration of such lock-box), and (iii) such bank will immediately deposit all such collections to an account of Administrative Agent, for the benefit of the Lender Parties.  Each Borrower shall instruct all Account Debtors in writing to cause, and will otherwise take reasonable steps to cause, all payments of proceeds of Collateral to be delivered directly to the address established for such lock-box service.
 
(b)   Obligor will not use, dispose, withhold or otherwise exercise dominion over any proceeds of Collateral, provided , that if any Obligor at any time receives any proceeds of Collateral, it shall receive such proceeds as Administrative Agent’s trustee and shall immediately cause such proceeds to be deposited to an account of Administrative Agent, for the benefit of the Lender Parties, or deliver such proceeds to Administrative Agent, for the benefit of the Lenders, in their original form duly endorsed in blank or to the order of Administrative Agent.
 
(c)   All payments received by Administrative Agent pursuant to Section 6.3(a) or Section 6.3(b) shall be credited to the Obligations (conditional upon final collection) after allowing two (2) Business Days for collection, provided , that such payments shall be deemed to be credited to the Obligations immediately upon receipt for purposes of determining Availability and calculating the unused line fee pursuant to Section 4.3(b) .
 
 
30
 
 
Section 6.4.   Examinations; Inspections; Verifications .  Administrative Agent shall have the right at any time without hindrance or delay to conduct field examinations to inspect the Collateral and to inspect, audit and copy any Obligor’s books and records relating to the Collateral or any Obligor’s business.  Administrative Agent is authorized to discuss any Obligor’s affairs with any Person, including without limitation employees of any Obligor, as Administrative Agent may deem necessary in relation to the Collateral, any Obligor’s business or financial condition or Administrative Agent’s or Lenders’ rights under the Loan Documents.  Obligors jointly and severally agree to pay Administrative Agent’s customary fees and disbursements relating to such field examinations and the preparation of reports thereof.  Administrative Agent shall have full access to all records available to any Obligor from any credit reporting service, bureau or similar service and shall have the right to examine and make copies of any such records.  Administrative Agent may exhibit a copy of this Agreement to such service and such service shall be entitled to rely on the provisions hereof in providing access to Administrative Agent as provided herein.  If requested by Administrative Agent, any such Obligor will deliver to Administrative Agent any authorization or consent necessary for Administrative Agent to obtain records from any such service.
 
Section 6.5.   Appraisals .  At any time when a Default or Event of Default exists, and also at such other times not more frequently with respect to any particular type of Collateral than once per Fiscal Quarter as Administrative Agent requests, each Obligor shall, at its expense, provide Administrative Agent with appraisals, or updates of appraisals, of any Collateral, prepared by an appraiser acceptable to Administrative Agent and on a basis satisfactory to Administrative Agent.
 
Section 6.6.   Right to Cure .  Administrative Agent may pay any amount or do any act required of any Obligor hereunder or under any other Loan Document in order to preserve, protect, maintain or enforce the Collateral or Administrative Agent’s Liens, and which any such Obligor fails to pay or do, including payment of any judgment lien, insurance premium, charge, landlord’s or bailee’s claim on or with respect to the Collateral.  All payments that Administrative Agent makes under this   Section 6.6 and all costs, fees and expenses that Administrative Agent pays or incurs in connection therewith shall be paid or reimbursed to Administrative Agent pursuant to Section 17.5 .  Any action taken by Administrative Agent under this Section 6.6 shall not waive any Default or Event of Default or any rights of Administrative Agent or Lenders with respect thereto.
 
Section 6.7.   Power of Attorney .  Each Obligor hereby irrevocably appoints Administrative Agent as such Obligor’s agent and attorney-in-fact to take any action necessary to preserve and protect the Collateral and Administrative Agent’s interests under the Loan Documents or to sign and file any document necessary to perfect Administrative Agent’s Liens.  Without limiting the foregoing:
 
(a)   Administrative Agent shall have the right at any time to take any of the following actions, in its own name or in the name of any Obligor, whether or not an Event of Default is in existence:  (i) make written or verbal requests for verification of the validity, amount or any other matter relating to any Collateral from any Person, (ii) endorse such Obligor’s name on checks, instruments or other evidences of payment on Collateral, (iii) sign and file, in such Obligor’s name or in Administrative Agent’s name as secured party, any proof of claim or other document in any bankruptcy proceedings of any Account Debtor or obligor on Collateral, (iv) access, copy or utilize any information related to the Collateral, recorded or contained in any computer or data processing equipment or system maintained by such Obligor in respect of the Collateral and (v) open mail addressed to such Obligor and take possession of checks or other proceeds of Collateral for application in accordance with this Agreement.
 
 
31
 
 
(b)   Administrative Agent shall have the right at any time to take any of the following actions, in its own name or in the name of any Obligor, at any time when any Event of Default is in existence:  (i) notify any or all Persons which Administrative Agent believes may be Account Debtors or obligors on Collateral to make payment directly to Administrative Agent, for the benefit of the Lenders, for the account of such Obligor, (ii) redirect the deposit and disposition of collections and proceeds of Collateral; provided , that such proceeds shall be applied to the Obligations as provided by this Agreement, (iii) settle, adjust, compromise or discharge Accounts or extend time of payment upon such terms as Administrative Agent may determine, (iv) notify post office authorities, in the name of such Obligor or in the name of Administrative Agent, as secured party, to change the address for delivery of such Obligor’s mail to an address designated by Administrative Agent, (v) sign such Obligor’s name on any invoice, bill of lading, warehouse receipt or other document of title relating to any Collateral and (vi) clear Inventory through customs in such Obligor’s name, in Administrative Agent’s name as secured party or in the name of Administrative Agent’s designee, and to sign and deliver to customs officials powers of attorney in such Obligor’s name for such purpose.
 
The powers granted under this Section 6.7 are coupled with an interest and are irrevocable until all Obligations have been indefeasibly paid in full and all commitments of Lenders under this Agreement have been terminated.  Costs, fees and expenses incurred by Administrative Agent in connection with any of such actions by Administrative Agent, including attorneys’ fees and out-of-pocket expenses, shall be reimbursed to Administrative Agent on demand in accordance with Section 17.5 .
 
Section 6.8.   Preservation of Administrative Agent’s Rights .  To the extent allowed by law, neither Administrative Agent, Lenders, their Affiliates nor any of their officers, directors, members, managers, employees or agents shall be liable or responsible in any way for the safekeeping of any Collateral or for any act or failure to act with respect to the Collateral, or for any loss or damage thereto or any diminution in the value thereof, or for any act by any other Person.  In the case of any Instruments and Chattel Paper included within the Collateral, Administrative Agent shall have no duty or obligation to preserve rights against prior parties.  The Obligations shall not be affected by any failure of Administrative Agent or Lenders to take any steps to perfect its security interests or to collect or realize upon the Collateral, nor shall loss of or damage to the Collateral release any Obligor’s from any of the Obligations.
 
 
32
 
 
ARTICLE VII
CONDITIONS
 
Section 7.1.   Conditions Precedent to Initial Loan .  The obligation of Lenders to make the initial extension of credit under this Agreement is subject to the fulfillment, to Administrative Agent’s satisfaction, of each of the following conditions precedent on or before the date that is five (5) Business Days after the Agreement Date:
 
(a)   Administrative Agent shall have received each of the following, in each case with respect to each Borrower and in form and substance satisfactory to Administrative Agent:
 
(i)   With respect to each Obligor, a copy of its organizational documents and all amendments thereto, accompanied by a certificate of the appropriate Governmental Authority of its jurisdiction of organization bearing a current date acceptable to Administrative Agent, to the effect that such copy is correct and complete and that it is duly organized and validly existing in such jurisdiction;
 
(ii)   With respect to each Obligor, certification by the appropriate Governmental Authority of its jurisdiction of organization, bearing a current date acceptable to Administrative Agent, to the effect that it is in good standing and qualified to transact business in such jurisdiction and in each other jurisdiction where it transacts business;
 
(iii)   With respect to each Obligor, (A) a copy of its bylaws or similar governing document and all amendments thereto, (B) certification of the name, signature and incumbency of all officers who are authorized to execute any Loan Document or request Loans on is behalf and (C) a copy of authorizing resolutions approving this Agreement and the other Loan Documents to be executed and delivered by it, authorizing the transactions contemplated thereby, and authorizing and directing a named officer or officers to sign and deliver all Loan Documents to be executed by it, duly adopted by its board of directors or similar governing body, all accompanied by a certificate from an authorized officer dated as of the Agreement Date to the effect that each such item is true and complete and in full force and effect as of the Agreement Date;
 
(iv)   This Agreement, duly executed by each Obligor;
 
(v)   A guaranty of payment by each Subsidiary of Parent (if any) other than Borrowers, duly executed by an authorized officer of such Subsidiary;
 
(vi)   Evidence of insurance in compliance with the requirements of this Agreement;
 
(vii)   All third-party waivers, subordinations and consents as may be required by Administrative Agent with respect to any Collateral located on premises not owned by such Borrower;
 
 
33
 
 
(viii)   A Subordination Agreement with respect to any Debt proposed by such Borrower as Subordinated Debt and a copy of the instrument evidencing any such debt;
 
(ix)   If requested by Administrative Agent, a security agreement in respect of Proprietary Rights, in form sufficient for filing in the United States Patent and Trademark Office;
 
(x)   A deposit account control agreement establishing Control in favor of Administrative Agent with respect to such Deposit Accounts and Investment Property as may be requested by Administrative Agent;
 
(xi)   Evidence satisfactory to Administrative Agent that Aggregate Availability, after giving effect to the initial Revolving Loans and the Term Loans and application of the proceeds thereof, the payment of all taxes then due and payable by each Obligor, all fees then due and payable under Section 4.3 and all Lender Party Expenses then due and payable and provision for reducing trade Debt to within 30 days of terms, is equal to or greater than $500,000;
 
(xii)   An appraisal of the NOLV of each Borrower’s Inventory, prepared by a credentialed appraiser acceptable to Administrative Agent;
 
(xiii)   (A) A partial release letter agreement from PNC Bank, National Association, addressed to Sellers (and allowing Agent to rely thereon), committing to release its Liens in the Purchased Assets upon payment by or for the account of Sellers of a specified cash amount according to specified payment instructions, in each case as provided therein, and (B) UCC-3 termination statements, partial releases or such other releases with respect to other Liens, if any, as may be required by Administrative Agent with respect to the Collateral;
 
(xiv)   Current tax returns for Parent and its Subsidiaries;
 
(xv)   A copy of the final execution version of the Asset Purchase Agreement, with all schedules and exhibits (which shall be attached to the closing certificate required by Section 7.1(a)(xxiii ), and each other agreement, instrument or document executed or delivered in connection with the Asset Purchase Agreement as may be requested by Administrative Agent;
 
(xvi)   Evidence satisfactory to Administrative Agent and its counsel (i) that all conditions precedent to the closing of the Acquisition have occurred other than the funding of the purchase price thereunder, (ii) that Sellers have executed and are committed to deliver bills of sale transferring to Apace I, Apace II and Parent, as applicable, the Purchased Assets, and all other instruments or agreements required to be delivered by Sellers pursuant to the Asset Purchase Agreement, subject only to payment of the cash amount of the purchase price payable under the Asset Purchase Agreement and (iii) confirming the cash amount of the purchase price payable under the Asset Purchase Agreement;
 
 
34
 
 
(xvii)   Copies of audited financial statements for Parent and its Subsidiaries for the Fiscal Year ending December 31, 2010;
 
(xviii)   Copies of unaudited financial statements for Parent and its Subsidiaries for the period ending March 31, 2012;
 
(xix)   An opening consolidated and consolidating balance sheet for Parent and its Subsidiaries, as of the Agreement Date and after giving effect to the Acquisition;
 
(xx)   An opinion of counsel for Obligors, in form and substance satisfactory to Administrative Agent;
 
(xxi)   A request for each Loan requested by a Borrower as part of such initial extension of credit and, with respect to any Revolving Loans, each related Borrowing Base Certificate as required by Section 9.5(a) , in each case duly executed by a Responsible Officer;
 
(xxii)   Projections of the financial results of Obligor’s operations, after giving effect to the Acquisition, for the period from the Agreement Date through December 31, 2012, presented on a monthly basis;
 
(xxiii)   a closing certificate in form and substance satisfactory to Administrative Agent executed by a Responsible Officer, dated and delivered on the Agreement Date, (A) certifying that, as of the Agreement Date, (i) all of the representations and warranties made by Obligors under this Agreement are true and correct in all material respects as of the Agreement Date (except to the extent, if any, that any such representations and warranties relate solely to an earlier date), (ii) no Default or Event of Default has occurred and is continuing, (iii) Aggregate Availability, after giving effect to the initial Revolving Loans and the Term Loans and application of the proceeds thereof, the payment of all taxes then due and payable by each Obligor, all fees then due and payable under Section 4.3 and all Lender Party Expenses then due and payable and provision for reducing trade Debt to within 30 days of terms, is equal to or greater than $500,000, and (B) attaching true and correct copies of (i) each of the insurance certificates and endorsements thereto evidencing all insurance coverage required by this Agreement, and (ii) a copy of the final execution version of the Asset Purchase Agreement with all related exhibits and schedules thereto, together with each other agreement, instrument or document executed or delivered in connection with the Asset Purchase Agreement as may be requested by Administrative Agent;
 
(xxiv)   the Initial Funding Date Certificate, dated as of and delivered to Administrative Agent on the Initial Funding Date;
 
(xxv)   copies of appropriate documents to effect the name changes referenced in Section 9.21 ;
 
(xxvi)   a letter agreement from Israel Discount Bank addressed to Agent confirming that that all of such institution’s Liens on the assets of the Obligors shall be automatically released and all Debt owing by any Obligor to such institution shall have been paid in full, in each case, upon the receipt by Israel Discount Bank of a specified dollar amount; and
 
 
35
 
 
(xxvii)   stock certificates representing all the outstanding Equity Interests issued by each Subsidiary owned by or on behalf of any Obligor as of the Agreement Date and stock powers and instruments of transfer, endorsed in blank, with respect to such stock certificates.
 
(b)   Each Borrower shall have established cash proceeds management and Control with respect to all Deposit Accounts in which proceeds of Accounts will be deposited, pursuant to Section 6.3 and confirmed that such Borrower’s reporting systems are acceptable to Administrative Agent;
 
(c)   Administrative Agent shall have filed all financing statements as required to perfect Administrative Agent’s Liens in all Collateral with respect to which perfection can be achieved by filing a financing statement, and shall have received evidence or other confirmation of such filing, satisfactory to Administrative Agent;
 
(d)   Administrative Agent shall have received satisfactory reference checks with respect to each Borrower’s senior management;
 
(e)   Administrative Agent shall have completed a satisfactory field examination of Borrowers and the Collateral, including verification of projected cost savings of at least $1,200,000 after giving effect to the Acquisition, the results of which shall be satisfactory to Administrative Agent;
 
(f)   Administrative Agent shall have conducted a confirmation of each Borrower’s Accounts, and the results of such confirmation shall be satisfactory to Administrative Agent;
 
(g)   To the extent requested by Administrative Agent, Administrative Agent shall have reviewed a copy of all material customer and vendor agreements and contracts for each Borrower’s operations, including Real Property leases, after giving effect to the Acquisition, and the results thereof shall be satisfactory to Administrative Agent;
 
(h)   To the extent requested by Administrative Agent, Obligors shall have delivered to Administrative Agent copies of all license agreements material to the operation of each Borrower's business (after giving effect to the Acquisition), which shall not prohibit, or restrict or otherwise impair Administrative Agent’s rights, as secured party, to dispose of any Borrower’s inventory pursuant to this Agreement;
 
(i)   Administrative Agent shall be satisfied that upon giving effect to the initial Loans, Borrowers shall have paid all fees and Lender Party Expenses due and payable;
 
(j)   Administrative Agent shall be satisfied that upon funding the initial Loans, all amounts required to effect the full payment of the aggregate cash amount of the purchase price payable under the Asset Purchase Agreement shall have been funded as required by the Asset Purchase Agreement (or deposited with Administrative Agent for funding as required by the Asset Purchase Agreement); and
 
 
36
 
 
(k)   All legal and business matters in connection with the transaction contemplated by this Agreement shall be satisfactory to Administrative Agent.
 
