AMENDED AND RESTATED FORBEARANCE AGREEMENT
AMENDED
AND RESTATED
AMENDED
AND RESTATED FORBEARANCE AGREEMENT (this “Agreement”), dated as of August 11,
2005, by and between CAPITAL TEMPFUNDS, a division of CAPITAL FACTORS LLC,
as
successor in interest to Capital Tempfunds, Inc., a Delaware limited liability
company having its principal place of business at One Brixam Green, 15800 Xxxx
X. Xxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxx Xxxxxxxx 00000 (“Capital”), and
STRATUS SERVICES GROUP, INC., a Delaware corporation with its principal place
of
business at 000 Xxxxx Xxxx, Xxxxx 000, Xxxxxxxxx, Xxx Xxxxxx 00000
(“Borrower”).
BACKGROUND
Borrower
and Capital are parties to (i) a Loan and Security Agreement dated as of
December 8, 2000 (as amended, restated, supplemented or otherwise modified
from
time to time, the “Loan Agreement”) pursuant to which Capital provides Borrower
with certain financial accommodations, and (ii) a Forbearance Agreement dated
as
of January 15, 2005, between Borrower and Capital and amended on April 8, 2005
and June 10, 2005 (as amended, restated, supplemented or otherwise modified
from
time to time, the “Forbearance Agreement”) pursuant to which Capital agreed to
forbear from exercising rights and remedies under the Loan
Agreement.
As
of
January 15, 2005 and continuing thereafter, there were various continuing Events
of Default existing under the Loan Agreement as listed (the “Designated
Defaults”) on Exhibit
A
annexed
hereto and incorporated by reference herein, by reason of which Capital has
no
obligation to make any additional Loans and Capital has the full legal right
to
exercise its rights and remedies under the Loan Agreement. Borrower has
requested that Capital forbear for an additional period of time from exercising
its rights and remedies under the Loan Agreement. Capital is prepared to
establish an additional period of forbearance for Borrower on the terms and
conditions set forth below.
Borrower
and Capital have agreed to amend and restate the Forbearance Agreement in its
entirety.
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions.
All
capitalized terms not otherwise defined herein shall have the meanings given
to
them in the Loan Agreement.
2. Acknowledgement.
Borrower acknowledges and agrees that the Designated Defaults have occurred
and
exist as of the date hereof. Borrower hereby affirms and acknowledges that
(a)
as of August 5, 2005, there is presently due and owing to Capital the principal
amount of $9,040, 039.42 with respect to the Loan Agreement including interest,
costs, fees and expenses (collectively, the “Amount”), (b) the Amount is
due and owing without
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defense,
offset or counterclaim of any kind or nature whatsoever, and (c) the
Loan
Documents are and shall continue to be legal, valid and binding obligations
and
agreements of Borrower enforceable in accordance with their respective
terms.
3. Forbearance
Period.
During
the period commencing on the date hereof and ending on the earlier to occur
of
(a) August 26, 2005 (or such other date as may be mutually agreed upon in
writing) or (b) the date of any Forbearance Default (as defined below) (the
“Forbearance Period”), Capital will forbear from the exercise of its rights and
remedies under the Loan Documents solely with respect to the Designated
Defaults. Such forbearance shall not derogate from Capital’s rights to collect,
receive and/or apply proceeds of Collateral to the Obligations as may be
specifically provided for in the Credit Agreement. At the option of Capital
all
Obligations shall be due and payable in full at the end of the Forbearance
Period, without the need for any demand or notice by Capital and notwithstanding
any future compliance by Borrower with any provisions of the Loan Agreement
(including the provisions giving rise to the Designated Defaults). During the
Forbearance Period, the Maximum Credit Line shall continue at $10,
500,000.
4. Forbearance
Fee.
