SECURITIES PURCHASE AND LOAN
CONVERSION AGREEMENT
This
SECURITIES PURCHASE AND LOAN CONVERSION AGREEMENT, dated as of
September 23, 2008 (this “Agreement”), is by and
between Brookside Technology Holdings Corp., a Florida corporation
(the “Company”), and Vicis Capital Master Fund
(“Vicis”).
A.
Pursuant to the Company’s Credit Agreement dated as of
September 26, 2007 (the “Prior Senior Credit
Agreement”) and the related Revolving Loan Note (the
“Prior Senior Note”) (which Vicis acquired from Hilco
Financial LLC (“Hilco”)), the Company owes $7,100,000
to Vicis (plus interest thereon from July 3, 2008 at 10% per
annum), and Pursuant to the Subordinated Note Purchase Agreement
(the “DD Subordinated Note Purchase Agreement”) and the
related Subordinated Promissory Note (the “DD Subordinated
Note”) dated as of August 30, 2007, and substituted and
amended as of September 26, 2007, which the Company acquired
from DD Growth Premium Fund (“DD”), the Company owes
$1,000,000 to Vicis (plus interest thereon from August 30,
2007 at 10% per annum) (collectively, the “Vicis
Debt”).
B.
In connection with the Company’s acquisition of Standard-Tel
Networks, LLC (“STN”), the Company is obtaining a new
senior secured credit facility (the “New Senior Credit
Facility”) from CHATHAM INVESTMENT FUND III, LLC, CHATHAM
INVESTMENT FUND III QP, LLC (collectively,
“Chatham”).
C.
In connection with the closing of the Company’s acquisition
of STN and the New Senior Credit Facility, the Company and Vicis
have agreed that, in full satisfaction of the Vicis Debt, at
Closing (as defined below): (i) the Company will pay
$2,250,000, in cash, to Vicis; (ii) the Company will deliver
to Vicis a new subordinated note in the original principal amount
of $1,500,000, in the form attached hereto as
Exhibit B (the “New Subordinated
Note”), and (iii) Vicis will convert the balance of the
Vicis Debt, including all accrued interest through the Closing, as
calculated in Exhibit C attached hereto, into
shares of the Company’s Series A Convertible Preferred
Stock (the “Series A Preferred Stock”) at $1.00
per share, all as further contemplated hereby.
In
consideration of the foregoing recitals and for good and other
valuable consideration hereinafter set forth, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
PURCHASE AND SALE OF
SECURITIES
1.
Purchase and Sale of Series A Preferred Stock .
In full satisfaction of the Vicis Debt, the parties hereto agree
that, at Closing: (a) the Company shall pay $2,250,000 in cash
to Vicis; (b) the Company shall execute and deliver to Vicis
the New Subordinated Note; and (c) Vicis will convert the
balance of the Vicis Debt, including all accrued interest through
the
Closing, as
calculated in Exhibit C attached hereto,
existing under the Prior Senior Note and DD Subordinated Note into
shares of the Series A Preferred Stock at a conversion price
of $1.00 per share (the “Acquired Shares”), as
calculated in Exhibit C attached hereto. Any
shares of Common Stock issuable upon conversion of the
Series A Preferred Stock issued pursuant hereto to Vicis are
herein referred to as the “Conversion Shares;” and the
New Subordinated Note, the Acquired Shares and the Conversion
Shares are collectively referred to herein as the
“Securities.”
2.
Closing . The closing (the “Closing”) of
the transactions contemplated by Section 1 above shall take
place immediately prior to the Company’s acquisition of
STN.
3.
Closing Deliveries . At the Closing, the Company
shall (a) pay $2,250,000 in cash to Vicis, (b) deliver or
cause to be delivered to Vicis the New Subordinated Note, and
(c) deliver or cause to be delivered to Vicis a certificate in
the name of Vicis evidencing the Acquired Shares. At the Closing,
Vicis shall deliver to the Company, for cancellation, all original
promissory notes representing the Vicis Debt, including the Prior
Senior Note and the DD Subordinated Note.
4.