Section 7.2.   Conditions Precedent to all Loans .  In addition to the conditions precedent specified by Section 7.1 , the obligation of Lender to make any Loan shall be subject to the following conditions precedent:
 
(a)   All representations and warranties in this Agreement and the other Loan Documents shall be true and correct in all material respects on and as of the date of such Loan, as though such representations and warranties are made on and as of such date (except to the extent any such representations and warranties relate specifically to an earlier date);
 
(b)   No Default or Event of Default shall have occurred and be continuing on the date of such Loan, and no Default or Event of Default will occur after giving effect to such Loan;
 
(c)   The funding of such Loan shall not be prohibited by any Applicable Law;
 
(d)   All applicable requirements under this Agreement for such Loan shall have been satisfied or waived in writing; and
 
(e)   Administrative Agent shall be satisfied in its discretion that no Material Adverse Effect shall have occurred or will occur after giving effect to such Loan.
 
Any request for a Loan pending at a time when any condition precedent specified by Section 7.1 or Section 7.2 is not satisfied may be declined by Administrative Agent without prior notice.
 
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
 
In order to induce the Lender Parties to enter into this Agreement and make Loans, each Obligor makes each of the following representations and warranties to the Lender Parties as being true, complete and correct in all material respects:
 
Section 8.1.   Fundamental Information .   Schedule 8.1 sets forth, for such Obligor and each of its Subsidiaries and other Affiliates that are entities, respectively (a) its legal name, (b) its federal tax identification number, (c) its jurisdiction of organization, (d) its address of its chief executive office, (e) jurisdictions in which qualification is necessary in order for it to own or lease its property and conduct its business, (f) the relationship to such Obligor of each of such Subsidiaries and other Affiliates, and (g) a true and complete listing of each class of such Obligor’s and each such Subsidiary’s and Affiliate’s Equity Interests, all of which are validly issued, outstanding, fully paid and non-assessable, and, with respect to each such Subsidiary or Affiliate, owned beneficially and of record by the Person identified therein.  Such Obligor is a registered organization, as defined by the UCC, duly organized and validly existing and in good standing under the laws of its jurisdiction of organization, and is qualified to do business and is in good standing as a foreign organization in each jurisdiction in which qualification is necessary in order for it to own or lease its property and conduct its business and has all requisite power and authority to conduct its business and to own its property.
 
 
37
 
 
Section 8.2.   Prior Transactions .  Such Obligor has not, during the past five (5) years, (a) changed its name or used any fictitious name, (b) been a party to any merger or organizational change or (c) other than the Acquisition, acquired any of its property outside of the ordinary course of business.
 
Section 8.3.   Subsidiaries .  Such Obligor has no Subsidiaries except as shown in Schedule 8.1 .
 
Section 8.4.   Authorization, Validity and Enforceability .  Such Obligor has the corporate power and authority to execute, deliver and perform this Agreement and the other Loan Documents to which it is a party, to incur the Obligations, and to grant the Administrative Agent’s Liens.  Such Obligor has taken all necessary action to properly authorize its execution, delivery and performance of the Loan Documents to which it is a party.  This Agreement and the other Loan Documents to which such Obligor is a party have been duly executed and delivered by such Obligor, and constitute the legal, valid and binding obligations of such Obligor, enforceable against it in accordance with their respective terms.
 
Section 8.5.   Noncontravention .  Such Obligor’s execution, delivery, and performance of this Agreement and the other Loan Documents to which it is a party do not and will not conflict with, or constitute a violation of or breach or default under (a) such Obligor’s organizational documents, (b) any agreement or instrument to which such Obligor is a party or which is otherwise binding upon such Obligor or (c) any Applicable Law applicable to such Obligor or any of its Subsidiaries.
 
Section 8.6.   Financial Statements and Projections .  Obligors have delivered to Administrative Agent the audited balance sheet and related statements of income, retained earnings, cash flows and changes in stockholders’ or members’ equity for Parent and its consolidated Subsidiaries as of December 31, 2010 and as of December 31, 2011, and for each of such Fiscal Years then ended, respectively, accompanied by the report thereon of the Parent’s independent certified public accountants. Obligors have also delivered to Administrative Agent the unaudited projected balance sheet and related projected statements of income and cash flows for Borrower and its consolidated Subsidiaries as of and after giving effect to consummation on the Initial Funding Date of the Acquisition.  All such projected financial statements have been prepared in accordance with GAAP and present accurately and fairly Obligors’ projection of the financial position of Parent and its consolidated Subsidiaries as at the dates thereof and their results of operations for the periods specified thereby.  No Material Adverse Effect has occurred since the dates of such financial statements, respectively.
 
Section 8.7.   Litigation .  Except as set forth on Schedule 8.7 , there is no pending or, to the best of such Obligor’s knowledge, threatened, action, suit, proceeding or claim by any Person, or to the best of such Obligor’s knowledge, investigation by any Governmental Authority, or any basis for any of the foregoing, which could cause a Material Adverse Effect.
 
 
38
 
 
Section 8.8.   ERISA and Employee Benefit Plans .   Except for those that could not cause a Material Adverse Effect, (x) each ERISA Benefit Plan is in compliance with applicable provisions of ERISA, the IRC and other Applicable Law and (y) there are no existing or pending (or to the knowledge of such Obligor, threatened) claims (other than routine claims for benefits in the normal course), sanctions, actions, lawsuits or other proceedings or investigations involving any ERISA Benefit Plan to which such Obligor incurs or otherwise has or could have a material obligation or any material liability.  No ERISA Affiliate is required to contribute to, or has any other absolute or contingent liability in respect of, any “multiemployer plan” as defined in Section 4001 of ERISA.  No “accumulated funding deficiency” (as defined in Section 412(a) of the IRC) exists with respect to any ERISA Benefit Plan, whether or not waived by the Secretary of the Treasury or his delegate, and the current value of each ERISA Benefit Plan’s benefits does not exceed the current value of such ERISA Benefit Plan’s assets available for the payment of such benefits.
 
Section 8.9.     Compliance with Laws .  Such Obligor and its Subsidiaries each are in compliance, in all material respects, with Applicable Laws.
 
Section 8.10.   Taxes .  Such Obligor and its Subsidiaries have filed all federal and other tax returns and reports required to be filed, and have paid all federal and other taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable unless any such unpaid taxes, assessments fees or other charges would constitute a Permitted Lien.
 
Section 8.11.   Location of Collateral and Books and Records .   Schedule 8.11 is a complete list of the each location of the Collateral constituting property of such Obligor (other than Inventory in transit to one of such locations) and of such Obligor’s books and records.  Such Obligor is the owner of each location, except as identified in Schedule 8.11 .  If any such location is not owned by such Obligor, Schedule 8.11 includes the name and mailing address of the owner thereof.
 
Section 8.12.   Accounts .  Each Account of a Borrower represents a bona fide sale or lease and delivery of goods by such Borrower, or rendition of services by such Borrower in the ordinary course of such Borrower’s business.  Each Account of a Borrower is for a liquidated amount payable by the Account Debtor thereon on the terms set forth in the invoice therefor and in the schedule of Accounts delivered to Administrative Agent, without any offset, deduction, defense or counterclaim except those known to such Borrower and disclosed to Administrative Agent in writing.  No payment has been received, and no credit, discount or extension or agreement has been granted, on any Account except as reported to Administrative Agent in writing.  Each copy of an invoice delivered to Administrative Agent by a Borrower in respect of any Account is a genuine copy of the original invoice sent to the Account Debtor named therein.  All goods described in any such invoice representing a sale of goods have been delivered to the Account Debtor named therein and all services of such Borrower described in each invoice representing services have been performed.
 
 
39
 
 
Section 8.13.   Inventory .  No negotiable documents have been issued in respect of any Inventory of a Borrower.
 
Section 8.14.   Documents, Instruments, and Chattel Paper .  All Documents, Instruments and Chattel Paper of such Obligor, and all signatures and endorsements thereon, are complete, valid and genuine.
 
Section 8.15.   Proprietary Rights .   Schedule 8.15 sets forth a correct and complete list of all Proprietary Rights owned by such Obligor that have been registered with the United States Copyright Office or the United States Patent and Trademark Office or with respect to which applications for such registrations have been filed.  None of such Proprietary Rights is subject to any licensing agreement or similar arrangement except as set forth on Schedule 8.15 .  To such Obligor’s knowledge, none of such Proprietary Rights infringes on or conflicts with any other Person’s property, and no other Person’s property infringes on or conflicts with such Proprietary Rights.  The Proprietary Rights described on Schedule 8.15 and all other Propriety Rights in which such Obligor has an interest constitute all of the property necessary to the current and reasonably anticipated future conduct of such Obligor’s business.
 
Section 8.16.   Investment Property .   Schedule 8.16 sets forth a correct and complete list of all Investment Property owned by such Obligor.  Such Obligor is the legal and beneficial owner of such Investment Property and has not sold, granted any option with respect to, assigned or transferred, or otherwise disposed of any of its rights or interest therein.
 
Section 8.17.   Real Property; Leases .  Neither such Obligor nor any of its Subsidiaries owns any Real Property.   Schedule 8.17 sets forth a correct and complete list of all leases and subleases of Real Property on which an Obligor is lessee or sublessee, and all leases or subleases of Real Property on which an Obligor is lessor or sublessor.  Each of such leases is valid and enforceable in accordance with its terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and general principles of equity, if any, under Applicable Law) and is in full force and effect, and no default by any party to such lease exists.
 
Section 8.18.   Material Agreements .   Schedule 8.18 sets forth all material agreements to which such Obligor or any of its Subsidiaries is a party or is otherwise bound.
 
Section 8.19.   Bank Accounts .   Schedule 8.19 contains a complete list of all Deposit Accounts, securities accounts and commodity accounts maintained by such Obligor.
 
Section 8.20.   Title to Property .  Such Obligor has good, valid, marketable and exclusive title to all of its property, free of all Liens except Permitted Liens.  Such Obligor possesses all licenses, permits, franchises, patents, copyrights, trademarks and trade names, and other intellectual property (or otherwise possesses the right to use such intellectual property without violation of the rights of any other Person) which are necessary to carry out its business as presently conducted and as presently proposed to be conducted hereafter, and such Obligor is not in violation in any material respect of the terms under which it possesses such intellectual property or the right to use such intellectual property.  Administrative Agent’s Liens are not subject or junior to any other Lien.
 
 
40
 
 
Section 8.21.   Debt .  After giving effect to the making of the initial Loans, such Obligor and its Subsidiaries have no Debt except (a) the Obligations, (b) Debt described on Schedule 8.21 , (c) Debt permitted by Section 10.5 and (d) trade payables and other contractual obligations arising in the ordinary course of business.
 
Section 8.22.   Liens .  There are no Liens on any property of such Obligor other than Permitted Liens.
 
Section 8.23.   Solvency .  Such Obligor is Solvent prior to and after giving effect to the making of the initial Loans and all subsequent Loans.
 
Section 8.24.   Non-Regulated Entities .  Neither such Obligor nor any Affiliate of such Obligor is an “Investment Company” within the meaning of the Investment Company Act of 1940.  Such Borrower is not subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code or law, or any other federal or state statute or regulation limiting its ability to incur indebtedness.
 
Section 8.25.   Governmental Authorization .  No approval, consent, exemption, authorization or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against, such Obligor or any of its Subsidiaries of this Agreement or any other Loan Document.
 
Section 8.26.   Investment Banking or Finder’s Fees .  Neither such Obligor nor any of its Subsidiaries has agreed to pay or is otherwise obligated to pay or reimburse any Person with respect to any investment banking or similar or related fee, underwriter’s fee, finder’s fee or broker’s fee in connection with this Agreement.
 
Section 8.27.   Full Disclosure .  None of the representations or warranties made by such Obligor in the Loan Documents and none of the statements contained in any Schedule or any report, statement or certificate furnished to Administrative Agent by or on behalf of such Obligor in connection with the Loan Documents contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading as of the time when made or delivered.
 
Section 8.28.   Commercial Tort Claims .  Each Obligor has no Commercial Tort Claims other than as disclosed in Schedule 1.1B .
 
Section 8.29.   Other Obligations and Restrictions .  Parent and its Subsidiaries have no outstanding liabilities of any kind (including contingent obligations, tax assessments, or long-term commitments) of a nature and type required to be set forth as a liability on a balance sheet in accordance with GAAP which are, in the aggregate, material to Parent or a Borrower or material with respect to Parent’s consolidated financial condition that are not reflected on the financial statements delivered pursuant to Section 9.4 or in the notes thereto or that were not incurred since October 31, 2011 in the ordinary course of business.  No Obligor is subject to or restricted by any franchise, contract, deed, charter restriction, or other instrument or restriction which could cause a Material Adverse Effect.
 
 
 
41
 
 
Section 8.30.   Force Majeure; and Labor Disputes .  Neither the business nor the properties of such Obligor has been affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance), which could cause a Material Adverse Effect.
 
Section 8.31.   Environmental and Other Laws .  (a) Except as individually or in the aggregate could not result in a Material Adverse Effect, such Obligor is conducting its business in material compliance with all Applicable Laws, including Environmental Laws, and is in compliance with all licenses and permits required under any such laws; (b) to the knowledge of such Obligor, none of the operations or properties of such Obligor is the subject of federal, state or local investigation evaluating whether any material remedial action is needed to respond to a release of any Hazardous Materials into the environment or to the improper storage or disposal (including storage or disposal at offsite locations) of any Hazardous Materials, except as set forth on Schedule 8.31 ; (c) such Obligor has not (and to the knowledge of such Obligor, no other Person has) filed any notice under any Applicable Law indicating that such Obligor is responsible for the improper release into the environment, or the improper storage or disposal, of any material amount of any Hazardous Materials or that any Hazardous Materials have been improperly released, or are improperly stored or disposed of, upon any property of such Obligor; (d) such Obligor has not transported or arranged for the transportation of any Hazardous Material to any location which is (i) listed on the National Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, listed for possible inclusion on such National Priorities List by the Environmental Protection Agency in its Comprehensive Environmental Response, Compensation and Liability Information System List, or listed on any similar state list or (ii) the subject of federal, state or local enforcement actions or other investigations which may lead to claims against such Obligor for clean-up costs, remedial work, damages to natural resources or for personal injury claims (whether under Environmental Laws or otherwise); and (e) such Obligor has no known material contingent liability under any Environmental Laws or in connection with the release into the environment, or the storage or disposal, of any Hazardous Materials.
 
