SECURITIES AMENDMENT AND PURCHASE AGREEMENT

SECURITIES AMENDMENT AND PURCHASE AGREEMENT

DATED AS OF DECEMBER 23, 2008

by and among

HC INNOVATIONS, INC.

and

THE NOTEHOLDERS IDENTIFIED HEREIN

TABLE OF CONTENTS

			Page
ARTICLE I DEFINITIONS			1
ARTICLE II AUTHORIZATION OF AMENDED NOTES AND NEW WARRANTS;
		CLOSING	9
2.1		Authorization of the Amended Notes and New Warrants	9
2.2		Amendment and Restatement of Existing Notes	9
2.3		Issuance of Additional Notes	10
2.4		Issuance of New Warrants	10
2.5		Replacement of Existing Notes and Cancellation of Existing Warrants	10
2.6		Noteholder Obligations Are Several, Not Joint	10
2.7		Closing	11
2.8		Fees	11
ARTICLE III MATURITY AND PREPAYMENT OF NEW NOTES			11
3.1		Maturity of Amended Notes	11
3.2		Optional Prepayment of Amended Notes	12
3.3		No Repurchase, Etc. of Amended Notes	12
3.4		Note Conversion, New Warrants not Affected by Repayment	12
ARTICLE IV CONVERSION OF NEW NOTES			13
4.1		Conversion at the Option of the Securities Holder	13
4.2		Conversion Procedure	13
4.3		Taxes on Conversion	14
4.4		Company to Reserve Stock; Related Covenants	14
4.5		Adjustment of Conversion Price	15
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY			18
5.1		Corporate Existence and Power	18
5.2		Subsidiaries and Affiliates	18
5.3		Authorization	19
5.4		Due Execution and Delivery; Binding Obligations	19
5.5		Issuance of Amended Notes, New Warrants and Common Stock	19
5.6		Collateral	19
5.7		No Conflict or Violation	20
5.8		Consents and Approvals	20
5.9		Capitalization	21
5.10		SEC Reports	21
5.11		Financial Statements	22
5.12		Financial Projections	22
5.13		Internal Controls and Procedures	22
5.14		Independent Accountants	23
5.15		Securities Act Registration, Etc	23
5.16		Compliance with Laws	24

 

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5.17		Assets	24
5.18		Taxes	24
5.19		Insurance	24
5.20		Litigation; Orders	25
5.21		Material Contracts	25
5.22		Franchises, Licenses, Permits	25
5.23		Arrangement Fees, Etc	25
5.24		Supplier and Customer Relationships	25
ARTICLE VI INVESTMENT REPRESENTATIONS OF EACH NOTEHOLDER			26
6.1		Investment Representations	26
6.2		Restricted Securities	27
6.3		Trading Restriction	27
ARTICLE VII CONDITIONS PRECEDENT TO NOTEHOLDERS' OBLIGATIONS			28
7.1		Conditions Precedent to Effectiveness	28
7.2		Conditions Precedent to the Closing	29
ARTICLE VIII COVENANTS			30
8.1		Reporting	30
8.2		Books and Records; Inspection Rights	32
8.3		Use of Proceeds	32
8.4		Compliance with Law	33
8.5		Insurance	33
8.6		Maintenance of Properties	33
8.7		Payment of Taxes and Claims	33
8.8		Corporate Existence	34
8.9		Further Assurances	34
8.10		Guaranty and Grant of Security by Subsidiaries	34
8.11		Additional Amounts	35
8.12		Limitations on Indebtedness	36
8.13		Limitation on Liens	36
8.14		Issuances of Stock; Restricted Payments	36
8.15		Merger, Consolidation	37
8.16		Sales of Assets	37
8.17		Nature of Business	38
8.18		Transactions with Affiliates	38
8.19		Board of Directors and Management	38
8.20		Management and Consulting Arrangements; Finders' Fees Etc	38
8.21		Qualifying Transaction	39
ARTICLE IX DEFAULT; REMEDIES			39
9.1		Events of Default	39
9.2		Acceleration	41
9.3		Other Remedies	41
9.4		Rescission	41
9.5		No Waivers or Election of Remedies, Expenses, Etc	42

 

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ARTICLE X TRANSFERS OF SECURITIES			42
10.1		Restrictions on Transfer	42
10.2		Restrictive Legends; Exchanges; Lost, Stolen or Mutilated Notes and
		Warrants	42
10.3		Notice of Transfer	42
10.4		Limitations on Disposition By Noteholders	44
ARTICLE XI MISCELLANEOUS			44
11.1		Survival of Agreement	44
11.2		Entire Agreement	44
11.3		Successors and Assigns	44
11.4		Counterparts	45
11.5		Notices	45
11.6		Governing Law	45
11.7		Amendments and Waivers	46
11.8		Incorporation of Schedules and Exhibits	46
11.9		Interpretation; Construction	46
11.10		No Duty	47
11.11		Liability of Noteholders	47
11.12		Independence of Agreements, Covenants and Representations and
		Warranties	47
11.13		Cumulative Remedies	48
11.14		Severability	48

 

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List of Annexes, Exhibits and Schedules :

Annex I	Noteholders
Annex II	Principal Amounts of Amended Notes and Amount of New Warrants
Exhibit A	Form of Amended Note
Exhibit B	Form of New Warrant
Exhibit C	Form of Guarantee and Amended and Restated Security Agreement
Exhibit D	Form of Registration Rights Agreement
Exhibit E	Form of Opinion of Gersten Savage LLP
Schedule A	Prior Transaction Documents
Schedule B	Subordinated Notes
Schedule 5.2	Subsidiaries and Affiliates
Schedule 5.9(a)	Capitalization, Etc.
Schedule 5.9(b)	Indebtedness
Schedule 5.12	Projections
Schedule C	Markman Group Transaction Documents
Schedule 5.21	Material Contracts
Schedule 7.1	Subordination Provisions
Schedule 7.1(e)	Insurance Certificate
Schedule 7.2(a)	Notice of Closing
Schedule 8.14(b)	Stock Issuance Obligations as of 11/26/2008
Schedule 8.14(c)	Rights of First Refusal Provisions
Schedule D	Existing Liens
Schedule E	Post-Closing Items and Deliverables

 

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SECURITIES AMENDMENT AND PURCHASE AGREEMENT

      THIS SECURITIES AMENDMENT AND PURCHASE AGREEMENT (this “ Agreement ”) is made and entered into as of December 23, 2008 by and among HC INNOVATIONS, INC. , a Delaware corporation (the “ Company ”), and the parties identified on Annex I hereto (each, a “ Noteholder ” and, collectively, the “ Noteholders ”).