Release . From and after the Closing: (a) the
Prior Senior Credit Agreement, the Prior Senior Note, the DD
Subordinated Note Purchase Agreement and the DD Subordinated Note
(collectively, the “Vicis Loan Documents”), shall
automatically be deemed to be terminated, satisfied and of no
further force and effect; (b) Vicis hereby fully releases,
acquits, and forever discharges the Company and all of its
subsidiaries, affiliates, successors and assigns, together with
their respective past and present directors, officers,
shareholders, employees, agents, attorneys and representatives
(collectively, the “Released Parties”) of and from any
and all rights, claims, demands, damages, actions, and causes of
action, of any nature whatsoever, whether known or unknown, whether
arising at law or in equity, and whether direct or indirect, which
Vicis may have had, may now have, or may hereafter have, against
the Released Parties by reason of any matter, cause, happening or
thing arising under the Vicis Loan Documents, except for any claims
involving fraud, willful misconduct, breach of fiduciary duty or
criminal acts by any Released Party; and (c) the Company shall
be entitled, and is hereby authorized, to terminate all liens on
its assets filed by DD, Vicis, Hilco or any of their
affiliates.
5.
Securities Law Matters . The Company and Vicis are
executing and delivering this Agreement in accordance with and in
reliance upon the exemption from securities registration afforded
by Section 4(2) of the U.S. Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (the
“Securities Act”), including Regulation D
(“Regulation D”), and/or upon such other exemption
from the registration requirements of the Securities Act as may be
available with respect to any or all of the investments to be made
hereunder.
6.
Related Matters . Any and all pledges of stock by
Michael Nole and/or Michael Dance to Dynamic or Vicis are hereby
terminated and of no further force and effect.
REPRESENTATIONS AND
WARRANTIES
2
1.
Representations and Warranties of the Company . The
Company hereby represents and warrants to Vicis, as of the date
hereof and the Closing Date (except as set forth on the Schedule of
Exceptions attached hereto with each numbered Schedule
corresponding to the section number herein), as follows:
a.
Organization, Good Standing and Power . The Company is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Florida and has the
requisite corporate power to own, lease and operate its properties
and assets and to conduct its business as it is now being
conducted. The Company is duly qualified as a foreign corporation
to do business and is in good standing in every jurisdiction in
which the nature of the business conducted or property owned by it
makes such qualification necessary except for any jurisdiction(s)
(alone or in the aggregate) in which the failure to be so qualified
will not have a Material Adverse Effect. For the purposes of this
Agreement, “Material Adverse Effect” means any material
adverse effect on the business, operations, properties, prospects,
or financial condition of the Company and its Subsidiaries (as
defined below) on the transactions contemplated hereby or by the
agreements and instruments to be entered into in connection
herewith or any condition, circumstance, or situation that would
prohibit or otherwise materially interfere with the ability of the
Company to perform any of its obligations under this Transaction
Documents (defined below) in any material respect.
b.
Authorization; Enforcement . The Company has the requisite
corporate power and authority to enter into and perform this
Agreement, the New Subordinated Note and each of the other
agreements or instruments entered into by the parties hereto in
connection with the transactions contemplated by this Agreement
(collectively, the “Transaction Documents”) and to
issue and sell the Securities in accordance with the terms hereof.
The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly and validly
authorized by all necessary corporate action, and no further
consent or authorization of the Company, its Board of Directors or
stockholders is required. When executed and delivered by the
Company, each of the Transaction Documents shall constitute a valid
and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, reorganization,
moratorium, liquidation, conservatorship, receivership or similar
laws relating to, or affecting generally the enforcement of,
creditor’s rights and remedies or by other equitable
principles of general application.
c.
Capitalization . The issued and outstanding shares of
capital stock of the Company as of the Closing Date is as set forth
on Exhibit A . All of the outstanding shares of
the Common Stock and any other outstanding security of the Company
have been duly and validly authorized. Except for the Securities,
or as disclosed in Schedule (II)(1)(c) attached hereto:
(i) no
holder of shares of the Company’s capital stock has any
preemptive rights or any other similar rights or has been granted
or holds any liens or encumbrances suffered or permitted by the
Company;
(ii) there
are no outstanding options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, or exercisable or
exchangeable for, any shares of capital stock of the
Company
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or any
Subsidiary, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of capital stock of the
Company or any Subsidiary or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, or
exercisable or exchangeable for, any shares of capital stock of the
Company or any Subsidiary;
(iii) there
are no outstanding debt securities, notes, credit agreements,
credit facilities or other agreements, documents or instruments
evidencing Indebtedness (as defined in Section 1(s) below) of the
Company or any Subsidiary in excess of $100,000 or by which the
Company or a Subsidiary is or may become bound and involves
Indebtedness in excess of $100,000;
(iv) there
are no financing statements securing obligations in any material
amounts, either singly or in the aggregate, filed in connection
with the Company or its Subsidiaries;
(v) there
are no agreements or arrangements under which the Company or any
Subsidiary is obligated to register the sale of any of their
securities under the Securities Act of 1933, as amended (the
“Securities Act”);
(vi) there
are no outstanding securities or instruments of the Company or any
Subsidiary that contain any redemption or similar provisions, and
there are no contracts, commitments, understandings or arrangements
by which the Company or any Subsidiary is or may become bound to
redeem a security of the Company or a Subsidiary;
(vii) there
are no securities or instruments containing antidilution or similar
provisions that will be triggered by the issuance of the
Securities; and
(viii) the
Company does not have any stock appreciation rights or
“phantom stock” plans or agreements or any similar plan
or agreement.