Section 8.32.   Security Interests .  Administrative Agent, for the benefit of the Lenders, has a valid and perfected first priority security interest in the Collateral, subject only to Permitted Liens, and no further or subsequent filing, recording, registration, other public notice or other action is necessary or desirable to perfect or otherwise continue, preserve or protect Administrative Agent’s security interest in the Collateral except (i) for continuation statements described in UCC §9.515(d), (ii) for filings required to be filed in the event of a change in the name, identity, or structure of such Obligor, or (iii) in the event any financing statement filed by Administrative Agent, for the benefit of the Lenders, relating hereto otherwise becomes inaccurate or incomplete.
 
Section 8.33.   Acquisition .  After giving effect to the Acquisition on the Initial Funding Date, the Acquisition was conducted and consummated in compliance with Applicable Laws.  On the Agreement Date and on the Initial Funding Date, all conditions precedent to performance by Parent, Apace I and Apace II, as purchasers, and by Sellers and the other parties under the Asset Purchase Agreement have been satisfied or waived, other than payment of the cash portion of the purchase price payable by the purchasers to Sellers on the effective date of the Asset Purchase Agreement pursuant to the terms thereof (the aggregate amount of which does not exceed $8,000,000), with no Debt assumed by Obligors other than the “Assumed Liabilities” as defined by the Acquisition Agreement as in effect on the Initial Funding Date.  Without limiting the foregoing, after giving effect to the Acquisition, no Obligor owes any Debt to GreatAmerica Leasing Corporation and GreatAmerica Leasing Corporation has no Liens on any of the Purchased Assets acquired by any Obligor in connection with the Acquisition.
 
 
42
 
 
Section 8.34.   Novation of Government Contracts .  With respect to each Government Contract included in the Purchased Assets acquired by it pursuant to the Acquisition, each of Apace I and Apace II has notified the applicable Contracting Officer (or other Person of appropriate authority over such Contracting Officer) that it intends to purchase such Government Contract pursuant to the Acquisition and request a Novation Agreement.  Obligors have no knowledge of any reason to believe that Apace I and Apace II will not be able to obtain a Novation Agreement with respect to each such Government Contract.
 
Section 8.35.   Continuing Representations .  Each request for a Loan, and acceptance by a Borrower of the proceeds of any Loan, shall constitute a representation and warranty by such Obligor, as of the date of each such request and acceptance, and after giving effect thereto (and in connection with the initial Loans, without limiting the foregoing, after giving effect to the Acquisition) that all such representations and warranties in this Agreement are true, complete and correct in all material respects, as of each such date, as though separately made and stated on and as of each such date (except to the extent that any such representations and warranties expressly relate solely to an earlier date, in which case such representations and warranties shall be true, complete and correct in all material respects as of such earlier date).  All representations and warranties under this Agreement shall survive the execution and delivery of this Agreement.
 
ARTICLE IX
AFFIRMATIVE COVENANTS
 
 Until termination of the Commitments and payment and performance in full of the Obligations, each Obligor agrees as follows:
 
Section 9.1.   Existence and Good Standing .  Such Obligor shall maintain its existence and its qualification and good standing in all jurisdictions in which the failure to maintain such qualification or good standing could reasonably be expected to have a Material Adverse Effect.
 
Section 9.2.   Compliance with Agreements and Laws .  Such Obligor will perform all obligations it is required to perform under the terms of each indenture, mortgage, deed of trust, security agreement, lease, franchise, agreement, contract or other instrument or obligation to which it is a party or by which it or any of its properties is bound, except where failure to do so could not have a Material Adverse Effect.  Such Obligor will conduct its business and affairs in compliance with all Applicable Laws applicable thereto, except where the failure to do so would not have a Material Adverse Effect.  Such Obligor will cause all licenses and permits necessary for the conduct of its business and the ownership and operation of its property used and property reasonably expected to be used in the conduct of its business to be at all times maintained in good standing and in full force and effect, except where failure to do so could not have a Material Adverse Effect.
 
 
43
 
 
Section 9.3.   Books and Records .  Such Obligor shall maintain at all times correct and complete books and records in which complete, correct and timely entries are made of its transactions in accordance with GAAP applied consistently with the audited financial statements required to be delivered pursuant to   Section 9.4 .
 
Section 9.4.   Financial Reporting .  Each Obligor shall promptly furnish to Administrative Agent all such financial information with respect to Parent and its Subsidiaries as Administrative Agent may reasonably request.  Without limiting the foregoing, Obligors will furnish to Administrative Agent the following:
 
(a)   As soon as available, but in any event not later than ninety (90) days after the end of each Fiscal Year, consolidated audited and consolidating balance sheets, and statements of income and expense, cash flow and of stockholders’ or members’ equity for Parent which includes its Subsidiaries for such Fiscal Year, and the accompanying notes thereto, prepared in accordance with GAAP, in reasonable detail and fairly presenting the financial position and results of operations of Parent and its consolidated Subsidiaries as of the date thereof and for the Fiscal Year then ended.  Such statements shall be examined in accordance with generally accepted auditing standards by independent certified public accountants selected by Parent and reasonably satisfactory to Administrative Agent, whose report thereon shall accompany such financial statements and not be qualified in any respect.  Each Obligor hereby authorizes Administrative Agent to communicate directly with its certified public accountants and, by this provision, authorizes such accountants to disclose to Administrative Agent any and all financial statements and other supporting financial documents and schedules relating to such Obligor and to discuss directly with Administrative Agent the finances and affairs of such Obligor.  At Administrative Agent’s request, Parent and Borrowers will deliver to such accountants and Administrative Agent a consent to such authorization, signed by a Responsible Officer.
 
(b)   As soon as available, but in any event not later than thirty (30) days after the end of each Fiscal Month, unaudited consolidated and consolidating balance sheets of Parent and its consolidated Subsidiaries as of the end of such Fiscal Month, and unaudited consolidated and consolidating statements of income and expense and cash flow for Parent and its consolidated Subsidiaries for such Fiscal Month and for the period from the beginning of the Fiscal Year to the end of such Fiscal Month, all in reasonable detail, fairly presenting the financial position and results of operations of Parent and its consolidated Subsidiaries as of the date thereof and for such Fiscal Months, and prepared in accordance with GAAP applied consistently with the audited financial statements required by Section 9.4(a) , subject to normal year-end adjustments and the lack of footnote disclosure.  Each Obligor shall certify by a certificate signed by a Responsible Officer that all such statements have been prepared in accordance with GAAP and present fairly, in all material respects, subject to normal year-end adjustments and the lack of footnote disclosure, the financial position of Parent and its Subsidiaries as of the dates thereof and its results of operations for the Fiscal Months then ended.
 
 
44
 
 
(c)   No sooner than sixty (60) days and not less than fifteen (15) days prior to the beginning of each Fiscal Year, annual forecasts (to include forecasted consolidated and consolidating balance sheets, statements of income and expenses and statements of cash flow) for Parent and its Subsidiaries as of the end of the end of and for each Fiscal Month of such Fiscal Year.
 
(d)   As soon as available, but in any event not later than fifteen (15) days after Borrower’s receipt thereof, a copy of all management reports and management letters prepared for Parent by any independent certified public accountants.
 
(e)   Promptly after filing, a copy of each tax return filed by an Obligor.
 
(f)   If requested by Administrative Agent, copies of all reports, including annual reports, and notices which any Obligor files with or receives from the PBGC or the U.S. Department of Labor under ERISA; and as soon as possible and in any event within five (5) Business Days after any Obligor knows or has reason to know that any Reportable Event or Prohibited Transaction has occurred with respect to any ERISA Benefit Plan or that the PBGC or Parent or any Subsidiary has instituted or will institute proceedings under Title IV of ERISA to terminate any ERISA Benefit Plan, a certificate of the chief financial officer of such Obligor setting forth the details as to such Reportable Event or Prohibited Transaction or Plan termination and the action that such Obligor proposes to take with respect thereto.
 
(g)   Such additional information as Administrative Agent may from time to time reasonably request regarding the financial and business affairs of Parent and its Subsidiaries or any Obligor or any of their respective Subsidiaries.
 
Section 9.5.   Collateral Reporting .  Obligors shall timely provide, or cause to be timely provided, to Administrative Agent, in each case, with respect to each Borrower:
 
(a)   At least once during each calendar week, at the time of each request by any Borrower for a Revolving Loan and at any other time requested by Administrative Agent, (i) a Borrowing Base Certificate for each Borrower and (ii) an Aggregate Borrowing Base Certificate, therein including (A) a detailed calculation of the Borrowing Base or the Aggregate Borrowing Base, as the case may be, (B) a certification of Eligible Accounts and Eligible Inventory included therein, respectively, and (ii) all supporting documents and information (including, without limitation, sales journals, credit memos, cash receipts journals, reconciliation of changes from the most recent certificate delivered to Administrative Agent);
 
(b)   Monthly, not later than the fifteenth (15 th ) day of each Fiscal Month:
 
(i)   a schedule of Accounts of each Borrower and a schedule of payments on Accounts of each Borrower, as of the last day of the preceding Fiscal Month;
 
(ii)   a reconciliation to the Borrowing Base of each Borrower and of the Aggregate Borrowing Base, as calculated in the most recent related Borrowing Base Certificate to Administrative Agent, in the form prescribed by Administrative Agent;
 
 
45
 
 
(iii)   an aging of Accounts of each Borrower as of the last day of the preceding Fiscal Month, showing (A)(i) Accounts aged 30 days or less from date of invoice, (ii) Accounts aged over 30 days, but less than 61 days, from date of invoice, (iii) Accounts aged over 60 days, but less than 91 days, from date of invoice, (iv) Accounts aged over 90 days, but less than 120 days, from date of invoice, and (v) Accounts aged 120 days or more from date of invoice and (B) a listing of the name and complete address of each Account Debtor and such other information as Administrative Agent may request and (C) a reconciliation to the previous calendar month’s aging of Accounts and to such Borrower’s general ledger;
 
(iv)   an aging of each Borrower’s accounts payable as of the last day of the preceding Fiscal Month;
 
(v)   Perpetual Inventory reports for each Borrower, as of the last day of the preceding Fiscal Month, by category and location, with detail showing additions to and deletions from Inventory, together with a reconciliation to the general ledger;
 
(vi)   upon request, with respect to each Borrower, copies of invoices in connection with Accounts, customer statements, credit memos, remittance advices and reports, deposit slips, shipping and delivery documents in connection with Accounts and for Inventory and Equipment acquired by such Borrower, purchase orders and invoices; and
 
(vii)   at Administrative Agent’s request, copies of invoices and supporting delivery or service records, copies of credit memos or other advices of credit or reductions against amounts previously billed, shipping and delivery documents, purchase orders and such other copies or reports in respect of any Collateral as Administrative Agent may request from time to time.
 
Each Borrowing Base Certificate (together with applicable schedules, reconciliations, agings, copies and/or reports) delivered to Administrative Agent shall bear a signed statement by a Responsible Officer of such Borrower (and in the case of an Aggregate Borrowing Base, a signed statement by a Responsible Officer of Parent) certifying the accuracy and completeness of all information included therein.  The execution and delivery of a Borrowing Base Certificate or an Aggregate Borrowing Base Certificate shall in each instance constitute a representation and warranty by the Borrower(s) delivering same to Administrative Agent and Lenders that no Account included therein is excluded from inclusion in the Borrowing Base by clauses (a) through (q) of the definition of “Eligible Accounts” and that no Inventory included therein is excluded from inclusion in the Borrowing Base by clauses (a) through (i) of the definition of “Eligible Inventory.”  In the event any request for a Revolving Loan, or a Borrowing Base Certificate or an Aggregate Borrowing Base Certificate or other information required by this Section 9.5 delivered to Administrative Agent by a Borrower electronically or otherwise without signature, such request, or such Borrowing Base Certificate or Aggregate Borrowing Base Certificate or other information shall, upon such delivery, be deemed to be signed and certified on behalf of such Borrower by a Responsible Officer and constitute a representation to Administrative Agent and Lenders as to the authenticity thereof.  Administrative Agent shall have the right to review and adjust any such calculation of the Borrowing Base or the Aggregate  Borrowing Base to reflect exclusions from Eligible Accounts or Eligible Inventory, reserves pursuant to Section 2.1 , declines in value of Collateral or such other matters as are necessary to determine the Borrowing Base or the Aggregate Borrowing Base.  Administrative Agent shall have the continuing right to establish and adjust reserves in determining or re-determining the Borrowing Base or the Aggregate Borrowing Base, pursuant to Section 2.1 .
 
 
46
 
 
Section 9.6.   Compliance Certificate .  With each of the financial statements delivered pursuant to Section 9.4(a) and Section 9.4(b) , respectively, Parent shall deliver to Administrative Agent a certificate signed by a Responsible Officer of Parent (i) setting forth in reasonable detail the calculations required to establish that Obligors were in compliance with the covenants set forth in Section 10.14 during the period covered in such financial statements and as of the end thereof and (ii) stating that, except as explained in reasonable detail in such certificate (A) all of the representations and warranties of Obligors contained in this Agreement and the other Loan Documents are correct and complete in all material respects as at the date of such certificate as if made at such time, except for those that are solely effective as of a particular date, which shall be correct and complete in all material respects as of such particular date, (B) on the date of such certificate, each Obligors is in compliance in all material respects with all of its respective covenants and agreements in this Agreement and the other Loan Documents, (C) no Default or Event of Default then exists or existed during the period covered by such financial statements and (D) Obligors do not reasonably expect that any Default or Event of Default will occur.  If such certificate discloses that a representation or warranty is not correct or complete, or that a covenant has not been complied with, or that a Default or Event of Default existed or exists or is reasonably expected to occur, such certificate shall set forth what action any Borrower has taken or proposes to take with respect thereto.
 
Section 9.7.   Notification to Administrative Agent .  Such Obligor shall notify Administrative Agent in writing immediately (a) after becoming aware of any Default or Event of Default, or if such Obligor reasonably expects that any Default or Event of Default will occur, (b) after becoming aware of any event or circumstance, including without limitation any pending or threatened action, suit or claim by any Person, any pending or threatened investigation by a Governmental Authority or any violation of any Applicable Law, that would be treated as a contingent liability under GAAP and is in an amount in excess of $100,000 or which could have or cause a Material Adverse Effect, (c) immediately if its board of directors or other governing board or committee authorizes the filing by such Obligor of a petition in bankruptcy, (d) promptly upon the acceleration of the maturity of any Debt owed by such Obligor or of any default by such Obligor under any indenture, mortgage, agreement, contract or other instrument to which such Obligor is a party or by which any of its properties is bound and is in an amount in excess of $100,000 and (e) promptly upon any claim of $100,000 or more, any notice of potential liability under any Environmental Laws which could reasonably be expected to exceed such amount, and (f)(i) promptly upon receipt of any notice of default or cancellation with respect to any lease of any Real Property location where any Collateral is located and (ii) not less than 30 days prior to the effective date thereof, the expiration of any lease where Collateral is located.  Each notice given shall describe the subject matter thereof in reasonable detail and specify the action that such Obligor or any of its Subsidiaries, as applicable, has taken or proposes to take with respect thereto.
 