In
consideration of Capital’s extension of forbearance to Borrower pursuant to the
terms and conditions set forth herein and its forbearance from charging the
Default Rate which Capital was entitled to charge from and after the date of
the
Designated Defaults, Borrower hereby authorizes Capital to charge Borrower’s
loan account with a forbearance fee in the amount of $300,000 (the “Forbearance
Fee”), which Forbearance Fee shall be earned upon the execution of the
Agreement, provided,
however,
if the
Forbearance Fee is paid in full within sixty (60) days from the date hereof,
Capital shall rebate to Borrower’s loan account the amount of $50,000. Provided
there are no additional Events of Default, there will be no additional
Forbearance Fee due through October 31, 2005.
5. Representations
and Warranties.
Borrower hereby represents and warrants as follows:
(a) this
Agreement and the Loan Documents are and shall continue to be legal, valid
and
binding obligations of Borrower and are enforceable against Borrower in
accordance with their respective terms;
(b) with
the
exception of the Designated Defaults, upon the effectiveness of this Agreement,
Borrower hereby reaffirms all covenants, representations and warranties made
in
the Loan Documents and agrees that all such covenants, representations and
warranties shall be deemed to have been remade and are true and correct in
all
material respects as of the effective date of this Agreement, except for such
representations and warranties which, by their terms, are only made as of a
previous date;
(c) Borrower
has the corporate power, and has been duly authorized by all requisite corporate
action, to execute and deliver this Agreement and to perform its obligations
hereunder; and this Agreement has been duly executed and delivered by
Borrower;
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(d) Borrower’s
execution, delivery and performance of this Agreement does not and will not
(1)
violate any law, rule, regulation or court order to which Borrower is subject,
(2) conflict with or result in a breach of Borrower’s organizational documents
or any agreement or instrument to which Borrower is a party or by which it
or
its properties are bound, or (3) result in the creation or imposition of any
lien, security interest or encumbrance on any property of Borrower, whether
now
owned or hereafter acquired, other than liens, security interests or
encumbrances in favor of Capital;
(e) Capital
has and will continue to have a valid, first priority, and only Lien in all
Collateral except for Liens permitted by the Loan Documents, and Borrower
expressly reaffirms all Liens granted to Capital pursuant to the Loan
Documents;
(f) the
recitals set forth in the Background paragraph above are truthful and accurate
and are an operative part of this Agreement;
(g) no
Defaults or Events of Default are in existence other than the Designated
Defaults;
(h) Borrower
has no defense, counterclaim or offset with respect to the Loan Documents;
and
(i) the
Loan
Documents are in full force and effect, are hereby ratified and
confirmed.
6. General
Forbearance Covenants of Borrower.
During
the Forbearance Period, Borrower shall:
(a) comply
with all covenants (other than the covenants with respect to which the
Designated Defaults exist ) and other obligations of Borrower under the Loan
Documents;
(b) upon
notice sent by Capital to Borrower, make available to Capital and/or its
designated agent, accountant or other representative for audit, inspection
and/or evaluation all books, records, financial information, leases, invoices
and other materials relating to Borrower and/or the Collateral; and
(c) not,
directly or indirectly, make any payments, repayments or reimbursements, whether
in cash, in kind, securities or other property, to any guarantor, affiliate,
or
any officer, director, shareholder, general partner or limited partner of
Borrower with respect to (1) any indebtedness of Borrower to such person or
entity, (2) any capital contributed by such person to Borrower or (3)
any
indebtedness incurred by such person or entity on behalf of or for the benefit
of Borrower, provided,
however,
that
scheduled payments due to the holder of Series I Preferred Stock due and payable
after the date hereof, may be made but only the extent of third party
contributions of capital or fully subordinated loans (such subordinated loans
to
made pursuant to such terms and agreements as are acceptable to Capital) in
the
amount of any such payments.
