AMENDED AND RESTATED LOAN AGREEMENT

 

 

AMENDED AND RESTATED LOAN AGREEMENT

            THIS AMENDED AND RESTATED LOAN AGREEMENT (" Agreement "), dated May 27, 2005, is made and entered into on the terms and conditions hereinafter set forth, by and among HOME SOLUTIONS OF AMERICA, INC., a Delaware corporation (the " Borrower "), those lenders who are or become parties to this Agreement (collectively, the " Lenders " and, individually, a " Lender ") and PETRA MEZZANINE FUND, L.P., a Delaware limited partnership, as administrative agent for the Lenders (in such capacity, the " Administrative Agent ").

RECITALS:

            1.         Borrower, the Administrative Agent, and PETRA MEZZANINE FUND, L.P., a Delaware limited partnership, as lender (" Petra ") are parties to that certain Loan Agreement dated March 31, 2005 (the " Original Agreement "), pursuant to which Petra made available to Borrower a term loan in the aggregate original principal amount of FOUR MILLION and No/100ths Dollars ($4,000,000.00) (the " Petra Loan ") on the terms and conditions therein set forth, and for the purpose(s) therein set forth.

            2.         Pursuant to a Joinder Agreement dated April 14, 2005, by and among  LADDCAP VALUE PARTNERS L.P., a Delaware limited partnership (" Laddcap "), Borrower, the Administrative Agent and Petra (the " Joinder Agreement "), Laddcap made an Additional Advance (as defined in the Original Loan Agreement) to Borrower in the original principal amount of $500,000 (the " Laddcap Loan ") on the terms and conditions therein set forth and as set forth in the Original Loan Agreement (the Original Agreement, as modified by the Joinder Agreement, herein referred to as the " Original Loan Agreement ").

            3.         Borrower has requested that PATRIOT CAPITAL, L.P., a Delaware limited partnership (" Patriot ") make an Additional Advance pursuant to the terms of the Original Loan Agreement in the original principal amount of $1,800,000 (the " Patriot Loan "; the Petra Loan, the Laddcap Loan and the Patriot Loan referred to herein collectively as the " Loan ").

4.         Requisite Lenders (as defined in the Original Loan Agreement) have agreed to permit the Patriot Loan as an Additional Advance.

5.         Patriot, in reliance upon the representations and inducements of Borrower set forth herein and in the other Loan Documents, has agreed to make the Patriot Loan upon the terms and conditions hereinafter set forth.

5.         Borrower has requested that Lenders amend and restate the Original Loan Agreement as set forth herein.

            6.         Lenders, in reliance upon the representations and inducements of Borrower set forth herein and in the other Loan Documents, have agreed to amend and restate the Original Loan Agreement as set forth herein.

AGREEMENTS:

            NOW, THEREFORE , in consideration of the agreement of Lenders to make the Loan and the mutual covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of all of which are hereby acknowledged, the Administrative Agent, Lenders and Borrower hereby agree as follows:

ARTICLE 1

DEFINITIONS, ACCOUNTING TERMS
AND PRINCIPLES OF CONSTRUCTION

            1.1       Defined Terms .  In addition to terms defined elsewhere herein, the following terms, as used in this Agreement, shall have the respective meanings set forth below (terms defined in the singular to have the same meaning when used in the plural, and vice versa, unless otherwise expressly indicated):

            " Asset Acquisition " shall mean (a) any Investment by the Borrower or any of its Subsidiaries in any other Person pursuant to which such Person shall become a Subsidiary of the Borrower or any of its Subsidiaries or shall be merged with the Borrower or any of its Subsidiaries or (b) any acquisition by the Borrower or any of its Subsidiaries of the assets of any Person that constitute substantially all of an operating unit or business of such Person.

            " Average Life ": as of any date of determination, with respect to any Indebtedness, the quotient obtained by dividing (a) the sum of the products of (i) the numbers of years (rounded to the nearest one-twelfth of one year) from the date of determination to the scheduled date of each successive principal payment (including any payment due at maturity) of such Indebtedness multiplied by (ii) the amount of such payment by (b) the sum of all such payments.

            " Capitalized Lease " shall mean, as to any Person, any lease of property by such Person as lessee that, in accordance with GAAP, either would be required to be classified and accounted for as a capital lease on a consolidated balance sheet of such Person or otherwise be disclosed as such in a note to such balance sheet.

            " Capitalized Lease Obligations " shall mean, as to any Person as of any date, the amount of the obligation of the lessee under a Capitalized Lease that, in accordance with GAAP, would appear on a consolidated balance sheet of such Person in respect of such Capitalized Lease or otherwise be disclosed as such in a note to such balance sheet.

" Cash Equivalents " means: (a) marketable securities (i) issued or directly and unconditionally guaranteed as to interest and principal by the United States government or (ii) issued by any agency of the United States government the obligations of which are backed by the full faith and credit of the United States, in each case maturing within one year after acquisition thereof; (b) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof, in each case maturing within one year after acquisition thereof and having, at the time of acquisition, a rating of at least A‑1 from Standard & Poor's, a division of The McGraw Hill Companies, Inc. (" S&P ") or at least P‑1 from Moody's Investors Service, Inc. (" Moody's "); (c) commercial paper maturing no more than one year from the date of acquisition and, at the time of acquisition, having a rating of at least A‑1 from S&P or at least P‑1 from Moody's; (d) certificates of deposit or bankers' acceptances issued or accepted by any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia that is at least (i) "adequately capitalized" (as defined in the regulations of its primary Federal banking regulator) and (ii) has Tier 1 capital (as defined in such regulations) of not less than $250,000,000, in each case maturing within one year after issuance or acceptance thereof; and (e) shares of any money market mutual or similar funds that (i) has substantially all of its assets invested continuously in the types of investments referred to in clauses (a) through (d) above, (ii) has net assets of not less than $500,000,000 and (iii) has short term obligations that are rated either "A-1" by S&P or "P-1" by Moody's.

            " Cash Interest Expense " shall mean, with respect to any fiscal period of Borrower, the portion of Interest Expense for such period that was paid in cash.