 
47
 
 
Section 9.8.   Accounts .  If such Obligor becomes aware of any matter adversely affecting the collectibility of any Account of a Borrower involving an amount greater than $50,000, including information regarding the Account Debtor’s creditworthiness, such Obligor will promptly so advise Administrative Agent.  Each Borrower will promptly notify Administrative Agent of all disputes and claims in excess of $50,000 with respect to any Account of such Borrower.  No discount, credit or allowance shall be granted to any such Account Debtor without Administrative Agent’s prior written consent.  Each Borrower shall deliver to Administrative Agent a copy of each credit memorandum in excess of $50,000, in respect of any Account of such Borrower, as soon as issued.
 
Section 9.9.   Inventory .
 
(a)   All Inventory of a Borrower shall be held for sale in the ordinary course of such Borrower’s business, and is and will be fit for such purpose.  Each Borrower will keep its Inventory in good and marketable condition, at its own expense.  Each Borrower will not acquire or accept any Inventory on consignment or approval, without the prior written consent of Administrative Agent.  Each Borrower will not sell any Inventory on a bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment or other repurchase or return basis, without the prior written consent of Administrative Agent.
 
(b)   Such Borrower will conduct a physical count of its Inventory at least once per Fiscal Year, in connection with its audited financial statements to be delivered pursuant to Section 9.4(a) (which physical count shall include a count of 100% of such Inventory unless such count is of a lesser percentage and is acceptable to Obligors’ independent certified public accounts in connection with such audited financial statements) and at Administrative Agent’s request, within fifteen (15) days of conducting any physical count, such Borrower shall supply Administrative Agent with a copy of such count.
 
(c)   Each Borrower shall promptly report to Administrative Agent in writing any Inventory returned by an Account Debtor involving an amount in excess of $50,000.  All such returned Inventory shall be segregated from all other Inventory, and shall not be reportable as Eligible Inventory unless and until such Borrower demonstrates to Administrative Agent’s satisfaction that such returned Inventory is in saleable condition and meets all criteria for Eligible Inventory.  Unless otherwise agreed by Administrative Agent, the amount of such Borrower’s Accounts relating to such returned Inventory shall be deemed excluded from Eligible Accounts.  All returned Inventory shall be subject to Administrative Agent’s Liens ( provided , that any such returned Inventory that is returned by a Borrower to the seller thereof in exchange for a credit against payables then or thereafter due to such seller or a cash payment that is delivered to Administrative Agent as required by Section 5.4 shall be deemed to be transferred to such seller free and clear of Administrative Agent’s Liens).
 
Section 9.10.   Equipment .  Such Obligor will maintain, preserve, protect and keep all Equipment in good condition, repair and working order, ordinary wear and tear excepted, and will cause such Equipment to be used and operated in a good and workmanlike manner, in accordance with Applicable Laws and in a manner which will not make void or cancelable any insurance with respect to such Equipment.  Current maintenance records will be maintained on all Equipment and made available to Administrative Agent upon request.  Such Obligor will promptly furnish to Administrative Agent a statement respecting any loss or damage to any of such Equipment with an aggregate value in excess of $50,000.  Such Obligor will not alter or remove any identifying symbol or number on any Equipment or permit any of the Collateral which constitutes Equipment to at any time become so related or attached to, or used in connection with any particular Real Property so as to become a fixture upon such Real Property, or to be installed in or affixed to other goods so as to become an accession to such other goods unless such other goods are also included in the Collateral and in which Administrative Agent has a first priority Lien.
 
 
48
 
 
Section 9.11.   Control of Deposit Accounts .  Such Obligor shall cause Administrative Agent to have Control of all of its Deposit Accounts other than any Deposit Account utilized solely for funding payroll and related withholding taxes.  Notwithstanding the foregoing, on or before August 31, 2012, Obligors shall either (a) close each Deposit Account located at TD Bank or Israel Discount Bank, other than any Deposit Account utilized solely for funding payroll and related withholding taxes or for maintaining deposits for or on behalf of employees in respect of health or other benefit plans or (b) cause Administrative Agent to have Control of each such Deposit Account that is the subject of clause (a) preceding.
 
Section 9.12.   Insurance .  Such Obligor shall keep and maintain adequate insurance with respect to its business and all Collateral, written by insurers acceptable to Administrative Agent.  Such insurance shall be with respect to loss, damages, and liability of amounts acceptable to Administrative Agent and shall include, at a minimum, business interruption, workers compensation, general premises liability, fire, theft, casualty and all risk.  Such Obligor will make timely payment of all premiums required to maintain such insurance in force.  Such Obligor shall cause Administrative Agent to be an additional insured and loss payee under all policies of insurance covering any of the Collateral, to the extent of Administrative Agent’s interest, in form satisfactory to Administrative Agent.  All insurance proceeds paid to Administrative Agent shall be applied in reduction of the Obligations unless otherwise agreed by Administrative Agent.  Such Obligor shall deliver copies of each insurance policy to Administrative Agent upon request.
 
Section 9.13.   Payment of Trade Liabilities, Taxes, Etc .  Such Obligor will (a) timely file all required tax returns including any extensions; (b) timely pay all taxes, assessments, and other governmental charges or levies imposed upon it or upon its income, profits or property before the same become delinquent; (c) within ninety (90) days past the original invoice billing date after same becomes due, pay all material liabilities owed by it on ordinary trade terms to vendors, suppliers and other Persons providing goods and services used by it in the ordinary course of its business; (d) pay and discharge when due all other material liabilities now or hereafter owed by it, other than royalty payments suspended in the ordinary course of business; and (e) maintain appropriate accruals and reserves for all of the foregoing in accordance with GAAP.
 
Section 9.14.   Performance on an Obligor’s Behalf .  If such Obligor fails to pay any taxes, insurance premiums, expenses, attorneys’ fees or other amounts it is required to pay under any Loan Document, payment may be made by Administrative Agent as a Protective Advance.  Such Obligor shall immediately reimburse Administrative Agent for any such payments and each amount paid by Administrative Agent shall constitute an Obligation owed hereunder which is due and payable on the date such amount is paid by Administrative Agent.
 
 
49
 
 
Section 9.15.   Evidence of Compliance .  Such Obligor will furnish to Administrative Agent at such Obligor’s expense all evidence which Administrative Agent may from time to time reasonably request in writing as to the accuracy and validity of or compliance with all representations, warranties and covenants made by such Obligor in the Loan Documents, the satisfaction of all conditions contained therein, and all other matters pertaining thereto.
 
Section 9.16.   Environmental Matters; Environmental Reviews .
 
(a)   Such Obligor and each of its Subsidiaries will comply in all material respects with all Environmental Laws now or hereafter applicable to such Person, as well as all contractual obligations and agreements with respect to environmental remediation or other environmental matters, and shall obtain, at or prior to the time required by applicable Environmental Laws, all environmental, health and safety permits, licenses and other authorizations necessary for its operations and will maintain such authorizations in full force and effect, except for those which if not obtained could not have a Material Adverse Effect.  Neither such Obligor nor any of its Subsidiaries will do anything or permit anything to be done which will subject any of its properties to any remedial obligations under, or result in noncompliance with applicable permits and licenses issued under, any applicable Environmental Laws, assuming disclosure to the applicable governmental authorities of all relevant facts, conditions and circumstances.
 
(b)   Such Obligor will promptly furnish to Administrative Agent all written notices of violation, orders, claims, citations, complaints, penalty assessments, suits or other proceedings received by such Borrower or any of its Subsidiaries, or of which such Obligor otherwise has notice, pending or threatened against any such Person by any governmental authority with respect to any alleged violation of or non-compliance with any Environmental Laws or any permits, licenses or authorizations in connection with such Person’s ownership or use of its properties or the operation of its business.
 
(c)   Such Obligor will promptly furnish to Administrative Agent all requests for information, notices of claim, demand letters, and other notifications, received by such Obligor in connection with such Borrower’s or its Subsidiaries’ ownership or use of its properties or the conduct of its business, relating to potential responsibility with respect to any investigation or clean-up of Hazardous Material at any location.
 
Section 9.17.   Change of Name, Location, Jurisdiction of Incorporation or Organization, or Structure; Additional Filings .  Such Obligor acknowledges that financing statements pertaining to the Collateral have been filed where such Obligor is organized.  Without limitation of any other covenant herein, such Obligor will not cause or permit any change to be made in its name, identity or corporate structure (not including a change in capital structure resulting from authorization or issuance of Equity Interests or the exchange of Equity Interests for Equity Interests), or any change to be made to a jurisdiction other than as expressly provided herein with respect to (i) the location of any Collateral, (ii) the location of any records concerning any of its property included in Collateral, (iii) the location of such Obligor’s chief executive office or principal place of business or (iv) the jurisdiction of organization of such Obligor, unless such Obligor shall have first notified Administrative Agent of such change at least forty-five (45) days prior to the effective date of such change, taken all action requested by Administrative Agent for the purpose of further confirming and protecting Administrative Agent’s security interests and rights under the Loan Documents and the perfection and priority thereof, and if requested by Administrative Agent, provided to Administrative Agent a legal opinion to its satisfaction in respect of the perfection or priority thereof and such other matters as Administrative Agent may require.  In any notice furnished pursuant to this Section, such Obligor will expressly state that the notice is required by this Agreement and contains facts that may require additional filings of financing statements or other notices for the purposes of continuing perfection of Administrative Agent’s security interest in the Collateral.
 
 
50
 
 
Section 9.18.   Further Assurances .  Such Obligor shall execute and deliver, or cause to be executed and delivered, to Administrative Agent such documents and agreements, and shall take or cause to be taken such actions, as Administrative Agent may, from time to time, reasonably request to carry out the terms and conditions of this Agreement and the other Loan Documents.
 
Section 9.19.   Proprietary Rights .  Such Obligor shall provide Administrative Agent with an updated Schedule 8.15 at such time as such Obligor acquires any new trademarks, copyrights or patents or begins the application process therefor.
 
Section 9.20.   Real Property .  Unless agreed otherwise in writing by Administrative Agent, within ten (10) days following the acquisition of any Real Property, such Obligor will execute and deliver to Administrative Agent, or will cause each applicable Subsidiary to execute and deliver to Administrative Agent, documentation in form and substance satisfactory to Administrative Agent, granting to it perfected Liens (subject to no prior liens other than any Permitted Liens) in all such Real Property, together with such related documentation as may be requested by Administrative Agent.
 
Section 9.21.   Initial Funding Date Name Changes .
 
(a)   On the Initial Funding Date, Apace I will change its name to Aero-Missile Components, Inc., in compliance with Applicable Law.  Apace I shall cause to be delivered to Administrative Agent, promptly as soon as it is available, a certificate evidencing such name change, issued by the appropriate Governmental Authority.  Apace I and each other Obligor hereby acknowledges and agrees that any Loan Document executed by Apace I in the name of Aero-Missile Components, Inc. (or any similar name) prior to the effective date of such name change is in fact the act of Apace I and is the binding and enforceable agreement of Apace I, the same as if it had been executed in the name of Apace I.  All Loan Documents executed by Apace I prior to the effective date of such name change, whether in the name of Apace I or Aero-Missile Components, Inc. (or any similar name) shall continue in full force and effect following the effective date of such name change.
 
(b)   On the Initial Funding Date, Apace II will change its name to Creative Assembly Systems, Inc., in compliance with Applicable Law.  Apace II shall cause to be delivered to Administrative Agent, promptly as soon as it is available, a certificate evidencing such name change, issued by the appropriate Governmental Authority.  Apace II and each other Obligor hereby acknowledges and agrees that any Loan Document executed by Apace II in the name of Creative Assembly Systems, Inc. (or any similar name) prior to the effective date of such name change is in fact the act of Apace II and is the binding and enforceable agreement of Apace II, the same as if it had been executed in the name of Apace II.  All Loan Documents executed by Apace II prior to the effective date of such name change, whether in the name of Apace II or Creative Assembly Systems, Inc. (or any similar name) shall continue in full force and effect following the effective date of such name change.
 
 
51
 
 
Section 9.22.   Novation of Government Contracts .  Promptly upon the Initial Funding Date, Apace I and Apace II each will take all necessary action to apply for a Novation Agreement with respect to each Government Contract included in the Purchased Assets acquired by it pursuant to the Acquisition.  Obligors will use their best efforts to cause each such Novation Agreement to be executed and delivered by all parties thereto as soon as reasonably possible following the Initial Funding Date.  Without limiting the foregoing, with respect to each such Government Contract and to the extent it has not already done so prior to the Initial Funding Date, not later than June 15, 2012, each of Apace I and Apace II shall submit, or cause to be submitted, to the applicable Contracting Officer on each such Government Contract the form of Novation Agreement and related information in compliance with Federal Acquisition Regulation § 42.1204.  Obligors will keep Administrative Agent reasonably informed with respect to the status of efforts to obtain each such Novation Agreement and will deliver Administrative Agent a copy of each fully executed Novation Agreement promptly when available.
 
Section 9.23.   Initial Funding Date Certificate .  All conditions specified by Section 7.1 shall be satisfied, and Obligors will execute and deliver to Administrative Agent the Initial Funding Date Certificate on or before 9:00 a.m. on the date that is five (5) Business Days after the Agreement Date.
 
Section 9.24.   Post Closing Covenant .  On or before August 1, 2012, the Obligors shall deliver to Administrative Agent evidence, reasonably acceptable to Administrative Agent, that (a) Apace I is qualified to do business and is in good standing as a foreign organization in Alabama and Pennsylvania and (b) Apace II is qualified to do business and is in good standing as a foreign organization in Minnesota, Ohio and Washington.
 
ARTICLE X
NEGATIVE COVENANTS
 
Until termination of the Commitments and payment and performance in full of the Obligations, each Obligor agrees as follows:
 
Section 10.1.   Fundamental Changes .  Neither such Obligor nor any of its Subsidiaries shall enter into any transaction of merger, reorganization or consolidation, wind-up, liquidate or dissolve.  Such Obligor will not change its name, jurisdiction of organization, organizational type or location of its chief executive office unless it gives Administrative Agent at least forty-five (45) days prior written notice thereof and executes all documents that Administrative Agent reasonably requests in connection therewith.
 
 
52
 
 
Section 10.2.   Collateral Locations .  Except for Inventory in transit to a Borrower in the ordinary course of business, a Borrower will not maintain any Collateral at any location other than those locations listed on Schedule 8.11 unless it gives Administrative Agent at least thirty (30) days prior written notice thereof and delivers or causes to be delivered to Administrative Agent all documents that Administrative Agent reasonably requests in connection therewith, including without limitation, in the case of any leased location, an access and waiver agreement, signed by the owner of such location, in form and substance satisfactory to Administrative Agent.  On or before the date that is six months following the Agreement Date, Obligors shall either (a) deliver an access and waiver agreement for the 2200 Arthur Kill Road, Staten Island, New York location, signed by the owner of such location, in form and substance satisfactory to Administrative Agent or (b) terminate the lease for such location and remove all assets of Obligors from such location.
 