RECITALS

      WHEREAS , the Company previously has issued to the Noteholders certain secured convertible promissory notes in the aggregate principal amount of $7,139,955 plus interest, pursuant to various subscription agreements (the “ Existing Notes “, as further defined in ARTICLE I );

      WHEREAS , the Company and the Noteholders propose to amend and restate the Existing Notes, on the terms and conditions set forth in this Agreement, as Senior Secured Convertible Notes, in order to, among other things, extend the maturity of the Existing Notes;

      WHEREAS , the Company proposes to sell and issue to one or more of the Noteholders further Senior Secured Convertible Notes, which will rank pari passu and be part of the same series with the Senior Secured Convertible Notes referenced in the immediately prior recital (together with the Senior Secured Convertible Notes referred to in the immediately prior recital, the “ Amended Notes ”), in order to provide funds for the repayment of certain existing bank indebtedness of the Company and to settle all amounts owed under a consulting agreement with James J. Bigl, as described further in this Agreement;

      WHEREAS , the Company and the Noteholders desire that the Amended Notes be secured by substantially all of the assets of the Company and its Subsidiaries;

      WHEREAS , the Company has previously issued to the Noteholders certain warrants to purchase common stock of the Company (the “ Existing Warrants ”, as further defined in ARTICLE I ); and

      WHEREAS , the Company and the Noteholders propose to exchange, on the terms and conditions set forth in this Agreement, the Existing Warrants for new warrants (the “ New Warrants ”).

      NOW THEREFORE , in consideration of the mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows:

ARTICLE I

DEFINITIONS

     In addition to the capitalized terms defined elsewhere in this Agreement, the following capitalized terms shall have the following respective meanings when used in this Agreement.

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     “ Action ” shall have the meaning set forth in Section 5.20 .

     “ Additional Amounts ” shall have the meaning set forth in Section 8.11 .

     “ Affiliate ” means, with respect to any specified Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is under common control with, or is controlled by, such specified Person. As used in this definition, the term “ control ” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, as trustee or executor or otherwise.

     “ Agreement ” or “ this Agreement ” shall have the meaning set forth in Section 11.9 and in the caption to this Securities Amendment and Purchase Agreement.

     “ Amended Notes ” shall have the meaning ascribed to such term in the recitals to this Agreement.

     “ Ansley ” shall have the meaning set forth in Section 5.23(b) .

     “ Assets ” has the meaning set forth in Section 5.17 .

     “ Authorized Share Allocation ” has the meaning set forth in Section 4.4(a) .

     “ Authorized Share Failure ” has the meaning set forth in Section 4.4(b) .

     “ Bank Debt Amount ” shall mean Two Hundred Thousand Nine Hundred and Thirty Two U.S. Dollars and Eighty Two Cents ($200,932.82), being the total amount of principal, interest, and other amounts that are outstanding under the Existing Credit Agreement.

     “ Bigl Letter Agreement ” shall mean the letter agreement, dated as of December 23, 2008, by and between the Company and James J. Bigl, regarding the settlement and termination of a consulting agreement between the Company and James J. Bigl.

     “ Brahma Finance ” shall mean Brahma Finance (BVI) Limited, a company incorporated in the British Virgin Islands.

     “ Business Day ” means any day, other than a Saturday, Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.

     “ Closing ” shall mean the closing of the transactions contemplated by this Agreement.

     “ Closing Date ” shall mean the date of the amendment and restatement of the Existing Notes as the Amended Notes, the issuance of certain additional Amended Notes in accordance with this Agreement, and the issuance of the New Warrants, as shall be stated in the Notice of Closing.

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     “ Code ” means the Internal Revenue Code of 1986, as amended, or any successor federal statute, and the rules and regulations promulgated thereunder, all as the same may from time to time be in effect.

     “ Collateral ” shall have the meaning ascribed to such term in the Guarantee and Amended and Restated Security Agreement.

     “ Collateral Agent ” has the meaning ascribed to such term in the Guarantee and Amended and Restated Security Agreement.

     “ Common Stock ” means the common stock of the Company, $0.001 par value.

     “ Company ” shall have the meaning ascribed to such term in the caption to this Agreement.

     “ Company Bylaws ” shall have the meaning ascribed to such term in Section 5.1 .

     “ Company Certificate of Incorporation ” shall have the meaning ascribed to such term in Section 5.1 .

      “ Contract ” means any loan or credit agreement, note, bond, mortgage, indenture, lease, sublease, purchase order or other contract, agreement, commitment, instrument or license.

     “ Conversion Amount ” shall have the meaning set forth in Section 4.1 .

     “ Conversion Date ” shall have the meaning set forth in Section 4.2 .

     “ Conversion Notice ” shall have the meaning set forth in Section 4.2 .

     “ Conversion Price ” shall have the meaning set forth in Section 4.1 .

     “ Default ” means any event or condition the occurrence of which would, with the lapse of time or the giving of notice, or both, become an Event of Default .

     “ Distribution ” means, in respect of any Person, (i) the payment or making of any dividend or other distribution of property or assets in respect of equity interests (or any options or warrants for such equity interests) of such Person, other than distributions in equity interests (or any options or warrants for equity interests) of the same class or (ii) the redemption or other acquisition of any equity interests (or any options or warrants for equity interests) of such Person.

     “ Effective Date ” shall mean the date, not later than December 23, 2008, on which each of the conditions precedent set forth in Section 7.1 is satisfied or duly waived.

     “ Entities ” means the Company and its Subsidiaries.

     “ Event of Default ” shall have the meaning ascribed to such term in Section 9.1 .

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     “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations promulgated thereunder, all as the same may from time to time be in effect.

     “ Existing Credit Agreement ” shall mean, collectively: (i) that certain credit agreement between the Company and Citibank N.A., as lender; and (ii) that certain credit agreement between the Company and People’s United Bank, as lender.

     “ Exercise Price ” means the price per share of the Company’s common stock to be paid by the Noteholders upon exercise of the New Warrants .

     “ Existing Notes ” shall mean those promissory notes issued to the Noteholders pursuant to the Prior Transaction Documents.

     “ Existing Warrants ” shall mean those warrants issued to the Noteholders pursuant to the Prior Transaction Documents.