            " Change in Control " shall mean an event or series of events shall occur by which any "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the " Exchange Act ")), but excluding Frank Fradella, shall become the "beneficial owner" (within the meaning of Rule 13d-3 and/or Rule 13d-5 under the Exchange Act, except that Person shall be deemed to have "beneficial ownership" of all shares that such Person has the right to acquire without condition, other than the passage of time, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of fifty percent (50%) or more of the combined voting power of all securities of the Borrower entitled to vote in the election of directors, other than securities having such power only by reason of the happening of a contingency (other than the passage of time).

            " Closing Date " shall mean March 31, 2005.

            " Collateral " shall mean all property and interests in property, presently owned or hereafter acquired or presently existing or hereafter created directly by Borrower or any of the Guarantors, including any and all proceeds thereof, in which a security interest has been granted in favor of the Administrative Agent for the benefit of the Lenders, whether under this Agreement, the Security Documents or any other Loan Document.

            " Common Stock " shall have the meaning assigned to such term in Section 3.2 .

            " Commonly Controlled Entity " shall mean a Person that is under common control with Borrower within the meaning of subsection 414(b), (c), (m), (n) or (o) of the Internal Revenue Code.

            " Contingent Obligations " shall mean, for any Person, any contingent obligation calculated in accordance with GAAP, and in any event shall include (without duplication) all indebtedness, obligations or other liabilities of such Person guaranteeing or in effect guaranteeing the payment or performance of any indebtedness, obligation or other liability, regardless of whether contingent (collectively, the " primary obligations "), of any other Person (the " primary obligor ") in any manner, whether directly or indirectly, including any indebtedness, obligation or other liability of such Person, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (b) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (d) otherwise to assure or hold harmless the owner of such primary obligation against loss with respect thereto.

            " Cornerstone " shall mean Cornerstone Building and Remodeling, Inc., a Florida corporation.

" Cornerstone Acquisition " shall mean the acquisition, reorganization and merger contemplated by that certain Reorganization Agreement and Plan of Merger by and among Borrower, Cornerstone Acquisition Corp., Cornerstone, and the sole shareholder of Cornerstone, effective as of January 3, 2005.

            " Credit Parties " shall mean, collectively, the Borrower and the Guarantors.

            " Default " shall mean any of the events specified in Section 7.1 , regardless of whether any requirement for the giving of notice (and if applicable, an opportunity to cure), the lapse of time or both has been satisfied.

            " EBITDA "  shall mean, with respect to any fiscal period of Borrower and its Subsidiaries on a consolidated basis, Net Income for such period, plus , without duplication, and only to the extent reflected as an expense in the statement of such Net Income for such period, the sum of (a) income tax expense (including, without limitation, the expenses of any franchise or excise taxes imposed in lieu of income taxes), plus (b) Interest Expense, plus (c) depreciation and amortization expense, plus (d) amortization of intangibles (including, without limitation,  goodwill) and organization costs, plus (e) any other non-cash charges or expenses or non-cash losses (including non-cash losses on sales of assets outside of the ordinary course of business, and also including non-cash expenses relating to or arising out of the issuance of common stock purchase warrants), plus (f) any extraordinary, unusual or non-recurring losses (including losses on the sales of assets outside the ordinary course of business), minus , without duplication, and only to the extent included as an income item in the statement of such Net Income for such period, the sum of (i) any extraordinary, unusual or non-recurring income or gains (including gains on the sales of assets outside of the ordinary course of business), plus (ii) any other non-cash income, all as determined on a consolidated basis and in accordance with GAAP.

            " Environmental Laws " shall mean all applicable federal, state, regional, county or local laws, statutes, rules, regulations or ordinances, now or hereafter in effect, relating to the generation, recycling, use, reuse, sale, storage, handling, transport, treatment or disposal of Hazardous Materials, including the Comprehensive Environmental Response Compensation Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §9601 et seq ., the Resource Conservation and Recovery Act of 1976, as amended by the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. §6901 et seq ., the Toxic Substances Control Act, 15 U.S.C. §2601 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. §1801, et seq ., the Clean Air Act, 42 U.S.C. §7401 et seq ., the Clean Water Act of 1977, 33 U.S.C. §1251 et seq ., and any rules, regulations and guidance documents promulgated or published thereunder, and any state, regional, county or local statute, law, rule, regulation or ordinance now or hereafter in effect that relates to public health, safety or the discharge, emission or disposal of Hazardous Materials in or to air, water, land or groundwater, to the withdrawal or use of groundwater, to the use, handling or disposal of asbestos, polychlorinated biphenyls, petroleum, petroleum derivatives or by-products, other hydrocarbons or urea formaldehyde, to the treatment, storage, disposal or management of Hazardous Materials, to exposure to Hazardous Materials or to the transportation, storage, disposal, management or release of gaseous or liquid substances, and any regulation, order, injunction, judgment, declaration, notice or demand issued thereunder.

            " ERISA " shall mean the Employee Retirement Income Security Act of 1974.

            " ERISA Affiliate " shall mean each trade or business (whether or not incorporated) which, together with Borrower, is treated as a single employer under Section 414(b), (c), (m), (n) or (o) of the Internal Revenue Code.

            " Event of Default " shall mean any of the events specified in Section 7.1 , provided that any requirement for the giving of notice (and if applicable, an opportunity to cure), the lapse of time or both has been satisfied.

            " Financing Statement " shall mean any Uniform Commercial Code financing statement, authorized pursuant to the provisions of the Security Agreement, the Guarantor Security Agreement or any other Loan Document.

            " Fiscal Quarter " shall mean each of the accounting periods of three (3) months ending on March 31, June 30, September 30 and December 31, respectively, of each year.

            " Fiscal Year " shall mean the twelve (12) month period ending on December 31 of each year.

            " Fixed Charge Coverage Ratio " shall mean, for Borrower and its Subsidiaries on a consolidated basis, calculated as of the end of any period of four (4) consecutive Fiscal Quarters of Borrower after giving Pro Forma Effect to the Asset Acquisition, the ratio of (i) EBITDA for such period minus the sum of  (a) Capital Expenditures to the extent not covered by long-term Funded Indebtedness and (b) cash income taxes paid to (ii) Fixed Charges for such period.

            " Fixed Charges " means, for any period, the sum of (a) Cash Interest Expense for such period, plus (b) regularly scheduled payments of principal paid or payable in respect of Funded Indebtedness during such period, minus payments of principal under the Laurus Credit Facility made in the ordinary course of Borrower's business.

