FINANCING AGREEMENT

Exhibit 10.1

EXECUTION COPY

FINANCING AGREEMENT

Dated as of September 30, 2008

by and among

UNIGENE LABORATORIES, INC.

as Borrower

THE LENDERS PARTY HERETO

and

VICTORY PARK MANAGEMENT, LLC

as Agent

 

$20,000,000 SENIOR SECURED NOTES AND

1,500,000 SHARES OF COMMON STOCK

 

TABLE OF CONTENTS

 

 

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EXHIBITS

 

 

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FINANCING AGREEMENT

This FINANCING AGREEMENT (the “ Agreement ”), dated as of September 30, 2008, is being entered into by and among UNIGENE LABORATORIES, INC. (“ Principal Borrower ”), the lenders listed on the Schedule of Lenders attached hereto (each individually, a “ Lender ” and collectively, the “ Lenders ”) and Victory Park Management, LLC, as administrative agent and collateral agent (the “ Agent ”) for the Lenders and the Holders (as defined herein).

WHEREAS , the Principal Borrower has authorized a new series of senior secured notes of the Principal Borrower;

WHEREAS , each Lender wishes to purchase, and the Principal Borrower wishes to sell, upon the terms and conditions stated in this Agreement, that principal amount of Notes, in substantially the form attached hereto as Exhibit A , at the First Closing as set forth opposite such Lender’s name in column three (3) on the Schedule of Lenders attached hereto and at each Subsequent Closing pursuant to the terms and conditions of Section 3.2;

WHEREAS , in connection with the sale of the Notes at the First Closing, and as an inducement to the Lenders to purchase the Notes, the Principal Borrower wishes to issue to the Lenders at the First Closing, upon the terms and conditions stated in this Agreement, shares of common stock, par value $0.01 per share, of the Principal Borrower (or any capital stock issued in substitution or exchange for, or otherwise in respect of, such common stock) (the “ Common Stock ”), as set forth opposite such Lender’s name in column four (4) on the Schedule of Lenders attached hereto (together with any Common Stock that the Principal Borrower may be required to issue on the Subsequent Closing Date, the “ Shares ”);

WHEREAS , the Principal Borrower and each Lender is executing and delivering this Agreement in reliance upon the exemption from securities registration with respect to the Shares afforded by the Securities Act of 1933, as amended (the “ 1933 Act ”), and Regulation D (“ Regulation D ”) promulgated by the United States Securities and Exchange Commission (the “ SEC ”) under the 1933 Act;

WHEREAS , contemporaneously with the execution and delivery of this Agreement, the Principal Borrower and the Lenders are executing and delivering a Registration Rights Agreement, substantially in the form attached hereto as Exhibit B (the “ Registration Rights Agreement ”), pursuant to which the Principal Borrower has agreed to provide certain registration rights with respect to the Shares under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws;

WHEREAS , contemporaneously with the execution and delivery of this Agreement, the Principal Borrower and the Lenders are executing and delivering a Lock-Up Agreement, substantially in the form attached hereto as Exhibit O (the “ Lock-Up Agreement ”), pursuant to which the Lenders have agreed, subject to certain limitations, to refrain from transferring the Shares for a period of time;

WHEREAS , contemporaneously with the execution and delivery of this Agreement, the Principal Borrower and the Agent on behalf of the Holders and Lenders are executing and

delivering a Pledge and Security Agreement, substantially in the form attached hereto as Exhibit C (the “ Security Agreement ”), pursuant to which all of the assets of the Principal Borrower and any New Borrower that becomes a party hereto will be pledged as Collateral to secure the Obligations;

WHEREAS , contemporaneously with the execution and delivery of this Agreement, the Principal Borrower and the Agent are executing and delivering a Fee Letter, substantially in the form attached hereto as Exhibit D (the “ Fee Letter ”), pursuant to which the Principal Borrower shall pay and reimburse the Agent for itself and on behalf of the Holders and Lenders for fees and expenses incurred in connection with the transactions contemplated hereunder;

WHEREAS , contemporaneously with the execution and delivery of this Agreement, the Principal Borrower, the holders of the Affiliate Notes and the Agent on behalf of the Holders and Lenders are executing and delivering an Affiliate Subordination Agreement, substantially in the form attached hereto as Exhibit M (the “ Affiliate Subordination Agreement ”), pursuant to which the holders of the Affiliate Notes shall agree that the payment of all Affiliate Indebtedness shall be subordinated and junior in right of payment to the prior payment in full in cash of the Obligations; and

WHEREAS , the Notes and the Shares are collectively referred to herein as the “ Securities ”.

NOW, THEREFORE , in consideration of the premises and the covenants and agreements contained herein, the Principal Borrower, any New Borrower that becomes a party hereto and each Lender hereby agree as follows:

ARTICLE 1

DEFINITIONS; CERTAIN TERMS

Section 1.1 Definitions . As used in this Agreement, the following terms have the respective meanings indicated below, such meanings to be applicable equally to both the singular and plural forms of such terms:

“ 8-K Filing ” has the meaning set forth in Section 8.26.

“ 1933 Act ” has the meaning set forth in the recitals.

“ 1934 Act ” has the meaning set forth in Section 7.34.

“ Accelerated First Closing Interest ” has the meaning provided in Section 2.2(b).

“ Accelerated Interest ” means the Accelerated First Closing Interest and the Accelerated Subsequent Closing Interest, collectively.

“ Accelerated Subsequent Closing Interest ” has the meaning provided in Section 2.2(b).

“ Accounts ” has the meaning provided in the UCC.

 

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“ Acquisition ” means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of all or substantially all of any business line, unit or division of a Person, (b) the acquisition of in excess of 50% of the Equity Interests of any Person, or otherwise causing any Person to become a Subsidiary, or (c) a merger or consolidation or any other combination with another Person.

“ Agent ” has the meaning set forth in the introductory paragraph hereto.

“ Affiliate ” means, with respect to a specified Person, another Person that (i) is a director or officer of such specified Person, or (ii) directly or indirectly through one or more intermediaries, Controls, is Controlled by or is under common Control with the Person specified.

“ Affiliate Indebtedness ” means Indebtedness under the Affiliate Notes.

“ Affiliate Notes ” means each of (i) the Secured Promissory Note dated as of May 10, 2007 issued by the Principal Borrower in favor of Jaynjean Levy Family Limited Partnership in an aggregate principal amount of $7,418,803 and (ii) the Secured Promissory Note dated as of May 10, 2007 issued by the Principal Borrower in favor of Jay Levy in an aggregate principal amount of $8,318,714.

“ Affiliate Subordination Agreement ” has the meaning set forth in the recitals.

“ Asset Sale ” means (i) the sale, lease, license, conveyance or other disposition of any assets or rights of any Borrower or any of the Borrowers’ Subsidiaries, and (ii) the sale of Equity Interests in any of the Borrowers (other than the Capital Stock of the Principal Borrower) or any of the Borrowers’ Subsidiaries.

“ Bankruptcy Law ” has the meaning set forth in Section 10.1(c).

“ Blocked Account ” means each Controlled Account (as defined in the Security Agreement) that is subject to the full dominion and control of the Agent.

“ Borrower ” means the Principal Borrower and any New Borrower that becomes a party hereto in accordance with Section 8.28.

“ Business Day ” means any day other than Saturday or Sunday or any day that banks in Chicago, Illinois are required or permitted to close.

“ Capital Stock ” means (1) in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into, or exchangeable for, Capital Stock, whether or not such debt securities include any right of participation with Capital Stock.

 

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“ Cash Equivalent Investment ” means, at any time, (a) any evidence of debt, maturing not more than one year after such time, issued or guaranteed by the United States Government or any agency thereof, (b) commercial paper, maturing not more than one year from the date of issue, or corporate demand notes, in each case rated at least A-l by Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. or P-l by Moody’s Investors Service, Inc., (c) any certificate of deposit, time deposit or banker’s acceptance, maturing not more than one year after such time, or any overnight Federal Funds transaction that is issued or sold by a commercial banking institution that is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $500,000,000, (d) any repurchase agreement entered into with any commercial banking institution of the nature referred to in clause (c)  which (i) is secured by a fully perfected security interest in any obligation of the type described in any of clauses (a)  through (c)  above and (ii) has a market value at the time such repurchase agreement is entered into of not less than 100% of the repurchase obligation of such commercial banking institution thereunder, (e) money market accounts or mutual funds which invest exclusively in assets satisfying the foregoing requirements, and (f) other short term liquid investments approved in writing by Agent.

“ Cash Flow ” means, with respect to any Person for any period, the sum of (i) the total operating revenue of such Person for such period as set forth in such Person’s statement of operations prepared in accordance with GAAP plus (ii) the increase in deferred revenue of such Person during such period as set forth in such Person’s statement of cash flows prepared in accordance with GAAP.

“ cGMPs ” means the regulatory requirements for current good manufacturing practices promulgated by the FDA under the Food and Drug Act, including at 21 C.F.R. § 210 et seq . and under the Public Health Service Act, Biological Products, 21 C.F.R. §§ 610-10, as the same may be amended from time to time.

“ Change of Control ” means, with respect to any Borrower or Subsidiary, that (A) such Borrower or Subsidiary shall, directly or indirectly, in one or more related transactions, (i) consolidate or merge with or into (whether or not such Borrower or Subsidiary is the surviving corporation) another Person, (ii) sell, assign, transfer, lease, license, convey or otherwise dispose of all or substantially all of the properties or assets of such Borrower or Subsidiary to another Person, (iii) allow another Person to make a purchase, tender or exchange offer that is accepted by the holders of more than fifty percent (50%) of the outstanding shares of Common Stock (not including any shares of Common Stock held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), (iv) consummate a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than fifty percent (50%) of the outstanding shares of Common Stock, (v) reorganize, recapitalize or reclassify the Common Stock, or (vi) cause to occur a “change in control” under any Affiliate Indebtedness, or (B) with respect to the Principal Borrower, any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of fifty percent (50%) of the aggregate ordinary voting power represented by issued and outstanding Common Stock.