     “ Fair Market Value ” means the value that would be paid by a willing buyer to unaffiliated willing seller in a transaction not involving distress or necessity of either party, determined in good faith by the Board of Directors of the Company.

     “ Financial Statements ” shall have the meaning set forth in Section 5.11 .

     “ Fundamental Documents ” means the documents by which any Person (other than an individual) establishes its legal existence or which govern its internal affairs. For example, the “ Fundamental Documents ” of a corporation would be its articles of incorporation/certificate of incorporation and code of regulations/bylaws.

     “ GAAP ” shall mean generally accepted accounting principles in the United States of America and statements and interpretations (if applicable) issued by the Financial Accounting Standards Board, or any successor body, as in effect from time to time, unless otherwise stated.

     “ Governmental Entity ” means any foreign, federal, state, municipal or other government, governmental department, commission, board, bureau, agency or instrumentality, or any court, tribunal or arbitrator.

     “ Guarantee and Amended and Restated Security Agreement ” means the guaranty of the Subsidiary Guarantors in the form of Guarantee and Amended and Restated Security Agreement attached hereto as Error! Reference source not found. , as amended, supplemented or otherwise modified from time to time subsequent to the Closing Date.

     “ Indebtedness ” of any Person means, without duplication, (a) all obligations of such Person for borrowed money; (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments; (c) all obligations of such Person under conditional sale or other title retention agreements relating to property or assets acquired by such Person; (d) all obligations of such Person in respect of the deferred purchase price of property or assets or services; (e) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property or assets

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owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed; (f) all guarantees by such Person of Indebtedness of others; (g) all capital leases of such Person (as within the meaning of GAAP); (h) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guarantee; and (i) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances. Indebtedness of any person shall not include current accounts payable incurred in the ordinary course of business of such Person. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.

     “ Law ” means any foreign, federal, state or local constitution, law, statute, treaty, rule, directive, regulation, requirement, ordinance and any similar provision having the force or effect of law or any Order.

     “ Letter of Interest ” means that certain letter of interest that was submitted to the Company on November 11, 2008 and provided to the Noteholders.

     “ Lien ” means any security interest, pledge, lien, bailment (in the nature of a pledge or for purposes of security), mortgage, security agreement, deed of trust, grant of a power to confess judgment, conditional sale or title retention agreement (including any lease in the nature thereof), claim, charge, escrow, encumbrance, easement, reservation, restriction, cloud, preemptive right, right of first refusal or first offer, option, commitment or other similar agreement, arrangement, contract, commitment, understanding or obligation, whether written or oral and whether or not relating in any way to credit or the borrowing of money.

     “ Losses ” shall mean each and all of the following items: any loss (including, without limitation, diminutions in value and losses of earnings), liabilities, demands, claims, actions, causes of action, costs, damages (actual, punitive or consequential), deficiencies, Taxes (including any Taxes imposed with respect to indemnity payments), charges, judgments, penalties, fines or expenses, whether or not arising out of any claims by or on behalf of the Company or any third party, including interest, penalties, reasonable attorneys' fees and expenses and all amounts paid in investigation, defense or settlement of any of the foregoing.

     “ Markman Group Noteholders ” means, together, the holders of the Markman Group Notes, respectively.

     “ Markman Group Transaction ” means one or more binding agreements pursuant to which each of the Markman Group Noteholders closes a transaction with the Company extending the maturity of the Markman Group Notes on substantially similar terms as provided in the Transaction Documents or on terms otherwise satisfactory to the Required Noteholders.

     “ Markman Group Notes ” means those certain secured convertible promissory notes, in the aggregate principal amount of $310,000 plus interest, made by the Company pursuant to the transaction documents listed on Schedule C , as the same may be amended from time to time.

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     “ Material Adverse Effect ” means a material adverse effect on the business, operations, properties, assets, condition (financial or otherwise), prospects or results of operations of the Company and its Subsidiaries, taken as a whole.

     “ Material Contracts ” means any and all contracts or agreements to which the Company or any Subsidiary is a party and which fall under the term “material contract” as such term is defined in Item 601(b)(10) of Regulation SK of the SEC, and any and all amendments, modifications, supplements, renewals or restatements thereof.

     “ New Maturity Date ” means either: (a) the earlier of (x) May 31, 2009 or (y) the closing date of a Qualifying Transaction; (b) in the event no Markman Group Transaction closes by the earliest maturity date currently in effect of any of the Markman Group Notes, then the New Maturity Date shall mean the same date as such earliest maturity date of any of the Markman Group Notes; or (c) in the event no Qualifying Transaction closes by May 31, 2009, then the New Maturity Date shall mean May 30, 2010, subject to the terms and conditions of this Agreement.

     “ New Warrants ” shall have the meaning set forth in the recitals to this Agreement.

     “ New Warrants Capital Increase ” shall have the meaning set forth in Section 8.14(a) .

     “ Note ” or “ Notes ” means the Existing Notes and/or the Amended Notes, as the context requires.

     “ Noteholder ” and “ Noteholders ” shall each have the meaning ascribed to such terms in the caption to this Agreement.

     “ Notice of Closing ” shall have the meaning set forth in Section 7.2(a) .

     “ Order ” means any judgment, writ, decree, declaration, injunction, order, stipulation, compliance agreement or settlement agreement issued or imposed by, or entered into with, a Governmental Entity or arbitrator.

     “ PCAOB ” shall have the meaning set forth in Section 5.11 .

     “ Permit ” shall mean any permit, license, authorization, registration, franchise, approval, consent, certificate, variance, waiver, variance or clearance and similar rights obtained, or required to be obtained, from Governmental Entities.

     “ Permitted Liens ” means (i) Liens for Taxes not yet due and payable, (ii) workers or unemployment compensation Liens arising in the ordinary course of business of the Company or its Subsidiaries, consistent with past practice, (iii) mechanic’s, materialman’s, supplier’s, vendor’s or similar Liens arising in the ordinary course of business of the Company and its Subsidiaries, consistent with past practice, securing amounts that are not delinquent; (iv) zoning or deed restrictions, public utility easements, rights of way, minor title irregularities and similar matters relating to any real property of the Company or its Subsidiaries, in all such cases having no effect which is materially adverse as a practical matter on the ownership or use of any such real estate in question, as such property is used in the ordinary course of business of by the Company and

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its Subsidiaries; (v) any Lien granted to the Collateral Agent created or reaffirmed pursuant to the Guarantee and Amended and Restated Security Agreement for the benefit of one or more of the Noteholders; and (vi) any existing Lien fully disclosed on Schedule D .