            " Funded Indebtedness " shall mean, for Borrower and its Subsidiaries on a consolidated basis, without duplication, (a) indebtedness for borrowed money or for notes, debentures or other debt securities, (b) reimbursement obligations in respect of letters of credit issued for the account of such Person (including any such obligations in respect of any drafts drawn thereunder), (c) amounts owed with respect to Purchase Money Debt, amounts owed to sellers of other property, and amounts owed to shareholders, and (d) Capitalized Lease Obligations.

            " Funded Indebtedness to EBITDA Ratio "  shall mean, for Borrower and its Subsidiaries on a consolidated basis, calculated as of the end of any period of four (4) consecutive Fiscal Quarters of Borrower after giving Pro Forma Effect to the Asset Acquisition, the ratio of (a) Funded Indebtedness as of the last day of such period  minus unrestricted cash on hand of Borrower and the Guarantors, to (b) EBITDA for such period.

            " GAAP " shall mean generally accepted accounting principles in the United States of America in effect from time to time.

            " Governmental Authority " shall mean any nation, province, state or other political subdivision thereof and any government or any natural person or entity exercising executive, legislative, regulatory or administrative functions of or pertaining to government.

            " Guarantor Security Agreement " means that certain Security Agreement dated as of the Closing Date executed by Guarantors and Borrower in favor of the Administrative Agent and the Lenders.

            " Guarantors " means, collectively, Cornerstone and PW Stephens.

            " Guaranty " means that certain Guaranty Agreement dated as of the Closing Date executed by Guarantors.

            " Hazardous Material " shall mean any material, substance, pollutant or waste that is defined or designated as a hazardous material, hazardous substance, hazardous waste, pollutant, contaminant or toxic substance under any Environmental Law or otherwise is regulated under any Environmental Law, including asbestos, polychlorinated biphenyls, petroleum, petroleum derivatives or by-products, other hydrocarbons, urea formaldehyde and medical and infectious wastes.

            " Indebtedness " shall mean, as to any Person, all items that in accordance with GAAP would be shown on the balance sheet of such Person as a liability and in any event shall include (without duplication) (a) indebtedness for borrowed money or for notes, debentures or other debt securities, (b) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money, (c) reimbursement obligations in respect of letters of credit issued for the account of such Person (including any such obligations in respect of any drafts drawn thereunder), (d) liabilities for all or any part of the deferred purchase price of property or services, including any such liabilities in the form of deferred compensation payable to the sellers thereof, (e) liabilities secured by any Lien on any property or asset owned or held by such Person regardless of whether the indebtedness secured thereby shall have been assumed by or is a primary liability of such Person, (f) Capitalized Lease Obligations, and (g) Contingent Obligations.

            " Interest Expense " shall mean, with respect to any fiscal period of Borrower, interest expense of Borrower and its Subsidiaries determined on a consolidated basis in accordance with GAAP, whether paid or accrued, including, without duplication, amortization or write-off of original issue discount on any Indebtedness and all deferred financing fees, costs and expenses associated with the incurrence of such Indebtedness (to the extent customarily included in interest expense), the interest portion of any deferred payment obligation and the interest component of any Capitalized Lease Obligation; provided, that the amortization of deferred financing, legal and accounting costs with respect to this Agreement and all non-cash interest expense shall (in each case) be excluded from Interest Expense to the extent same would otherwise have been included therein.

            " Internal Revenue Code " shall mean the Internal Revenue Code of 1986.

            " Investment " shall mean the making of any loan, advance, extension of credit or capital contribution to, or the acquisition of any stock, bonds, notes, debentures or other obligations or securities of, or the acquisition of any other interest in or the making of any other investment in, any Person.

            " Laddcap Closing Fee " shall have the meaning assigned to such term in Section 2.2 .

            " Laurus Credit Facility " shall mean those certain loans made to Borrower by Laurus Master Fund, Ltd. in the maximum aggregate principal amount of $4,000,000, as evidenced by that certain Secured Revolving Note in the maximum principal amount of $2,500,000, executed by Borrower in favor of Laurus Master Fund, Ltd. and that certain Secured Convertible Minimum Borrowing Note in the principal amount of $1,500,000, executed by Borrower in favor of Laurus Master Fund, Ltd.

            " Lien " shall mean, as to any asset, (a) any lien, charge, claim, mortgage, security interest, pledge, hypothecation or other encumbrance of any kind with respect to such asset, (b) any interest of a vendor or lessor under any conditional sale agreement, Capitalized Lease or other title retention agreement relating to such asset, (c) any reservation, exception, encroachment, easement, right-of-way, covenant, condition, restriction, lease or other title exception affecting such asset, or (d) any assignment, deposit, preference, priority or other security agreement (including any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction).

            " Loan Documents " shall mean this Agreement, the Notes, the Security Documents and all other documents, instruments and agreements now or hereafter executed or delivered pursuant hereto or in connection herewith, including, without limitation, that certain Subordination Agreement dated as of the Closing Date by and between Laurus Master Fund, Ltd. and Petra and that certain Subordination Agreement dated as of the Closing Date by and between Old Florida Bank and Petra.

            " Material Adverse Effect " and " Material Adverse Change " shall mean a material adverse effect on, or a material adverse change in, (a) the properties, business, operations, or financial condition of Borrower and its Subsidiaries, taken as a whole, or (b) the ability of Borrower to perform its obligations under this Agreement, the Note and the other Loan Documents to which it is a party.

            " Multiemployer Plan " shall mean a " multiemployer plan " as defined in Section 4001(a)(3) of ERISA. 

            " Net Income " shall mean, for Borrower and its Subsidiaries on a consolidated basis for any period, the net income (or loss) after taxes, determined in accordance with GAAP, subject to customary exclusions with respect to extraordinary and nonrecurring items.

" Notes " shall mean one or more promissory notes, substantially in the form of Exhibit B , executed by the Borrower in favor of the Lenders, evidencing the indebtedness of the Borrower to the Lenders in connection with the Loan.

            " Operating Lease " shall mean, as to any Person, any lease of property (whether real, personal or mixed) by such Person as lessee that is not a Capitalized Lease.

            " Outstanding Shares " shall have the meaning assigned to such term in Section 3.2 .

            " Patriot Acceptance Fee " shall have the meaning assigned to such term in Section 2.2.

" Patriot Closing Fee " shall have the meaning assigned to such term in Section 2.2 .