 

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“ China JV ” means Unigene Biotechnology Co. Ltd., a corporation established under the laws of the People’s Republic of China.

“ Closing ” means the First Closing or the Subsequent Closing, as applicable.

“ Closing Date ” means the First Closing Date or the Subsequent Closing Date, as applicable.

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Collateral ” means the “Collateral” as defined in the Security Agreement.

“ Common Stock ” has the meaning set forth in the recitals.

“ Compliance Certificate ” means a certificate signed by a responsible officer of the Principal Borrower, in substantially the form attached hereto as Exhibit K and reasonably satisfactory to the Agent.

“ 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.

“ Control ” means the possession, directly or indirectly, of the power (i) to vote 10% or more of the Capital Stock having ordinary voting power for the election of directors of a Person or (ii) to direct or cause the direction of management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. “ Controlling ” and “ Controlled ” have meanings correlative thereto.

“ Current Interest Rate ” means a rate per annum equal to the lesser of (i) the greater of (A) the Prime Rate plus seven percent (7.00%) and (B) fourteen percent (14.00%) and (ii) eighteen percent (18.00%), in each case as adjusted pursuant to the terms of Section 2.2.

“ Custodian ” has the meaning set forth in Section 10.1(d).

“ Default Rate ” means a rate per annum equal to the Current Interest Rate plus three percent (3.00%).

“ Destruction ” means any and all damage to, or loss or destruction of, or loss of title to, all or any portion of the Collateral (i) in excess of $500,000 in the aggregate for any Fiscal Year or (ii) that results in a Material Adverse Effect.

“ Diligence Date ” has the meaning set forth in Section 7.14.

 

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“ Employee Benefit Plan ” means any “employee benefit plan” as defined in Section 3(3) of ERISA which is or was sponsored, maintained or contributed to by, or required to be contributed to by, any Borrower or any of their respective Subsidiaries or ERISA Affiliates.

“ Environmental Laws ” means all applicable federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “ Hazardous Materials ”) into the environment, the exposure of humans thereto, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all regulatory authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices of violation or similar notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

“ Equity Interests ” means Capital Stock and all warrants, options and other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock, whether or not such debt security includes the right of participation with Capital Stock).

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ ERISA Affiliate ” means, as to any Borrower, any trade or business (whether or not incorporated) that is a member of a group which includes such Borrower and which is treated as a single employer under Section 414 of the Code.

“ ERISA Event ” means (a) a “reportable event” within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for 30 day notice to the PBGC has been waived by regulation); (b) the failure to meet the minimum funding standards of Sections 412 and 430 of the Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(c) of the Code) or the failure to make by its due date a required installment under Section 430(j) of the Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (c) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (d) the withdrawal by any of the Borrowers, any of their Subsidiaries or any of their respective ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in liability to any of the Borrowers, any of their Subsidiaries or any of their respective Affiliates pursuant to Section 4063 or 4064 of ERISA; (e) the institution by the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which might constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (f) the imposition of liability on any of the Borrowers, any of their Subsidiaries or any of their respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (g) the withdrawal of any of the Borrowers, any of their Subsidiaries or any of their respective ERISA Affiliates in a complete or partial withdrawal (within the

 

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meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential liability therefor, or the receipt by any of the Borrowers, any of their Subsidiaries or any of their respective ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (h) the occurrence of an act or omission which could give rise to the imposition on any of the Borrowers, any of their Subsidiaries or any of their respective ERISA Affiliates of fines, penalties, taxes or related charges under Sections 4975 or 4971 of the Code or under Section 409, Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of any Employee Benefit Plan; (i) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof, or against any of the Borrowers, any of their Subsidiaries or any of their respective ERISA Affiliates in connection with any Employee Benefit Plan; (j) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan (or any other Employee Benefit Plan intended to be qualified under Section 401(a) of the Code) to qualify under Section 401(a) of the Code, or the failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Code; or (k) the imposition of a Lien pursuant to Section 401(a)(29) or 430(k) of the Code or pursuant to ERISA with respect to any Pension Plan.

“ Event of Default ” has the meaning set forth in Section 10.1.

“ Event of Default Notice ” has the meaning set forth in Section 10.2(a).

“ Event of Default Redemption ” has the meaning set forth in Section 10.2(a).

“ Event of Default Redemption Notice ” has the meaning set forth in Section 10.2(a).

“ Event of Loss ” means any Destruction to, or any Taking of, any asset or property of any of the Borrowers or any of their Subsidiaries.

“ Extraordinary Receipts ” means any cash received by the Borrowers or any of their Subsidiaries outside the ordinary course of business (and not consisting of (i) Milestone Payments or (ii) proceeds described in Sections 2.3(b)(i), (b)(ii), (b)(iii), (b)(iv) or (b)(v)), including, without limitation, (a) foreign, United States, state or local tax refunds, (b) pension plan reversions, (c) judgments, proceeds of settlements or other consideration of any kind in connection with any cause of action, and (d) any purchase price adjustment received in connection with any Acquisition.

“ FDA ” means the U.S. Food and Drug Administration or any successor thereto.

“ FDA Approvals ” has the meaning set forth in Section 7.42.

“ FDA Regulations ” means any rule, regulation or administrative order promulgated or issued by the FDA.

“ Fee Letter ” has the meaning set forth in the recitals.

“ First Closing ” has the meaning set forth in Section 3.1.

 

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“ First Closing Date ” has the meaning set forth in Section 3.1.

“ First Closing Purchase Price ” has the meaning set forth in Section 3.1.

“ Fiscal Quarter ” means a fiscal quarter of any Fiscal Year of the Borrowers.

“ Fiscal Year ” means a fiscal year of the Borrowers.

“ Food and Drug Act ” means the U.S. Food, Drug and Cosmetic Act, as amended, 21 U.S.C. § 301 et seq . and any successor thereto.

“ Funds Flow Letter ” has the meaning set forth in Section 4.1(b).

“ GAAP ” means United States generally accepted accounting principles, consistently applied.

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

“ Hedging Obligations ” means, with respect to any specified Person, the obligations of such Person under: (i) interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements; (ii) other agreements or arrangements designed to manage interest rates or interest rate risk; and (iii) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates or commodity prices.

“ HHS Regulations ” means any rule, regulation or administrative order promulgated or issued by the U.S. Department of Health and Human Services or any successor thereto.

“ Holder ” means a holder of a Note.

“ 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 (including, without limitation, “capital leases” in accordance with GAAP) (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 instruments, (iv) all obligations evidenced by notes, bonds, notes or similar instruments whether convertible or not, 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 indebtedness referred to in clauses (i) through (v) 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, charge, security interest or

 

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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, (vii) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (i) through (vi) above; (viii) banker’s acceptances; (ix) the balance deferred and unpaid of the purchase price of any property or services due more than three months after such property is acquired or such services are completed; (x) Hedging Obligations; and (xi) obligations under convertible securities of the Borrower. In addition, the term “Indebtedness” of Borrowers or their Subsidiaries, as applicable, includes (a) all Indebtedness of others secured by a Lien on any assets of any of the Borrowers or any of their Subsidiaries (whether or not such Indebtedness is assumed by the Borrowers or such Subsidiaries), and (b) to the extent not otherwise included, the guarantee by any of the Borrowers or any of their Subsidiaries of any Indebtedness of any other Person.

“ Insolvent ” means, with respect to each Borrower or Subsidiary, (i) the present fair saleable value in a non-liquidation context of such Borrower’s or Subsidiary’s assets is less than the amount required to pay such Borrower’s or Subsidiary’s total Indebtedness as applicable, (ii) such Borrower or Subsidiary is unable to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured, (iii) such Borrower or Subsidiary intends to incur or believes that it will incur debts that would be beyond its ability to pay as such debts mature or (iv) such Borrower or Subsidiary 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.

“ Intellectual Property Security Agreements ” means each of the trademark security agreement, the patent security agreement and the copyright security agreement dated the First Closing Date, in the forms of Exhibit N attached hereto, by and among the Borrowers and the Agent.

“ Interest Date ” has the meaning provided in Section 2.2(a).

“ Inventory ” has the meaning provided in the UCC.

“ Investment ” means, with respect to any Person, any investment in another Person, whether by acquisition of any debt security or Equity Interest, by making any loan or advance, by becoming contingently liable in respect of obligations of such other Person or by making an Acquisition.

“ Investors ” has the meaning provided in the Registration Rights Agreement.

“ Irrevocable Transfer Agent Instructions ” has the meaning provided in Section 2.10.

“ Issuance Date ” has the meaning provided in Section 2.2(a).

“ Late Charge ” has the meaning provided in Section 2.4.

“ Lender ” and “ Lenders ” has the meaning set forth in the introduction.

 

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“ Lien ” means any mortgage, lien, pledge, security interest, conditional sale or other title retention agreement, charge or other security interest or encumbrance of any kind, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement or any lease or license in the nature thereof, any option or other agreement to sell or give a security interest in.

“ Lock-Up Agreement ” has the meaning set forth in the recitals.

“ Material Adverse Effect ” means any material adverse effect on the business, properties, assets, operations, the Collateral, results of operations, condition (financial or otherwise) or prospects of the Principal Borrower and its Subsidiaries, taken as whole, or on the transactions contemplated hereby and by the other Transaction Documents, or on the authority or ability of each of the Borrowers to fully and timely perform its obligations under any Transaction Document.

“ Material Contract ” means (i) each of the Material License Agreements, (ii) each of the Affiliate Notes and (iii) any other contract or other arrangement to which the Borrowers or any of their Subsidiaries is a party (other than the Transaction Documents) for which breach, nonperformance, cancellation, termination or failure to renew could reasonably be expected to have a Material Adverse Effect.

“ Material License Agreements ” means, collectively, the Novartis License Agreement, the USL License Agreement and the SmithKline License Agreement.