     “ Permitted Management Stock Options ” means options to purchase shares of Common Stock granted to employees of the Company and its subsidiaries pursuant to a duly adopted employee stock option plan, the grant of which is approved by the Company’s Board of Directors upon recommendation of a duly appointed outside compensation committee.

     “ Person ” shall be construed as broadly as possible and shall include an individual, a corporation, a company, an association, a joint stock company, a partnership (including a limited liability partnership), a limited liability company, a joint venture, a trust or an unincorporated organization and a Governmental Entity.

     “ Prepayment Notice ” has the meaning set forth in Section 3.2(a).

     “ Prior Transaction Documents ” shall mean the documents listed on Schedule A .

     “ Proceeding ” shall mean any action, suit, proceeding, complaint, charge, hearing, inquiry or investigation before or by a Governmental Entity.

     “ Projections ” shall have the meaning set forth in Section 5.12 .

     “ Qualifying Transaction ” shall mean a binding agreement for the sale of all or substantially all of the Company’s assets or capital stock or a merger, consolidation, reorganization or other combination of the Company which results in the transfer of more than 90% of the voting securities of the Company; provided that such transaction shall provide for the mandatory repayment in full, at closing, of principal, interest, and all other amounts outstanding in respect of, the Amended Notes. The Company currently expects that a Qualifying Transaction will result from either (x) the transaction contemplated by the Letter of Interest or (y) a transaction with a third party who makes an offer which the Board of Directors of the Company has a fiduciary duty to consider.

     “ Registration Rights Agreement ” shall mean the Registration Rights Agreement in the form attached hereto as Error! Reference source not found. , as amended, supplemented or otherwise modified from time to time subsequent to the Closing Date.

     “ Required Noteholders ” shall mean at any time holders of the Amended Notes representing at least 66-2/3% in principal amount of the Amended Notes at the time outstanding (exclusive of any Amended Notes then owned by the Company of any of its Subsidiaries).

     “ Required Reserve Amount ” has the meaning set forth in Section 4.4(a) .

     “ Restricted Payment ” means any Distribution (whether in cash, security or other property or assets) with respect to any equity interest of the Company or any payment (whether in cash, securities or other property or assets), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such

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equity interest of the Company or any option, warrant or other right to acquire any such equity interest of the Company.

     “ Rule 144 ” shall mean Rule 144 promulgated under the Securities Act, or any successor rule thereto, all as the same may from time to time be in effect.

     “ Securities ” has the meaning ascribed to the term “ security ” in Section 2(a)(1) of the Securities Act.

     “ Securities Act ” means the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations promulgated thereunder, all as the same may from time to time be in effect.

     “ Securities Holder ” means each Noteholder (or its successors or permitted assigns) which holds Amended Notes or New Warrants.

     “ Security Document ” means any and all of the security agreements, pledge agreements and/or collateral assignments among the Collateral Agent and the Company and the Subsidiary Guarantors which secure the obligations of the Company and/or the Subsidiary Guarantors under the Transaction Documents, whether in existence on the date hereof or hereafter entered into, in each case as supplemented, amended, modified, renewed and replaced.

     “ SEC ” means the United States Securities and Exchange Commission.

     “ SEC Reports ” shall have the meaning set forth in Section 5.10 .

     “ Share Delivery Due Date ” shall have the meaning set forth in Section 4.2 .

     “ Subordinated Notes ” means the notes, copies of which are attached hereto as Schedule B .

     “ Subsidiary ” means with respect to any Person, any other Person of which at least fifty percent (50%) of the shares of stock or other interests entitled to vote in the election of the members of the board of directors of such other Person or comparable Persons performing similar functions at such other Person (excluding shares or other interests entitled to vote only upon the failure to pay dividends thereon or other contingencies) are at the time owned or controlled, directly or indirectly through one or more Subsidiaries, by such Person. Unless the context otherwise requires, the term “ Subsidiary ” means a Subsidiary of the Company.

     “ Subsidiary Guarantors ” means those Subsidiaries of the Company that will execute the Guarantee and Amended and Restated Security Agreement.

     “ Taxes ” means, with respect to any Person, (i) all income taxes (including any tax on or based upon net income, gross income, income as specially defined, earnings, profits or selected items of income, earnings or profits) and all gross receipts, sales, use, ad valorem, transfer, franchise, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property or windfall profits taxes, alternative or add-on minimum taxes, customs duties, levies, imposts, and other taxes, fees, assessments or charges of any kind whatsoever,

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together with all interest and penalties, additions to tax and other additional amounts, in each case imposed by any taxing authority (domestic or foreign) on such Person (if any) and (ii) any liability for the payment of any amount of the type described in clause (i) above as a result of (A) being a “transferee” (within the meaning of Section 6901 of the Code or any other applicable Law) of another Person, (B) being a member of an affiliated, combined or consolidated group or (C) a contractual arrangement or otherwise.

     “ Taxing Authority ” shall have the meaning set forth in Section 8.11(c) .

     “ Tax Return ” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

     “ Transaction Documents ” shall mean this Agreement, the Amended Notes, the New Warrants, the Guarantee and Amended and Restated Security Agreement, the Registration Rights Agreement and any other document or instrument executed and delivered by the Company in connection with the Amended Notes, the New Warrants or this Agreement.

ARTICLE II

AUTHORIZATION OF AMENDED NOTES AND NEW WARRANTS; CLOSING

2.1     Authorization of the Amended Notes and New Warrants

     The Company has authorized, upon the terms and conditions set forth in this Agreement: (i) the amendment and restatement of the Existing Notes as Amended Notes, in the form of Exhibit A , in the respective principal amounts set forth beside each Noteholder’s name on Annex II ; (ii) the issuance and sale of additional notes, which shall also be Amended Notes and which shall have the same substantive terms as the other Amended Notes, to all of the Noteholders pro rata based upon the unpaid principal amount of their Amended Notes, in the aggregate amount set forth on Annex II (which is equal to the Bank Debt Amount), and the use of the proceeds from such sale for the repayment of all of the Indebtedness incurred under the Existing Credit Agreement; (iii) the issuance and sale of an additional note, which shall also be an Amended Note and which shall have the same substantive terms as the other Amended Notes, to the James J. Bigl Revocable Trust, in the aggregate amount set forth on Annex II , pursuant to the Bigl Letter Agreement; and (iv) the issuance and sale of the New Warrants, in the form of Error! Reference source not found. , in the respective amounts set forth beside each Noteholder’s name on Annex II and which together provide rights to purchase an aggregate of 25,817,057 shares of Common Stock of the Company at $0.30 per share.