            " Patriot Loan Closing Date " shall have the date on which the conditions set forth in Article 6 have been satisfied and the proceeds of the Patriot Loan have been advanced to Borrower by Patriot.

" Patriot Second Advance " shall mean the maximum principal amount of $700,000.00 or such lesser amount as may be advanced to Borrower pursuant to the terms of this Agreement.

" Patriot Second Advance Closing Date " shall be the date on which the conditions set forth in Article 6 have been satisfied and the proceeds of the Patriot Second Advance have been advanced to Borrower by Patriot. 

" PBGC " shall mean the Pension Benefit Guaranty Corporation established pursuant to subtitle A of Title IV of ERISA.

" Permitted Acquisition " shall mean any Asset Acquisition by the Borrower or any Guarantor with respect to which (a) the Borrower and its Subsidiaries shall have complied with the provisions of Section 4.21 , (b) all assets acquired in the transaction are held or acquired by the Borrower or its Subsidiary, (c) at the time of such Asset Acquisition and after giving Pro Forma Effect thereto and to any other Asset Acquisition made during the then most recent twelve (12) month period, no Default shall have occurred or be continuing or would result therefrom, (d) the aggregate consideration paid or to be paid in connection with such Asset Acquisition, inclusive of all Indebtedness and other liabilities incurred or assumed, when combined with the aggregate consideration paid or to be paid (inclusive of all Indebtedness incurred or assumed and all potential future earn out as if paid in full) will not exceed $15,000,000, (e) the aggregate consideration paid or to be paid in connection with such Asset Acquisition, inclusive of all Indebtedness incurred or assumed, when combined with the aggregate consideration paid or to be paid (inclusive of all Indebtedness incurred or assumed and all potential future earn out as if paid in full) in connection with all other Asset Acquisitions by the Borrower and its Subsidiaries occurring during the term of the Loan will not exceed $45,000,000, and (f) the applicable Target is and shall continue to be, after the consummation of the acquisition, engaged in the business of residential services.

            " Permitted Liens " shall mean Liens permitted pursuant to the provisions of Section 4.15 .

" Permitted Non-Guarantor Entity " shall mean, collectively Fiber Seal Systems, L.P., a Texas limited partnership, FSS Holding Corp, a Texas limited partnership, Southern Exposure Holdings, Inc., a Florida corporation, SE Tops of Florida, Inc., a Florida corporation, Southern Exposure Unlimited of Florida, Inc., a Florida corporation, and Southernstone Cabinets, Inc., a Florida corporation.

            " Person " shall mean an individual, corporation, partnership, limited partnership, limited liability company, limited liability limited partnership, trust, business trust, association, joint stock company, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, Governmental Authority or other form of entity not specifically listed herein.

            " Petra Acceptance Fee " shall have the meaning assigned to such term in Section 2.2.

" Petra Closing Fee " shall have the meaning assigned to such term in Section 2.2 .

            " Plan " shall mean an employee pension benefit plan covered by Title IV of ERISA that is maintained by Borrower, any of its Subsidiaries or a Commonly Controlled Entity.

" Pro Forma Effect " shall mean, in making any calculation hereunder necessary to determine whether the Borrower is in compliance with Article 5 , any Asset Acquisition made during the twelve (12) month period ending on and including the date of determination shall be assumed to have occurred on the first day of such period; provided that the Requisite Lenders have been furnished with annual audited financial statements or interim financial statements regarding the Asset Acquisition that are in sufficient detail to provide a basis for determining the Pro Forma Effect thereof and that otherwise are in form and substance and prepared by Persons satisfactory to the Requisite Lenders.  For purposes of illustrating the parties' intent, if the Asset Acquisition were to occur as of April 1, (a) any calculation made with a determination date as of June 30 in the same year as the Asset Acquisition would include three months of actual results and nine months of pro forma results, and (b) any calculation made with a determination date of September 30 in the same year as the Asset Acquisition would include six months of actual results and six months of pro forma results.

            " Purchase Money Debt " shall mean (a) Indebtedness of Borrower or any of its Subsidiaries that, within forty-five (45) days of the purchase of real property, equipment or other tangible personal property in which neither Borrower nor any of its Subsidiaries at any time prior to such purchase had any interest, is incurred to finance part or all of (but not more than) the purchase price of such property, and that bears interest at a rate per annum that is commercially reasonable at the time, and (b) Indebtedness that constitutes a renewal, extension, refunding or refinancing of, but not an increase in the principal amount of, Purchase Money Debt that is such by virtue of clause (a) , is binding only upon the obligor or obligors under the Purchase Money Debt being renewed, extended or refunded and bears interest at a rate per annum that is commercially reasonable at the time.

            " PW Stephens " shall mean P.W. Stephens, Inc., a California corporation.

" Refinance ": in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, repurchase, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and "Refinancing" shall have correlative meanings.

            " Reportable Event " shall mean any of the events set forth under Section 4043(b) of ERISA or the PBGC regulations thereunder.

            " Requirement of Law " shall mean, as to any Person (a) the partnership agreement, charter, certificate of incorporation, articles of incorporation, bylaws, operating agreement or other organizational or governing documents of such Person, (b) any federal, state or local law, treaty, ordinance, rule or regulation, (c) any order, decree or determination of a court, arbitrator or other Governmental Authority; 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.

" Requisite Lenders " shall mean, as of any date of determination, Lenders holding in the aggregate more than eighty percent (80%) of the indebtedness evidenced by the Notes. 

            " Responsible Officer " shall mean, as to any Person, its president, chief executive officer or chief financial officer.