Section 10.3.   Use of Proceeds .  Obligors will not use any proceeds of any Loan, directly or indirectly, for any purpose other than (a) to pay transactional fees, costs and expenses incurred in connection with the Loan Documents, (b) in the case of each of Apace I and Apace II, on the Initial Funding Date, to finance all or a portion of the cash amount in respect of the purchase price payable for the Purchased Assets purchased by it pursuant to the Asset Purchase Agreement, (c) to repay Debt of a Borrower existing on the Initial Funding Date, (d) to finance an acquisition described in clause (b) of the definition of “ Restricted Investment ” and (e) on the Initial Funding Date and thereafter, for working capital in the ordinary course of a Borrower’s business (including, in the case of proceeds of Revolving Loans, payments on the Term Loans).  Obligors will not use any proceeds of any Loan, directly or indirectly, to purchase or carry margin stock, repay or otherwise refinance indebtedness incurred to purchase or carry Margin Stock or to extend credit for the purpose of purchasing or carrying any Margin Stock.
 
Section 10.4.   Business .  Unless otherwise agreed by Administrative Agent in writing, Parent and its Subsidiaries (i) will not engage, directly or indirectly, in any line of business other than the businesses in which such Parent and its Subsidiaries, respectively, are engaged on the Agreement Date, and (ii) will not make any expenditure or commitment or incur any obligation or enter into or engage in any transaction except in the ordinary course of business.
 
Section 10.5.   Debt .  Neither such Obligor nor any of its Subsidiaries shall incur or maintain any Debt, other than (a) the Obligations, (b) trade payables and contractual obligations to suppliers and customers arising in the ordinary course of business, (c) Subordinated Debt, (e) the “Assumed Liabilities” as defined by the Acquisition Agreement as in effect on the Initial Funding Date, (d) Debt described on Schedule 8.21 , (e) purchase money secured Debt incurred to purchase Equipment, provided , that the aggregate amount of such Debt outstanding does not exceed $100,000 annually, and (f) Debt evidencing a refunding, renewal, or extension of Debt described in clause (e) preceding, provided , that (i) the principal amount thereof is not increased at the time of such renewal, refinancing, refunding, or extension, (ii) no Obligor that is not an obligor or guarantor of such Debt as of the Agreement Date shall become an obligor or guarantor thereof and (iii) the terms of such refunding, renewal, or extension are no less favorable to such Obligor than the original Debt, and (g) purchase money secured Debt incurred to purchase Permitted Purchased Real Estate.
 
 
53
 
 
Section 10.6.   Guaranties .  Neither such Obligor nor any of its Subsidiaries shall make, issue or be or become liable on any guaranty, except (i) guaranties in favor of Administrative Agent, (ii)  guaranties described on Schedule 8.21 , and (iii) guaranties by any Obligor of Debt of any other Obligor if such Debt was incurred in the ordinary course of business and is not prohibited by this Agreement.
 
Section 10.7.   Liens .  Neither such Obligor nor any of its Subsidiaries shall create, incur, assume, or permit to exist any Lien on any property now owned or hereafter acquired by any of them, except Permitted Liens.  Such Obligor will not enter into or become subject to any agreement whereby such Obligor is prohibited from, or would otherwise be in default as a result of, creating, assuming, incurring, or suffering to exist, directly or indirectly, any Lien on any of its assets in favor of Administrative Agent or Lenders.
 
Section 10.8.   Disposition of Property .  Without the prior written consent of Administrative Agent, neither such Obligor nor any of its Subsidiaries will transfer, sell, assign, lease, license or otherwise dispose of any of its property, or agree to do any of the foregoing, except the (a) use of money or cash equivalents, not constituting proceeds of Collateral, in the ordinary course of business and in a manner that is not prohibited by this Agreement, (b) sale of Inventory in the ordinary course of business and (c) sale or other disposition of Equipment in the ordinary course of business that is obsolete or no longer useable by such Obligor in its business, provided , that (i) if such sale or disposition is made without replacement of such Equipment, or such Equipment is replaced by Equipment leased by such Obligor, then such Obligor shall deliver to Administrative Agent, for the account of Lenders, all net proceeds of any such sale or disposition for application to the Obligations or (ii) if such sale or disposition is made in connection with the purchase by such Obligor of replacement Equipment, then such Obligor shall use the proceeds of such sale or disposition to purchase such replacement Equipment and shall deliver to Administrative Agent written evidence of the use of such proceeds for such purchase.
 
Section 10.9.   Sale and Leaseback .  Without the prior written consent of Administrative Agent, neither such Obligor nor any of its Subsidiaries shall directly or indirectly enter into any arrangement with any Person providing for such Borrower or such Subsidiary to lease or rent property that such Obligor or such Subsidiary has sold or will sell or otherwise transfer to such Person.
 
Section 10.10.   Distributions; Capital Contribution; Redemption .  Without the prior written consent of Administrative Agent, no Obligor nor its Subsidiaries shall directly or indirectly declare or make, or incur any liability to make, any Distribution, other than a Distribution by a Subsidiary to a Borrower.  No Obligor nor its Subsidiaries will, directly or indirectly, make any capital contribution of any nature (other than a contribution by Parent to a Borrower) to or purchase, redeem, acquire or retire any Equity Interests in any Person (other than the exchange of one class or series of Equity Interests of Parent for another class or series of Equity Interests of Parent), whether such interests are now or hereafter issued, outstanding or created, or cause or permit any reduction or retirement of the Equity Interests of any Person.
 
 
54
 
 
Section 10.11.   Restricted Investments .  Neither such Obligor nor any of its Subsidiaries shall make any Restricted Investment, other than intercompany loans by Parent or a Borrower to a Borrower.
 
Section 10.12.   Transactions with Affiliates .  Such Obligor will not engage in any transaction with any Affiliate except in the ordinary course of business and in amounts and upon terms no less favorable to such Obligor than would be obtained in a comparable arm’s-length transaction with a Person who is not an Affiliate.
 
Section 10.13.   New Subsidiaries .  Without the prior written consent of Administrative Agent, such Obligor shall not organize, create or acquire any Subsidiary unless otherwise allowed by this Agreement and, concurrently with such organization, creation or acquisition, such new Subsidiary becomes a party to this Agreement, in form and substance satisfactory to Administrative Agent.
 
Section 10.14.   Financial Covenants .
 
(a)   The Fixed Charge Coverage Ratio, determined for Parent and its Subsidiaries on a consolidated basis as of the last day of any Fiscal Month, shall not be less than the ratio specified for such date as follows:
 
Date
 
Minimum Fixed Charge Ratio
June 30, 2012
 
1.30 to 1.0
July 31, 2012
 
1.60  to 1.0
August 31, 2012
 
1.70 to 1.0
September 30, 2012
 
1.70 to 1.0
October 31, 2012
 
1.70 to 1.0
November 30, 2012
 
1.70 to 1.0
December 31, 2012
 
1.70 to 1.0
January 31, 2013
 
1.70 to 1.0
February 28, 2013
 
1.70 to 1.0
March 31, 2013
 
1.70 to 1.0
April 30, 2013 and continuing thereafter
 
1.20 to 1.0

(b)   Leverage Ratio for Parent and its Subsidiaries of the end of any Fiscal Month, shall not be greater than the amount specified for such date as follows:
 
Date
 
Maximum Leverage Ratio
June 30, 2012
 
2.85 to 1.0
July 31, 2012
 
2.75 to 1.0
August 31, 2012
 
2.65 to 1.0
September 30, 2012
 
2.60 to 1.0
October 31, 2012
 
2.50 to 1.0
November 30, 2012
 
2.45 to 1.0
December 31, 2012
 
2.25 to 1.0
January 31, 2013
 
2.20 to 1.0
February 28, 2013
 
2.15 to 1.0
March 31, 2013
 
2.05 to 1.0
April 30, 2013
 
1.95 to 1.0
May 31, 2012
 
1.90 to 1.0
June 30, 2012 and continuing thereafter
 
1.90 to 1.0
 
 
55
 

(c)   Tangible Net Worth, determined for Parent and its Subsidiaries as of the end of any Fiscal Month, shall not be less than the amount specified with respect to such Fiscal Month as follows:
 
Date
Minimum Tangible Net Worth
May 31, 2012
$3,727,000
June 30, 2012
$3,850,000
July 31, 2012
$3,948,000
August 31, 2012
$4,050,000
September 30, 2012
$4,155,000
October 31, 2012
$4,301,000
November 30, 2012
$4,423,000
December 31, 2012
$4,545,000
January 31, 2013
$4,751,000
February 28, 2013
$4,913,000
March 31, 2013 and continuing thereafter
$5,142,000

Section 10.15.   Fiscal Year .  Such Obligor will not change its Fiscal Year used for financial reporting.
 
Section 10.16.   Impairment of Security Interest .  Such Obligor will not take or fail to take any action which would in any manner impair the value or enforceability of Lender’s security interest in any Collateral.  Such Obligor will not adjust, settle, compromise, amend or modify any of its rights in the Collateral (other than in the ordinary course of business).
 
Section 10.17.   Prohibited Contracts .  Except as expressly provided for in the Loan Documents, neither such Obligor nor any of its Subsidiaries will, directly or indirectly, enter into, create, or otherwise allow to exist any contract or other consensual restriction on the ability of any Subsidiary of such Obligor to:  (a) pay dividends or make other distributions to such Obligor, (b) to redeem equity interests held in it by such Obligor, (c) to repay loans and other indebtedness owing by it to such Obligor, or (d) to transfer any of its assets to such Obligor.  Such Obligor will not amend or permit any amendment to any contract or lease which releases, qualifies, limits, makes contingent or otherwise detrimentally affects the rights and benefits of Lender under or acquired pursuant to any Loan Document.
 
Section 10.18.   Asset Purchase Agreement .  On or after the Agreement Date, Obligors will not agree to amend or modify the Asset Purchase Agreement without the prior written consent of Administrative Agent.
 
ARTICLE XI
EVENT OF DEFAULT
 
Section 11.1.   Event of Default .  Each of the following shall constitute an Event of Default under this Agreement (each, an “ Event of Default ”):
 
(a)   any failure by any Borrower to timely pay any of the Obligations when due;
 
 
56
 
 
(b)   any representation or warranty made or deemed made by any Obligor or any of its Subsidiaries in any Loan Documents, in any financial statement, or in any information furnished by such Obligor or such Subsidiary to Lenders or Administrative Agent shall be untrue in any material respect as of the date on which made, deemed made or furnished;
 
(c)   any noncompliance or breach of any requirements contained in:
 
(i)   Sections 9.1 through 9.3 , Sections 9.5 through 9.7 , Section 9.11 , Section 9.12 , Section 9.21 , 9.23 , Section 10.1 , or Sections 10.3 through 10.14 ;
 
(ii)   Sections 9.4 , 9.8 , 9.9 , 9.10 , 10.2 or 10.15 and any such failure continues for a period of ten (10) days; or
 
(iii)   any provision of the Loan Documents other than those listed in clauses (i) and (ii) preceding of this Section 11.1(c) , and such failure continues for a period of fifteen (15) days after the earlier of any Obligor’s actual knowledge thereof or written or verbal notice thereof by Administrative Agent to any Obligor;
 
(d)   Any Obligor or any of its Subsidiaries shall (i) file a voluntary petition in bankruptcy or otherwise commence any action or proceeding seeking reorganization, arrangement or readjustment of its debts, or consent to or acquiesce in any such petition, action or proceeding; (ii) apply for or acquiesce in the appointment of a receiver, assignee, liquidator, custodian, trustee or similar officer for it or for all or any part of its property; (iii) make an assignment for the benefit of creditors; or (iv) be unable generally to pay its debts as they become due;
 
(e)   an involuntary petition shall be filed or an action or proceeding otherwise commenced seeking relief under the Bankruptcy Code or seeking any reorganization, arrangement, consolidation or readjustment of the debts of any Obligor or any of its Subsidiaries under any other bankruptcy or insolvency law;
 
(f)   a receiver, assignee, liquidator, custodian, trustee or similar officer shall be appointed for any Obligor or any of its Subsidiaries or for all or any part of its property or a warrant of attachment, execution or similar process shall be issued against any part of the property of any Obligor or any of its Subsidiaries;
 
(g)   Any Obligor or any of its Subsidiaries shall file a certificate of dissolution or shall be liquidated, dissolved or wound-up or shall commence or have commenced against it any action or proceeding for dissolution, winding-up or liquidation, or shall take any action in furtherance thereof;
 
(h)   Any Obligor or any Subsidiary of an Obligor shall   default with respect to any Debt for borrowed money (other than the Obligations) of any Obligor or any of its Subsidiaries in an outstanding principal amount which exceeds $50,000 and such default shall continue for more than the period of grace, if any, therein with respect thereto, if the effect thereof (with or without the giving of notice or further lapse of time or both) is to accelerate, or to permit the holder of any such Debt to accelerate, the maturity of any such Debt, or any such Debt shall be declared due and payable or be required to be prepaid (other than by a regularly scheduled required prepayment) prior to the stated maturity thereof;
 
 
57
 
 
(i)   one or more judgments, orders, decrees or arbitration awards is entered against any Obligor or any of its Subsidiaries involving in the aggregate liability (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage) of $50,000 or more;
 
(j)   the filing or commencement of any attachment, sequestration, garnishment, execution or other Lien or action against or with respect to any Collateral;
 
(k)   any Loan Document ceases to be in full force and effect or any Lien with respect to any material portion of the Collateral intended to be secured thereby ceases to be, or is not, valid, perfected (for any reason other than the failure of Administrative Agent to file a financing statement or continuation thereof to maintain perfection) and prior to all other Liens (other than Permitted Liens that are expressly allowed to be prior pursuant to the Loan Documents) or is terminated, revoked or declared void, or any Loan Document shall terminate (other than in accordance with its terms with the written consent of Administrative Agent) or become void or unenforceable, or the validity or enforceability of any Loan Document shall be contested by any Obligor or any Affiliate of any Obligor;
 
(l)   the occurrence of any breach, default or event of default, under the Asset Purchase Agreement;
 
(m)   Administrative Agent at any time believes, in accordance with the standards prescribed by the UCC, that the prospect for payment or performance of the Obligations is impaired;
 
(n)   the occurrence of any event or circumstance which Administrative Agent believes in its discretion has resulted or may result in a Material Adverse Effect; or
 
(o)   any of the following events shall occur or exist with respect to an Obligor or any ERISA Affiliate: (i) any Prohibited Transaction involving any ERISA Benefit Plan, (ii) any Reportable Event with respect to any ERISA Benefit Plan, (iii) the filing under Section 4041 of ERISA of a notice of intent to terminate any ERISA Benefit Plan or the termination of any ERISA Benefit Plan, (iv) any event or circumstance that might constitute grounds entitling the PBGC to institute proceedings under Section 4042 of ERISA for the termination of, or for the appointment of a trustee to administer, any ERISA Benefit Plan, or the institution by the PBGC of any such proceedings, or (v) complete or partial withdrawal under Section 4201 or 4204 of ERISA from a Multiemployer Plan or the reorganization, insolvency, or termination of any Multiemployer Plan; and, in each case above, such event or condition, together with all other events or conditions, if any, have subjected or could in the reasonable opinion of Administrative Agent subject an Obligor to any tax, penalty, or other liability to an ERISA Benefit Plan, a Multiemployer Plan, the PBGC, or otherwise (or any combination thereof) which in the aggregate exceed or could reasonably be expected to exceed $100,000 .
 