2.2     Amendment and Restatement of Existing Notes

     At the Closing, subject to the terms and conditions of this Agreement, the Company and the Noteholders will amend and restate, each of the Existing Notes, in the form of Exhibit A , in the respective amounts set forth beside each Noteholder’s name on Annex II , as Amended Notes, dated the Closing Date, and duly executed by the Company and registered in the name of the applicable Noteholder or its nominee. The principal amount of each Existing Note that is

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amended and restated as an Amended Note shall be 100% of the principal amount of such Existing Note immediately prior to the Closing, plus accrued interest through the Closing Date.

2.3     Issuance of Additional Notes

     At the Closing, subject to the terms and conditions of this Agreement, the Company will issue and sell additional notes, which shall also be Amended Notes and which shall have the same substantive terms as the other Amended Notes, to:

      (a) the Noteholders, pro rata based upon the unpaid principal amount of their Amended Notes, in the specific amounts and in the aggregate amount set forth on Annex II (which is equal to the Bank Debt Amount), against the wiring of funds by the Noteholders pursuant to Section 8.3 . The wiring of such funds will constitute the entire proceeds received by the Company from the issuance and sale of such additional Amended Notes to the Noteholders; and to

      (b) James J. Bigl, in the aggregate amount set forth on Annex II , pursuant to the Bigl Letter Agreement.

2.4     Issuance of New Warrants

     At the Closing, subject to the terms and conditions of this Agreement, the Company will issue, New Warrants, in the form of Error! Reference source not found. , in the respective amounts set forth beside each Noteholder’s name on Annex II , dated the Closing Date, and duly executed by the Company and registered in the name of the applicable Noteholder or its nominee. In the event that a Qualifying Transaction is not consummated by May 31, 2009 or the Company has not prepaid the Amended Notes in full pursuant to Section 3.2 by May 31, 2009, then the New Warrants shall be immediately exercisable for a period of five years from May 31, 2009, at a price of $0.30 per share.

2.5     Replacement of Existing Notes and Cancellation of Existing Warrants

     At the Closing, each Noteholder shall deliver for replacement the Existing Notes and the Existing Warrants in the amounts specified opposite each such Noteholder’s name under the columns titled “Outstanding Principal” and “Outstanding Number of Warrants”, respectively, on Error! Reference source not found.. The Company will execute and deliver to each of the Noteholders the Amended Notes and the New Warrants in the amounts specified opposite such Noteholder’s name under the column titled “Amended Notes” and “New Warrants”, respectively, on Error! Reference source not found.. Upon such delivery of the Amended Notes, the Existing Notes shall thereby be amended and restated as the Amended Notes, and upon such delivery of the New Warrants, the Existing Warrants will be canceled. Interest which has accrued on the Existing Notes but which is unpaid through the Closing Date shall be added to the principal amount of the Existing Notes for purposes of determining the principal amount of Amended Notes to be issued to each respective Noteholder.

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2.6     Noteholder Obligations Are Several, Not Joint

     The obligations of the Noteholders hereunder are several and not joint obligations, and no Noteholder shall have any obligation to perform the obligations of any other Noteholder under this Agreement, and no Noteholder shall have any liability to any Person for the performance or nonperformance by any other Noteholder of its obligations under this Agreement.

2.7     Closing

     The Closing hereunder shall occur at the offices of Thompson Hine LLP, 335 Madison Avenue, New York, New York 10017, or at such other place as shall be mutually agreed to between the Noteholders and the Company, and shall occur at 10:00 AM New York time on December 23, 2008 or on such other Business Day prior to December 23, 2008 as may be agreed upon between the Noteholders and the Company.

2.8     Fees

     The Company shall pay to the Noteholders or their respective designees the following fees:

      (a) The Company shall pay all of the Noteholders' reasonable legal and professional costs incurred in connection with the transactions contemplated hereby, which, if the Closing occurs on or before December 19, 2008, will not exceed an aggregate of $75,000, plus all of Noteholders' reasonable travel and subsistence costs in connection with the transactions contemplated hereby. All such costs shall be paid on the earlier to occur of the Closing and December 19, 2008. Any legal and professional costs incurred after December 19, 2008 shall be payable on demand and shall not be subject to the foregoing limitations.

      (b) In the event that a Qualifying Transaction is not consummated by May 31, 2009 or if the Company has not prepaid the Amended Notes in full pursuant to Section 3.2 by May 31, 2009, the Company shall thereafter pay to the Noteholders a monthly fee of $10,000. Such fee shall be paid to an agent appointed by the Noteholders and shall be distributed to the Noteholders pro rata based upon the unpaid principal amount of their Amended Notes. Such monthly fee will be payable on the last Business Day of each month, with the initial payment payable on June 30, 2009.

ARTICLE III

MATURITY AND PREPAYMENT OF NEW NOTES

3.1     Maturity of Amended Notes

     The Amended Notes shall mature and be repayable in full on the New Maturity Date. If the Company consummates a Qualifying Transaction on or prior to May 31, 2009, the Amended Notes shall be repaid out of the proceeds of the Qualified Transaction. With respect to each Amended Note, no late fees or penalties will be assessed on the Company for the period from the

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Closing to the New Maturity Date solely by reason of the non-payment of the Existing Notes on the original maturity date thereof.

3.2     Optional Prepayment of Amended Notes

      (a) The Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time any part of, the Amended Notes, in an amount of not less than 10% of the aggregate principal amount of the Amended Notes then outstanding in the case of a partial prepayment, at 100% of the principal amount so prepaid, together with interest accrued thereon to the date of such prepayment. The Company will give each holder of Amended Notes written notice (a “ Prepayment Notice ”) of each optional prepayment under this Section 3.2 not less than five Business Days prior to the date fixed for such prepayment. Each such notice shall specify the date fixed for prepayment, the aggregate principal amount of the Amended Notes to be prepaid on such date, the principal amount of each Amended Note held by such holder to be prepaid (determined in accordance with subsection (b)), and the interest to be paid on the prepayment date with respect to such principal amount being prepaid.