“ Maturity Date ” means the earlier of (a) September 30, 2011 and (b) such earlier date as the unpaid principal balance of all outstanding Notes becomes due and payable pursuant to the terms of this Agreement and the Notes.

“ Maximum Commitment ” means $20,000,000.

“ Milestone Payments ” means payments, net of any costs recovered, made to the Borrowers or their Subsidiaries pursuant to the Material License Agreements that are made upon the achievement of specified events or results and are outside the ordinary course of business pursuant to the terms set forth in such Material License Agreements.

“ Mortgage ” means a mortgage or deed or trust, in form and substance reasonably satisfactory to the Agent, as it may be amended, supplemented or otherwise modified from time to time.

“ Multiemployer Plan ” means any Employee Benefit Plan which is a “multiemployer plan” as defined in Section 3(37) of ERISA.

“ New Borrower ” has the meaning set forth in Section 8.28.

“ Notes ” has the meaning set forth in Section 2.1.

 

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“ Novartis License Agreement ” means the License Agreement dated as of April 7, 2004, between the Borrower and Novartis Pharma AG, as amended, modified or otherwise supplemented from time to time in accordance with Section 8.27.

“ Obligations ” means any and all obligations, liabilities and indebtedness, including without limitation, principal, interest (including, but not limited to, interest calculated at the Default Rate and post-petition interest in any proceeding under any Bankruptcy Law), Late Charges and other fees, costs, expenses and other charges and other obligations under the Transaction Documents, of the Borrowers to the Agent, the Holders and the Lenders or to any parent, affiliate or subsidiary of such Holders of any and every kind and nature, howsoever created, arising or evidenced and howsoever owned, held or acquired, whether now or hereafter existing, whether now due or to become due, whether primary, secondary, direct, indirect, absolute, contingent or otherwise (including, without limitation, obligations of performance), whether several, joint or joint and several, and whether arising or existing under written or oral agreement or by operation of law.

“ Other Taxes ” has the meaning set forth in Section 2.6(b).

“ Outside Legal Counsel ” means Dechert LLP.

“ Payment Month ” means the period beginning on and including the Issuance Date and ending on and including every successive one (1) month anniversary thereof until the Maturity Date or until all amounts under the Notes have been paid in full in cash.

“ PBGC ” means the Pension Benefit Guaranty Corporation or any successor thereto.

“ Pension Plan ” means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to Sections 412 and 430 of the Code or Section 302 of ERISA.

“ Permitted Acquisition ” means any Acquisition permitted in the discretion of the Agent, which permission shall not be unreasonably withheld, and for which an appraisal and field examination satisfactory to the Agent shall have been obtained if reasonably requested by the Agent.

“ Permitted Dispositions ” means (i) sales of Inventory in the ordinary course of business, (ii) disposals of obsolete, worn out or surplus property in the ordinary course of business, (iii) the granting of Permitted Liens, and (iv) the licensing of patents, trademarks, copyrights and other intellectual property rights in the ordinary course of business consistent with past practice.

“ Permitted Indebtedness ” means (i) Indebtedness outstanding as of the First Closing Date as set forth on Schedule 7.8 , (ii) unsecured guaranties in the ordinary course of business of the obligations of suppliers, customers and licensees of the Borrowers or their Subsidiaries, (iii) Indebtedness which may be deemed to exist pursuant to any unsecured guaranties with respect to surety and appeal bonds, performance bonds, bid bonds and similar obligations incurred in the ordinary course of business, (iv) Indebtedness in respect of netting services, overdraft protections and otherwise in connection with deposit accounts in the ordinary course of business, (v) Affiliate Indebtedness to the extent subject to the terms and conditions of the Affiliate Subordination Agreement, (vi) Indebtedness in an aggregate amount not to exceed $1,000,000

 

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( less the aggregate amount of Indebtedness described in clauses (vii) and (viii) hereof) incurred in connection with any capital lease transaction, so long as (A) no default or Event of Default shall have occurred and be continuing on the date of such incurrence or shall be caused thereby, (B) the terms and conditions of such Indebtedness shall be reasonably satisfactory to the Agent, and (C) such Indebtedness shall be secured solely with Liens permitted under clause (xiv) of the definition of “Permitted Liens,” (vii) purchase money Indebtedness in an aggregate amount not to exceed $1,000,000 ( less the aggregate amount of Indebtedness described in clauses (vi) and (viii) hereof), so long as (A) no default or Event of Default shall have occurred and be continuing on the date of such incurrence or shall be caused thereby, (B) the terms and conditions of such Indebtedness shall be reasonably satisfactory to the Agent, and (C) such Indebtedness shall be secured solely with Liens permitted under clause (xiv) of the definition of “Permitted Liens,” and (viii) unsecured Indebtedness in an aggregate amount not to exceed $1,000,000 ( less the aggregate amount of Indebtedness described in clauses (vi) and (vii) hereof).

“ Permitted Liens ” means (i) Liens in favor of the Agent for the benefit of the Holders granted pursuant to any Security Document, (ii) Liens for unpaid taxes, assessments, or other governmental charges or levies that either (A) are not yet delinquent or (B) do not have priority over Agent’s Liens, so long as in each case the underlying taxes, assessments, charges or levies are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, (iii) Liens securing judgments for the payment of money not constituting an Event of Default, (iv) Liens outstanding as of the First Closing Date as set forth on Schedule 8.6 , provided that any such Lien only secures the Indebtedness that it secures on the First Closing Date, (v) the interests of lessors under operating leases and licensors under license agreements in each case entered into in the ordinary course of business of the Borrowers and their Subsidiaries, (vi) Liens arising by operation of law in favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers or suppliers, in each case incurred in the ordinary course of business and not in connection with the borrowing of money and either (A) for amounts that are not yet delinquent or (B) for amounts that are no more than 30 days overdue that are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as such reserves or appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts, (vii) Liens incurred in the ordinary course of business in connection with workers’ compensation and other unemployment insurance, or to secure the performance of tenders, surety and appeal bonds, bids, leases, government contracts, trade contracts and other similar obligations (exclusive of obligations for the payment of borrowed money), in each case so long as no foreclosure, sale or similar proceedings have been commenced with respect to any portion of the Collateral on account thereof, (viii) rights of setoff or bankers’ liens upon deposits of cash in favor of banks or other depository institutions, solely to the extent incurred in connection with the maintenance of such deposit accounts in the ordinary course of business, (ix) Liens to secure Affiliate Indebtedness so long as such Liens (A) encumber only those assets encumbered by such Indebtedness as of the First Closing Date and (B) are subordinated to the Liens securing the Obligations pursuant to the Affiliate Subordination Agreement, (x) easements, reservations, rights of way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances affecting real property in a manner not materially or adversely affecting the value or use of such property, (xi) Liens in favor of customs and revenue authorities arising as a matter of law to secure payments of customs duties in connection with the importation of goods, (xii) Liens on insurance proceeds in favor of insurance companies granted solely as security for financed premiums, (xiii) Liens arising from judgments,

 

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decrees or attachments in circumstances not constituting an Event of Default hereunder, provided that enforcement of any such Liens is stayed and claims secured by such Liens are being actively contested in good faith and by appropriate proceedings, and (xiv) Liens to secure Indebtedness described in clauses (vi) and (vii) of the definition of “Permitted Indebtedness,” so long as such Liens encumber only those assets acquired with the proceeds of such Indebtedness.

“ Permitted Redemption ” means any redemption of Notes permitted pursuant to Section 2.3(a).

“ Permitted Redemption Amount ” has the meaning set forth in Section 2.3(a)(i).

“ Permitted Redemption Date ” means the date on which the Borrowers elect to redeem the Notes in accordance with Section 2.3(a).

“ Permitted Redemption Notice ” has the meaning set forth in Section 2.3(a)(i).

“ Person ” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.

“ Plan ” means any Multiemployer Plan or Pension Plan.

“ Post-Closing Obligations Letter ” means that certain letter agreement dated the First Closing Date, in the form of Exhibit J attached hereto, by and among the Borrowers and the Agent.

“ Prime Rate ” means the rate of interest per annum announced from time to time by Citibank, N.A. as its prime rate. The Prime Rate is a variable rate and each change in the Prime Rate is effective from and including the date the change is announced as being effective.

“ Principal Borrower ” has the meaning set forth in the introduction.

“ Principal Market ” means the OTC Bulletin Board.

“ Proceeding ” has the meaning set forth in Section 7.15.

“ Product ” means a specific pharmaceutical product or pharmaceutical product family or pharmaceutical formulation in the development phase, except that for the purposes of Sections 7.42 and 7.44, Products means the products being developed, marketed, sold and/or offered for sale in the Territory under the following trademarks/tradenames: Fortical®, all other nasal spray and oral salmon calcitonins, and all successor products thereto.

“ Product Recall Notice ” means any written notice from the FDA stating that any product or product line of any Borrower or any of its Subsidiaries has been or will be recalled.

“ Property ” means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible, including, without limitation, Capital Stock.

 

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“ Registrable Securities ” has the meaning set forth in the Registration Rights Agreement.

“ Registration Rights Agreement ” has the meaning set forth in the recitals.

“ Registration Statement ” has the meaning set forth in the Registration Rights Agreement.

“ Regulation D ” has the meaning set forth in the recitals.

“ Reporting Period ” has the meaning set forth in Section 8.18.

“ Required Holders ” means at any time (i) the Holders of Notes representing at least seventy percent (70%) of the aggregate principal amount of the Notes then outstanding, plus (ii) the Lenders representing at least seventy percent (70%) of the aggregate principal amount of the then unfunded amount of commitments to purchase Notes on the Subsequent Closing Date.

“ Related Parties ” of any Person means such Person’s Affiliates or any of their respective partners, directors, agents, employees and controlling persons.

“ Schedules ” has the meaning set forth in ARTICLE 7.

“ SEC ” has the meaning set forth in the recitals.