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7. |
Specific
Forbearance Covenants of Borrower.
|
(a) Borrower
shall continue to furnish to Capital all financial reporting as required by
the
Loan Documents;
(b) Borrower
hereby acknowledges, confirms and agrees that upon the request of Capital,
Borrower will, at Borrower’s sole cost and expense, engage Xxxxxx Xxxxxxxx &
Associates, Ltd. (“MAA”) or another consultant acceptable to Capital in
Capital’s sole discretion, to examine Borrower’s books and records, interview
Borrower’s staff and report directly to Capital concerning various areas of
Borrower’s business and the status of Capital’s Collateral, provided,
however,
that if
MAA is engaged, such engagement shall be pursuant to the existing Agreement
for
Consulting Services among Borrower, Capital and Capital’s counsel dated May 27,
2005, as amended from time to time. In such event, Capital may confer directly
with the personnel of MAA or such other consultant with respect to their
engagement;
(c) Borrower
shall retain no later than thirty (30) days after the effective date of this
Agreement, an investment bank of recognized standing and repute acceptable
to
Capital in its sole discretion (the “Investment Bank”) to make a complete
analysis and review of strategic alternatives concerning the recapitalization,
sale, reorganization and/or alternate funding of the Borrower. Among other
things, the engagement letter between Borrower and Investment Bank shall provide
as follows:
“Investment
Bank shall give Capital timely access (a) to the work product of Investment
Bank with respect to Borrower and the Engagement, and (b) to Investment
Bank’s personnel engaged with respect to Borrower and the Engagement. In
furtherance and not in limitation of the foregoing, (a) Investment Bank shall
provide Capital with copies of all correspondence, reports, memoranda, and
other
documents that may be issued or generated by Investment Bank pursuant to the
Engagement, as and when transmitted by Investment Bank to Borrower, and
(b) Capital may confer directly with Investment Bank’s personnel on an
ongoing basis with respect to the Engagement, without borrower’s consent or
approval and whether or not a representative of Borrower is present at any
such
conference. Capital shall be a third party beneficiary of this letter agreement
and entitled to the benefits of this paragraph.”
(d) During
the Forbearance Period, Capital shall maintain a representative at Borrower’s
premises to monitor Collateral performance and the adherence by Borrower to
the
terms and provisions of the Loan Documents and this Agreement. Borrower shall
be
charged a monitoring fee $750 per day plus all out of pocket expenses of such
representative which shall be charged to Borrower’s account
monthly;
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(e) All
Accounts shall be placed on a notification basis (the form and substance of
such
notification to be determined exclusively by Capital) which notice shall, among
other things, require that customers remit proceeds of Accounts to a lock box
controlled by Capital; and
(f) No
later
than August 31, 2005, Borrower shall have received at least $500,000 in capital
or subordinated loans from a third party.
8. Forbearance
Defaults.
Each of
the following shall constitute a Forbearance Default, absent the prior written
approval by Capital:
(a) the
existence of any Event of Default (other than a Designated Default) under the
Loan Documents, provided,
however,
that in
determining whether or not the outstanding Loans are within permissible
borrowing formulae, the amount of Loans resulting from the charging of the
Forbearance Fee shall not be included.
(b) Borrower
shall fail to keep or perform any of the terms, obligations, covenants or
agreements contained in this Agreement or under the Loan Documents;
(c) if
any
representation or warranty of Borrower herein shall be false, misleading or
incorrect in any respect;
(d) the
occurrence of any event, condition, obligation, liability or circumstance or
set
of events, conditions, obligations, liabilities or circumstances or any
change(s) which (i) has, had or could reasonably be expected to have any
material adverse effect upon or change in the validity or enforceability of
any
Loan Document or this Agreement, (ii) has been or could reasonably be expected
to be material and adverse to the value of any of the Collateral or to the
business, operations, prospects, properties, assets, liabilities or condition
of
Borrower and/or Guarantors, either individually or taken as a whole, or (iii)
has materially impaired or could reasonably be expected to materially impair
the
ability of Borrower or Guarantors to perform the Obligations or to consummate
the transactions under the Loan Documents or this Agreement;
(e) Borrower
or any third party shall threaten or assert any claim, or commence any action,
suit or proceeding, against Capital contesting or challenging the validity,
priority, perfection or enforceability of this Agreement or any of the Loan
Documents, of the Obligations, or of any interest of Capital in the
Collateral;
(f) Failure
of the Borrower or ALS, LLC, after the Forbearance Period, to comply in any
material respect with any of the terms and conditions of that certain Employer
Services Agreement bearing the effective date of August 13, 2004 between
Borrower and ALS, LLC, as the same may be amended, supplemented, modified or
restated from time to time or such Employer Outsourcing Agreement shall
hereafter be amended, supplemented, modified or restated without Capital’s
written consent; and
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(g) Failure
of the Borrower to pay when due any fees, costs or expenses owing to Capital,
including, without limitation, the remaining $50,000 portion of that certain
consent fee in the amount of $150,000 agreed to on June 10, 2005, which is
due
and payable in full on August 12, 2005.