            " Restricted Payments " shall mean, as to any Person for any period:

                        (a)        dividends, other distributions and other payments or deliveries of property on account of the capital stock of or other ownership interests in, or any warrants, options or other rights in respect of any capital stock of or other ownership interests in, such Person or its Subsidiaries, now or hereafter outstanding, that are recorded by such Person and its Subsidiaries on a consolidated basis (excluding any such dividends, distributions and other payments made solely to such Person or a wholly-owned Subsidiary of such Person by a Subsidiary of such Person, and other dividends payable solely in shares of any class of capital stock to holders of that class;

                        (b)        amounts paid to purchase, redeem, retire or otherwise acquire for value any of the capital stock of or other ownership interests in, or any warrants, options or other rights in respect of the capital stock of or other ownership interests in, such Person or its Subsidiaries, now or hereafter outstanding (excluding any dividends, distributions and other payments made solely to such Person or a wholly-owned Subsidiary of such Person by a Subsidiary of such Person);

                        (c)        any assets segregated or set apart (including any money or property deposited with a trustee or other paying agent) by such Person or any of its Subsidiaries for a sinking or analogous fund for the purchase, redemption or retirement or other acquisition of any capital stock of or other ownership interests in, or any warrants, options or other rights in respect of any capital stock of or other ownership interests in, such Person or its Subsidiaries, now or hereafter outstanding (excluding any assets so segregated or set apart with respect to any stock, warrants, options or other rights held by a wholly-owned Subsidiary of such Person);

                        (d)        payments made or required to be made by such Person with respect to any stock appreciation rights plan, equity incentive or achievement plan, other than regular compensation and bonuses paid to employees of the Borrower and its Subsidiaries in the ordinary course of business and consistent with past practices, or any similar plan and any assets segregated or set apart for such purposes (including any money or property deposited with a trustee or other paying agent); and

                        (e)        any payment, purchase, redemption or acquisition of Indebtedness subordinated to the Indebtedness evidenced by the Notes and any assets segregated or set apart for such purposes (including any money or property deposited with a trustee or other paying agent), excluding, however, regularly scheduled payments of interest made according to the stated terms of such subordinated Indebtedness;

            all as determined in accordance with GAAP.

            " Securities Act " means the Security Act of 1933, as amended, or any similar federal statute and the rules and regulations of the SEC thereunder, all as the same shall be in effect at the time.

            " Security Agreement " shall mean the Security Agreement, substantially in the form of Exhibit C , executed by Borrower in favor of the Administrative Agent for the benefit of the Lenders.

            " Security Documents " shall mean the Security Agreement, the Trademark and Patent Security Agreement, the Guaranty, the Guarantor Security Agreement and the Financing Statements, together with all documents, instruments and agreements now or hereafter executed or delivered pursuant thereto or in connection therewith.

            " Solvent " shall mean, with respect to any Person on any particular date, that on such date (a) the fair value of the assets of such Person is, on the date of determination, greater than the total amount of liabilities, including contingent and unliquidated liabilities, of such Person, (b) such Person is able to pay all liabilities of such Person as they mature, and (c) such Person does not have unreasonably small capital with which to carry on its business.  In computing the amount of contingent or unliquidated liabilities at any time, such liabilities will be computed at the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can be reasonably expected to become an actual or matured liability.

" Stated Maturity ": with respect to any Indebtedness, the date specified in the governing documents thereof as the fixed date on which the final or only, as the case may be, payment of principal of such Indebtedness is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such Indebtedness at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer).

            " Subsidiary " shall mean, as to any Person (a) a corporation, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock having such power only by reason of the occurrence of a contingency) to elect a majority of the board of directors or other managers thereof are at the time owned, or the management of which is otherwise controlled, directly or indirectly, through one or more intermediaries, or both, by such Person, or (b) a partnership in which such Person is a general partner or the management of which is otherwise controlled, directly or indirectly, through one or more intermediaries or both, by such Person.

            " Target " shall mean any Person or material group of assets acquired or proposed to be acquired pursuant to an Asset Acquisition.

            " Trademark and Patent Security Agreement " shall mean that certain Trademark and Patent Security Agreement executed by Borrower and each Guarantor in favor of the Administrative Agent for the benefit of the Lenders.

            " UCC " shall mean the Uniform Commercial Code as in effect in the State of Tennessee or any other applicable jurisdiction, as the context may require.

            " Warrant " shall mean each Stock Purchase Warrant, substantially in the form of Exhibit D , executed by Borrower in favor of each Lender.

            1.2       Accounting and Commercial Terms .  As used in this Agreement, all accounting terms used but not otherwise defined herein shall have the respective meanings assigned to them by GAAP.  All terms used but not otherwise defined herein that are defined or used in Article 9 of the UCC shall have the respective meanings assigned to them in such Article.

            1.3       General Construction .  As used in this Agreement, the masculine, feminine and neuter genders and the plural and singular numbers shall be deemed to include the others in all cases in which they would so apply.  "Includes" and "including" are not limiting, and shall be deemed to be followed by "without limitation" regardless of whether such words or words of like import in fact follow same.  The word "or" is not intended and shall not be construed to be exclusive.

            1.4       Headings .  Article and section headings and captions in this Agreement and the other Loan Documents are included in such Loan Documents for convenience of reference and shall not constitute a part of the applicable Loan Documents for any other purpose.

            1.5       References to this Agreement and Parts Thereof .  As used in this Agreement, unless otherwise specified the words "hereof," "herein" and "hereunder" and words of similar import shall refer to this Agreement including all schedules and exhibits hereto, as a whole, and not to any particular provision of this Agreement, and the words "Article", "Section", "Schedule" and "Exhibit" refer to articles, sections, schedules and exhibits of or to this Agreement.

            1.6       Documentary References .  Any reference herein to any instrument, document or agreement, by whatever terminology used, shall be deemed to include any and all amendments, modifications, supplements, extensions, renewals, substitutions or replacements thereof as the context may require.

            1.7       Legal References .  Any reference herein to any law shall be a reference to such law as in effect from time to time and shall include any rules and regulations promulgated or published thereunder and published interpretations thereof.

ARTICLE 2
THE LOAN

            2.1       The Loan; Evidence of Loan Indebtedness; Repayment .  Subject to the terms and conditions hereof, Lenders severally agree to make their portion of the Loan to Borrower.  The Loan shall be evidenced by, and payable in accordance with the provisions of, the Notes.  Borrower may prepay the Loan, in whole or in part, at any time and from time to time, without premium or penalty.  The parties acknowledge and agree that any Notes delivered on the date of this Agreement, in substitution for the Notes delivered under the terms of the Original Loan Agreement, are not intended to and shall not cause a novation with respect to any or all of the Obligations.

            If Patriot makes the Patriot Second Advance pursuant to the terms hereinafter set forth, from and after the Patriot Second Advance Closing Date the Loan shall be deemed to include the Patriot Second Advance.