      (b) In the case of each partial prepayment of the Amended Notes pursuant to this Section 3.2 , the principal amount of the Notes to be prepaid shall be allocated pro rata among all of the holders of Amended Notes at the time outstanding in accordance with the unpaid principal amount thereof.

      (c) In the case of each prepayment of Amended Notes pursuant to this Section 3.2 , the principal amount of each Amended Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date. From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest, as aforesaid, interest on such principal amount shall cease to accrue. Any Amended Note paid or prepaid in full shall be surrendered to the Company and cancelled and shall not be reissued, and no Amended Note shall be issued in lieu of any prepaid principal amount of any Amended Note.

3.3     No Repurchase, Etc. of Amended Notes

     The Company will not and will not permit any Subsidiary or Affiliate to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any part or portion of the outstanding Amended Notes, except upon the repayment at the New Maturity Date or upon prepayment in accordance with Section 3.2 .

3.4     Note Conversion, New Warrants not Affected by Repayment

      (a) If the New Warrants become exercisable pursuant to the terms thereof, the New Warrants and any shares of Common Stock issued or required to be issued pursuant to exercise thereof, shall not be affected by any payment or repayment of the Amended Notes and shall remain outstanding and exercisable in accordance with the terms of such New Warrants.

      (b) If the Amended Notes become convertible pursuant to Section 4.1 , any Common Stock issued or required to be issued pursuant to any Conversion Notice transmitted to the Company prior to payment or repayment of the Amended Notes shall not be affected by any such

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payment or repayment and shall remain issuable in accordance with the terms of ARTICLE IV hereof.

ARTICLE IV

CONVERSION OF NEW NOTES

4.1     Conversion at the Option of the Securities Holder

     Subject to the further provisions of this ARTICLE IV , in the event that by May 31, 2009 both (i) a Qualified Transaction has not been consummated and (ii) the Company has not prepaid the Amended Notes in full pursuant to Section 3.2 , at any time or times thereafter, a Noteholder may convert the outstanding principal amount and any accrued and unpaid interest (the “ Conversion Amount ”) of any Amended Notes (or any portion thereof) into such number (rounded to the nearest whole number) of validly issued, fully paid and nonassessable shares of Common Stock at an initial conversion price per share equal to $0.20 (as such conversion price may be adjusted from time to time pursuant hereto, the “ Conversion Price ”). The provisions of this Agreement that apply to the conversion of all of an Amended Note shall also apply to the conversion of a portion of an Amended Note. A Noteholder is not entitled to any rights of a holder of Common Stock until such Noteholder has converted its Amended Notes to Common Stock in compliance with the procedures set forth in this ARTICLE IV , and only to the extent such Amended Notes are deemed to have been converted into Common Stock pursuant to this ARTICLE IV .

4.2     Conversion Procedure

      (a)     Procedure

     To convert an Amended Note (or portion thereof) into shares of Common Stock, a Noteholder must (i) complete and manually sign the conversion notice on the back of the Amended Note (the “ Conversion Notice ”) and transmit by facsimile (or otherwise deliver) such Conversion Notice to the Company, (ii) surrender the Amended Note to be converted to the Company or its designee (or deliver an indemnification undertaking with respect to such Amended Note in the case of its loss, theft or destruction), (iii) furnish appropriate endorsements and transfer documents if required by the Company, and (iv) pay any transfer or similar tax payable by the Noteholder pursuant to Section 4.3 , if required, and provide evidence of such payment to the Company. Each conversion shall be deemed to have been effected as to any Amended Note (or portion thereof) on the date on which the requirements set forth in this Section 4.2 have been satisfied as to any such Amended Note (or portion thereof) (the “ Conversion Date ”). As soon as practicable after the Conversion Date, but in no event later than five Business Days following such Conversion Date (the “ Share Delivery Due Date ”) the Company shall execute and deliver, to the address specified in the Conversion Notice, a certificate, registered in the name of the converting Noteholder or its designee, for the number of whole shares of Common Stock to which such Noteholder shall be entitled.

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      (b)     Date Shares Held

     The Person or Persons entitled to receive Common Stock upon conversion of the Amended Notes as set forth in this Agreement shall be treated for all purposes as the holder or holders of such Common Stock, as of the close of business on the applicable Conversion Date; provided, however, that no surrender of an Amended Note on any date when the stock transfer books of the Company shall be closed shall be effective to constitute the Person or Persons entitled to receive the shares of Common Stock upon such conversion as the holder or holders of such shares of Common Stock on such date, but such surrender shall be effective to constitute the Person or Persons entitled to receive such shares of Common Stock as the holder or holders thereof for all purposes at the close of business on the next succeeding day on which such stock transfer books are open; provided further that such conversion shall be at the Conversion Price in effect on the applicable Conversion Date as if the stock transfer books of the Company had not been closed.

      (c)     Remaining Principal Amount

     Upon surrender of an Amended Note that is converted in part, the Company shall execute and deliver to the Noteholder a replacement Amended Note equal in principal amount to the unconverted portion of the Amended Note surrendered. Upon conversion in full of an Amended Note, such Amended Note shall be terminated.

4.3     Taxes on Conversion

     If a Noteholder converts an Amended Note, the Company shall pay any documentary, stamp or similar issue or transfer tax due on the issue of shares of Common Stock upon such conversion. However, the Noteholder shall pay any such tax which is due because the Noteholder requests the securities to be issued in a name other than the Noteholder’s name.

4.4     Company to Reserve Stock; Related Covenants

      (a)     Reservation of Shares

     So long as any Amended Notes are outstanding, the Company shall take all action necessary to reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Amended Notes, the number of shares of Common Stock as shall from time to time be necessary to effect the conversion of all of the outstanding Amended Notes (without regard to any limitations on conversions) (the “ Required Reserve Amount ”). The initial number of shares of Common Stock reserved for conversions of the Amended Notes and each increase in the number of shares so reserved shall be allocated pro rata among the Noteholders based on the unpaid principal amount of the Amended Notes held by each Noteholder on the Closing Date or the date of increase in the number of reserved shares, as the case may be (the “ Authorized Share Allocation ”). In the event that a Noteholder shall sell or otherwise transfer any of such Noteholder’s interests in any Amended Notes, each transferee shall be allocated a pro rata portion of such Noteholder’s Authorized Share Allocation.