(h) Failure
of Borrower to comply with that certain forbearance agreement between Borrower
and ALS, LLC of even date.
9. Reaffirmation
of Guaranty.
Xxxxxx
Xxxxxxx (“Guarantor”), by his signature below, hereby reaffirms and ratifies the
terms of his Fidelity Guaranty dated as of December 8, 2000 as amended (the
“Guaranty”), confirms that the Guaranty is in full force and effect and binding
on Guarantor without any defenses, setoffs or counterclaims of any kind and
Guarantor consents to this Forbearance Agreement.
10. Rights
and Remedies.
Upon
the termination of the Forbearance Period, at the option of Capital, all
Obligations shall be immediately due and payable, and in addition, Capital
shall
be immediately entitled to enforce all of its rights and remedies under this
Agreement, the Loan Documents and/or applicable law.
11. Waivers.
Borrower, waives and affirmatively agrees not to allege or otherwise pursue
any
or all defenses, affirmative defenses, counterclaims, claims, causes of action,
setoffs or other rights that it may have, as of the date hereof, to contest
on
any basis whatsoever, including without limitation based upon theories of
liability such as “lender in control”, “lender liability” and/or “deepening
insolvency” or otherwise, (a) any Defaults and/or Events of Default which could
be declared by Capital on the date hereof, (b) any provision of the Loan
Documents or this Agreement, (c) the right of Capital to all of the rents,
issues, profits and proceeds from the Collateral, (d) the mortgage, lien and/or
security interest of Capital in any property, whether real or personal, tangible
or intangible, or any right or other interest, now or hereafter arising in
connection with the Collateral, or (e) the conduct of Capital in administering
the financing arrangements by and between Borrower and Capital.
12. Release.
Borrower hereby releases, remises, acquits and forever discharges Capital,
and
its respective employees, agents, representatives, consultants, attorneys,
fiduciaries, servants, officers, directors, partners, predecessors, successors
and assigns, subsidiary corporations, parent corporations, and related corporate
divisions (all of the foregoing hereinafter called the “Released Parties”), from
any and all actions and causes of action, judgments, executions, suits, debts,
claims, demands, Obligations, obligations, damages and expenses of any and
every
character, known or unknown, direct and/or indirect, at law or in equity, of
whatsoever kind or nature, for or because of any matter or things done, omitted
or suffered to be done by any of the Released Parties prior to and including
the
date of execution hereof, and in any way directly or indirectly arising out
of
or in any way connected to this Agreement and the Loan Documents (all of the
foregoing hereinafter called the “Released Matters”). Borrower acknowledges that
the agreements in this Section are intended to be in full satisfaction of all
or
any alleged injuries or damages arising in connection with the Released Matters.
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13. Effect
and Construction of Agreement.