“ SEC Documents ” has the meaning set forth in Section 7.31.

“ Securities ” has the meaning set forth in the recitals.

“ Security Agreement ” has the meaning set forth in the recitals.

“ Security Documents ” means the Security Agreement, the Intellectual Property Security Agreements, the Mortgages, if any, and all other instruments, documents and agreements delivered by any of the Borrowers or any of their Subsidiaries in order to grant to Agent or any Holder a Lien on any real, personal or mixed Property of the Borrowers or one of their Subsidiaries as security for the Obligations.

“ Shares ” has the meaning set forth in the recitals.

“ SmithKline License Agreement ” means the License Agreement dated as of April 13, 2002, between the Borrower and SmithKline Beecham Corporation, as amended, modified or otherwise supplemented from time to time in accordance with Section 8.27.

“ Subsequent Closing ” has the meaning set forth in Section 3.2.

“ Subsequent Closing Date ” has the meaning set forth in Section 3.2.

“ Subsequent Closing Purchase Price ” has the meaning set forth in Section 3.2.

“ Subsidiaries ” has the meaning set forth in Section 7.1.

 

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“ Taking ” means any taking of any property of any of the Borrowers or any of their Subsidiaries or any portion thereof, in or by condemnation or other eminent domain proceedings pursuant to any law, general or special, or by reason of the temporary requisition of the use of such assets or any portion thereof, by any Governmental Authority, civil or military (i) in excess of $500,000 in the aggregate for any Fiscal Year or (ii) that results in a Material Adverse Effect.

“ Taxes ” has the meaning set forth in Section 2.6(a).

“ Territory ” means the United States (including its territories and possessions).

“ Transaction Documents ” has the meaning set forth in Section 7.2.

“ UCC ” has the meaning set forth in Section 7.13.

“ Unigene UK ” means Unigene U.K. Limited, a corporation organized under the laws of England and Wales.

“ USL License Agreement ” means the License and Development Agreement dated as of November 26, 2002, between the Borrower and Upsher-Smith Laboratories, Inc., as amended, modified or otherwise supplemented from time to time in accordance with Section 8.27.

“ Yield Maintenance Premium ” shall be equal to the greater of (i) one percent (1%) of the unredeemed Notes immediately prior to the applicable redemption or (ii) the excess, if any, of (A) the present value (“ PV ”) of all scheduled interest (determined with reference to the interest rate then in effect) and all scheduled redemptions in respect of the unredeemed Notes immediately prior to the applicable redemption for the period from the date of such redemption to the scheduled maturity date, including the amount of the Notes scheduled to be redeemed on the scheduled maturity date, discounted at an interest rate per annum equal to the Index (defined below), based on a 360-day year of twelve 30-day months, over (B) the amount of the Notes immediately before such redemption (i.e., (PV of all future payments) - (principal balance at time of redemption)). The foregoing amount shall be calculated by Agent and shall be conclusive and binding on the Borrower (absent manifest error).

For purposes hereof, “ Index ” means the average yield for “treasury constant maturities” published by the Federal Reserve Board in Federal Reserve Statistical Release H.15 (519) (“ FRB Release ”), for the second full week preceding the date of acceleration of the Maturity Date for instruments having a maturity coterminous with the remaining term of the Notes. If the FRB Release is no longer published, Agent shall select a comparable publication to determine the Index. If there is no Index for instruments having a maturity coterminous with the remaining term of the Notes, then the weighted average yield to maturity of the Indices with maturities next longer and shorter than such remaining average life to maturity shall be used, calculated by averaging (and rounding upward to the nearest whole multiple of 1/100 of 1% per annum, if the average is not such a multiple) the yields of the relevant Indices (rounded, if necessary, to the nearest 1/100 of 1% with any figure of 1/200 of 1% or above rounded upward).

Section 1.2 Terms Generally . The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words

 

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“ include ”, “ includes ” and “ including ” shall be deemed to be followed by the phrase “ without limitation ”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise, (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “ herein ”, “ hereof ” and “ hereunder ”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words “asset” and “ property ” shall be construed to have the same meaning and effect and to refer to any right or interest in or to assets and properties of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. References in this Agreement to “ determination ” by the Agent include good faith estimates by the Agent (in the case of quantitative determinations) and good faith beliefs by the Agent (in the case of qualitative determinations).

Section 1.3 Accounting and Other Terms . Unless otherwise expressly provided herein, each accounting term used herein shall have the meaning given it under GAAP applied on a basis consistent with those used in preparing the financial statements delivered to Agent pursuant to Section 8.2.

ARTICLE 2

BORROWERS’ AUTHORIZATION OF ISSUE

Section 2.1 Senior Secured Notes . The Borrowers have authorized the issue to the Lenders of senior secured notes in the aggregate principal amount up to the Maximum Commitment, to be dated the date of issue thereof, to mature September 30, 2011, to bear interest as provided in Section 2.2 below and to be in the form of Exhibit A hereto (the “ Notes ”). The Borrowers shall repay the outstanding principal balance of the Notes in full in cash on the Maturity Date, unless accelerated in accordance with Section 10.2 or redeemed or prepaid in accordance with Section 2.3. The term “ Notes ” as used herein shall include each such senior secured note delivered pursuant to any provision of this Agreement and each such senior secured note delivered in substitution or exchange for, or otherwise in respect of, any other Note pursuant to any such provision.

Section 2.2 Interest . The Borrowers shall pay interest on the unpaid principal amount of the Notes at the rates, time and manner set forth below:

(a) Rate of Interest. Each Note shall bear interest on the unpaid principal amount thereof from the date issued through the date such Note is paid in full in cash (whether upon final maturity, by redemption, prepayment, acceleration or otherwise) at the Current Interest Rate. Interest on each Note shall be computed on the basis of a 360-day year and actual days elapsed and, subject to Section 2.2(b), shall be payable in arrears for each Payment Month on the first day of the succeeding Payment Month during the period beginning on the date such Note is issued (the “ Issuance Date ”) and ending on, and including, the Maturity Date (each, an “ Interest Date ”).

 

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(b) Interest Payments. Interest on each Note shall be payable on each Interest Date or at any such other time the Notes become due and payable (whether by acceleration, redemption or otherwise) to the record holder of such Note on the applicable Interest Date, in cash; provided that (i) interest accruing on each Note purchased on the First Closing Date for the period from the First Closing Date through the six (6) month anniversary thereof (the “ Accelerated First Closing Interest ”) shall be due and payable by the Principal Borrower on the First Closing Date, and (ii) interest accruing on any Note purchased on the Subsequent Closing Date for the period from the Subsequent Closing Date through the six (6) month anniversary thereof (the “ Accelerated Subsequent Closing Interest ”) shall be due and payable by the Borrowers on the Subsequent Closing Date; provided further that, to the extent the payment of any Accelerated Interest by the Borrowers on the First Closing Date or the Subsequent Closing Date, as applicable, constitutes a prepayment of interest on the unpaid principal amount of the Notes that would accrue during the time period from the prepayment of such principal amount of the Notes pursuant to Sections 2.3(b) and 2.3(d) through the six (6) month anniversary of issuance thereof, such payment of Accelerated Interest shall be applied to the next subsequent interest period(s) commencing, in each case, with the first interest period following the applicable six (6) month anniversary date. Each Interest Date shall be considered the last day of an accrual period for U.S. federal income tax purposes. Notwithstanding anything herein to the contrary, any payment of accrued but unpaid interest due and owing on any Note shall be made by cash only by wire transfer of immediately available funds.

(c) Default Rate. Upon the occurrence of any Event of Default, the Notes shall bear interest (including post-petition interest in any proceeding under any Bankruptcy Law) on the unpaid principal amount thereof at the Default Rate from the date of such Event of Default through and including the date such Event of Default is cured. In the event that such Event of Default is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be effective as of the date of such cure; provided that interest as calculated and unpaid at the Default Rate during the continuance of such Event of Default shall continue to be due to the extent relating to the days after the occurrence of such Event of Default through and including the date of cure of such Event of Default.

(d) Savings Clause. In no contingency or event shall the interest rate charged pursuant to the terms of this Agreement exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto. In the event that such a court determines that the Holders have received interest hereunder in excess of the highest applicable rate, the amount of such excess interest shall be applied against the principal amount then outstanding under the Notes to the extent permitted by applicable law, and any excess interest remaining after such application shall be refunded promptly to the Borrower.

 

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Section 2.3 Redemptions and Payments .

(a) Permitted Redemption.

(i) At any time on or after the first anniversary of the First Closing Date, the Borrowers may, at their option, elect to pay to the Holders of the Notes the Permitted Redemption Amount (as defined below), on the Permitted Redemption Date, by redeeming the principal amount of all Notes, in whole (a “ Permitted Redemption ”); provided , that the Borrowers have no knowledge that an Event of Default (including, but not limited to, a Change of Control) exists or will exist on the date of the Permitted Redemption; provided, further , that notwithstanding the foregoing, the Borrowers may, at their option, at any time make Permitted Redemptions in an aggregate Permitted Redemption Amount not to exceed $5,000,000. On or prior to the date which is the sixth (6th) Business Day prior to the proposed Permitted Redemption Date, the Borrowers shall deliver written notice (the “ Permitted Redemption Notice ”) to the Holders stating (i) the amount which the Borrowers elect to redeem pursuant to the Permitted Redemption (the “ Permitted Redemption Amount ”), which Permitted Redemption Amount shall be equal to (A) the unpaid outstanding principal amount of all Notes, (B) all accrued and unpaid interest with respect to such principal amount, and (C) accrued and unpaid Late Charges with respect to such Permitted Redemption Amount, and (ii) the proposed Permitted Redemption Date.

(ii) A Permitted Redemption Notice delivered pursuant to this subsection shall be irrevocable. If the Borrowers elect to redeem pursuant to a Permitted Redemption under Section 2.3(a), then the Permitted Redemption Amount which is to be paid to the Holders on the Permitted Redemption Date shall be redeemed by the Borrowers on the Permitted Redemption Date, and the Borrowers shall pay to the Holders on the Permitted Redemption Date, by wire transfer of immediately available funds, an amount in cash equal to the Permitted Redemption Amount.