 
58
 
 
ARTICLE XII
REMEDIES
 
Section 12.1.   Obligations .
 
(a)   Upon the occurrence of any Event of Default described in Sections 11.1(d) , 11.1(e) , 11.1(f) or 11.1(g) , this Agreement shall automatically and immediately terminate and all Obligations shall automatically become immediately due and payable without notice or demand of any kind.

(b)   If an Event of Default exists, Administrative Agent may do any one or more of the following, in addition to the actions described in clause (a) preceding, as applicable, at any time or times and in any order, without notice to or demand on any Obligor: (i) reduce the Revolving Credit Limit or the advance rates used in computing the Borrowing Base, (ii) terminate the Commitments, (ii) declare any or all Obligations to be immediately due and payable and (iii) pursue its other rights and remedies under the Loan Documents or otherwise under Applicable Law.
 
Section 12.2.   Collateral .  If an Event of Default has occurred and is continuing, Administrative Agent shall have, in addition to all other rights of Administrative Agent, the rights and remedies of a secured party under the UCC.  At any time when an Event of Default is in existence:  (i) Administrative Agent may notify Account Debtors to make payment directly to Administrative Agent, for the account of Lenders, or to such address as Administrative Agent may specify, and enforce, settle or adjust Accounts, General Intangibles or Chattel Paper with Account Debtors or obligors thereon for amounts and upon terms which Administrative Agent considers appropriate, and in such case, Administrative Agent will credit the Obligations with only the net amounts received by Administrative Agent in payment thereof after deducting all Lender Party Expenses incurred or expended in connection therewith; (ii) Administrative Agent may take possession of any Collateral and keep it on an Obligor’s premises or remove all or any part of it to another location selected by Administrative Agent; (iii) on request by Administrative Agent, an Obligor will, at such Obligor’s cost, assemble the Collateral and make it available to Administrative Agent at a place reasonably convenient to Administrative Agent; and (iv) Administrative Agent may sell or otherwise dispose of any Collateral at public or private sales, for cash, upon credit or otherwise, at such prices and upon such terms as Administrative Agent deems appropriate.  Unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, Administrative Agent will give Obligors reasonable notice of the time and place of any public sale thereof or of the time after which any private sale or any other intended disposition thereof is to be made.  For this purpose, it is agreed that at least five (5) days notice of the time of sale or other intended disposition of the Collateral delivered in accordance with Section 17.6 shall be deemed to be reasonable notice in conformity with the UCC.  Administrative Agent may adjourn or otherwise reschedule any public sale by announcement at the time and place specified in the notice of such public sale, and such sale may be made at the time and place as so announced without necessity of further notice.  Administrative Agent shall not be obligated to sell or dispose of any Collateral, notwithstanding any prior notice of intended disposition.  If any Collateral is sold on terms other than payment in full at the time of sale, no credit shall be given in reduction of the Obligations until Administrative Agent receives payment in cash, and if any such buyer defaults in payment, Administrative Agent may resell the Collateral without further notice to any Obligor.  In the event Administrative Agent seeks to take possession of all or any portion of the Collateral by judicial process, each Obligor waives the posting of any bond, surety or security with respect thereto which might otherwise be required.  Each Obligor agrees that Administrative Agent has no obligation to preserve rights to the Collateral or marshal any Collateral for the benefit of any Person.  Administrative Agent is hereby granted a license or other right to use, without charge, each Obligor’s labels, patents, copyrights, name, trade secrets, trade names, trademarks in completing production of, advertising or selling any Collateral, and each Obligor’s rights under all licenses shall inure to Administrative Agent’s benefit for such purpose.  The proceeds of any sale or disposition of Collateral shall be applied first to all expenses of sale, including reasonable attorneys’ fees, and then to the Obligations.  Each Obligor shall remain liable for any deficiency.
 
 
59
 
 
Section 12.3.   Injunctive Relief .  All cash proceeds of Collateral from time to time existing, including without limitation collections and payments of Accounts, whether consisting of cash, checks or other similar items, at all times shall be subject to an express trust for the benefit of Administrative Agent.  All such proceeds shall be subject to Administrative Agent’s Liens.  Except as may be specifically allowed otherwise by this Agreement, each Obligor is expressly prohibited from using, spending, retaining or otherwise exercising any dominion over such proceeds.  Each Obligor acknowledges and agrees that an action for damages against any Obligor for any breach of such prohibitions shall not be an adequate remedy at law.  In the event of any such breach, any Obligor agrees to the fullest extent allowed by law that Administrative Agent shall be entitled to injunctive relief to restrain such breach and require compliance with the requirements of this Agreement.
 
Section 12.4.   Setoff .  Each Obligor irrevocably authorizes Administrative Agent and/or Lenders to charge any account of such Obligor maintained with Administrative Agent or Lenders with such amount as may be necessary from time to time to pay any Obligations when due.  Each Obligor agrees that Administrative Agent and Lenders shall have a contractual right to setoff any and all deposits or other sums at any time credited by or due from Administrative Agent or Lenders to such Obligor against any part of the Obligations.
 
ARTICLE XIII
TERMINATION
 
Section 13.1.   Term and Termination .  Obligors jointly may terminate the Commitments at any time subject to the requirements of Section 5.5 .  Administrative Agent may terminate the Commitments as provided by Section 12.1(b) and the Commitments shall terminate as provided by Section 12.1(a) .  Upon the effective date of termination of the Commitments for any reason, Lenders’ obligation to make Loans shall automatically terminate and all Obligations shall become immediately due and payable in full.  Notwithstanding the foregoing, until all Obligations are indefeasibly paid in cash and performed in full, each Obligor shall remain bound by the terms of this Agreement and Administrative Agent and Lenders shall retain all rights and remedies under the Loan Documents.
 
ARTICLE XIV
ADMINISTRATIVE AGENT
 
Section 14.1.   Appointment and Authority .  Each Lender hereby irrevocably appoints NewStar Business Credit, LLC to act on its behalf as Administrative Agent hereunder and under the other Loan Documents and authorizes Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto.  The provisions of this Article XIV are solely for the benefit of Administrative Agent and the Lenders, and no Obligor shall have rights as a third party beneficiary of any of such provisions.
 
 
60
 
 
Section 14.2.   Exculpatory Provisions .  Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents.  Without limiting the generality of the foregoing, Administrative Agent:
 
(a)   shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or an Event of Default has occurred and is continuing;
 
(b)   shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that Administrative Agent is required to exercise as directed in writing by the Required Lenders; provided that Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose Administrative Agent to liability or that is contrary to any Loan Document or applicable law; and
 
(c)   shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to any Obligor or any of its Affiliates that is communicated to or obtained by the Person serving as Administrative Agent or any of its Affiliates in any capacity.
 
(d)   Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of Required Lenders (or as Administrative Agent shall believe in good faith shall be necessary) or (ii) in the absence of its own gross negligence or willful misconduct.  Administrative Agent shall be deemed not to have knowledge of any Default or Event of Default unless and until notice describing such Default or Event of Default is given to Administrative Agent by an Obligor or Required Lenders.
 
(e)   Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default or Event of Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article VII or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to Administrative Agent.
 
Section 14.3.   Reliance by Administrative Agent .  Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person.  Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon.  In determining compliance with any condition hereunder to the making of a Loan that by its terms must be fulfilled to the satisfaction of the Lenders, Administrative Agent may presume that such condition is satisfactory to all Lenders (i) if such condition is satisfactory to Required Lenders, or (ii) unless Administrative Agent shall have received notice to the contrary from such Lender prior to the making of such Loan.  Administrative Agent may consult with legal counsel, independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
 
 
61
 
 
Section 14.4.   Non-Reliance on Administrative Agent and other Lenders .  Each Lender acknowledges that it has, independently and without reliance upon Administrative Agent or any other Lender or any of their Affiliates and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement.  Each Lender also acknowledges that it will, independently and without reliance upon Administrative Agent or any other Lender or any of their Affiliates and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.
 
Section 14.5.   Rights as a Lender .  The Person serving as Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as Administrative Agent hereunder in its individual capacity.  Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with any Obligor or any Subsidiary or other Affiliate thereof as if such Person were not Administrative Agent hereunder and without any duty to account therefor to the Lenders.
 
Section 14.6.   Sharing of Set-Offs and Other Payments .  Each Lender Party agrees that if it shall, whether through the exercise of rights under the Loan Documents or rights of banker’s lien, set off, or counterclaim against any Obligor or otherwise, obtain payment of a portion of the aggregate Obligations owed to it, taking into account all distributions made by Administrative Agent under Section 5.7 , that causes such Lender Party to have received more than it would have received had such payment been received by Administrative Agent and distributed pursuant to Section 5.7 , then (a) it shall be deemed to have simultaneously purchased and shall be obligated to purchase interests in the Obligations as necessary to cause all Lender Parties to share all payments as provided for in Section 5.7 , and (b) such other adjustments shall be made from time to time as shall be equitable to ensure that Administrative Agent and all Lender Parties share all payments of Obligations as provided in Section 5.7 ; provided, however, that nothing herein contained shall in any way affect the right of any Lender Party to obtain payment (whether by exercise of rights of banker’s lien, set-off or counterclaim or otherwise) of indebtedness other than the Obligations.  Each Obligor expressly consents to the foregoing arrangements and agrees that any holder of any such interest or other participation in the Obligations, whether or not acquired pursuant to the foregoing arrangements, may to the fullest extent permitted by law exercise any and all rights of banker’s lien, set-off, or counterclaim as fully as if such holder were a holder of the Obligations in the amount of such interest or other participation.  If all or any part of any funds transferred pursuant to this section is thereafter recovered from the seller under this section which received the same, the purchase provided for in this section shall be deemed to have been rescinded to the extent of such recovery, together with interest, if any, if interest is required pursuant to the order of a tribunal order to be paid on account of the possession of such funds prior to such recovery.
 
 
62
 
 
Section 14.7.   Investments .  Whenever Administrative Agent in good faith determines that it is uncertain about how to distribute to Lender Parties any funds which it has received, or whenever Administrative Agent in good faith determines that there is any dispute among Lender Parties about how such funds should be distributed, Administrative Agent may choose to defer distribution of the funds which are the subject of such uncertainty or dispute.  If Administrative Agent in good faith believes that the uncertainty or dispute will not be promptly resolved, or if Administrative Agent is otherwise required to invest funds pending distribution to Lender Parties, Administrative Agent shall invest such funds pending distribution; all interest on any such investment shall be distributed upon the distribution of such investment and in the same proportion and to the same Persons as such investment.  All moneys received by Administrative Agent for distribution to Lender Parties (other than to the Person who is Administrative Agent in its separate capacity as a Lender Party) shall be held by Administrative Agent pending such distribution solely as Administrative Agent for such Lender Parties, and Administrative Agent shall have no equitable title to any portion thereof.
 
Section 14.8.   Resignation of Administrative Agent .  Administrative Agent may at any time give notice of its resignation to the Lenders and Obligors.  Upon receipt of any such notice of resignation, the Lenders shall have the right to appoint a successor.  If no such successor shall have been so appointed by the Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may on behalf of the Lenders appoint a successor Administrative Agent provided that if Administrative Agent shall notify Obligors and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any Collateral held by Administrative Agent on behalf of the Lenders under any of the Loan Documents, the retiring Administrative Agent shall continue to hold such Collateral until such time as a successor Administrative Agent is appointed) and (2) all payments, communications and determinations provided to be made by, to or through Administrative Agent shall instead be made by or to each Lender directly, until such time as the Lenders appoint a successor Administrative Agent as provided for above in this paragraph.  Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent, and the retiring Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this paragraph).  The fees payable by Obligors to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between Obligors and such successor.  After the retiring Administrative Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article and Sections 17.5 and 17.10 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Affiliates in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent.
 
 
63
 
 
Section 14.9.   Delegation of Duties .  Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by Administrative Agent.  Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Affiliates.  The exculpatory provisions of this Article shall apply to any such sub-agent and to the Affiliates of Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.
 
Section 14.10.   Collateral Matters .
 
(a)   The Lenders hereby irrevocably authorize Administrative Agent, at its option and in its sole discretion, to release any Lien on any Collateral (i) upon the termination of the Commitments and payment and satisfaction in full by Obligors of all Obligations, (ii) constituting property being sold or disposed of by an Obligor if a release is required or desirable in connection therewith and if such Obligor certifies to Administrative Agent that the sale or disposition is permitted under this Agreement or the other Loan Documents (and Administrative Agent may rely conclusively on any such certificate, without further inquiry), (iii) constituting property in which Obligors or its Subsidiaries owned no interest at the time Administrative Agent’s Lien was granted nor at any time thereafter, or (iv) constituting property leased to an Obligor or its Subsidiaries under a lease that has expired or is terminated in a transaction permitted under this Agreement.  Except as provided above, Administrative Agent will not execute and deliver a release of any Lien on any Collateral without the prior written authorization of (y) if the release is of all or substantially all of the Collateral, all of the Lenders, or (z) otherwise, the Required Lenders.  Upon request by Administrative Agent or an Obligor at any time, the Lenders will confirm in writing Administrative Agent’s authority to release any such Liens on particular types or items of Collateral pursuant to this Section 14.10 ; provided however, that (1) Administrative Agent shall not be required to execute any document necessary to evidence such release on terms that, in Administrative Agent’s opinion, would expose Administrative Agent to liability or create any obligation or entail any consequence other than the release of such Lien without recourse, representation, or warranty, and (2) such release shall not in any manner discharge, affect, or impair the Obligations or any Liens (other than those expressly being released) upon (or obligations of any Obligor in respect of) all interests retained by such Obligor, including, the proceeds of any sale, all of which shall continue to constitute part of the Collateral.
 
(b)   Administrative Agent shall have no obligation whatsoever to any of the Lenders to assure that the Collateral exists or is owned by any Obligor or its Subsidiaries or is cared for, protected, or insured or has been encumbered, or that the Administrative Agent’s Liens have been properly or sufficiently or lawfully created, perfected, protected, or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to Administrative Agent pursuant to any of the Loan Documents, it being understood and agreed that in respect of the Collateral, or any act, omission, or event related thereto, subject to the terms and conditions contained herein, Administrative Agent may act in any manner it may deem appropriate, in its sole discretion given Administrative Agent’s own interest in the Collateral in its capacity as one of the Lenders and that Administrative Agent shall have no other duty or liability whatsoever to any Lender as to any of the foregoing, except as otherwise provided herein.
 
 
64
 
 
Section 14.11.   Agency for Perfection .  Administrative Agent hereby appoints each other Lender as its agent (and each Lender hereby accepts such appointment) for the purpose of perfecting the Administrative Agent’s Liens in assets which, in accordance with Article 8 or Article 9, as applicable, of the UCC can be perfected by possession or control.  Should any Lender obtain possession or control of any such Collateral, such Lender shall notify Administrative Agent thereof, and, promptly upon Administrative Agent’s request therefor shall deliver possession or control of such Collateral to Administrative Agent or in accordance with Administrative Agent’s instructions.
 