Except
as expressly provided herein, the Loan Documents shall remain in full force
and
effect in accordance with their respective terms, and this Agreement shall
not
be construed to:
(a) impair
the validity, perfection or priority of any lien or security interest securing
the Obligations;
(b) waive
or
impair any rights, powers or remedies of Capital under, or constitute a waiver
of, any provision of the Loan Documents upon termination of the Forbearance
Period with respect to the Designated Defaults or otherwise; or
(c) constitute
an agreement by Capital, or require Capital to extend the Forbearance Period,
grant additional waivers, or extend the term of the Loan Agreement or the time
for payment of any of the Obligations.
14. Presumptions.
Borrower acknowledges that it has consulted with and has been advised by counsel
and such other experts and advisors as it has deemed necessary in connection
with the negotiation, execution and delivery of this Agreement and has
participated in the drafting hereof. Therefore, this Agreement shall be
construed without regard to any presumption or rule requiring that it be
construed against any one party causing this Agreement or any part hereof to
be
drafted.
15. Conditions
of Effectiveness.
This
Agreement shall become effective upon satisfaction of the following conditions
precedent:
(a) Capital
shall have received an original of this Agreement executed by
Borrower;
(b) Capital
shall have received an opinion of counsel to Borrower in form and substance
satisfactory to Capital; and
(c) Borrower
shall pay all costs, fees and expenses of Capital (including the reasonable
costs, fees and expenses of Capital’s in-house and outside counsel, consultants
and appraisers) incurred by Capital in connection with the negotiation,
preparation and closing of this Agreement.
16. Expenses.
Borrower shall pay all costs, fees and expenses of Capital (including the
reasonable costs, fees and expenses of Capital’s in-house and outside counsel,
consultants and appraisers) incurred by Capital from and after the date of
this
Agreement in connection with the administration and enforcement of this
Agreement.
17. Entire
Agreement.
This
Agreement sets forth the entire agreement among the parties hereto with respect
to the subject matter hereof. Borrower has not relied on any agreements,
representations, or warranties of Capital except as specifically set forth
herein. Any promises, representations, warranties or guarantees not herein
contained and hereinafter made shall have no force and effect unless in writing,
signed by each party hereto. Borrower
7
acknowledges
that it is not relying upon oral representations or statements inconsistent
with
the terms and provisions of this Agreement.
18. Further
Assurance.
Borrower shall execute such other and further documents and instruments as
Capital may reasonably request to implement the provisions of this Agreement
and
to perfect and protect the liens and security interests created by or agreed
upon in the Loan Documents.
19. Benefit
of Agreement.
This
Agreement shall be binding upon, inure to the benefit of and be enforceable
by
the parties hereto and their respective permitted successors and assigns. No
other person or entity shall be entitled to claim any right or benefit
hereunder, including, without limitation, any third-party beneficiary of this
Agreement. Capital’s agreement to forbear with respect to the Designated
Defaults subject to the terms and conditions of this Agreement and to refrain
from enforcing certain of its remedies does not in any manner limit Borrower’s
obligations to comply with, and Capital’s right to insist upon compliance with,
each and every one of the terms of this Agreement and the Loan Documents except
as specifically modified herein.
20. Severability.
The
provisions of this Agreement are intended to be severable. If any provisions
of
this Agreement shall be held invalid or unenforceable in whole or in part in
any
jurisdiction, such provision shall, as to such jurisdiction, be ineffective
to
the extent of such invalidity or enforceability without in any manner affecting
the validity or enforceability of such provision in any other jurisdiction
or
the remaining provisions of this Agreement in any jurisdiction.
21. Governing
Law, Jurisdiction, Venue.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of North Carolina applied to contracts to be performed wholly within
the
State of North Carolina Any judicial proceeding brought by or against Borrower
with respect to this Agreement or any related agreement may be brought in any
court of competent jurisdiction in the State of North Carolina and, by execution
and delivery of this Agreement, Borrower accepts for itself and in connection
with its properties, generally and unconditionally, the non-exclusive
jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by
any
judgment rendered thereby in connection with this Agreement. Nothing herein
shall affect the right to serve process in any manner permitted by law or shall
limit the right of Capital to bring proceedings against Borrower in the courts
of any other jurisdiction. Borrower waives any objection to jurisdiction and
venue of any action instituted hereunder and shall not assert any defense based
on lack of jurisdiction or venue or based upon forum
non conveniens.