d.
Subsidiaries . The Company has no subsidiary other than
Brookside Technology Partners, Inc. (“BTP”) and U.S.
Voice & Data, LLC (“USVD” and together with BTP,
the “Subsidiaries”). The Company owns 100% of such
Subsidiaries. For the purposes of this Agreement,
“subsidiary” shall mean any corporation or other entity
of which at least a majority of the securities or other ownership
interest having ordinary voting power (absolutely or contingently)
for the election of directors or other persons performing similar
functions are at the time owned directly or indirectly by the
Company and/or any of its other Subsidiaries. Each Subsidiary is
validly existing and in good standing under the laws of the
jurisdiction in which it is organized, and has all requisite entity
power and authority to carry on its business as now conducted. Each
Subsidiary is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which its
ownership of property or the nature of the business conducted by it
makes such qualification necessary, except to the extent that the
failure to be so qualified or be in good standing would not have a
Material Adverse Effect.
e.
Securities Filings. The Common Stock of the Company is
currently reported on the OTC Bulletin Board and is registered
pursuant to the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and the Company has filed all reports,
schedules,
4
forms,
statements and other documents required to be filed by it with the
Commission pursuant to the reporting requirements of the Exchange
Act (all of the foregoing, including filings incorporated by
reference therein, being referred to herein as the
“Commission Documents”). As of their respective dates,
the Commission Documents complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the
rules and regulations of the Commission promulgated thereunder, and
such filings when made by the Company do not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of the Company
included in the Commission Documents comply in all material
respects with applicable accounting requirements and the rules and
regulations of the Commission (defined below) with respect thereto
as in effect at the time of filing. Such financial statements have
been prepared in accordance with United States generally accepted
accounting principles applied on a consistent basis during the
periods involved (“GAAP”), except as may be otherwise
specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all
footnotes required by GAAP and remain subject to year end
adjustments, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries
as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal year-end audit
adjustments.
f.
Actions Pending . There is no action, suit, claim,
investigation, arbitration, alternate dispute resolution proceeding
or other proceeding pending or, to the knowledge of the Company,
threatened against or involving the Company or any of its
respective properties or assets, other than demands and threats
made by the prior owners of USVD, notice of which Vicis hereby
acknowledges being made aware of. There are no outstanding orders,
judgments, injunctions, awards or decrees of any court, arbitrator,
governmental or regulatory body, or a self regulatory authority or
trading market against the Company or any officers or directors of
the Company in their capacities as such. To the Company’s
knowledge, neither the Company nor any Subsidiary, nor any director
or executive officer thereof (in his/her capacity as such), is or,
within the last five years, has been the subject of any action
involving a claim of violation of or liability under federal or
state securities laws or a claim of breach of fiduciary duty. To
the knowledge of the Company, there has not been, and there is not
pending or threatened in writing, any investigation by the United
States Securities and Commission (the “Commission” or
“SEC”) involving the Company or any current director or
executive officer of the Company. The Commission has not issued any
stop order or other order suspending the effectiveness of any
registration statement filed by the Company under the Exchange Act
or the Securities Act.
g.
Compliance with Law . The business of the Company and the
Subsidiaries has been and is presently being conducted in
accordance with all applicable federal, state and local
governmental laws, rules, regulations and ordinances (including,
without limitation, rules and regulations of each governmental and
regulatory agency, self regulatory organization and trading market
applicable to the Company or any Subsidiary).
h.