Without implying any limitation on the Security Documents, Borrower acknowledges and agrees that the Collateral covered by the Security Documents secures, among other things, all of the indebtedness, liabilities and obligations of Borrower to the Lenders, whether now existing or hereafter arising, of any nature whatsoever (fixed, contingent or otherwise) under the Loan, the Note, this Agreement, the Security Agreement, the other Loan Documents, or otherwise, including, without limitation, any indebtedness, liability and obligation arising under Section 8.7 or Section 10.3 of this Agreement.

2.2              Acceptance Fee; Closing Fee . 

            (a)        In connection with the making of the Petra Loan, Borrower paid to Petra an acceptance fee in the amount of $37,500 (the " Petra Acceptance Fee ").  Petra hereby acknowledges that Borrower prepaid the Petra Acceptance Fee.  Further in connection with the making of the Petra Loan, Borrower paid to Petra a closing fee in the amount of $122,500 (the " Closing Fee ").  The Petra Closing Fee was due and payable on the Closing Date, and Borrower authorized and directed  Petra to deduct from the Petra Loan proceeds and retain for its account the sum of $122,500 as payment of the Petra Closing Fee.

            (b)        In connection with the making of the Laddcap Loan, Borrower paid to Laddcap a closing fee in the amount of $20,000 (the " Laddcap Closing Fee ").  The Laddcap Closing Fee was due and payable simultaneously with the advance of the Laddcap, and Borrower authorized and directed  Laddcap to deduct from the Laddcap Loan proceeds and retain for its account the sum of $20,000 as payment of the Laddcap Closing Fee.

            (c)        In connection with the making of the Patriot Loan, Borrower shall pay to Patriot an acceptance fee in the amount of $15,000 (the " Patriot Acceptance Fee ").  Patriot hereby acknowledges that Borrower has prepaid the Patriot Acceptance Fee.  Further in connection with the making of the Patriot Loan, subject to Section 10.17 below , Borrower shall pay to Patriot a closing fee in the amount of $85,000 (the " Patriot Closing Fee ").  The Patriot Closing Fee is due and payable on the Patriot Loan Closing Date, and Borrower hereby authorizes and directs Patriot to deduct from the Patriot Loan proceeds and retain for its account the sum of $85,000 as payment of the Patriot Closing Fee.

            2.3       Purpose .  The purpose of the Loan shall be to finance the Cornerstone Acquisition and to provide additional working capital to Borrower .  The Patriot Loan shall be to finance the Cornerstone Acquisition specifically by repaying Borrower's $2,300,000 Promissory Note dated January 3, 2005, payable to the order of Anthony Leeber, Jr. and thereafter to provide additional working capital to Borrower.  The proceeds of the Loan shall be used for no other purposes.

ARTICLE 3
REPRESENTATIONS AND WARRANTIES

            To induce Lenders to make the Loan and to induce the Lenders and the Administrative Agent to enter into this Agreement, Borrower hereby represents and warrants to Lenders as follows:

            3.1       Corporate Status .  Borrower and its Subsidiaries are entities of the types set forth on Schedule 3.1 , and each is duly organized, validly existing and in good standing under the laws of the jurisdiction indicated next to its name on Schedule 3.1 .  Borrower and its Subsidiaries have all requisite corporate power, authority and legal rights to own and operate their respective properties, to carry on their respective businesses as now conducted and to enter into and to perform their respective obligations under this Agreement and the other Loan Documents to which each is a party.  Borrower and its Subsidiaries are each duly qualified to do business and in good standing in each jurisdiction in which a failure to be so qualified would have a Material Adverse Effect.

            3.2       Capitalization .  The authorized capital stock of Borrower consists solely of  (i) 50,000,000  shares of common stock, $ .001 par value per share (" Common Stock "), of which  17,022,486 shares (the " Outstanding    Common   Shares ") are issued and outstanding  and (ii) 1,000,000 shares of preferred stock , $.001 par value per share (the " Preferred Stock "), of which there are 68 shares of Series A Convertible Preferred Stock (the " Series A Convertible Preferred Stock ") issued and outstanding and 40 shares of Series B Convertible Preferred Stock (the " Series B Convertible Preferred Stock ") issued and outstanding (collectively, the "Outstanding Preferred Shares" and together with the Outstanding Common Shares, the "Outstanding Shares").  Schedule 3.2 lists the respective holders of Outstanding Shares, the number of Outstanding Shares held by each and the respective percentage ownership of each on a fully diluted basis, assuming the exercise or conversion of all issued and outstanding option securities and convertible securities of Borrower.  All of the Outstanding Shares are duly authorized, validly issued and outstanding and fully paid and nonassessable and free of preemptive rights.  Except for the Outstanding Shares, there are no shares of capital stock or other securities of Borrower outstanding.  Except as set forth on Schedule 3.2 , there are no outstanding options, warrants or rights to purchase or acquire from Borrower any securities of Borrower, and there are no contracts, commitments, agreements, understandings, arrangements or restrictions as to which Borrower is a party or by which it is bound relating to any shares of capital stock or other securities of Borrower (including the Outstanding Shares), regardless of whether outstanding. 

            3.3       Authorization .    The execution and delivery of this Agreement, the borrowing hereunder, the execution and delivery of each Loan Document to which Borrower and any of its Subsidiaries is a party and the performance by Borrower and its Subsidiaries of their respective obligations thereunder are within the corporate powers of Borrower and its Subsidiaries and have been duly authorized by all necessary corporate action properly taken, have received all necessary governmental approvals, if any were required, and do not and will not contravene or conflict with any provision of law, any applicable judgment, ordinance, regulation or order of any court or Governmental Authority.  The officer(s) executing this Agreement, the Notes and all of the other Loan Documents to which Borrower or any of its Subsidiaries is a party are duly authorized to act on behalf of Borrower or its Subsidiaries, as the case may be.

            3.4       Validity and Binding Effect .  This Agreement and the other Loan Documents are the legal, valid and binding obligations of Borrower and the Guarantors, as the case may be, enforceable in accordance with their respective terms, subject to limitations imposed by bankruptcy, insolvency, moratorium or other similar laws affecting the rights of creditors generally or the application of general equitable principles.