Any
judicial proceeding by Borrower against Capital involving, directly or
indirectly, any matter or claim in any way arising out of, related to or
connected with this Agreement or any related agreement, shall be brought only
in
a federal or state court located in the State of North Carolina.
22. Waiver
of Jury Trial.
EACH
PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
OF
ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT,
THE LOAN DOCUMENTS OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED
OR
DELIVERED IN
8
CONNECTION
HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT,
THE LOAN DOCUMENTS OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED
OR
DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING
IN
CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART
OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF
THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. IN ADDITION,
EACH
PARTY WAIVES THE RIGHT TO CLAIM OR RECOVER IN ANY SUCH SUIT, ACTION OR
PROCEEDING ANY DAMAGES OTHER THAN OR IN ADDITION TO ACTUAL DAMAGES.
23. Counterparts;
Telecopied Signatures.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original and all of which taken together shall constitute one and
the
same agreement. Any signature delivered by a party by facsimile transmission
shall be deemed to be an original signature hereto.
24. Survival.
All
representations, warranties, covenants, agreements, undertakings, waivers and
releases of Borrower contained herein shall survive the termination of the
Forbearance Period and payment in full of the Obligations under the Loan
Documents.
25. Amendment.
No
amendment, modification, rescission, waiver or release of any provision of
this
Agreement shall be effective unless the same shall be in writing and signed
by
Borrower and Capital. This Agreement shall constitute a Loan
Document.
26. Headings.
Section
headings in this Agreement are included herein for convenience of reference
only
and shall not constitute a part of this Agreement for any other
purpose.
27. Limited
Forbearance.
The
forbearance with respect to the Designated Defaults set forth in this Agreement
(a) shall not apply to any other past, present or future violation or violations
of any other provision of the Loan Documents, and (b) Capital’s failure to
exercise any right, privilege or remedy as a result of the Specified Defaults
shall not directly or indirectly in any way whatsoever either: (a) impair,
prejudice or otherwise adversely affect Capital’s’ right at any time to exercise
any right, privilege, or remedy in connection with the Loan Documents, any
other
agreement, or any other contract or instrument (except to the extent expressly
waived in this Agreement), or (b) amend or alter any provision of the Loan
Documents, any other agreement, or any other contract or instrument, or (c)
constitute any course of dealing or other basis for altering any obligation
of
the Borrower or any rights, privilege, or remedy of the Capital under the Loan
Documents, any other agreement, or any other contract or
instrument.
[
Signature pages follows ]
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IN
WITNESS WHEREOF, this Agreement has been duly executed as of the day and year
first above written.
CAPITAL
TEMPFUNDS, a division of CAPITAL FACTORS LLC, as successor in interest to
Capital Tempfunds, Inc., as Lender
By: /s/
Xxxxx Xxxxxxx
Name:
Xxxxx Xxxxxxx
Title:
President
STRATUS
SERVICES GROUP, INC.
By:
/s/ Xxxxxx X. Xxxxxxx
Name:
Xxxxxx X. Xxxxxxx
Title:
President & CEO
/s/
Xxxxxx X.
Xxxxxxx
Xxxxxx
X.
Xxxxxxx, individually
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EXHIBIT
A
DESIGNATED
DEFAULTS
Borrower’s
common stock being delisted from NASDAQ beginning October 1, 2004.
Borrower’s
failure to meet financial covenant for the period beginning October 1, 2004
and
thereafter.
Borrower
having delinquent state, local and federal taxes.
Borrower’s
acknowledgement that the Obligations will not be paid in full as of August
12,
2005
Default
under Outsourcing Agreement with ALS, LLC
Series
I
Dividend Payment of August 5, 2005