(b) Mandatory Prepayments.

(i) No later than the third Business Day following the date of receipt by the Borrowers or any of their Subsidiaries of any net cash proceeds in excess of $200,000 in the aggregate from any Asset Sales (other than any Permitted Dispositions (except pursuant to clause (ii) of such definition)), the Borrowers shall prepay the Notes as set forth in Section 2.3(d) in an aggregate amount equal to 50% of such net cash proceeds.

(ii) No later than the third Business Day following the date of receipt by the Borrowers or any of their Subsidiaries, or the Agent as loss payee, of any net cash proceeds in excess of $200,000 in the aggregate from any Destruction or Taking (without giving regard to clauses (i) or (ii) of each such definition), the Borrower shall prepay the Notes as set forth in Section 2.3(d) in an aggregate amount equal to 100% of such net cash proceeds, provided , so long as no default or Event of Default shall have occurred and be continuing on the date of receipt thereof or caused thereby, Borrowers shall have the option to apply such net cash proceeds, prior to the date that is 90 days following receipt thereof, for purposes of the repair, restoration or replacement of the applicable assets thereof.

 

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(iii) No later than the third Business Day following the date of receipt by the Borrowers or any of their Subsidiaries of any net cash proceeds from a capital contribution to, or the issuance of any Equity Interests of, the Borrowers or any of their Subsidiaries (other than to operating companies in the biotechnology or pharmaceutical industries in connection with strategic alliances or pursuant to any employee stock or stock option compensation plan), the Borrowers shall prepay the Notes as set forth in Section 2.3(d) in an aggregate amount equal to 50% of such net cash proceeds.

(iv) On the date of receipt by the Borrowers or any of their Subsidiaries of any net cash proceeds from the incurrence of any Indebtedness of the Borrowers or any of their Subsidiaries (other than with respect to Permitted Indebtedness), the Borrowers shall prepay the Notes as set forth in Section 2.3(d) in an aggregate amount equal to 100% of such net cash proceeds.

(v) No later than the third Business Day following the date of receipt by the Borrowers or any of their Subsidiaries of any Milestone Payments, the Borrowers shall prepay the Notes as set forth in Section 2.3(d) with 10% of the proceeds of such Milestone Payments.

(vi) No later than the third Business Day following the date of receipt by the Borrowers or any of their Subsidiaries of any Extraordinary Receipts, the Borrowers shall prepay the Notes as set forth in Section 2.3(d) in an aggregate amount equal to 50% of such Extraordinary Receipts, provided that no payment shall be required pursuant to this Section 2.3(b)(vi) unless the amount of Extraordinary Receipts received on such date exceeds $100,000.

(vii) Concurrently with any prepayment of the Notes pursuant to this Section 2.3(b), the Borrowers shall deliver to the Agent a certificate of an authorized officer thereof demonstrating the calculation of the amount of the applicable proceeds. In the event that the Borrowers shall subsequently determine that the actual amount received exceeded the amount set forth in such certificate (including as a result of the conversion of non-cash proceeds into cash), the Borrowers shall promptly make an additional prepayment of the Notes in an amount equal to such excess, and the Borrowers shall concurrently therewith deliver to the Agent a certificate of an authorized officer thereof demonstrating the derivation of such excess.

(c) Waiver of Mandatory Prepayments. Anything contained in Section 2.3(b) to the contrary notwithstanding, in the event the Borrowers are required to make any mandatory prepayment (a “ Waivable Mandatory Prepayment ”) of the Notes, not less than three (3) Business Days prior to the date (the “ Required Prepayment Date ”) on which the Borrowers are required to make such Waivable Mandatory Prepayment, the Borrowers shall notify the Agent of the amount of such prepayment, and the Agent shall promptly thereafter notify each Holder holding an outstanding Note of the amount of such Holder’s pro rata share of such Waivable Mandatory Prepayment and such Holder’s option to refuse such amount. Each such Holder may exercise such option by giving written notice to the Borrowers and the Agent of its election to do so on or before the first Business Day prior to the Required Prepayment Date (it being understood that any Holder which does not notify the Borrowers and the Agent of its

 

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election to exercise such option on or before the first Business Day prior to the Required Prepayment Date shall be deemed to have elected, as of such date, not to exercise such option). On the Required Prepayment Date, the Borrowers shall pay to the Agent the amount of the Waivable Mandatory Prepayment, which amount shall be applied in an amount equal to that portion of the Waivable Mandatory Prepayment payable to those Holders that have elected not to exercise such option, to prepay the Notes of such Holders.

(d) Application of Mandatory Prepayments. All mandatory prepayments made pursuant to Section 2.3(b) and not waived pursuant to Section 2.3(c) shall be made to the Holders on a pro rata basis with respect to the outstanding Notes.

Section 2.4 Payments . Whenever any payment of cash is to be made by any of the Borrowers to any Person pursuant to the Notes, such payment shall be made in lawful money of the United States of America by a check drawn on the account or accounts of the Borrowers and sent via overnight courier service to such Person at such address as previously provided to the Borrowers in writing (which address, in the case of each of the Lenders, shall initially be as set forth on the Schedule of Lenders attached hereto); provided that (i) any Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Borrowers with prior written notice setting out such request and such Holder’s wire transfer instructions and (ii) Borrowers may elect to make a payment of cash via wire transfer of immediately available funds in accordance with wire transfer instructions provided by each Holder upon request therefor. Whenever any amount expressed to be due by the terms of any Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day and, in the case of any Interest Date which is not the date on which this Note is paid in full in cash, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. Any amount due under the Transaction Documents (other than principal and interest, if the same are already accruing interest at the Default Rate), which is not paid when due shall result in a late charge being incurred and payable by the Borrowers in an amount equal to the Default Rate from the date such amount was due until the same is paid in full in cash (“ Late Charge ”). Such Late Charge shall continue to accrue post-petition in any proceeding under any Bankruptcy Law.

Section 2.5 Dispute Resolution . Except as otherwise provided herein, in the case of a dispute as to the determination of any amounts due and owing pursuant to a redemption under Section 2.3 or otherwise or any other similar or related amount, the Borrowers shall submit the disputed determinations or arithmetic calculations via facsimile within three (3) Business Days of receipt, or deemed receipt, of the applicable notice of dispute to the Agent. If the Agent and the Holders and the Borrowers are unable to agree upon such determination or calculation within three (3) Business Days of such disputed determination or arithmetic calculation being submitted to the Agent, then the Borrowers shall, within three (3) Business Days submit via facsimile the disputed determinations or arithmetic calculations to an independent outside national accounting firm specified by Agent. The Borrowers, at the Borrowers’ expense, shall cause the accountant to perform the determinations or calculations and notify the Borrowers and the Agent of the results no later than five (5) Business Days from the time it receives the disputed determinations or calculations. Such accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.

 

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Section 2.6 Taxes .

(a) Any and all payments by or on behalf of the Borrowers hereunder and under any Transaction Document shall be made, free and clear of and without deduction for any and all current or future taxes, levies, imposts, deductions, charges or withholdings that are or would be applicable to the Holders, and all liabilities with respect thereto, excluding (x) income taxes imposed on the net income of a Holder and (y) franchise taxes imposed on the net income of a Holder, in each case by the jurisdiction under the laws of which such Holder is organized or qualified to do business or a jurisdiction or any political subdivision thereof in which a Holder engages in business activity other than activity arising solely from the Holder having executed this Agreement and having enjoyed its rights and performed its obligations under this Agreement or any Transaction Document (all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and liabilities, collectively or individually, being called “ Taxes ”). If any Borrower must deduct any Taxes from or in respect of any sum payable hereunder or under any other Transaction Document to a Holder, (x) the sum payable shall be increased by the amount (an “ additional amount ”) necessary so that, after making all required deductions (including deductions applicable to additional sums payable under this Section 2.6), such Holder shall receive an amount equal to the sum it would have received had no such deductions been made, (y) such Borrower shall make such deductions and (z) such Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

(b) The Borrowers will pay to the relevant Governmental Authority in accordance with applicable law any current or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or under any Transaction Document, or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any Transaction Document that are or would be applicable to the Holders (“ Other Taxes ”).

(c) The Borrowers jointly and severally agree to indemnify each Holder for the full amount of Taxes and Other Taxes paid by such Holder and any liability (including penalties, interest and expenses (including reasonable attorney’s fees and expenses)) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability prepared by such Holder absent manifest error, shall be final conclusive and binding for all purposes. Such indemnification shall be made within thirty (30) days after the date such Holder makes written demand therefor. The Borrowers shall have the right to receive that portion of any refund of any Taxes and Other Taxes received by a Holder for which any Borrower has previously paid any additional amount or indemnified such Holder and which leaves the Holder, after such Borrower’s receipt thereof, in no better or worse financial position than if no such Taxes or Other Taxes had been imposed or additional amounts or indemnification paid to the Holder.

Section 2.7 Reissuance .

(a) Transfer. If any Note is to be transferred, the Holder shall surrender such Note to the Borrowers, whereupon the Borrowers will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with this Section 2.7, registered as the Holder may

 

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request, representing the outstanding principal being transferred by the Holder and, if less than the entire outstanding principal is being transferred, a new Note (in accordance with this Section 2.7) to the Holder representing the outstanding principal not being transferred.

(b) Lost, Stolen or Mutilated Note. Upon receipt by the Borrowers of evidence reasonably satisfactory to the Borrowers of the loss, theft, destruction or mutilation of any Note and (i) in the case of loss, theft or destruction, upon delivery of an indemnity agreement reasonably satisfactory to the Borrowers ( provided, however, that if the Holder is an institutional investor, the affidavit of an authorized partner or officer of such Holder setting forth the circumstances with respect to such loss, theft or destruction shall be accepted as satisfactory evidence thereof and no indemnity agreement or other security shall be required), and (ii) in the case of mutilation, upon surrender and cancellation of the mutilated Note, the Borrowers shall execute and deliver to the Holder a new Note (in accordance with this Section 2.7) representing the outstanding principal.