            3.5       No Conflicts .  Except as set forth on Schedule 3.5 , the execution and delivery of this Agreement and the other Loan Documents, consummation of the transactions contemplated by such Loan Documents and the performance of the respective obligations of Borrower and the Guarantors under and by virtue of such Loan Documents will not result in any breach of, or constitute a default under, any mortgage, security deed or agreement, deed of trust, lease, bank loan or credit agreement, corporate charter or bylaws, agreement or certificate of limited partnership, partnership agreement, license, franchise or any other instrument or agreement to which Borrower or its Subsidiaries is a party or by which Borrower, its Subsidiaries, or their respective properties may be bound or affected, unless and except to the extent that Borrower or its Subsidiaries have obtained an effective waiver.

            3.6       Investments .  Borrower has no Investments other than cash on deposit with banks in deposit accounts in the ordinary course of Borrower's business or in Cash Equivalents of such banks and Investments (including Investments in Subsidiaries of Borrower) set forth on Schedule 3.6 .

            With respect to each Subsidiary of Borrower, Schedule 3.6 shows the percentage of the stock or other equity interests that is owned by Borrower and each other Person having an interest therein.  The outstanding capital stock of each Subsidiary that is a corporation is validly issued, fully paid and nonassessable.  Borrower and its Subsidiaries have good and valid title to the equity interests in the Subsidiaries of Borrower shown as owned by each of them on Schedule 3.6 , free and clear of all Liens.

            3.7       Trademarks, Patents, Etc .  Schedule 3.7 is an accurate and complete list of all patents, trademarks, tradenames, trademark registrations, service names, service marks, copyrights, licenses, formulas and applications therefor owned by Borrower or any of its Subsidiaries or used or required by Borrower or any of its Subsidiaries in the operation of their respective businesses, title to each of which is, except as set forth in Schedule 3.7 , held by Borrower or its subsidiary, as applicable, free and clear of all Liens.  There is no infringement action, lawsuit, claim or, to the knowledge of Borrower, complaint that asserts that Borrower's or its Subsidiaries operations violate or infringe the rights or the trade names, trademarks, trademark registrations, service names, service marks or copyrights of others with respect to any asset or operation of Borrower or any of its Subsidiaries or, to the knowledge of Borrower, any adversely held trademark, trade name, trademark registration, service name, service mark or copyright, and Borrower and its Subsidiaries are not in any way making use of any confidential information or trade secrets of any Person except with the consent of such Person.

3.8              Financial Statements . 

(a)    The financial statements of the Borrower and its Subsidiaries included in the Borrower's filings with the SEC for the last three (3) fiscal years, the audited financial statements as of December 31, 2004 and for the year ended December 31, 2004 and the unaudited financial statements of January 31, 2005 and for the month then ended (including the related notes, if any) complied as to form, as of their respective dates of filing with the SEC, if applicable, in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto (including, without limitation, Regulation S-X), have been prepared in accordance with GAAP (except, in the case of unaudited statements, as permitted by Quarterly Report Form 10-QSB of the SEC) applied on a consistent basis during the periods and at the dates involved (except as may be indicated in the notes thereto) and fairly present the consolidated financial condition of the Borrower and its Subsidiaries at the dates thereof and the consolidated results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to the absence of notes and normal year-end audit adjustments that were not material in amount or effect).  Except (A) as reflected in the Borrower's audited financial statements at December 31, 2004 (the " Most Recent Financial Statements ") or liabilities described in any notes thereto (or liabilities for which neither accrual nor footnote disclosure is required pursuant to GAAP) or (B) for liabilities incurred in the ordinary course of business since December 31, 2004 consistent with past practice or in connection with this Agreement or the transactions contemplated hereby, neither the Borrower nor any of its Subsidiaries has any material liabilities or obligations of any nature.  Corbin & Company, LLP, who have expressed their opinion with respect to the audited financial statements of the Borrower and its Subsidiaries included in the Borrower's filings with the SEC (including the related notes), are independent public or certified public accountants as required by the Securities Act and the Exchange Act.

 

            3.9       Indebtedness .  Schedule 3.9 is a complete and correct list of all Indebtedness of Borrower and its Subsidiaries, and identifies all credit agreements, indentures, purchase agreements, promissory notes and other evidences of Indebtedness, guaranties, Capitalized Leases and other instruments, agreements and arrangements presently in effect providing for or relating to extensions of credit (including agreements and arrangements for the issuance of letters of credit or for acceptance financing) in respect of which Borrower or any of the properties thereof is in any manner directly or contingently obligated.  The maximum principal or face amounts of the credit in question that are outstanding and that can be outstanding are correctly stated on Schedule 3.9 , and all Liens of any nature given or agreed to be given as security for any Indebtedness of Borrower are correctly described or indicated in such Schedule.

            3.10     Title to Assets .  Borrower and its Subsidiaries have good and valid title (or good and valid leasehold interests with respect to leased property) to all their respective assets (including all assets constituting a part of the Collateral and all assets reflected in the balance sheet of Borrower as of January 31, 2005), subject to no Liens other than Permitted Liens.

            3.11     Labor Matters .  There are no disputes or controversies pending between Borrower or its Subsidiaries and their respective employees, the outcome of which reasonably may be expected to have a Material Adverse Effect.

            3.12     Litigation .  Except as set forth on Schedule 3.12 , there are no actions, suits or proceedings pending, or, to the knowledge of Borrower threatened, against or affecting Borrower or any of its Subsidiaries or involving the validity or enforceability of any of the Loan Documents, at law or in equity, before any court or Governmental Authority.  To Borrower's knowledge, Borrower is not in default with respect to any order, writ, injunction, decree or demand of any court or Governmental Authority.

            3.13     Other Agreements; No Defaults .  Borrower is not a party to any indenture, loan or credit agreement, lease or other instrument, document or agreement or instrument, or subject to any charter or corporate restriction, that could have a Material Adverse Effect.  Borrower is not in default in any respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument material to its business to which it is a party, including this Agreement and the other Loan Documents, and no other default or event has occurred and is continuing that with notice or the passage of time or both would constitute a default or event of default under any of same.  Without implying any limitation on the foregoing, No Default or Event of Default (including, without limitation, those with respect to representations and warranties) existed under the Original Loan Agreement or under any of the other Loan Documents immediately before the execution and delivery of this Agreement.