Section 14.12.   Concerning the Collateral and Related Loan Documents .  Each Lender Party authorizes and directs Administrative Agent to enter into this Agreement and the other Loan Documents.  Each Lender Party agrees that any action taken by Administrative Agent in accordance with the terms of this Agreement or the other Loan Documents relating to the Collateral and the exercise by Administrative Agent of its powers set forth therein or herein, together with such other powers that are reasonably incidental thereto, shall be binding upon all of the Lenders.
 
ARTICLE XV
AFFILIATE ACCOMMODATIONS
 
Section 15.1.   Purposes .  Administrative Agent and the Lenders have determined that extension of Loans to each Borrower is conditioned upon additional credit support from all other Obligors.  Because of the inter-relationships among Obligors and their respective operations, each Obligor has determined (in the case of a Borrower, independently from considerations relative to credit otherwise available to any other Borrower under this Agreement) that providing such additional credit support is within its corporate purpose, will be of direct and indirect benefit to such Obligor and is in its best interest.  Each Borrower hereby acknowledges that its agreement to the Affiliate Accommodations is in consideration of the availability of Loans to each of the other Borrowers and is not required as a condition to the availability of Loans to such Borrower.
 
Section 15.2.   Affiliate Guaranty .  As an inducement to Administrative Agent and the Lenders to make Loans and extend credit to each Borrower (other than, in the case of an Obligor that is a Borrower, Loans to such Borrower) under this Agreement, each Obligor, for value received, does hereby unconditionally, irrevocably, and absolutely guarantee the prompt and full payment and performance of the Obligations by each such other Borrower, when due and at all times thereafter.  The guaranty of payment by each Obligor pursuant to this Section is an absolute, unconditional, irrevocable, and continuing unlimited guaranty of payment and not solely of collection.
 
 
65
 
 
Section 15.3.   Affiliate Pledge .  Each Obligor hereby grants to Administrative Agent a continuing security interest and lien in, and collateral assignment of, all of such Obligor’s right, title and interest in and to all of the following, in each case both now owned and hereafter acquired, as security for the payment and performance of the Obligations owing by each other Obligor: All Accounts, Inventory, Equipment, General Intangibles, Chattel Paper, Letter of Credit Rights, Proprietary Rights, Instruments, Documents and documents of title, Investment Property (including all Equity Interests of each Subsidiary of such Obligor), Deposit Accounts, Commercial Tort Claims, money, cash, cash equivalents, securities and other personal property of any kind at any time held directly or indirectly by such Obligor or any affiliate of such Obligor, all books and records, whether in tangible or intangible form, all  other assets, if any, and all accessions to, substitutions for and replacements, products and proceeds of any of the foregoing.  Administrative Agent’s Lien under this Section shall continue in full force and effect in all Collateral until all Obligations have been indefeasibly and fully paid and all commitments of the Lenders under this Agreement have been terminated.  The Lien granted to Administrative Agent pursuant to this Section is in addition to and cumulative of the Lien granted by each Obligor pursuant to Section 6.1 and shall be governed by and entitled to all of the benefits of this Agreement.
 
Section 15.4.   Limitation .  Notwithstanding any other provision of the Affiliate Accommodations, each Obligor’s liability under its Affiliate Guaranty, and the extent of its Affiliate Pledge, in each case shall be limited to a maximum aggregate amount equal to the largest amount that would not render its obligations under its Affiliate Guaranty, or its Affiliate Pledge, subject to avoidance as a fraudulent transfer or conveyance under any Applicable Laws, in each case after giving effect to all other obligations and liabilities of such Obligor, contingent or otherwise, that are relevant under such laws, and after giving effect to the value, as assets (as determined under the applicable provisions of such laws) of any rights of such Obligor to contribution, indemnity and/or subrogation from any other Obligor or other Person as provided by the Affiliate Accommodations or any Applicable Laws or other agreement providing for an equitable allocation among such Obligor and each other Obligor of their respective obligations under the Affiliate Accommodations.  This Section is intended solely to preserve the rights of Administrative Agent and the Lenders to the maximum extent not subject to avoidance under Applicable Laws, and no Obligor or any other Person shall have any right or claim under this Section except to the extent necessary so that neither the obligations of any Obligor under its Affiliate Guaranty nor its Affiliate Pledge shall be rendered voidable under Applicable Laws.  Each Obligor has received and will receive direct and indirect material benefits from the Affiliate Accommodations of each other Obligor, and the Affiliate Guaranty and Affiliate Pledge made and given by such Obligor in furtherance of its own business interests.  The value of the consideration received and to be received by such Obligor in respect of its Affiliate Accommodations is reasonably worth at least as much as the amount of the obligations of such Obligor incurred thereunder.
 
Section 15.5.   Information .  Each Obligor is currently informed of the financial condition of each other Obligor and of all other circumstances which a diligent inquiry would reveal and which bear upon the risk of nonpayment of the Obligations.  Each Obligor is familiar with and has had an opportunity to review the books and records regarding the financial condition of each other Obligor and is familiar with the value of any and all property of each such other Obligor intended to be security for the payment of all or any part of the Obligations, provided , that such Obligor is not relying on such financial condition or the existence or value of any such security as an inducement to enter into its Affiliate Accommodations. Each Obligor has adequate means to obtain, on a continuing basis, information concerning the financial condition of each other Obligor.
 
 
66
 
 
Section 15.6.   Affiliate Accommodations Not Impaired .  Each Obligor agrees that its Affiliate Accommodations shall not be released, impaired, reduced, or affected by the occurrence of any one or more of the following events: (a) partial or total release or discharge of any other Person from liability for the Obligations or the performance of any obligation under the Loan Documents, (b) any change in the time, manner or place of payment of, or in any other term of, or any increase or decrease in the amount of, all the Obligations owing by any other Obligor, or any other amendment or waiver of any term of, or any consent to departure from any requirement of, any of the Loan Documents, (c) any failure to acquire, perfect or continue perfection of any Lien on any Collateral securing all or any part of the Obligations or any release or subordination of any such Lien, (d) any failure to dispose of any Collateral in a commercially reasonable manner or as otherwise may be required by any Applicable Law, (e) any merger, reorganization, consolidation, or dissolution of any other Obligor or any change in the name, business or organization of any other Obligor, (f) any change in the capitalization or Equity Interest ownership   of any Obligor, (g) any invalidity or unenforceability of any of the Loan Documents against any other Obligor, (h) any waiver, consent, extension, forbearance, or granting by Administrative Agent or any Lender of any indulgence with respect to the Guaranteed Obligations or any provision of any of the Loan Documents, (i) any delay in or lack of enforcement of any remedies under the Loan Documents, (j) any election of remedies by Administrative Agent or any Lender, (k) any of the Loan Documents were forged by any other Obligor, (l) in any Proceeding in respect of any other Obligor (i) the election by Administrative Agent or any Lender of the application of Section 1111(b)(2) of the Bankruptcy Code, (ii) any borrowing or grant of a security interest by such Obligor, or use of cash Collateral by such other Obligor, (iii) the extension of post-petition financing to any Obligor or (iv) the disallowance of all or any portion of the claims of Administrative Agent or the Lenders for payment of any of the Obligations owing by such other Obligor or (m) any other circumstance which might otherwise constitute a legal or equitable discharge or defense available to any other Obligor other than that the Obligations of such Obligor shall have been indefeasibly paid and performed in full.
 
Section 15.7.   Consent and Waiver .
 
(a)   Each Obligor waives (i) notice of any Loans or other financial accommodations to or for the benefit of any other Obligor, (ii) notice of any adverse change in the financial condition of any other Obligor, (iii) presentment, notice of presentment, demand, protest and notice thereof, notice of intent to accelerate, notice of acceleration, notice of dishonor, diligence or promptness in enforcement, and indulgences of every kind as to any Obligations, (iv) any requirement that Administrative Agent or any Lender exhaust any right or take any action against any other Obligor or any Collateral, (v) the benefit of any statute of limitation applicable to enforcement of the Obligations owing by any other Obligor, (vi) all rights by which Obligor might be entitled to require suit on an accrued right of action in respect of any of the Obligations owing by any other Obligor or require suit against any other Obligor, whether arising pursuant to Section 34.02 of the Texas Business and Commerce Code, as amended, Section 17.001 of the Texas Civil Practice and Remedies Code, as amended, Rule 31 of the Texas Rules of Civil Procedure, as amended, or otherwise or (vii) any other defense of any other Obligor (other than that the Obligations of such Obligor shall have been indefeasibly paid and performed in full.
 
 
67
 
 
(b)   Administrative Agent and the Lenders may at any time, without the consent of or notice to any Obligor and without impairing, releasing, reducing, or affecting the obligations of any Obligor under its Affiliate Accommodations, (i) change the manner, place, or terms of payment of all or any part of the Obligations, or renew, extend, modify, rearrange, refinance, refund, increase or alter all or any part of the Obligations, (ii) sell, exchange, release, surrender, subordinate, realize upon, or otherwise deal with in any manner and in any order any Collateral and any Lien securing all or any part of the Obligations, (iii) exercise or refrain from exercising any rights against any other Obligor, or otherwise act or refrain from acting, (iv) settle or compromise all or any part of the Obligations owing by any other Obligor, (vi) release any Person or grant forbearance or other indulgences or (vii) renew, extend, amend, modify or restate any of the Loan Documents in any manner at any time in accordance with the terms thereof.  The Affiliate Accommodations of a Obligor shall not be impaired by any action, if any, which results in the denial or impairment of any right to seek a deficiency against any other Obligor.
 
Section 15.8.   Affiliate Subordination .  The payment of any and all principal of and interest on all Debt owing to a Obligor by any other Obligor, whether direct, indirect, fixed, contingent, liquidated, unliquidated, joint, several, or joint and several, now or hereafter existing, due or to become due under any circumstances, including, without limitation, any rights of subrogation of a Obligor in respect of any payment by such Obligor of the Obligations of any other Obligor pursuant to its Affiliate Accommodations (herein called the “ Subordinated Affiliate Debt ”), shall in all respects be subordinate and junior in right of payment and enforcement to the prior payment and enforcement in full of the Obligations as provided in this Section, and until the Commitments have been terminated and the Obligations have been paid in full, no payments thereon may be made or retained except as expressly allowed herein.  Notwithstanding the foregoing, subject to the terms of this Agreement, an Obligor may make payments on Subordinated Affiliate Debt, provided , that at the time of and after giving effect to such payment, no Default or Even of Default exists.  In the event that any Obligor shall receive any payment on account of the Subordinated Affiliate Debt in violation of this Section, such Obligor will hold, or cause to be held (as the case may be), any amount so received in trust for the benefit of Administrative Agent and will forthwith deliver, or cause to be delivered (as the case may be), such payment to Administrative Agent, in the form received, to be applied to the Obligations.  All Liens, if any, at any time securing payment of all or any part of the Subordinated Affiliate Debt (herein called the “ Subordinated Affiliate Liens ”) shall be and remain junior and subordinate to the Administrative Agent’s Liens securing payment of the Obligations, regardless of whether such Subordinated Affiliate Liens presently exist or are hereafter created or when such Subordinated Affiliate Liens were created, perfected, filed, or recorded ( provided that the foregoing shall not be interpreted or deemed to allow the existence of any Liens that are prohibited by the Loan Documents).  Each Obligor shall not exercise or enforce any creditors’ rights or remedies that it may have against any other Obligor, or foreclose, repossess, sequester, or otherwise institute any action or proceeding to enforce the Subordinated Affiliate Debt or any Subordinated Affiliate Lien on any assets of any other Obligor unless and until the Obligations shall have been paid and performed in full.
 
 
68
 
 
Section 15.9.   Contribution and Indemnification .  To the extent that any Obligor shall repay any of the Obligations owing by any other Obligor (any such payment hereinafter being called an “ Accommodation Payment ”) then the Obligor making such Accommodation Payment shall be entitled to contribution and indemnification from, and be reimbursed by, each of the other Obligors in an amount, for each of such other Obligor, equal to a fraction of such Accommodation Payment, the numerator of which fraction is such other Obligor’s Allocable Amount (as defined below) and the denominator of which is the sum of the Allocable Amounts of all Obligors.  As of any date of determination, the “ Allocable Amount ” of each Obligor be equal to the maximum amount of liability for Accommodation Payments which could be asserted against such Obligor under its Affiliate Accommodations without (a) rendering such Obligor insolvent within the meaning of the Bankruptcy Code, the Uniform Fraudulent Transfer Act (“ UFTA ”) or the Uniform Fraudulent Conveyance Act (“ UFCA ”), (b) leaving such Obligor with unreasonably small capital or assets, within the meaning of the Bankruptcy Code, the UFTA or the UFCA, or (c) leaving such Obligor unable to pay its debts as they become due within the meaning of the Bankruptcy Code, the UFTA or the UFCA.  All rights and claims of contribution, indemnification, and reimbursement under this Section shall be subordinate in right of payment to the prior payment in full of the Obligations, as provided by Section 15.8 .  The provisions of this Section shall, to the extent (if any) expressly inconsistent with any other provision in the Loan Document, supersede any such inconsistent provision.
 
Section 15.10.   Cumulative .  The liabilities and obligations of each Obligor under its Affiliate Accommodations are in addition to and shall be cumulative of all other obligations of such Obligor otherwise provided by this Agreement and the other Loan Documents.
 
ARTICLE XVI
BORROWER REPRESENTATIVE
 
Section 16.1.   Appointment .  Parent is hereby appointed by each Borrower as such Borrower’s contractual representative (herein referred to as the “ Borrower Representative ” under this Agreement and the other Loan Documents, and each such Borrower irrevocably authorizes the Borrower Representative to act as the contractual representative of such Borrower as provided by this Agreement and the other Loan Documents.  The Borrower Representative agrees to act as such contractual representative as provided herein.  Without limiting the foregoing, each Borrower hereby appoints the Borrower Representative as its agent to receive proceeds of Loans in the Designated Account, at which time the Borrower Representative shall promptly disburse such proceeds to such Borrower.  Administrative Agent and the Lenders, and their respective officers, directors, agents or employees, shall not be liable to the Borrower Representative or any other Obligor for any action taken or omitted to be taken by the Borrower Representative or any Borrowers pursuant to this Agreement.
 
Section 16.2.   Notices .  Any notice required by Administrative Agent to Borrowers or any Borrower pursuant to this Agreement or the other Loan Documents may be directed to and in the name of the Borrower Representative.  Any notice provided to the Borrower Representative hereunder shall constitute notice to each Borrower.  Any notice required by a Borrower to Administrative Agent or the Lenders pursuant to this Agreement or the other Loan Documents may be sent by and on behalf of such Borrower by the Borrower Representative.  Any such notice provided by the Borrower Representative shall constitute notice by each such Borrower.
 
 
69
 
 
Section 16.3.   Loan Documents .  Each Borrower hereby empowers and authorizes the Borrower Representative, on behalf of such Borrower, to execute and deliver to Administrative Agent and the Lenders the Loan Documents and all related agreements, certificates, documents, or instruments as shall be necessary or appropriate to effect the purposes of the Loan Documents, including, without limitation, the Aggregate Borrowing Base Certificate, the Borrowing Base Certificate of each Borrower and the Compliance Certificates.  Each Borrower agrees that any action taken by the Borrower Representative or Borrowers in accordance with the terms of this Agreement or the other Loan Documents, and the exercise by the Borrower Representative of its powers set forth therein or herein, together with such other powers that are reasonably incidental thereto, shall be binding upon all Borrowers with the same effect as if taken by such Borrowers.
 