(c) Note Exchangeable for Different Denominations. The Notes are exchangeable, upon the surrender thereof by the Holder at the principal office of the Borrowers, for a new Note or Notes (in accordance this Section 2.7) in principal amounts of at least $250,000) representing in the aggregate the outstanding principal of the surrendered Note, and each such new Note will represent such portion of such outstanding principal as is designated by the Holder at the time of such surrender.

(d) Issuance of New Notes. Whenever the Borrowers are required to issue a new Note pursuant to the terms of this Agreement or the Notes, such new Note (i) shall be of like tenor with the Note being replaced, (ii) shall represent, as indicated on the face of such new Note, the principal remaining outstanding (or, in the case of a new Note being issued pursuant to paragraph (a) or (b) of this Section 2.7, the principal designated by the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the principal remaining outstanding under the Note being replaced immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note, which is the same as the Issuance Date of the Note being replaced, (iv) shall have the same rights and conditions as the Note being replaced, and (v) shall represent accrued interest on the principal and Late Charges of the Note being replaced, from the Issuance Date.

Section 2.8 Registers . The Principal Borrower shall maintain at its principal executive office (or such other office or agency of the Principal Borrower as it may designate by notice to each holder of Securities), a register for the Notes in which the Principal Borrower shall record the name and address of the Person in whose name the Notes have been issued (including the name and address of each transferee) and the principal amount of Notes held by such Person. The Principal Borrower shall keep the register open and available at all times during business hours for inspection of any Holder or its legal representatives. The Principal Borrower shall cause its transfer agent to maintain a register for the Shares which shall record the name and address of the Person in whose name the Shares have been issued (including the name and address of each transferee) and the number of Shares held by such Person. The Principal Borrower shall cause the transfer agent to keep the register open and available for inspection by any Lender or its legal representatives on the same terms that it makes such information available to any other holder of shares of Common Stock.

 

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Section 2.9 Maintenance of Registers . Notwithstanding anything to the contrary contained herein, the Notes are registered obligations and the right, title, and interest of each Lender and its assignees in and to such Notes shall be transferable only upon notation of such transfer in the Register. The Notes shall only evidence a Lender’s or its assignee’s right, title and interest in and to the related Notes, and in no event is any such Note to be considered a bearer instrument or obligation. This Section 2.9 shall be construed so that the Notes are at all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code and any related Treasury regulations promulgated thereunder.

Section 2.10 Transfer Agent Instructions . The Principal Borrower shall issue irrevocable instructions to its transfer agent, and any subsequent transfer agent, to issue certificates registered in the name of each Lender or its respective nominee(s), for the Shares in such amounts as specified from time to time by each Lender to the Principal Borrower in the form of Exhibit G attached hereto (the “ Irrevocable Transfer Agent Instructions ”). The Principal Borrower warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 2.10, and stop transfer instructions to give effect to the Lock-Up Agreement or Section 6.4 and Section 6.5 hereof, will be given by the Principal Borrower to its transfer agent with respect to the Shares, and that the Shares shall otherwise be freely transferable on the books and records of the Principal Borrower, as applicable, to the extent provided in this Agreement and the other Transaction Documents. If a Lender effects a sale, assignment or transfer of Shares in accordance with the Lock-Up Agreement and Section 6.4 and Section 6.5, the Principal Borrower shall permit the transfer and shall promptly instruct its transfer agent to issue one or more certificates in such name and in such denominations as specified by such Lender to effect such sale, transfer or assignment. In the event that such sale, assignment or transfer involves Shares sold, assigned or transferred pursuant to an effective registration statement or pursuant to Rule 144 under the 1933 Act, the transfer agent shall issue such Shares to such Lender, assignee or transferee, as the case may be, without any restrictive legend. The Principal Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to a Lender. Accordingly, the Principal Borrower acknowledges that the remedy at law for a breach of its obligations under this Section 2.10 will be inadequate and agrees, in the event of a breach or threatened breach by the Principal Borrower of the provisions of this Section 2.10, that a Lender shall be entitled, in addition to all other available remedies, to seek an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required.

Section 2.11 Common Stock . The Principal Borrower has authorized the issuance to the Lenders of 1,125,000 Shares of Common Stock, in the aggregate, as of the First Closing Date. In addition, in connection with the issuance of any Notes on the Subsequent Closing Date, the Borrower will authorize the issuance to the Lenders of 375,000 Shares of Common Stock, in the aggregate as of such date.

Section 2.12 Compensation for Increased Costs and Taxes . In the event that any Holder shall reasonably determine (which determination shall, absent manifest error, be final and

 

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conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or governmental authority, in each case that becomes effective after the date hereof, or compliance by such Holder with any guideline, request or directive issued or made after the date hereof by any central bank or other governmental or quasi-governmental authority (whether or not having the force of law): (i) subjects such Holder (or its applicable lending office) to any additional Taxes with respect to this Agreement or any of the other Transaction Documents or any of its obligations hereunder or thereunder or any payments to such Holder (or its applicable lending office) of principal, interest, Late Charges, fees or any other amount payable hereunder; (ii) imposes, modifies or holds applicable any reserve (including any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, FDIC insurance or similar requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Holder; or (iii) imposes any other condition (other than with respect to a Tax matter) on or affecting such Holder or its obligations hereunder; and the result of any of the foregoing is to increase the cost to such Holder of holding Notes hereunder or to reduce any amount received or receivable by such Holder with respect thereto; then, in any such case, the Borrowers shall promptly pay to such Holder, upon receipt of the statement referred to in the next sentence, such additional amount or amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Holder in its reasonable discretion shall determine) as may be necessary to compensate such Holder for any such increased cost or reduction in amounts received or receivable hereunder. Such Holder shall deliver to the Borrowers (with a copy to the Agent) a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to such Holder under this Section 2.17, which statement shall be conclusive and binding upon all parties hereto absent manifest error.

Section 2.13 Capital Adequacy Adjustment . In the event that any Holder shall have determined that the adoption, effectiveness, phase-in or applicability after the First Closing Date of any law, rule or regulation (or any provision thereof) regarding capital adequacy, reserve requirements, or similar requirements, or any change therein or in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Holder with any guideline, request or directive regarding capital adequacy (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the capital of such Holder or any corporation controlling such Holder as a consequence of, or with reference to, such Holder’s Notes or other obligations hereunder with respect to the Notes to a level below that which such Holder or such controlling corporation could have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Holder or such controlling corporation with regard to capital adequacy), then from time to time, within five (5) Business Days after receipt by the Borrowers from such Holder of the statement referred to in the next sentence, the Borrowers shall pay to such Holder such additional amount or amounts as will compensate such Holder or such controlling corporation on an after-tax basis for such reduction. Such Holder shall deliver to the Borrowers (with a copy to the Agent) a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to such Holder under this Section 2.18, which statement shall be conclusive and binding upon all parties hereto absent manifest error.

 

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ARTICLE 3

PURCHASE AND SALE OF NOTES AND SHARES

Section 3.1 First Closing . In consideration for each Lender’s payment of its pro rata share of the First Closing Purchase Price (as defined below), which is set forth opposite such Lender’s name in column five (5) of the Schedule of Lenders attached hereto, (i) the Principal Borrower shall issue and sell to each Lender, and each Lender severally, but not jointly, agrees to purchase from the Principal Borrower on the First Closing Date (as defined below), a principal amount of Notes, in substantially the form attached hereto as Exhibit A , as is set forth opposite such Lender’s name in column three (3) on the Schedule of Lenders attached hereto, and (ii) the Principal Borrower shall issue to each Lender on the First Closing Date the number of Shares of Common Stock as is set forth opposite such Lender’s name in column four (4) on the Schedule of Lenders attached hereto, including the Common Stock purchase rights associated therewith. The closing (the “ First Closing ”) of the purchase of such Securities by the Lenders shall occur at the offices of Latham & Watkins LLP, Sears Tower, Suite 5800, 233 South Wacker Drive, Chicago, Illinois 60606. The date and time of the First Closing (the “ First Closing Date ”) shall be 10:00 a.m., Chicago time, on the date hereof, subject to notification of satisfaction (or waiver) of the conditions to the First Closing set forth in Section 4.1 and Section 5.1 below (or such later date as is mutually agreed to by the Principal Borrower and each Lender). The aggregate purchase price (the “ First Closing Purchase Price ”) of the Notes and the Shares to be purchased by the Lenders at the First Closing shall be equal to $15,000,000. On the First Closing Date, (i) each Lender shall pay its pro rata share of the First Closing Purchase Price (less the amounts withheld by it pursuant to Section 8.25) to the Principal Borrower for the Notes and the Shares to be issued and sold to such Lender at the First Closing, by wire transfer of immediately available funds in accordance with the Funds Flow Letter, and (ii) the Principal Borrower shall deliver to each Lender (A) the Notes (in the denominations as such Lender shall have requested prior to the First Closing) which such Lender is then purchasing, duly executed on behalf of the Principal Borrower and registered in the name of such Lender or its designee and (B) certificates representing the Shares (in the denominations as such Lender shall have requested prior to the First Closing) which such Lender is then purchasing, duly executed on behalf of the Principal Borrower and registered in the name of such Lender or its designee.