Taxes . The Company has accurately prepared and filed all
federal, state and other tax returns required by law to be filed by
it, has paid or made provisions for the payment of all taxes shown
to be due and all additional assessments, and adequate
provisions
5
have been and
are reflected in the financial statements of the Company for all
current taxes and other charges to which the Company is subject and
which are not currently due and payable. None of the federal income
tax returns of the Company or any Subsidiary have been audited by
the Internal Revenue Service. The Company has no knowledge of any
additional assessments, adjustments or contingent tax liability
(whether federal or state) of any nature whatsoever, whether
pending or threatened against the Company for any period, nor of
any basis for any such assessment, adjustment or
contingency.
i.
Employees . Neither the Company nor any Subsidiary has any
collective bargaining arrangements or agreements covering any of
its employees. Except as set forth in Schedule II(1)(i), no
Executive Officer of the Company (as defined in Rule 501(f) of the
Securities Act) has notified the Company that such officer intends
to leave the Company or otherwise terminate such officer’s
employment with the Company. No Executive Officer of the Company,
to the knowledge of the Company, is, or is now, in violation of any
material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition
agreement, or any other contract or agreement or any restrictive
covenant, and, to the actual knowledge of the Company, the
continued employment of each such executive officer does not
subject the Company or any Subsidiary to any liability with respect
to any of the foregoing matters. The Company and each Subsidiary
are in compliance with all federal, state, local and foreign laws
and regulations respecting employment and employment practices,
terms and conditions of employment and wages and hours, except
where failure to be in compliance would not, either individually or
in the aggregate, reasonably be expected to result in a Material
Adverse Effect.
j.
Public Utility Holding Company Act and Investment Company Act
Status . The Company is not a “holding company” or
a “public utility company” as such terms are defined in
the Public Utility Holding Company Act of 1935, as amended. The
Company is not, and immediately after receipt of payment for the
Securities will not be, an “investment company,” an
“affiliated person” of, “promoter” for or
“principal underwriter” for, or an entity
“controlled” by an “investment company,”
within the meaning of the Investment Company Act.
k.
ERISA . No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by the
Company which has not been satisfied by the Company. As used in
this section, the term “Plan” shall mean an
“employee pension benefit plan” (as defined in
Section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the
Company or any Subsidiary or by any trade or business, whether or
not incorporated, which, together with the Company or any
Subsidiary, is under common control, as described in
Section 2(b)14(b) or (c) of the Code.
l.
Securities Act of 1933 . Based in material part upon the
representations herein of Vicis, the Company has complied and will
comply with all applicable federal and state securities laws in
connection with the offer, issuance and sale of the Securities
hereunder. Assuming the accuracy of the representations and
warranties in Article IV hereof (and assuming no change in
applicable law and no unlawful distribution of the Securities by
Vicis or other Persons), no registration under the Securities Act
is required for the offer and sale of the Securities by the Company
to Vicis as is contemplated hereby. Neither the Company nor anyone
acting on its behalf, directly or indirectly, has or will sell,
offer to sell or solicit offers to buy any
6
of the
Securities or similar securities to, or solicit offers with respect
thereto from, or enter into any negotiations relating thereto with,
any person, or has taken or will take any action so as to
(i) bring the issuance and sale of any of the Securities under
the registration provisions of the Securities Act and applicable
state securities laws, or (b) or (ii) trigger shareholder
approval provisions under the rules or regulations of any trading
market., and neither the Company nor any of its affiliates, nor any
person acting on its or their behalf, has engaged in any form of
general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the
offer or sale of any of the Securities.
m.
No Integrated Offering . Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or
solicited any offers to buy any security under circumstances that
would cause the offering of the Securities pursuant to this
Agreement to be integrated with prior offerings by the Company for
purposes of the Securities Act, which would prevent the Company
from selling the Securities pursuant to Regulation D and
Rule 506 thereof under the Securities Act, or any applicable
exchange-related stockholder approval provisions, nor will the
Company or any of its affiliates or subsidiaries take any action or
steps that would cause the offering of the Securities to be
integrated with other offerings.
n.
Issuance of Securities . The Securities to be issued at the
Closing have been duly authorized by all necessary corporate action
and, when paid for or issued in accordance with the terms hereof,
the Securities shall be validly issued and outstanding, free and
clear of all liens, encumbrances and rights of refusal of any kind.
When the Conversion Shares are issued and paid for in accordance
with the terms of this Agreement, such shares will be duly
authorized by all necessary corporate action and validly issued and
outstanding, fully paid and nonassessable, free and clear of all
liens, encumbrances and rights of refusal of any kind and the
holders shall be entitled to all rights accorded to a holder of
such security.
o.