ARTICLE XVII
MISCELLANEOUS
 
Section 17.1.   Waivers & Amendments .  No waiver or amendment of any provision of any Loan Document and no consent to any departure therefrom shall be effective unless it is in writing and signed as provided below in this section, and then such waiver, amendment or consent shall be effective only in the specific instances and for the purposes for which given and to the extent specified in such writing.  No waiver, consent, release, modification or amendment of or supplement to this Agreement or the other Loan Documents shall be valid or effective against any party hereto unless the same is in writing and signed by (a) if such party is an Obligor, by such Obligor, (b) if such party is Administrative Agent, by Administrative Agent and (c) if such party is a Lender, by such Lender or by Administrative Agent on behalf of Lenders with the written consent of Required Lenders; provided however, that with respect to any Lender that is an Affiliate of Administrative Agent and for which Administrative Agent acts as servicer, Administrative Agent may act on such Lender’s behalf.  Notwithstanding the foregoing or anything to the contrary herein, Administrative Agent shall not, without the prior consent of each individual Lender, execute and deliver on behalf of such Lender any waiver or amendment which would:  (i) increase the maximum amount which such Lender is committed hereunder to lend, (ii) reduce any principal, interest or fees payable to such Lender hereunder, (iii) extend the Maturity Date or postpone any date fixed for any payment of any such fees, principal or interest, (iv) amend the definition herein of “Required Lenders” or otherwise change the aggregate amount of Percentage Shares which is required for Administrative Agent, Lenders or any of them to take any particular action under the Loan Documents, (v) release any Obligor from its obligation to pay such Lender’s Obligations, (vi) release all or substantially all of the Collateral, except for such releases relating to sales or dispositions of property permitted by the Loan Documents, or (vii) amend this Section 17.1 .
 
Section 17.2.   Severability .  The illegality or unenforceability of any provision of any Loan Document shall not in any way affect or impair the legality or enforceability of the remaining provisions thereof.
 
 
70
 
 
Section 17.3.   Governing Law; Venue .
 
(a)   This Agreement and the other Loan Documents shall be governed and construed in accordance with the laws of the State of Texas without regard to its conflicts of law principles.
 
(b)   Any legal action or proceeding with respect to this Agreement or any other Loan Document may be brought in the courts of the State of Texas or in the United States District Court for the Northern District of Texas, and by execution and delivery of this Agreement, each Obligor, Administrative Agent and each Lender consents to the non-exclusive jurisdiction of those courts.  Each Obligor, Administrative Agent and each Lender irrevocably waives any objection, including any objection to venue on the grounds of forum non conveniens , which it may now or hereafter have to the bringing of any such action or proceeding in such jurisdiction.  Notwithstanding the foregoing, Administrative Agent and each Lender shall each have the right to bring any action or proceeding against any Obligor or its property in the courts of any other jurisdiction as Administrative Agent or Lenders, as the case may be, deems necessary or appropriate in order to exercise remedies with respect to the Collateral.
 
Section 17.4.   Waiver of Jury Trial .   Each Obligor, Administrative Agent and Lenders each irrevocably waives its respective right to a trial by jury of any claim or cause of action based upon or arising out of or related to this Agreement, the other Loan Documents, or the transactions contemplated hereby or thereby, in any action, proceeding or other litigation of any kind brought by either against the other, whether with respect to contract claims, tort claims, or otherwise.  Each Obligor, Administrative Agent and Lenders each agrees that any such claim or cause of action shall be tried by a court without a jury.  Without limiting the foregoing, the parties further agree that their respective right to a trial by jury is waived by operation of this section as to any action, counterclaim or other proceeding which seeks, in whole or in part, to challenge the validity or enforceability of this Agreement or the other Loan Documents or any provision hereof or thereof.  This waiver shall apply to any subsequent amendments, renewals, supplements or modifications to this Agreement and the other Loan Documents, whether or not specifically set forth therein.
 
 
71
 
 
Section 17.5.   Fees and Expenses .  Obligors jointly and severally agree to pay to Administrative Agent and Lenders, on demand, all costs, fees and expenses that Administrative Agent or Lenders, as the case may be, pays or incurs in connection with the negotiation, preparation, consummation, administration, enforcement, perfection and termination of this Agreement or any of the other Loan Documents, including:  (a) reasonable attorneys fees and costs for preparation, negotiation and closing of the Loan Documents and any amendment, supplement, waiver, consent or subsequent closing in connection with the Loan Documents and the transactions contemplated thereby, (b) ongoing administration of the Loan Documents, including without limitation, reasonable attorneys fees and costs incurred in consultation with attorneys, (c) costs and expenses of lien and title searches, (d) taxes, fees and other charges for filing financing statements and other actions to perfect, protect and continue Administrative Agent’s Liens, (e) sums paid or incurred to pay any amount or take any action required of any Obligor under the Loan Documents that such Obligor fails to pay or take, (f) costs of appraisals, inspections and verifications of the Collateral, including travel, lodging, and meals for inspections of the Collateral and Obligor’s operations by Administrative Agent, (g) costs and expenses of disbursing Loans and administering cash management of Collateral proceeds, including collection accounts and lock-boxes, (h) costs and expenses of preserving and protecting the Collateral, (i) costs, fees and expenses, including reasonable attorneys fees and costs, paid or incurred to enforce Administrative Agent’s Liens, sell or dispose of the Collateral, and obtain payment of the Obligations and (j) costs and expenses, including reasonable attorneys fees and costs, paid or incurred to defend any claims made or threatened against Administrative Agent or Lenders arising out of the transactions contemplated by the Loan Documents (all such costs, expenses and fees described in this Section 17.5 , the “ Lender Party Expenses ”).  The foregoing shall not limit any other provisions of the Loan Documents regarding costs and expenses to be paid by any Obligor.
 
Section 17.6.   Notices .  Except as otherwise expressly provided in any Loan Document, all notices, demands and requests that any party is required to give to any other party shall be in writing and shall become effective (a) upon personal delivery, (b) three (3) days after it shall have been mailed by United States mail, first class, certified or registered, with postage prepaid, or (c) when properly transmitted by telecopy, in each case addressed to the party to be notified as follows:
 
If to Administrative Agent:

NewStar Business Credit, LLC
8080 North Central Expressway, Suite 800
Dallas, Texas  75206
Fax No.: 214-242-5840
Attention:  Portfolio Manager, URGENT

with a copy (which shall not constitute notice) to:

Hunton & Williams LLP
1445 Ross Avenue, Suite 3700
Dallas, Texas 75202
Fax No.:  214-880-0011
Attention:  Daniel C. Garner, Esq.
 
 
72
 

If to a Lender: To the address set forth below such Lender’s name on Schedule 1.1A hereto

If to any Obligor:

Precision Aerospace Components, Inc., as Borrower Representative
2200 Arthur Kill Road
Staten Island, NY 10309
Fax No.: 347-258-9006
Attention:  Andrew S. Prince, President and CEO

with a copy (which shall not constitute notice) to:

LeClair Ryan
1037 Raymond Boulevard, Sixteenth Floor
Newark, NJ 07102
Fax No.:  973-491-3555
Attention:  John J. Oberdorf, Esq.

or to such other address as each party may designate for itself by like notice.
 
Section 17.7.   Waiver of Notices .  Unless otherwise expressly provided in any Loan  Document, each Obligor hereby waives presentment and notice of demand or dishonor and protest, notice of intent to accelerate the Obligations and notice of acceleration of the Obligations, as well as any and all other notices to which it might otherwise be entitled.  No notice to or demand on any Obligor which Administrative Agent or Lenders may elect to give shall entitle such Obligor or any other Obligor to any or further notice or demand in the same, similar or other circumstances.
 
Section 17.8.   Binding Effect .  This Agreement shall be binding upon and inure to the benefit of each Obligor, Administrative Agent and Lenders and their respective representatives, successors, and assigns, provided , that no interest herein may be assigned, and no obligation may be delegated, by any Obligor without prior written consent of Administrative Agent.  The rights and benefits of Administrative Agent and Lenders under the Loan Documents shall inure to any Person acquiring any interest in the Obligations, unless otherwise agreed by Administrative Agent, Lenders and any such Person.
 
Section 17.9.   Indemnity of Lenders and Administrative Agent by Obligors .   Each Obligor agrees to defend, indemnify and hold each Indemnified Person harmless from and against any and all Indemnified Claims, provided , that Obligors shall have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities resulting solely and directly from the willful misconduct or gross negligence of such Indemnified Person.  The agreements in this Section 17.9 shall survive any termination of this Agreement or payment of all other Obligations.
 
 
73
 
 
Section 17.10.   Limitation of Liability .  No claim may be made by any Obligor against Administrative Agent and/or Lenders or any of their Affiliates, directors, officers, members, managers, employees or agents for any special, indirect, consequential, exemplary or punitive damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by this Agreement or any other Loan Document, or any act, omission or event occurring in connection therewith, and each Obligor hereby waives, releases and agrees not to sue upon any claim for such damages, whether or not accrued and whether or not known or suspected to exist in its favor.
 
Section 17.11.   Continuing Rights of Lenders in Respect of Obligations .  In the event any amount from time to time applied in reduction of the Obligations is subsequently set aside, avoided, declared invalid or recovered by any Obligor or any trustee or in bankruptcy, or in the event any Lender is otherwise required to refund or repay any such amount pursuant to any applicable law, then the Obligations shall automatically be deemed to be revived and increased to the extent of such amount and the same shall continue to be secured by the Collateral as if such amount had not been so applied.
 
Section 17.12.   Assignments .
 
(a)   Lenders may at any time sell, assign, grant participations in, delegate or otherwise transfer to any other Person (an “ Assignee ”) all or part of the rights and duties of a Lender under this Agreement and the other Loan Documents.  To the extent indicated in any document, instrument or agreement so selling, assigning, granting participations in, or otherwise transferring to an Assignee such rights and/or duties, (i) the Assignee shall acquire all of such Lender’s rights under the Agreement and the other Loan documents and (ii) the Assignee shall be deemed to be the “Lender” under this Agreement and the other Loan Documents with the authority to exercise such rights in the capacity of Lender.  Each Obligor hereby authorizes each Lender to disseminate any information it has pertaining to the Obligations, including without limitation, complete and current credit information on such Obligor or any other Obligor, and any of their principals to any Assignee or prospective Assignee.  Each Obligor hereby acknowledges and agrees that any assignment will give rise to a direct obligation of Obligor to the Assignee and that the Assignee shall be considered to be a Lender hereunder.  The Lenders may at any time (a) pledge the Obligations held by it or create a security interest in all or any portion of its rights under this Agreement or the other Loan Documents in favor of any Person; provided, however, that (i) no such pledge or grant of security interest to any Person shall release a Lender from its obligations hereunder or under any other Loan Document and (ii) the acquisition of title to the Lender’s Obligations pursuant to any foreclosure or other exercise of remedies by such Person shall be subject to the provisions of this Agreement and the other Loan Documents in all respects.
 
(b)   Except as otherwise provided herein, a Lender shall, as between each Obligor and such Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment, transfer or negotiation of, or granting of a participation in, all or any part of the Loans or other Obligations owed to such Lender.  Such Lender may furnish any information concerning any Obligor from time to time to Assignees and participants and to any Affiliate of such Lender or its parent company.
 
 
74
 
 
Section 17.13.   Confidentiality .  Subject to requirements applicable to Obligors under Applicable Laws, each Obligor agrees, and agrees to cause each of its Affiliates, (i) not to transmit or disclose any provision of any Loan Document to any Person (other than to such Obligor’s advisors and officers on a need-to-know basis, or as required by Applicable Law) without Administrative Agent’s prior written consent, (ii) to inform all Persons of the confidential nature of the Loan Documents and to direct them not to disclose the same to any other Person and to require each of them to be bound by these provisions.  Each Obligor agrees to submit to Administrative Agent and Administrative Agent reserves the right (subject to the last sentence of this Section 17.13 ) to review and approve all materials that such Obligor or any of its Affiliates prepares that contain any Lender Party’s name or describe or refer to any Loan Document, any of the terms thereof or any of the transactions contemplated thereby.  Each Obligor shall not, and shall not permit any of its Affiliates to, use any Lender Party’s name (or the name of any of their Affiliates) in connection with any of its business operations, including without limitation, advertising, marketing or press releases or such other similar purposes, without such Lender Party’s prior written consent (except as required by applicable law).  Nothing contained in any Loan Document is intended to permit or authorize any Obligor or any of its Affiliates to contract on behalf of any Lender Party.  Notwithstanding the foregoing, nothing contained in this Section 17.13 shall prohibit any Obligor from complying with requirements of Applicable Laws.
 
Section 17.14.   Acceptance and Performance .  This Agreement shall become effective only upon acceptance by Lenders and by Administrative Agent at its office in Dallas, Dallas County, Texas.  The Obligations are payable at Administrative Agent’s offices in Dallas, Dallas County, Texas.
 
Section 17.15.   Schedules .  All Schedules referenced herein and attached hereto are incorporated in this Agreement and made a part hereof for all purposes.
 
Section 17.16.   Counterparts .  This Agreement may be executed in any number of counterparts, and signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document.  A telecopy of any such executed counterpart signature page shall be deemed valid as an original.
 
Section 17.17.   Captions .  The captions contained in this Agreement are for convenience of reference only, are without substantive meaning and may not be construed to modify, enlarge or restrict any provision of this Agreement.
 
This Agreement and the other Loan Documents represent the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties.  There are no unwritten oral agreements between the parties.
 
Remainder of page blank
 
Signatures follow
 
 
75
 
 
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the Agreement Date.
 
PARENT :

PRECISION AEROSPACE COMPONENTS, INC.

By:       _____________________________________ 
Name:  Andrew S. Prince
Title:    President, Chief Executive Officer and Treasurer


BORROWERS :

FREUNDLICH SUPPLY COMPANY, INC.

By:       _____________________________________ 
Name:  Andrew S. Prince
Title:    President, Chief Executive Officer and Treasurer


TIGER-TIGHT CORP

By:       _____________________________________     
Name:  Andrew S. Prince
Title:    President, Chief Executive Officer and Treasurer

APACE ACQUISITION I, INC.
By:       _____________________________________     
Name:  Andrew S. Prince
Title:    President, Chief Executive Officer and Treasurer
 
 
76
 
 
APACE ACQUISITION II, INC.

By:       _____________________________________     
Name:  Andrew S. Prince
Title:    President, Chief Executive Officer and Treasurer


ADMINISTRATIVE AGENT :

NEWSTAR BUSINESS CREDIT, LLC, as Administrative Agent, Swing Lender and as a Lender

By:       _____________________________________     
Name:  Greg Gentry
Title:    Senior Vice President

LENDERS :

NEWSTAR BUSINESS CREDIT, LLC
as a Lender and as Swing Lender

By:       _____________________________________  
Name:  _____________________________________   
Title:    _____________________________________   
 
 
77