Section 3.2 Subsequent Closing . Subject to the satisfaction (or waiver) of the conditions to the Subsequent Closing set forth in Sections 4.2 and 5.2 (or such later date as is mutually agreed to by the Borrowers and each Lender), and further subject to Section 10.2(a), in consideration for each Lender’s payment of its pro rata share of the Subsequent Closing Purchase Price (as defined below), which is set forth opposite such Lender’s name in column (E) of the Schedule of Lenders attached hereto, (i) the Borrowers shall issue and sell to each Lender listed in column (A) of the Schedule of Lenders attached hereto, and each such Lender severally, but not jointly, agrees to purchase from the Borrowers on the Subsequent Closing Date (as defined below), a principal amount of Notes, in substantially the form attached hereto as Exhibit A , as is set forth opposite such Lender’s name in column (C) on the Schedule of Lenders attached hereto in a notice of purchase and sale (“ Notice of Purchase and Sale ”) in the form attached hereto as

 

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Exhibit L delivered by the Borrowers to each such Lender at least 30 days prior to the proposed Subsequent Closing Date, and (ii) the Borrowers shall issue to each such Lender on the Subsequent Closing Date the number of Shares of Common Stock as is set forth opposite such Lender’s name in column (D) on the Schedule of Lenders attached hereto. The closing (the “ Subsequent Closing ”) of the purchase of such Securities by the Lenders shall occur at the offices of Latham & Watkins LLP, Sears Tower, Suite 5800, 233 South Wacker Drive, Chicago, Illinois 60606. The date and time of the Subsequent Closing (the “ Subsequent Closing Date ”) shall be 10:00 a.m., Chicago time, on the day that is three (3) Business Days following the date on which the conditions set forth in shall be satisfied or waived in accordance with this Agreement, provided that the Subsequent Closing Date may occur no later than the two (2) year anniversary of the First Closing Date. The aggregate purchase price (the “ Subsequent Closing Purchase Price ”) of the Notes and the Shares to be purchased by the Lenders at the Subsequent Closing shall be equal to $5,000,000. On the Subsequent Closing Date, (i) each Lender shall pay its pro rata share of the Subsequent Closing Purchase Price (less the amounts withheld by it pursuant to Section 8.25) to the Borrowers for the Notes and the Shares to be issued and sold to such Lender at the Subsequent Closing, by wire transfer of immediately available funds in accordance with the Borrowers’ written wire instructions, and (ii) the Borrowers shall deliver to each Lender (A) the Notes (in the denominations as such Lender shall have requested prior to the Subsequent Closing) which such Lender is then purchasing, duly executed on behalf of the Borrowers and registered in the name of such Lender or its designee and (B) certificates representing the Shares (in the denominations as such Lender shall have requested prior to the Subsequent Closing) which such Lender is then purchasing, duly executed on behalf of the Principal Borrower and registered in the name of such Lender or its designee.

ARTICLE 4

CONDITIONS TO THE BORROWERS’ OBLIGATION TO SELL

Section 4.1 First Closing . The obligations of the Principal Borrower hereunder to issue and sell the Notes and the Shares to each Lender at the First Closing are subject to the satisfaction, at or before the First Closing Date, of each of the following conditions:

(a) Such Lender shall have executed each of the Transaction Documents to which it is a party and delivered the same to the Principal Borrower.

(b) Such Lender and each other Lender shall have delivered to the Principal Borrower its pro rata portion of the First Closing Purchase Price (less the amounts withheld by it pursuant to Section 8.25) for the Notes and the Shares being purchased by such Lender at the First Closing by wire transfer of immediately available funds pursuant to the wire instructions provided by the Principal Borrower in the funds flow letter (the “ Funds Flow Letter ”) set forth on Exhibit E attached hereto.

(c) The representations and warranties of such Lender shall be true and correct in all material respects as of the date when made and as of the First Closing Date as though made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such specific date).

 

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Section 4.2 Subsequent Closing . The obligations of the Borrowers hereunder to issue and sell the Notes and the Shares to each Lender at the Subsequent Closing is subject to the satisfaction, at or before the Subsequent Closing Date, of each of the following conditions:

(a) Such Lender and each other Lender shall have delivered to the Borrowers its pro rata portion of the Subsequent Closing Purchase Price (less the amounts withheld by it pursuant to Section 8.25) for the Notes and the Shares being purchased by such Lender at the Subsequent Closing by wire transfer of immediately available funds pursuant to the written wire instructions provided by the Borrowers.

(b) The representations and warranties of such Lender shall be true and correct in all material respects as of the date when made and as of the Subsequent Closing Date as though made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such specific date).

ARTICLE 5

CONDITIONS TO EACH LENDER’S OBLIGATION TO PURCHASE

Section 5.1 First Closing . The obligation of each Lender hereunder to purchase the Notes and the Shares at the First Closing is subject to the satisfaction, at or before the First Closing Date, of each of the following conditions:

(a) The Principal Borrower shall have executed and delivered to each Lender (i) the Notes (in such denominations as such Lender shall have requested prior to the First Closing) being purchased by such Lender at the First Closing pursuant to this Agreement, (ii) each of the other Transaction Documents to which it is a party (other than the Transaction Documents contemplated to be executed and delivered to the Agent pursuant to the other subsections of this Section 5.1), and (iii) certificates representing the Shares (in such denominations as such Lender shall have requested prior to the First Closing) being purchased by such Lender at the First Closing pursuant to this Agreement.

(b) The Principal Borrower shall have delivered to such Lender a letter from the Principal Borrower’s transfer agent certifying the number of shares of Common Stock outstanding as of a date within five (5) days of the First Closing Date.

(c) The Principal Borrower shall have executed and delivered to the Lenders the Registration Rights Agreement.

(d) The Principal Borrower shall have executed and delivered, or caused to be delivered, to the Agent the Fee Letter and evidence satisfactory to the Agent that the Principal Borrower shall pay to the Agent on the First Closing Date all fees and other amounts (including Accelerated First Closing Interest) due and owing thereon under the Fee Letter, this Agreement and the other Transaction Documents.

(e) The Principal Borrower shall have executed and delivered, or caused to be delivered, to the Agent the Security Agreement.

 

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(f) The Principal Borrower shall have executed and delivered, or caused to be delivered, to the Agent deposit account control agreements and securities account control agreements, in form and substance satisfactory to the Agent, executed by the applicable banks, in each case as the Agent may request.

(g) The Principal Borrower shall have executed and delivered, or caused to be delivered, to the Agent the Affiliate Subordination Agreement.

(h) The Agent shall have received the opinions of Outside Legal Counsel, dated the First Closing Date, in substantially the forms of Exhibit F attached hereto.

(i) The Principal Borrower shall have executed and delivered, or caused to be delivered, to the Agent the Funds Flow Letter.

(j) The Principal Borrower shall have delivered to the Agent a copy of the Irrevocable Transfer Agent Instructions, which instructions shall have been delivered to and acknowledged in writing by the Principal Borrower’s transfer agent.

(k) The Principal Borrower shall have executed and delivered, or caused to be delivered, to the Agent a certificate evidencing its incorporation and good standing in its jurisdiction of incorporation issued by the Secretary of State of such jurisdiction, as of a date reasonably proximate to the First Closing Date.

(l) The Principal Borrower shall have executed and delivered, or caused to be delivered, to the Agent a certificate evidencing its qualification as a foreign corporation and good standing issued by the Secretary of State (or comparable office) of each jurisdiction in which the Principal Borrower is qualified to conduct business and failure to so qualify would cause a Material Adverse Effect, as of a date reasonably proximate to the First Closing Date.

(m) The Principal Borrower shall have executed and delivered, or caused to be delivered, to the Agent a certificate as to the fact that no action has been taken with respect to any merger, consolidation, liquidation or dissolution of the Principal Borrower, or with respect to the sale of substantially all of its assets, nor is any such action pending or contemplated.

(n) The Principal Borrower shall have executed and delivered, or caused to be delivered, to the Agent a certified copy of the Principal Borrower’s certificate or articles of incorporation, as certified by the Secretary of State of its jurisdiction of incorporation, as of a date reasonably proximate to the First Closing Date.

(o) The Principal Borrower shall have executed and delivered, or caused to be delivered, to the Agent a certificate, executed by the secretary of the Principal Borrower and dated the First Closing Date, as to (i) the resolutions consistent with Section 7.2 as adopted by the Principal Borrower’s board of directors in a form reasonably acceptable to the Agent, (ii) the Principal Borrower’s articles or certificate of incorporation, each as in effect at the First Closing, (iii) the Principal Borrower’s bylaws, each as in effect at the First Closing, and (iv) no action having been taken by the Principal Borrower or its stockholders, directors or officers in contemplation of any amendments to items (i), (ii), or (iii) listed in this Section 5.1(o), as certified in the form attached hereto as Exhibit H .

 

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(p) The Common Stock (i) shall be designated for quotation or listed on the Principal Market and (ii) shall not have been suspended, as of the First Closing Date, by the SEC or the Principal Market from trading on the Principal Market nor shall suspension by the SEC or the Principal Market have been threatened, as of the First Closing Date, either (A) in writing by the SEC or the Principal Market or (B) by falling below the minimum listing maintenance requirements of the Principal Market.

(q) The Principal Borrower shall have obtained all governmental, regulatory and third party consents and approvals, if any, necessary for the sale of the Securities at the First Closing.

(r) The Principal Borrower shall have obtained and delivered to the Agent searches of UCC filings in the jurisdictions of formation or incorporation of the Principal Borrower, the jurisdiction of the chief executive offices of the Principal Borrower and each jurisdiction where any Collateral is located or where a filing would need to be made in order to perfect the Agent’s and Holders’ security interest in the Collateral, copies of the financing statements on file in such jurisdictions and evidence that no Liens exist other than Permitted Liens.

(s) The Principal Borrower shall have authorized the filing of UCC financing statements for each appropriate jurisdiction as is necessary, in the Agent’s sole discretion, to perfect the Agent’s and Holders’ security interest in the Collateral.

(t) The Principal Borrower shall have authorized the filing of the Intellectual Property Security Agreements in the U.S. Patent and Trademark Office and the U.S. Copyright Office, as applicable.