No Conflicts . The execution, delivery and performance of
the Transaction Documents by the Company, and the consummation by
the Company of the transactions contemplated hereby and thereby,
and the issuance of the Securities as contemplated hereby, do not
and will not (i) violate or conflict with any provision of the
Company’s Articles of Incorporation (the
“Articles”) or Bylaws (the “Bylaws”), each
as amended to date, or any Subsidiary’s comparable charter
documents; (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, mortgage, deed of
trust, indenture, note, bond, license, lease agreement, instrument
or obligation to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries’
respective properties or assets are bound; or (iii) result in
a violation of any federal, state, local or foreign statute, rule,
regulation, order, judgment or decree (including federal and state
securities laws and regulations and rules and regulations of any
governmental or any regulatory agency, self-regulatory
organization, or trading market) applicable to the Company or any
of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries are bound or affected, except,
in all cases, for such conflicts, defaults, terminations,
amendments, acceleration, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse
Effect (other than violations pursuant to clauses (i) or (iii)
(with respect to federal and state securities laws)). Neither the
Company nor any of its
7
Subsidiaries is
required under federal, state, foreign or local law, rule or
regulation to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its
obligations under the Transaction Documents or issue and sell the
Securities in accordance with the terms hereof (other than any
filings, consents and approvals which may be required to be made by
the Company under applicable state and federal securities laws,
rules or regulations).
p.
No Violation . Except as set forth in
Schedule II(1)(c), neither the Company nor any Subsidiary
(i) is in default under or in violation of (and no event has
occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any
Subsidiary under), nor has the Company or any Subsidiary received
notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or
any of its properties is bound, except such that, individually or
in the aggregate, such default(s) and violations(s) would not have
a Material Adverse Effect, (ii) is in violation of any order
of any court, arbitrator or governmental body, or (iii) is in
violation of any of the provisions of its certificate or articles
of incorporation, bylaws or other organizational or charter
documents.
q.
Dilutive Effect . The Company understands and
acknowledges that its obligation to issue the Conversion Shares
upon conversion of the Acquired Shares is absolute and
unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other stockholders of the
Company.
r.
Placement Agent’s Fees . No brokerage or
finder’s fee or commission are or will be payable to any
Person with respect to the transactions contemplated by this
Agreement based upon arrangements made by the Company or any of its
affiliates. The Company agrees that it shall be responsible for the
payment of any placement agent’s fees, financial advisory
fees, or brokers’ commissions (other than for Persons engaged
by Vicis or any of its affiliates) relating to or arising out of
the transactions contemplated hereby. The Company shall pay, and
hold Vicis harmless against, any liability, loss or expense
(including, without limitation, reasonable attorney’s fees
and out-of-pocket expenses) arising in connection with any claim
for any such fees or commissions.
s.
Indebtedness and Other Contracts . Except as
disclosed in the Commission Documents, neither the Company nor any
Subsidiary (a) has any outstanding Indebtedness (as defined
below in this Section), (b) is a party to any contract,
agreement or instrument, the violation of which, or default under,
by any other party to such contract, agreement or instrument would
result in a Material Adverse Effect, (c) is in violation of
any term of or in default under any contract, agreement or
instrument relating to any Indebtedness, except where such
violations and defaults would not result, individually or in the
aggregate, in a Material Adverse Effect, or (d) is a party to
any contract, agreement or instrument relating to any Indebtedness,
the performance of which, in the judgment of the Company’s
officers, has or is expected to have a Material Adverse Effect. For
purposes of this Agreement: (x) “Indebtedness” of any
Person means, without duplication (i) all indebtedness for
borrowed money, (ii) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services
(other than trade payables entered into in the ordinary course of
business), (iii) all reimbursement or payment obligations with
respect to letters of credit, surety bonds and other
similar
8
instruments,
(iv) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses,
(v) all indebtedness created or arising under any conditional
sale or other title retention agreement, or incurred as financing,
in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and
remedies of the seller or bank under such agreement in the event of
default are limited to repossession or sale of such property),
(vi) all monetary obligations under any leasing or similar
arrangement which, in connection with generally accepted accounting
principles, consistently applied for the periods covered thereby,
is classified as a capital lease, (vii) all indebtedness
referred to in clauses (i) through (vi) above secured by
(or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, change, security interest or other encumbrance upon
or in any property or assets (including accounts and contract
rights) owned by any Person, even though the Person which owns such
assets or property has not assumed or become liable for the payment
of such indebtedness, and (viii) all Contingent Obligations in
respect of indebtedness or obligations of others of the kinds
referred to in clauses (i) through (vii) above; (y)
“Contingent Obligation” means, as to any Person, any
direct or indirect liability, contingent or otherwise, of that
Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of
the Person incurring such liability, or the primary effect thereof,
is to provide assurance to the obligee of such liability that such
liability will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such
liability will be protected (in whole or in part) against loss with
respect thereto; and (z) “Person” means an individual,
a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
t.