            3.14     Compliance with Laws .  Borrower and its Subsidiaries (a) have not been, are not and will not be in violation of any applicable Requirement of Law, including any building, zoning, occupational safety and health, fair employment, equal opportunity, pension, environmental control or similar federal, state or local law, ordinance or regulation, relating to the ownership or operation of their respective businesses or assets, (b) have not failed to obtain any license, permit, certificate or other governmental authorization necessary for the conduct of their businesses or the ownership and operation of their assets, (c) have not received any notice from any Governmental Authority, and to their knowledge no such notice is pending or threatened, alleging that Borrower or any of its Subsidiaries has violated, or has not complied with, any Requirement of Law, condition or standard applicable with respect to any of the foregoing, and (d) are not a party to any agreement or instrument, or subject to any judgment, order, writ, rule, regulation, code or ordinance, except to the extent that any violation, noncompliance, failure, agreement, judgment, etc. as described in this Section 3.14 cannot reasonably be expected to have a Material Adverse Effect.

            3.15     Governmental Authorizations; Permits, Licenses and Accreditation; Other Rights .  Borrower and its Subsidiaries have all licenses, permits, approvals, registrations, contracts, consents, franchises, qualifications, accreditations and other authorizations necessary for the lawful conduct of their respective businesses or operations wherever now conducted and as planned to be conducted, pursuant to all applicable statutes, laws, ordinances, rules and regulations of all Governmental Authorities having, asserting or claiming jurisdiction over Borrower and its Subsidiaries or over any part of their respective operations.  Copies of all such licenses, permits, approvals, registrations, contracts, consents, franchises, qualifications, accreditations and other authorizations shall be provided to Lender upon request.  Borrower and its Subsidiaries are not in default under any of such licenses, permits, approvals, registrations, contracts, consents, franchises, qualifications, accreditations or other authorizations, and no event has occurred, and no condition exists, that with the giving of notice, the passage of time or both would constitute a default thereunder or would result in the suspension, revocation, impairment, forfeiture or non-renewal of any thereof, except to the extent that the cumulative effect of all such defaults, events, conditions, suspensions, revocations, impairments, forfeitures and non-renewals cannot reasonably be expected to have a Material Adverse Effect.  The continuation, validity and effectiveness of all such licenses, permits, approvals, registrations, contracts, consents, franchises, qualifications, accreditations and other authorizations will not be adversely affected by the transactions contemplated by this Agreement.  Borrower and its Subsidiaries know of no reason why they will not be able to maintain after the date hereof all licenses, permits, approvals, registrations, contracts, consents, franchises, qualifications, accreditations and other authorizations necessary or appropriate to conduct the businesses of Borrower and its Subsidiaries as now conducted and presently planned to be conducted.

            3.16     Taxes .  Borrower has filed or caused to be filed all tax returns that to its knowledge are required to be filed (except for returns that have been appropriately extended), and has paid, or will pay when due, all taxes shown to be due and payable on said returns and all other taxes, impositions, assessments, fees or other charges imposed on them by any governmental authority, agency or instrumentality, prior to any delinquency with respect thereto (other than taxes, impositions, assessments, fees and charges currently being contested in good faith by appropriate proceedings, for which appropriate amounts have been reserved).  No tax liens have been filed against Borrower or any of the property thereof.

            3.17     Certain Transactions .  Except as set forth on Schedule 3.17 , (a) Borrower is not indebted, directly or indirectly, to any of its officers or directors or to their respective spouses or children, in any amount whatsoever, and (b) none of said officers or directors or any members of their immediate families, are indebted to Borrower or have any direct or indirect ownership interest in any firm or corporation with which Borrower has a business relationship, or any firm or corporation which competes with Borrower, except that officers or directors of Borrower may own no more than 1% of outstanding stock of publicly traded companies that may compete with Borrower.  Except as set forth on Schedule 3.17 , no officer or director or any member of their immediate families, is, directly or indirectly, interested in any material contract with Borrower, and each such contract has been fully disclosed to and approved by the directors of Borrower and is on arm's length terms.  Except as set forth on Schedule 3.17 , Borrower is not a guarantor or indemnitor of any Indebtedness of any other person, firm or corporation.

            3.18     Margin Regulations . Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock.  No proceeds received pursuant to this Agreement will be used to purchase or carry any equity security of a class registered pursuant to Section 12 of the Exchange Act.

            3.19     Significant Contracts .  Schedule 3.19 is a complete and correct list of all contracts, agreements and other documents pursuant to which Borrower receives revenues in excess of $500,000.  Each such contract, agreement and other document is in full force and effect as of the date hereof and Borrower knows of no reason why such contracts, agreements and other documents would not remain in full force and effect pursuant to the terms thereof.

            3.20     ERISA .

                        (a)        Plans .  Schedule 3.20 sets forth any and all Plans maintained by or on behalf of Borrower or any of its Subsidiaries, including any defined benefit pension plan, profit sharing plan, money purchase pension plan, savings or thrift plan, stock bonus plan, employee stock ownership plan or Multiemployer Plan and any plan, fund, program, arrangement or practice providing for medical (including post-retirement medical), hospitalization, accident, sickness, disability, or life insurance benefits.  Neither Borrower nor any ERISA Affiliate maintains or contributes to, or has maintained or contributed to, any defined benefit pension plan or Multiemployer Plan.

                        (b)        Compliance .  Each Plan maintained by or on behalf of Borrower or any of its Subsidiaries has at all times been maintained, by its terms and in operation, in accordance in all material respects with ERISA and all other applicable Requirements of Law.

                        (c)        Liabilities .  Except for liabilities and expenses that become payable and are timely paid pursuant to the terms and usual operations of the Plans, Borrower currently is not, and to its knowledge will not become, subject to any material liability (including withdrawal liability), tax or penalty whatsoever to any Person whomsoever with respect to any Plan including any material tax, penalty or liability arising under Title I or Title IV of ERISA or Chapter 43 of the Internal Revenue Code.

                        (d)        Funding .  Each of Borrower and its ERISA Affiliates has made full and timely payment of all amounts (1) required to be contributed under the terms of each Plan and applicable law and (2) required to be paid as expenses of each Plan.  No Plan or Plans have an "amount of unfunded benefit liabilities" (as defined in Section 4001(a)(18) of ERISA) that, in the aggregate, exceeds $25,000.

            3.21     Environmental Matters .

                        (a)        Except as set forth on Schedule 3.21 , neither Borrower nor any of its Subsidiaries, nor any of the properties owned or leased thereby or operations thereof, nor, to the knowled