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      (b)     Insufficient Authorized Shares

     If at any time while any of the Amended Notes remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Amended Notes at least a number of shares of Common Stock equal to the Required Reserve Amount (an “ Authorized Share Failure ”), then the Company shall immediately take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the outstanding Amended Notes. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than 60 days after the occurrence of such Authorized Share Failure, the Company shall call a meeting of its shareholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each shareholder with a proxy statement and shall use its best efforts to solicit its shareholders' approval of such increase in authorized shares of Common Stock and to cause its Board of Directors to recommend to the shareholders that they approve such proposal.

      (c)     Validity

     All shares of Common Stock delivered upon conversion of the Amended Notes shall be newly issued shares, shall be duly authorized, validly issued, fully paid and nonassessable and shall be free from preemptive rights and free of any lien or adverse claim with respect to the issue thereof.

      (d)     Compliance with Applicable Laws; Additional Listing Application

     The Company will comply with all federal and state securities laws regulating the offer and delivery of shares of Common Stock upon conversion of Amended Notes, if any, and if the shares of Common Stock are listed on a United States national securities exchange or other trading market, if permitted by the rules of such exchange or market, will list or cause to have quoted such shares of Common Stock on each national securities exchange or other trading market on which the Common Stock is then listed or quoted, if any.

4.5     Adjustment of Conversion Price

     The Conversion Price shall be adjusted from time to time by the Company as follows:

      (a)     Dividends; Distributions; Subdivisions; Combinations

     In case the Company shall (i) pay a dividend on its Common Stock in shares of Common Stock, (ii) make a distribution on its Common Stock in shares of Common Stock, (iii) subdivide its outstanding Common Stock into a greater number of shares, or (iv) combine its outstanding Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior thereto shall be adjusted so that the holder of any Amended Note thereafter surrendered for conversion shall be entitled to receive that number of shares of Common Stock which it would have owned had such Amended Note been converted immediately prior to the happening of such event. An adjustment made pursuant to this paragraph shall become effective immediately after

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the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of subdivision or combination. If any dividend or distribution of the type described in this paragraph is declared but not so paid or made, or the outstanding shares of Common Stock are not subdivided or combined, as the case may be, the Conversion Price shall be immediately readjusted, effective as of the date the Board of Directors determines not to pay such dividend or distribution, or split or combine the outstanding shares of Common Stock, as the case may be, to the Conversion Price that would then be in effect if such dividend, distribution, share split or share combination had not been declared.

      (b)     Issuances Below Issue Date Closing Price; Issuances Below Conversion Price

     If, during the period commencing on November 26, 2008 and ending on May 31, 2011, the Company shall issue or sell, or is deemed to have issued or sold, Common Stock or securities convertible into or exercisable or exchangeable for Common Stock for a consideration per share of Common Stock:

     then the Conversion Price then in effect shall be adjusted to a price equal to the quotient obtained by dividing:

	(x)	an amount equal to the sum of (a) the total number of shares of Common Stock outstanding immediately prior to such issuance or sale or deemed issuance or sale (assuming conversion into Common Stock at the then effective conversion rate for the applicable series) multiplied by the Conversion Price in effect immediately prior to such issuance plus (b) the aggregate consideration received by the Company upon such issuance or sale or deemed issuance or sale, by
	(y)	the total number of shares of Common Stock outstanding immediately prior to such issuance or sale or deemed issuance or sale (assuming conversion into Common Stock at the then effective Conversion Price for the applicable series) plus the number of shares of Common Stock actually sold or issued (or deemed to be sold or issued) in the transaction which resulted in the adjustment pursuant to this Section 4.5(b) .

      (c)     Change in Exercise/Conversion Price or Rate of Conversion

     If the purchase price provided for in any equity-linked securities, the additional consideration, if any, payable upon the issue, conversion, exchange or exercise of any equity linked securities, or the rate at which any equity-linked securities are convertible into or exchangeable or exercisable for Common Stock changes at any time, the Conversion Price in

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effect at the time of such change shall be adjusted to the Conversion Price which would have been in effect at such time had such equity-linked securities provided for such changed purchase price, additional consideration or changed conversion, exchange or exercise rate, as the case may be, at the time initially granted, issued or sold. For purposes of this paragraph, if the terms of any equity-linked security that was outstanding as of the date of the Closing are changed in the manner described in the immediately preceding sentence, then such equity-linked security and the Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such change.

      (d)     Limitations & Interpretations

      (e)     Distributions of Capital Stock, Indebtedness or Other Non-Cash Assets

     In the event that the Company distributes to all or substantially all holders of its Common Stock any cash, shares of capital stock of the Company (other than Common Stock), evidences of indebtedness or other assets (including securities of any Person other than the Company but

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excluding dividends or distributions referred to in subsection (a) of this Section 4.5 ), or shall distribute to all or substantially all holders of its Common Stock rights or warrants to subscribe for or purchase any of its securities (excluding (i) the New Warrants, and (ii) those rights and warrants referred to in subsection (b) of this Section 4.5 ), then in each such case provision shall be made so that the Noteholders shall receive upon conversion thereof, in addition to the number of shares of Common Stock receivable thereupon, the amount of cash, securities, evidences of indebtedness, rights, warrants and other assets that the Noteholders would have received had their Amended Notes been converted into Common Stock on the record date for such event and had thereafter, during the period from such record date to and including the applicable Conversion Date, retained such cash, securities, evidences of indebtedness, rights, warrants and other assets receivable by them as aforesaid.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     The Company hereby represents and warrants to each Noteholder on the Effective Date and on the date of issuance of Amended Notes as follows:

5.1     Corporate Existence and Power

     Each of the Entities has been duly incorporated or organized, as the case may be, is validly existing as a corporation, partnership or limited liability company, as applicable, and is in good standing under the laws of the jurisdiction of its incorporation or organization and has all requisite corporate power and authority to own or lease and operate its properties and to conduct its business as it is presently conducted and as proposed to be conducted. Each of the Entities is duly qualified as a foreign corporation, partnership or limited liability company, as applicable, to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property, the conduct of its business or otherwise, except where the failure to be so qualified and in good standing would not, individually or in the aggregate, result in a Material Adverse Effect. The Company has made available to, and, to the extent requested, delivered to, the Noteholders true, correct and complete copies of (i) the Certificate of Incorporation of the Company, together with all amendments and any other modifications thereto (the “ Company Certificate of Incorporation ”), and (ii) the Bylaws of the Company, together with all amendments and any other modifications thereto (the “ Company Bylaws ”). The Company is not in violation or breach of any of the terms, conditions or provisions of the Company Certificate of Incorporation or the Company Bylaws. Each of the Subsidiaries of the Company has made available to, and, to the extent requested, delivered to, the Noteholders true, correct and complete copies of its Fundamental Documents, together with all amendments and any other modifications thereto. None of the Subsidiaries of the Company is in violation or breach of any of the terms, conditions or provisions of its respective Fundamental Documents.