(u) The Principal Borrower shall have executed and delivered, or caused to be delivered, to the Agent, with respect to each fee interest in real property owned by the Principal Borrower as of the First Closing Date, the following:

(i) a fully executed and notarized Mortgage, in proper form for recording in all applicable jurisdictions;

(ii) an opinion of counsel in the state in which such Mortgage is to be recorded with respect to the enforceability of the form of Mortgage to be recorded in such state and such other matters as Agent may request, in each case in form and substance satisfactory to Agent;

(iii) (A) a title insurance policy or unconditional commitment therefore issued by one or more title companies satisfactory to the Agent with respect to such mortgaged property in amounts satisfactory to the Agent, together with a title report issued by a title company with respect thereto, dated as of as of a date reasonably proximate to the First Closing Date, each in form and substance satisfactory to the Agent; and (B) evidence satisfactory to the Agent that the Principal Borrower has paid to the title company all expenses and premiums of the title company and all other sums required in connection with the issuance of each such title policy and all recording and stamp taxes (including mortgage recording and intangible taxes) payable in connection with recording such Mortgage in the appropriate real estate records;

 

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(iv) a flood certification with respect to such mortgaged property and evidence of flood insurance, if necessary, in each case in form and substance satisfactory to the Agent;

(v) a survey of such mortgaged property, certified to the Agent and dated as of a date reasonably proximate to the First Closing Date, in form and substance satisfactory to the Agent; and

(vi) such other agreements and documents relating to such Mortgage and mortgaged property as the Agent or its counsel may reasonably request.

(v) The Principal Borrower shall have delivered, or caused to be delivered, to the Agent such information in form, scope and substance reasonably satisfactory to the Agent regarding environmental matters relating to all real property owned, leased, operated or used by the Principal Borrower as of the First Closing Date.

(w) The Principal Borrower shall use its reasonable best efforts to have executed and delivered, or caused to be delivered, to the Agent such landlord waivers, collateral access agreements or other similar documents as the Agent may request.

(x) The Principal Borrower shall have delivered, or caused to be delivered, to the Agent certificates evidencing any Pledged Equity (as defined in the Security Agreement) pledged to the Agent pursuant to the Security Agreement, together with duly executed in blank, undated stock or unit powers attached thereto.

(y) The Agent shall have received a certificate from the chief financial officer of the Principal Borrower in form and substance satisfactory to the Agent, supporting the conclusions that, after giving effect to the transactions contemplated by the Transaction Documents, the Principal Borrower and each of its Subsidiaries are not Insolvent.

(z) Since June 30, 2008, there shall have been no change (other than any reduction in comparable store sales) which has had or could reasonably be expected to have a Material Adverse Effect.

(aa) The Agent shall have received certificates from the Principal Borrower’s insurance broker or other evidence satisfactory to it that all insurance required to be maintained pursuant to this Agreement is in full force and effect, together with endorsements naming the Agent, for the benefit of the Holders, as additional insured and lender’s loss payee thereunder.

(bb) The Principal Borrower shall have executed and delivered, or caused to be delivered, to the Agent the Post-Closing Obligations Letter.

(cc) The Principal Borrower shall have caused to be delivered to the Agent evidence satisfactory to the Agent that the holders of the Affiliate Notes have consented in all respects to the execution, delivery and performance of this Agreement and the other Transaction Documents, including the incurrence of Indebtedness and Liens hereunder and thereunder.

 

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(dd) The representations and warranties of the Principal Borrower shall be true and correct as of the date when made and as of the First Closing Date as though made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such specific date), and the Principal Borrower shall have performed, satisfied and complied in all respects with the covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Principal Borrower at or prior to the First Closing Date. The Agent shall have received certificates, executed by the chief executive officer of the Principal Borrower, dated the First Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Agent, in the form attached hereto as Exhibit I .

(ee) The Principal Borrower shall have executed and/or delivered to the Agent such other documents relating to the transactions contemplated by this Agreement as the Agent or its counsel may reasonably request.

(ff) No Event of Default (or event or circumstance that, with the passage of time, the giving of notice, or both, would become an Event of Default) shall have occurred and be continuing or would result from the issuance of the Notes at the First Closing.

Section 5.2 Subsequent Closing . The obligation of each Lender listed in column (A) on the Schedule of Lenders attached hereto to purchase the Notes and the Shares at the Subsequent Closing is subject to the satisfaction, at or before the Subsequent Closing Date, of each of the following conditions:

(a) Each Borrower, as applicable, shall have executed and delivered to such Lender (i) the Notes (in such denominations as such Lender shall have requested prior to the Subsequent Closing) being purchased by such Lender at the Subsequent Closing pursuant to this Agreement, (ii) each of the other Transaction Documents to which it is a party (other than the Transaction Documents contemplated to be executed and delivered to the Agent pursuant to the other subsections of this Section 5.2), and (iii) certificates representing the Shares (in such denominations as such Lender shall have requested prior to the Subsequent Closing) being purchased by such Lender at the Subsequent Closing pursuant to this Agreement.

(b) The Borrowers shall have delivered, or caused to be delivered, to the Agent evidence satisfactory to the Agent that the Borrowers shall pay to the Agent on the Subsequent Closing Date all fees and other amounts (including Accelerated Subsequent Closing Interest) due and owing thereon under the Fee Letter, this Agreement and the other Transaction Documents.

(c) If the Subsequent Closing Date occurs more than six (6) months following the First Closing Date, the Agent shall have received the opinions of the Borrowers’ Outside Legal Counsel, dated the Subsequent Closing Date, in form and substance satisfactory to such Agent.

 

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(d) If the Subsequent Closing Date occurs more than six (6) months following the First Closing Date, each Borrower shall have executed and delivered, or caused to be delivered, to the Agent a certificate evidencing the formation or incorporation and good standing of such Borrower in such entity’s jurisdiction of formation or incorporation issued by the Secretary of State (or comparable office) of such jurisdiction, as of a date reasonably proximate to the Subsequent Closing Date.

(e) If the Subsequent Closing Date occurs more than six (6) months following the First Closing Date, each Borrower shall have executed and delivered, or caused to be delivered, to the Agent a certificate evidencing such Borrower’s qualification as a foreign corporation or other entity and good standing issued by the Secretary of State (or comparable office) of each jurisdiction in which such Borrower conducts business, as of a date reasonably proximate to the Subsequent Closing Date.

(f) Each Borrower shall have executed and delivered, or caused to be delivered, to the Agent a certificate as to the fact that no action has been taken with respect to any merger, consolidation, liquidation or dissolution of such Borrower, or with respect to the sale of substantially all of its assets, nor is any such action pending or contemplated.

(g) If the Subsequent Closing Date occurs more than six (6) months following the First Closing Date, each Borrower shall have executed and delivered, or caused to be delivered, to the Agent a certified copy of such Borrower’s certificate or articles of incorporation (or other applicable governing document), as certified by the Secretary of State (or comparable office) of such entity’s jurisdiction of formation or incorporation, as of a date reasonably proximate to the Subsequent Closing Date.

(h) Each Borrower shall have executed and delivered, or caused to be delivered, to Agent a certificate, executed by the Secretary of such Borrower and dated the Subsequent Closing Date, as to (i) the resolutions consistent with Section 7.2 as adopted by such Borrower’s board of directors (or other governing body) in a form reasonably acceptable to the Agent, (ii) such Borrower’s articles or certificate of incorporation (or other applicable governing document), each as in effect at the Subsequent Closing, (iii) such Borrower’s bylaws (or other applicable governing document), each as in effect at the Subsequent Closing, and (iv) no action having been taken by such Borrower or its stockholders, directors or officers in contemplation of any amendments to items (i), (ii), or (iii) listed in this Section 5.2(h), as certified, in the form attached hereto as Exhibit H .

(i) The Common Stock (i) shall be designated for quotation or listed on the Principal Market and (ii) shall not have been suspended, as of the Subsequent Closing Date, by the SEC or the Principal Market from trading on the Principal Market nor shall suspension by the SEC or the Principal Market have been threatened, as of the Subsequent Closing Date, either (A) in writing by the SEC or the Principal Market or (B) by falling below the minimum listing maintenance requirements of the Principal Market.

(j) Each of the Borrowers shall have obtained all governmental, regulatory and third party consents and approvals, if any, necessary for the sale of the Securities at the Subsequent Closing.

 

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(k) If the Subsequent Closing Date occurs more than six (6) months following the First Closing Date, each of the Borrowers shall have obtained and delivered to the Agent searches of UCC filings in the jurisdictions of formation or incorporation of each of the Borrowers, the jurisdiction of the chief executive offices of each of the Borrowers and each jurisdiction where any Collateral is located or where a filing would need to be made in order to perfect the Agent’s and Holders’ security interest in the Collateral, copies of the financing statements on file in such jurisdictions and evidence that no Liens exist other than Permitted Liens.

(l) Each of the Borrowers shall have authorized the filing of UCC financing statements for each appropriate jurisdiction as is necessary, in the Agent’s sole discretion, to perfect the Agent’s and Holders’ security interest in the Collateral.

(m) The Agent shall have received a certificate from the chief financial officer of the Principal Borrower in form and substance satisfactory to the Agent, supporting the conclusions that, after giving effect to the transactions contemplated by the Transaction Documents, the Principal Borrower and each of its Subsidiaries are not Insolvent.

(n) The representations and warranties of each Borrower shall be true and correct as of the date when made and as of the Subsequent Closing Date as though made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such specific date), and each Borrower shall have performed, satisfied and complied in all respects with the covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by each Borrower at or prior to the Subsequent Closing Date. The Agent shall have received certificates, executed by the chief executive officer of each Borrower, dated the Subsequent Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Agent, in the form attached hereto as Exhibit I .

(o) No Event of Default (or event or circumstance that, with the passage of time, the giving of notice, or both, would become an Event of Default) shall have occurred and be continuing or would result from the issuance of the Notes at the Subsequent Closing; and there shall have been no event or occurrence or series of events or occurrences that, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect. The Agent shall have received certificates, executed by the chief executive officer of each Borrower, dated the Subsequent Closing Date, to the foregoing effect.

(p) The