Absence of Certain Changes or Developments . Except
as disclosed in Schedule II(1)(t) attached hereto or as disclosed
in the Commission Documents or as contemplated herein and in the
Transaction Documents, since December 31, 2007:
i.
there has been no Material Adverse Effect, and no event or
circumstance has occurred or exists with respect to the Company or
its businesses, properties, operations or financial condition,
which, under Exchange Act, Securities Act, or rules or regulations
of any Trading Market, requires public disclosure or announcement
by the Company but which has not been so publicly announced or
disclosed;
(a) issued
any stock, bonds or other corporate securities or any right,
options or warrants with respect thereto, except pursuant to the
exercise or conversion of securities outstanding as of such
date;
(b) borrowed
any amount in excess of $250,000 or incurred or become subject to
any other liabilities in excess of $250,000 (absolute or
contingent) except current liabilities incurred in the ordinary
course of business which are comparable in nature and amount to the
current liabilities incurred in the ordinary course of business
during the comparable portion of its prior fiscal year, as adjusted
to reflect the current nature and volume of the business of the
Company;
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(c) discharged
or satisfied any Lien or encumbrance in excess of $250,000 or paid
any obligation or liability (absolute or contingent) in excess of
$250,000, other than current liabilities paid in the ordinary
course of business and payments of principal and interest under
existing Indebtedness disclosed in the Commission
Documents;
(d) declared
or made any payment or distribution of cash or other property to
stockholders with respect to its stock, or purchased or redeemed,
or made any agreements so to purchase or redeem, any shares of its
capital stock, in each case in excess of $50,000 individually or
$100,000 in the aggregate;
(e) sold,
assigned or transferred any other tangible assets, or canceled any
debts or claims, in each case in excess of $250,000, except in the
ordinary course of business;
(f) sold,
assigned or transferred any patent rights, trademarks, trade names,
copyrights, trade secrets or other intangible assets or
intellectual property rights in excess of $250,000, or disclosed
any proprietary confidential information to any person except to
customers in the ordinary course of business;
(g) suffered
any material losses or waived any rights of material value, whether
or not in the ordinary course of business, or suffered the loss of
any material amount of prospective business;
(h) made
any changes in employee compensation except in the ordinary course
of business and consistent with past practices;
(i) made
capital expenditures or commitments therefor that aggregate in
excess of $250,000;
(j) entered
into any material transaction, whether or not in the ordinary
course of business that has not been disclosed in the Commission
Documents;
(k) suffered
any material damage, destruction or casualty loss, whether or not
covered by insurance;
(l) experienced
any material problems with labor or management in connection with
the terms and conditions of their employment;
(m) altered
its method of accounting, except to the extent required by
GAAP;
(n) issued
any equity securities to any officer, director or affiliate (as
such term is defined in Rule 144 of the Securities Act),
except pursuant to existing Company stock, option, equity incentive
or similar incentive plans; or
(o) entered
into an agreement, written or otherwise, to take any of the
foregoing actions.
10
u.
Solvency . The Company has not taken, nor does it
have any intention to take, any steps to seek protection pursuant
to any bankruptcy or similar law. The Company does not have any
actual knowledge nor has it received any written notice that its
creditors intend to initiate involuntary bankruptcy proceedings or
any actual knowledge of any fact that, as of the date hereof, would
reasonably lead a creditor to do so. After giving effect to the
transactions contemplated hereby to occur at the Closing and in
connection with the New Senior Credit Facility, the Company will
not be Insolvent (as hereinafter defined). For purposes of this
Agreement, “Insolvent” means (i) the Company is
unable to pay its debts and liabilities, subordinated, contingent
or otherwise, as such debts and liabilities become absolute and
matured, (ii) the Company intends to incur or believes that it
will incur debts that would be beyond its ability to pay as such
debts mature or (iii) the Company has unreasonably small
capital with which to conduct the business in which it is engaged
as such business is now conducted and is proposed to be
conducted.
v.
Off-Balance Sheet Arrangements . There is no
transaction, arrangement, or other relationship between the Company
and an un
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