5.2     Subsidiaries and Affiliates

     Except as set forth on Error! Reference source not found. , the Company has no Subsidiaries or Affiliates and does not own, directly or indirectly, and is not under common

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ownership with, any other corporation, association or business entity. All of the issued and outstanding capital stock or other equity or ownership interests of each Subsidiary of the Company have been duly authorized and validly issued, are fully paid and nonassessable and, except as contemplated by the Transaction Documents, are owned by the Company, directly or through Subsidiaries, free and clear of any Lien or adverse claim.

5.3     Authorization

     Each of the Entities has the requisite corporate power and authority to execute and deliver the Transaction Documents to which it is a party and to perform its obligations under such Transaction Documents. The execution and delivery by each of the Entities of the Transaction Documents to which it is a party and the performance by each such entity of its obligations under such Transaction Documents have been duly authorized by all necessary corporate or other organizational action on its or their part and no other proceedings on its or their part are necessary to authorize the execution and delivery of such Transaction Documents or its or their performance of its or their obligations under such Transaction Documents.

5.4     Due Execution and Delivery; Binding Obligations

     Each Transaction Document to which one or more of the Entities is a party has been duly executed and delivered by an authorized representative of each such entity, and each such Transaction Document constitutes the legal, valid and binding obligation of the respective Entities, enforceable against each of them in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or conveyance or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability.

5.5     Issuance of Amended Notes, New Warrants and Common Stock

     The Company has all necessary power and authority to issue the Amended Notes, the New Warrants and, subject to Section 8.14 , the Common Stock into which the Amended Notes and New Warrants are convertible or exercisable. The Amended Notes, the New Warrants and, subject as aforesaid, the Common Stock into which the Amended Notes and New Warrants are convertible or exercisable have been duly authorized and, subject as aforesaid, the shares of such Common Stock have been reserved for issuance by all necessary corporate action by the Company. The New Warrants and the Common Stock into which the Amended Notes and New Warrants are convertible or exercisable, when so issued in accordance with the Company’s Articles of Incorporation and Bylaws and delivered upon such conversion or exercise in accordance with the terms of the Amended Notes and the New Warrants, as the case may be, will be duly authorized and validly issued, fully paid and nonassessable and free and clear of all Liens.

5.6     Collateral

     As of the Closing Date, (a) the right, title and interest of the Company and each of its Subsidiaries, as applicable, in the collateral pledged pursuant to the Guarantee and Amended and Restated Security Agreement (the “ Collateral ”) will be free and clear of all Liens except for the Lien granted in favor of the Collateral Agent under the Guarantee and Amended and Restated

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Security Agreement and Permitted Liens, and no financing statements in respect of the Collateral will be on file in favor of any person other than the Collateral Agent; (b) the Guarantee and Amended and Restated Security Agreement creates valid security interests in, and Liens on, the Collateral covered thereby securing the obligations of the Company and each of its Subsidiaries to the Collateral Agent, (c) the representations and warranties of the Company and each of its Subsidiaries in the Guarantee and Amended and Restated Security Agreement will be true and correct (if such representations and warranties are not qualified with respect to materiality, in which case such representations will be true and correct in all respects) in all material respects; (d) upon the filing and recording of financing statements in the appropriate jurisdictions, the Lien securing the obligations of the Company and each of its Subsidiaries to the Collateral Agent will have been duly perfected as to the Collateral as to which perfection may be accomplished pursuant to the applicable Uniform Commercial Code or other applicable law in such jurisdictions; and (e) the Lien of the Guarantee and Amended and Restated Security Agreement shall be prior to any other Lien on any of the Collateral, other than Permitted Liens.

5.7     No Conflict or Violation

     The execution and delivery by each Entity of each Transaction Document to which it is a party, and the performance by each Entity of its obligations under each such Transaction Document, will not result in any conflict with, or result in a violation or breach of any of the terms, conditions or provisions of, or constitute (with or without due notice, lapse of time or both) a default under, or give rise to a right of termination, cancellation or acceleration of any obligation under, or result in the creation of any Lien (other than a Permitted Lien and any Lien granted under the Guarantee and Amended and Restated Security Agreement) upon any of the properties or assets of any Entity under, (a) the respective Fundamental Documents of the Entities, (b) any indenture, mortgage, loan or credit agreement, note, contract, franchise, lease or other agreement or instrument to which any Entity is a party or by which it or any of them may be bound, or to which any of the property or assets of any Entity is subject; or (c) any Law, Order or Permit applicable to any one or more of the Entities or to which any of their respective properties or assets is subject, except, in the case of clauses (b) and (c) above, such conflicts, violations, breaches, defaults, rights or Liens (excluding any of the foregoing arising under, or in connection with, the Securities Act), which would not, either individually or in the aggregate, result in a Material Adverse Effect or affect the enforceability of the Transaction Documents.

5.8     Consents and Approvals

     The execution and delivery by the Entities of each Transaction Document to which they are a party, and the performance by the Entities of their obligations under each such Transaction Document, do not and will not require any consent, approval, license, permit, order or authorization of, or any registration, notification, declaration or filing with, any Person (including, without limitation, any Governmental Entity), except for (a) such as have been obtained or made and are in full force and effect, (b) the filing of any notice with respect to a Closing with a Governmental Entity which may be required subsequent to the Closing under the Securities Act, any state securities laws or the rules and regulations promulgated thereunder (and which, if required, will be filed on a timely basis as may be so required), and (c) any such consents or approvals of, or filings with, any Persons who are not Governmental Entities, the

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failure of which to be obtained would not result, either individually or in the aggregate, in a Material Adverse Effect or affect the enforceability of the Transaction Documents.

5.9     Capitalization

      (a) As of the Effective Date, the authorized capital stock of the Company consists of 100,000,000 shares of Common Stock, of which 39,385,363 shares are issued and outstanding, and no shares are held by the Company as treasury shares. All outstanding shares of Common Stock are duly authorized, validly issued, fully paid and nonassessable. No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the sto